Denbury Resources: Files Chapter 11

On July 30, 2020 energy company Denbury Resources filed Chapter 11. The move was expected as we had added Denbury to the Weakest Links list earlier in the month. As is so often the case these days, the company had negotiated a restructuring plan in advance with most of its creditors and expects a quick exit from Chapter 11, with a much de-leveraged balance sheet.

BDC exposure continues to be limited to FS Energy & Power – the non traded, energy specialist BDC that has been taking it on the chin time after time during this most difficult period for its chosen sector. As of June 2020, the BDC’s exposure has dropped from the prior quarter. Off the books – and presumably written off – is $12.0mn in second lien debt due in 2024. What remains is $42.1mn in Term debt due 2022 and already written down by (59%). Between the two facilities, the BDC will be losing ($4.8mn_ of annual investment income. Going forward, we expect the debt will be converted to common stock, which means the loss of income could be permanent, but leaves a potential long term equity upside.

We have downgraded the company to CCR 5 from CCR 4; removed Denbury from the Weakest Links list and added an outcome expectation of a debt for equity swap, all of which is reflected in the BDC Credit Reporter’s database.