Email us with questions or comments: support@bdcreporter.com           α

Oaktree Specialty Lending: Portfolio Company Downgraded By BDC Credit Reporter

BDCs:
Premium Free

The BDC Credit Reporter has downgraded a portfolio company of Oaktree Specialty Lending (OCSL):

 

We hear that Covia Corp. – “a minerals and materials supplier for industrial and energy markets” – has been engaged in drastic cost cutting in the wake of the Covid-19 crisis “designed to reduce overhead expenses by about $25 million from 2019 levels”. The company had been struggling even before Covid-19 – and lower oil prices came along – due to its status as a supplier to the energy sector.

We initiated the company on the Underperformers list back on January 1, 2020, with an initial Corporate Credit Rating of 3. With the latest news and with the 2025 Term Loan trading at a (55%) discount compared to (22%) at year end 2019, we have downgraded the outlook to CCR 4 from CCR 3. We’re not yet placing the company on our Weakest Links list – companies deemed highly likely to become non performers shortly – but it’s early days yet. The stock it at risk of being delisted from the NYSE and trades at just $0.45. A year ago that was $6.25…

The only BDC with exposure to publicly traded Covia remains Oaktree Specialty Lending (OCSL) with a cost of $7.9mn and a current value probably close to $3.5mn. That means an unrealized loss of ($2.6mn) is likely to be booked at the end of the IQ 2020. Income at risk – should Covia default – is about $0.400mn a year. We’ll check back after OCSL reports IQ 2020 results or earlier if anything new transpires.

© BDC Credit Reporter 2016 – 2020
Already a Member? Log In

Register for the BDC Reporter

The BDC Reporter has been writing about the changing Business Development Company landscape for a decade. We’ve become the leading publication on the BDC industry, with several thousand readers every month. We offer a broad range of free articles like this one, brought to you by an industry veteran and professional investor with 30 years of leveraged finance experience. All you have to do is register, so we can learn a little more about you and your interests. Registration will take only a few seconds.

Sign Up