Harland Clarke Holdings: Dispute Between Creditors

Back on November 29, 2019 when we first wrote about Harland Clarke Holdings Corp. we warned that we might be writing again about the troubled check printer before long. That’s because the day of reckoning about how to handle debt maturing was fast approaching. Just three weeks later and we hear from the Wall Street Journal that the struggle to reorganize the company’s balance sheet is underway.

Apparently, the company has reached out to junior creditors to swap their claims for cash or more senior ranked debt. As you might expect, the existing senior lenders are not happy about such a move. That’s all we know for now, but we see that the value of the 2023 Term Loan held by Cion Investment – the only BDC lender to the company – has dropped from a (21%) discount at September 30, 2019 to (28%). We’re quoting from Advantage Data’s Syndicated Loans real-time pricing module.

The BDC Credit Reporter is still new to this particular under-performing company, but it’s fair to say that all the ingredients exist for a default or restructuring that could happen sooner rather than later and would affect Cion and many other creditors. Nearly $0.900mn of investment income is at risk of interruption for the sole BDC with exposure, and a further unrealized depreciation is likely when IVQ 2019 results are published. We expect to posting about the company once again before too much time passes.