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BDC Portfolio Company Sold: Two BDCs To Gain

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NEWS

On August 6, 2019 publicly traded Europcar Mobility Group [Paris:EUCAR] announced the acquisition of privately-held Fox-Rent-A-Car.

According to the press release:

“Fox Rent A Car operates a network of 21 corporate stations and 100+ affiliates. It is present in 15 of the country’s top 25 airports, with an attractive value for money price positioning, an impressive track record of organic growth (delivering an average 6.4% revenue growth p.a. between 2013 and 2018) and a fleet of approximately 18,000 vehicles. In 2018, Fox Rent A Car generated around $280m revenue”.


ANALYSIS

BDC Beneficiaries

There is no debt exposure to Fox-Rent-A-Car but two BDCs have small equity stakes in the company: WhiteHorse Finance (WHF) and Harvest Capital (HCAP).

At June 30, 2019 the warrants held by the BDCs were valued at $0.767mn and $0.918mn respectively.

The warrants were acquired when debt financing was provided in the past and Fox faced some short term difficulties.

For a time, the debt was on non accrual but was eventually repaid in full.

Based on what HCAP has said on a Conference Call, the investment is valued quarterly based on U.S. public company rental car comparables.

If that’s so – and depending on what Europcar has paid the value of the warrants may be higher than the $1.7mn already valued on the books.

In either case, WHF and HCAP appear to be about to book a modest – but still material – Realized Gain, probably in the IVQ 2019.


VIEWS

For A Change

Of late, as we’ve been digging into BDC portfolios, we’ve been reporting on numerous credit mishaps in the BDC sector.

To provide a balance – and as a reminder that many BDCs have equity stakes that can and do bear fruit – we’re reporting this development.

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