Gladstone Company: Portfolio Company Sold
NEWS
On January 30, 2020 PE group Century Park Lane Partners L.P announced the sale of The Mochi Ice Cream Company (“Mochi”).
The company was sold to Lakeview Capital, Inc.
No terms were disclosed.
The company was acquired by Century Park Lane Partners in 2015.
The press release announcing the sale to Lakeview is attached.
ANALYSIS
Gladstone Capital (GLAD) is both a second lien lender and minority equity investor in Mochi.
The investment was initiated in 2015, as per the BDC’s press release at the time.
The debt is priced at LIBOR + 10.50% and was scheduled to mature in 2023.
The BDC has invested $0.450mn in the common stock of Mochi, which was valued at $1.365mn as of September 2019.
We expect the BDC will be repaid on the debt and book a realized gain in the IQ 2020 results.
We can’t determine from the publicly available information if the proceeds to be received by GLAD will increase, decrease or remain the same compared to the most recent valuation.
The BDC Reporter projects a realized gain will be the most likely outcome.
Expect to hear more when GLAD reports IVQ 2019 results.
VIEWS
For A Change
We thought readers might want a break from the seemingly endless list of BDC-funded companies getting into credit trouble that we cover on these pages.
Success Story
For GLAD, Mochi appears to have been a successful investment pretty much from beginning to end.
(We’ve had to rely on the investment’s valuations and the public record rather than any commentary from GLAD’s conference calls which never mention the company, if our search results are accurate).
Initially, the BDC funded a loan due in 2021, which was replaced with current 2023 loan in the IIQ 2018.
The equity did drop in value for two consecutive quarters in June 2018 but has been valued at an increasing premium to cost since IVQ 2018.
Sweet And Sour
However, these successful investments can be bitter-sweet for the BDCs involved.
GLAD will be “losing” a borrower with above average performance which paid out an annual loan yield of 12.50%.
That’s above the 11.6% portfolio yield at September 30, 2019.
However, there may be a pre-payment fee of some sort involved with the repayment of the debt , which would boost IQ 2020 earnings.
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