ASP MCS Acquisition: Downgraded by S&P

On June 18, 2020 S&P downgraded ASP MCS Acquisition (dba Mortgage Contracting Services) to D from CCC, after the company failed to make a scheduled interest payment. Furthermore, the rating group grimly projects that the company is unlikely to make that payment within the allowed 5 day grace period, despite having the resources to do so. Also downgraded to D is the company’s 2024 Term Loan with a face value of $390mn.

This is all very bad – but not unexpected – news for the two BDCs with a total of $19.1mn at cost of exposure in that same 2024 Term Loan. The biggest exposure ($13.9mn) is held by non-traded Business Development Corporation of America and $5.2mn by publicly traded Crescent Capital (CCAP). Both BDCs had already greatly written down the value of their positions – by (61%) and (64%) respectively as of March 31, 2020.

The BDC Credit Reporter had already applied a CCR 4 credit rating to the company from IIQ 2019, and has been underperforming since the IIIQ 2018. However, we are now adding the company to our Weakest Links list given that non accrual seems to be inevitable. Just over $1.1mn of annual investment income will be suspended should that default occur.

We will circle back with an update shortly.