As expected, the Canadian subsidiary of bankrupt Bumble Bee Foods has filed for protection itself under Canadian law. The subsidiary is the long named Connor Brothers Clover Leaf Seafoods, which we’ve written about in the past. On December 2, 2019 trade publication – SeaFoodSource reported “Connors Bros. has commenced court-supervised restructuring proceedings under Canada’s Companies’ Creditors Arrangement Act, as has fellow Bumble Bee affiliate Cloverleaf Holdings Company, according to the CBC. The companies operate the Bumble Bee, Clover Leaf, and Brunswick brands in Canada“.
Connors Bros. operates a fish processing plant in Blacks Harbour, New Brunswick in Canada that employs between 400 and 800 people depending on the season and packs a variety of products, including tinned herring and sardines.
The Canadian bankruptcy- which is materially different than the process in the U.S. – is not expected to result in much change operationally or lead to liquidation. That may explain why the 2023 debt issued by Connor Brothers, held by the two BDCs with exposure thereto, is trading at only a (7%) discount to par when we checked Advantage Data’s Middle Markets loan module on December 3, 2019. In total, there is $13.6mn at cost of exposure. Two-thirds is held by non-listed TCW Direct Lending and one third by Apollo Investment (AINV). Both BDCs have modest discounts on the debt held, but will – presumably – be losing approximately $2mn of investment income on an annualized basis until the bankruptcy is resolved. Bumble Bee is reportedly going to be sold. We imagine – but have no confirmation – that Connor Brothers will be included in whatever transaction occurs.
Overall, the Bumble Bee/ Connor Brothers failure is a material blow to both BDCs involved, with over $60mn of exposure and $7.5mn of income interrupted. What we don’t know yet is how long the bankruptcies will go on for – impacting IVQ 2019 results already – and what recovery rates will look like. In theory, the lenders could still collect all principal and interest once the dust settles. Or not.
In any case, we’ve added Connor Brothers to the BDC Credit Reporter’s list of BDC-funded companies in bankruptcy. See in the Data Room.