We’ve added Finastra Group Holdings, Ltd – a UK based financial technology company – to the BDC Credit Reporter’s Under Performer list. That’s because the company was hard hit by hackers a few days ago, with as-yet unclear financial consequences. Moreover, the company’s traded 2024 Term Loan appears to be trading at a (20%) discount. That triggers our standard for placing the company on the under performers list with a Corporate Credit Rating of 3 on our 5 point scale.
There are two BDCs with $28.2mn of exposure. First, there is Barings BDC (BBDC), which has been invested in that previously mentioned 2024 Term Loan (which only pays L + 350 bps) since IIIQ 2018. BBDC has $14.8mn at risk and valued its position very close to par at 12/31/2019.
More recently -in the IVQ 2019 – Great Elm (GECC) invested in the company’s higher paying second lien debt. According to Advantage Data records, the BDC has $13.4mn invested and offered up a year end 2019 valuation at a slight premium. We have no data on what the value of the second lien debt might be but if the first lien is discounted (20%), we’re assuming – very conservatively a (40%) discount.
Longer term, we’re not terribly worried about Finastra from what we know about the “world’s third largest financial technology company”, which is sponsored by deep-pocketed Vista Equity Partners and is not directly in the Covid-19 line of fire. Nonetheless, when IQ 2020 BDC results come out – and possibly in a couple of quarters to follow – we might see the BDC loans materially discounted.