Following the Covid-19 engendered market meltdown, the BDC Credit Reporter is laboriously re-assessing every BDC portfolio, and every company therein, to identify any new under-performers or any change to existing denizens. At March 14, 2020, we’re making our way through the OFS Capital (OFS) portfolio with the goal of writing about every under-performing company:
We added 3rd Rock Gaming Holdings to the under-performers list with an initial rating of CCR 3, from CCR 2, on our five point scale back in IVQ 2018 in our database. This is the first article we’ve written about the company for the Credit Reporter but did mention 3rd Rock in the BDC Reporter back in May 2019 as part of an overall OFS credit review. The only BDC lender to the pre-packaged software firm is OFS, which has invested $23.6mn, mostly in a publicly traded 2023 Term Loan and an equity stake. The investment dates back to IQ 2018.
Frankly, we have found very little public information about the company and the BDC’s managers have never discussed 3rd Rock (no relation to the TV show but still appearing in any search results). That’s why readers will not have seen any article before this one. Our downgrade was driven only by the discount in the IVQ 2018 of the equity and the debt, and which has continued through 2019. Most recently, the 2023 Term Loan was discounted (15%) on March 13, 2020 and the equity discounted by (61%) at year end 2019, its highest percentage level ever.
Given the above, we will continue to track the company and the $2.0mn of investment income at risk, but have no immediate concerns. The company is not in a vulnerable sector and the discounts too date are modest in valuation terms.