The BDC Credit Reporter is committed to eventually writing about every BDC portfolio company where any material exposure exists. We’ve come round to Puerto Rico-based insurance company Advantage Insurance Holdings. The two BDCs with exposure are BlackRock Capital (BKCC) and MVC Capital (MVC). Both are invested in the insurer’s convertible preferred and have been for years. The preferred, though, has been non income producing at BKCC since June 2019 (no word on MVC’s treatment) and total exposure is $14.8mn at cost with BKCC holding $8.9mn and MVC $5.9mn.
In the IQ 2020, BKCC discounted the preferred by (47%), (11%) more than in the prior period and the worst valuation level since getting involved in 2012. (MVC’s discount is only 2%). The company has been underperforming since 2016…None of this is auspicious but there seems to be a difference of valuation opinion between MVC and BKCC.
For our part, we rate the company CCR 5, or non performing. In terms of value, we would not be surprised to see a complete write-off one day. However, we have no idea when that might be as public information is thin on the ground. Till then, neither the BDCs involved nor the BDC Credit Reporter should hold out much hope for this investment. We can’t tell if Covid-19 will impact the company.
12/23/2020: Due to the acquisition of MVC by Barings BDC (BBDC), the post has been re-classified to BBDC.