Evergreen Skills Lux: Files Chapter 11

On June 15, 2020 multiple news sources reported that private-equity education company Skillsoft Corp. (aka as Evergreen Skills Lux) filed for Chapter 11 bankruptcy. From the first details we’ve learned, this is a pre-packaged arrangement and the company – which has about $2.0bn in debt – expects to be in and out of bankruptcy court protection in a short time. As is the fashion these days, this is a debt for equity swap which will see $410mn of debt extinguished in return for control of the business. No word on whether a Debtor In Possession financing is involved, only that Skillsoft expects to have $50mn of liquidity available. More details will follow and we’ll circle back if worthwhile.

Under two different borrower names (Skillsoft Corp and Evergreen Skills Lux SARL) there is $50.3mn invested at cost in the company by 5 different BDCs. These are non-traded BDCs Cion Investment, Business Development Corporation of America and HMS Income, and publicly traded Main Street Capital (MAIN) and Monroe Capital (MRCC). [In an earlier version of this article because of a confusion about the company’s multiple names only one BDC was identified and the amount was smaller].

Skillsoft had been underperforming for some time. From the IIQ 2018 the debt had been discounted more than (10%). As early as IVQ 2019 Cion had already placed its second lien position on non accrual. By the latest quarter – March 31 2020 – all the BDCs had their first and second lien loans rated as non performing. This is yet another large cap company whose debt was priced inexpensively (LIBOR + 475 bps) seeing their financial condition deteriorate more quickly than might otherwise have been the case due to Covid-19. We call these companies First Wave credit casualties.

This is the sixth BDC-financed company to file for bankruptcy protection in June and the second on this day.