Joerns HealthCare: Files Chapter 11

Joerns Healthcare has filed for Chapter 11. “The company is seeking court approval of a restructuring plan that is supported by the majority of its lenders and noteholders. The plan will eliminate a substantial amount of debt and provide operating capital during the restructuring process and beyond. The company has requested that the plan be approved and the process complete within the next 30-45 days”. This is bad news for the three BDCs with $27.9mn in exposure in 2020 senior/unitranche debt – all publicly traded. Main Street Capital (MAIN) has the biggest share with $13.3mn, and sister non traded fund HMS Income ($11.0mn). Golub Capital (GBDC) comes in third with only $3.5mn, but we imagine the asset manager has exposure in other affiliated funds. Until a restructuring falls into place $0.200mn a month of interest income will be lost. The company was still carried as performing through IIIQ 2018, but the discount increased from the IVQ 2018 and closed the IQ 2019 at (15%).  Chances look high that a Realized Loss will have to be booked, but we’ll postpone making any predictions till we review the restructuring plan that the company is so confident will be approved and implemented in short order.