Commercial Barge Line: To Exit Chapter 11

Not very long ago in calendar days, we wrote about Commercial Barge Line’s pre-agreed Chapter 11 filing. Now, about a month later, we can report that the company is poised to exit from court protection. As we knew from the outset, a debt-for-equity swap will see lenders become owners. In addition, a rights offering and new debt facilities are planned for the barge company. A law firm involved in what seems like a successful restructuring says the company will be operating normally – much to the relief of its 2,100 employees as early as April.

We won’t delve too much into the details of the new arrangement because BDC exposure to the company will be de minimis to non existent going forward. We found out today that the biggest of the two BDC lenders with exposure – Great Elm (GECC) – sold out of its $15.9mn secured Term Loan earlier in the first quarter 2020. GECC was not interested in owning a non-income producing stake in a restructured company, and took its lumps. According to GECC, the BDC received 34 cents of par or $5.4mn. At year end 2019 the position was valued at $8.0mn, so GECC will be booking an additional ($2.6mn) loss. Overall, the realized loss will amount to ($8.9mn) for GECC.

Looking at GECC’s investment history on Advantage Data we see that the opportunistically minded BDC had been invested in Commercial Barge Line debt since 2017 and was increasing its exposure as late as IVQ 2018.

That leaves a question mark as to the only other BDC with exposure: FS-KKR Capital (FSK), inherited from Corporate Capital Trust, which also began lending in 2017. As of year end 2019, FSK’s debt – in the same facility as GECC- had a cost of $4.2mn and was worth about $1.5mn, down from $2.2mn at year end. We don’t know if FSK is going to hang in there as an equity holder, but given the small amounts involved relative to the BDC’s size and the absence of any income, this company is likely to become too small to be material in our database, and be removed from our active under performers list.