Abaco Energy Technologies LLC manufactures downhole drilling tools such as rotors and stators used in the oil and gas industry in horizontal drilling operations. The company acquires, integrates, and develops energy manufacturing and service businesses for oil and gas markets. The company was incorporated in 2013 and is based in Houston, Texas.
Abaco Energy has been hit-like so many oil field services companies-by the drop in oil and gas prices. The Company was founded only in 2013 with an equity injection from private equity group Riverstone Holdings and with substantial borrowings. Since the IVQ of 2014 at least, BDC exposure has been around $100mn, principally in the form of First Lien secured debt and a small amount of equity. The latter began to be written down to zero almost immediately as market conditions deteriorated. The debt was written down by 45% at year end 2015, and the equity was almost completely written down. However, Riverstone injected new equity capital in early 2016, which presumably helped valuations. At September 30 2016, the debt had been partly written back up to a 32% discount and the lenders appear to have advanced some new funds too, in the form of Preferred. Still, on October 5 2016 S&P downgraded the Company and the debt, pointing out that debt service obligations are greater than EBITDA. There are financial covenants coming due in September 2017 which might trip up the Company. The BDC Credit Reporter has the Company as Performing (a small miracle in this segment) but with a Credit Rating of 4. The risks of a bankruptcy or recapitalization appear very high. Moreover, with the S&P downgrade, the valuation of the debt seems high so the Credit Trend is marked as Down for the coming quarter, barring any new information.