A South Florida restaurant chain – TooJay’s Deli LLC – has filed for Chapter 11. Not surprisingly, the principal reason given is the Covid-19 crisis and the impact of the stay at home orders on business. The company “reported assets between $50 million and $100 million and liabilities ranging from $10 million to $50 million. An affiliated company, TJ Acquisition LLC, is also filing for Chapter 11 bankruptcy“.
The only BDC lender to the company is Monroe Capital (MRCC) which has multiple loan facilities with a cost of $4.1mn to the parent (“TooJay’s Mgmt LLC” ), as of 12/31/2019. That debt was all valued at par. There’s $0.300mn of annual investment income that will no longer be coming in.
It’s too soon to determine what capital loss – if any – MRCC might endure because of the bankruptcy. We’ll learn more – presumably – when the BDC reports its results in May. In any case, this is a minor investment and will only have a modest impact – win, lose or draw- on MRCC’s balance sheet and income statement.
More disturbing is that the TooJay’s story presages what might happen much more frequently, and with a great deal more dollars involved: companies that were previously blameless and performing well suddenly filing for bankruptcy. We cannot do much more than bring these sudden credit disasters to your attention once they have occurred as we do not have the data to pick up the signs of distress early as is usually the case.