It’s good to have a plan: a restructuring plan that is. Pace Industries entered Chapter 11 back on April 13, 2020 with a pre-agreed restructuring agreement worked out with its lenders. Just six weeks later, the manufacturer of die casts, is out of bankruptcy and with “a new go-forward growth strategy, focused on building its position in key industries and expanding in growth markets”. This speedy exit has been possible by both the conversion of 100% of secured debt (!) into equity and the provision of Debtor In Possession (“DIP”) financing by those same creditors, now owners.
For the only BDC with exposure – non-traded TCW Direct Lending – this will be a bittersweet resolution. The lender has advanced $96.2mn in senior debt, discounted (19%) at March 31, 2020, just before the filing. We can only guess – but we won’t – at what the ultimate write-down might be. The debt will turn into equity in Pace. We’re not clear if the DIP financing will be converted into longer term debt financing or will be extinguished. If that’s the case, total invested capital by TCW might yet increase.
We will circle back to the BDC when IIQ 2020 results are published to get all the details straight. This is definitely a set-back for the lenders – and for TCW – but hope springs eternal that – over time – the company will prosper and what has been lost will be recouped. As a result, we expect to be covering the company for some time yet. We’re currently upgrading Pace from CCR 5 to CCR 3, still underperforming, till we get all the perinent details.