Maxus Carbon: Debt Placed On Non Accrual

Apollo Investment (AINV) has reported IIQ 2020 results, which included the news that two debt facilities associated with chemical plant Maxus Carbon were placed on non accrual in the quarter. These are two 2024 senior loans of $13.3mn and $17.1mn respectively. AINV – which owns the troubled business – had already been requiring only a reduced interest rate (5.0% and 3.0% respectively). Still, the income lost is substantial: ($1.2mn) annually.

We’ve written about the company before on two occasions. Every time we have a new look at the company business seems to have gotten worse and valuations are lower. Besides the non accruals AINV took two unrealized write-downs this quarter on debt and equity in Maxus Carbon and its affiliated company totaling of ($10.0mn). The current FMV is $22.6mn on investments with a cost of $76.5mn. That means (70%) has been discounted already.

The BDC Credit Reporter has downgraded Maxus Carbon to CCR 5, or non performing. We’d be surprised if AINV achieved any recovery on the entire amount invested, but with very limited disclosures as to what is going right or wrong at the plant it’s hard to point to more than hunches. Unfortunately, this is an example of a “zombie” portfolio company kept alive – seemingly – by the goodwill of its lender-owner but generating no return for the BDC’s shareholders. Apollo Global – which manages AINV – should be either closing down this operation; bringing in partners to validate the value, or – at the very least – provide a level of performance disclosure to allow its shareholders to determine what the eventual outcome might be. Instead, we are getting a slow death by multiple cuts in an information void.