Good news for a change for an underperforming BDC portfolio company and one that’s been in that category for a record time. News reports indicates Goldman Sachs is to purchase Folio Financial (dba Foliofn Inc.). According to the company the transaction will occur in the IIIQ 2020, but terms were not revealed.
The only BDC with exposure – and going back twenty years – is MVC Capital (MVC). The BDC owns $15.0mn in Preferred stock that’s been carried at all sorts of discounts to cost (up to 100%) over the past many years. As recently as October 2019 the discount was (58%) but jumped up in the latest books that closed January 2020 to a discount of just (20%). Maybe that’s reflective of the early days of this negotiation with Goldman.
At this point we don’t know what amount MVC – as part owner and with a director on the Board – will be receiving. Nonetheless, this will create an exit from an investment that has often been given up for dead – money, that is. This has been a non income producing investment but receiving whatever millions will be coming its way will be gratefully accepted by MVC.
This is an investment that goes back to the BDC sector’s dinosaur era and when MVC was known as MEVC Draper Fisher Jurvetson Fund I, Inc. (“meVc”). At that time BDCs were regarded as a vehicle to bring venture capital equity investments to the masses. As you’ll have seen that did not work out and MVC – subsequently taken over and repositioned – is one of the few survivors from the early days. FolioFn is their largest “legacy” investment from that period.
For our part, we are maintaining the company’s CCR 3 rating but are hopeful that should the deal close, Foliofn Inc. – the oldest denizen – can be removed once and for all from the BDC underperforming company list.