Melinta Therapeutics: Files Chapter 11

It’s never too late in the year to file for bankruptcy. On December 27, 2019 Melinta Therapeutics, which manufacturers antibiotics, sought court protection in a Chapter 11 filing. Apparently, the company has arranged a debt for equity swap which see $140mn be wiped out in return for taking on Deerfield Management as its new owner.

The only BDC with exposure is Hercules Capital (HTGC), which had $2.6mn in equity at cost invested in the company. We surmise that the investment – already non income producing and written down to almost nothing – will get written off. Expect a modest but predictable Realized Loss this quarter or next.

The BDC will consider itself lucky to have gotten away with so little damage. Not so long ago HTGC had as much as $30mn advanced in the form of debt to the company but that got repaid in a transaction back in 2017 when Melinta merged with a subsidiary of Cempra, according to a footnote in the 10-Q. You win some and you lose some in venture debt investing, but HTGC will probably be glad this loss was a modest one that will have no impact on NAV or even on its total realized loss column.