Templar Energy: Files Chapter 11

On June 1, 2020 Templar Energy LLC filed for Chapter 11. We first wrote about the troubled energy company back on April 28, 2019 when the CEO resigned and the outlook was bleak even then. Now the company’s lenders are seeking the sale of Templar’s assets and its eventual dissolution, says Law360.

We won’t spend any time on the bankruptcy details given that the only BDC exposure is in the company’s preferred and equity ($12.8mn) at cost and has already been effectively written down to nothing at the end of the IQ 2020. This will result in a ($12.8mn) much expected realized loss for non-traded BDC FS Investment II.

This is a borrower with a long history for BDC lenders, which once included Main Street Capital (MAIN) and HMS Income, and which filed for bankruptcy back in 2016 when BDC exposure at cost was close to $130mn. Realized losses were taken then but FSIC II received equity which was carried till now, if we understand the back story correctly.

In any case, this is just one more casualty amongst many for the partnership between KKR and FS Investments. In this case, though, as in many others, KKR inherited an investment left over from when FS Investments was teamed up with GSO Blackstone. This bankruptcy will at least clear the BDC’s books of a “zombie” investment that has been kicking around for many quarters, generating no income and with little chance of ever being worth anything.