Rhino Energy LLC: Files Chapter 11

On July 22, 2020 Rhino Resource Partners, and its wholly owned subsidiary Rhino Energy, filed voluntarily for Chapter 11. According to a press release: “.. Rhino has obtained $11.75 million of post-petition financing and the support from a stalking horse bidder to acquire the company. Rhino intends to use the bankruptcy process to implement an orderly sale of substantially all of its assets in an effort to maximize value for all stakeholders and allow for the prospect of continued employment and business opportunities at its operating locations“. Rhino Energy is a publicly traded coal company.

There is only one BDC with exposure that dates back to 2017 and which has been underperforming almost since the beginning. The BDC in question is Cion Investment which has invested $9.8mn in first lien debt and $0.280mn in equity. As of March 31, 2020 the debt was still valued at a modest discount of just (6%), but the equity was written down (95%). We doubt that the first lien lenders will get away without a material loss but don’t have the numbers at hand to be sure. However, we know that Cion will not be collecting about $1.0mn of annual investment income from the debt until this is resolved.

We are downgrading Rhino from CCR 3 to CCR 5. This is the sixth BDC-financed company to file for bankruptcy protection in July to date, and the fourth in a row from the energy sector broadly defined. Fossil fuels are having a very hard time.