Capstone Nutrition: Acquired By PE firm

The news – reported on September 24, 2019 – that PE firm Brightstar Capital had finalized its acquisition of Capstone Nutrition should have been music to the ears of its 3 BDC lenders, with an aggregate $117mn in exposure. That’s a pretty penny to have outstanding and to a contract manufacturer much of whose debt has been on non accrual since 2016 !

The BDCs involved are Medley Capital (MCC), Sierra Income and Business Development Corporation of America. Big discounts in excess of three-quarters of cost have been taken as of the latest IIQ 2019 results.

What we don’t know – and nobody is saying – is whether the purchase price was large enough to ensure the repayment in full of the lenders – including the afore mentioned 3 BDCs. If so, that will be a major gain (over $80mn) – and elicit a huge sigh of relief from the BDCs and their shareholders. If not, a realized loss of an undetermined amount will be crystallised as early as the third quarter 2019 BDC results.