Tensar Corp: Added To Under Performers

On March 25, 2020, we added Tensar Corp. – previously rated as performing and CCR 2 – as under-performing and CCR 3, our Watch List. The global engineering’ company’s downgrade was due principally to what has happened to the value of its 2021 Term Loan, which has been discounted by (30%) in the market and a 2022 Term Loan which is off by (40%). Otherwise, we have very little new information about the company except that its plant in Wuhan (!) has recently reopened after being closed because of you-know-what.

There are 4 BDCs with exposure that totals $49.8mn and all in the 2021 Term Loan. The larger exposure is publicly traded Pennant Park Floating Rate (PFLT) with $22.5mn. Also a lender is Great Elm (GECC), which has been adding to its position of late, and non-traded Sierra Income and Cion Investment. At year end 2019, the debt was only modestly discounted by the BDCs involved. In years past Tensar had some difficulties and had a speculative rating from Moody’s but since IVQ 2016 has been valued closer to par and given a B- rating by S&P.

Frankly, we understand very little about the company’s most recent performance and how much Covid-19 has affected its business, although its website admits management is taking all precautions. Apparently, all the company’s factories are open but that does not tell us much. The drop in the debt value – which only accelerated in the last few days – might be a knee-jerk market reaction, or something else. We’re not ready yet to assume a realized loss will occur down the road, but we’ll be looking out for news from the company, the press or the rating groups. At the moment, though, we expect this credit will return to performing status when the world gets back to work, but you never know in these unprecedented conditions for leveraged companies.