As the company promised back on June 26, 2020 when we last wrote, Mood Media Inc. has filed for Chapter 11 bankruptcy. Also as previously indicated, the company and its creditors appear to have worked out a restructuring agreement in advance, the details of which are spelt out in the prior article. In the most recent press release on July 30, 2020 Mood Media indicated the whole plan was submitted to a judge on July 31, with the hope of exiting from Chapter 11 status very quickly. No word yet on the outcome of that deliberation.
We continue to believe the $120mn invested by three BDCs (with most of the capital advanced by FS KKR Capital or FSK and FS KKR Capital II or FSKR) will be largely written off. Our current estimate is that two-thirds of the debt and equity will result in a realized loss. Also likely is that the BDCs will be involved in both the DIP financing and the $200mn in post-bankruptcy senior loans planned. That will result in some investment income coming in but will increase long term exposure. Many years may go by – even if the restructured Mood Media does well – before this investment gets exited, as the BDC lenders will now be owners and creditors.
The hard truth is that even a restructured Mood Media has no guarantee of success given the pandemic and the structural changes going on in retail. If more and more of us shop from home, and less and less in stores, the demand for the company’s piped-in music will necessarily drop. Currently we are maintaining a Corporate Credit Rating of 5, and adding the company to the BDC Bankruptcies list, an exclusive feature of our publication. This is the tenth BDC-financed company bankruptcy in July and the 40th for the year. (Remember to go to the BDC Credit Reporter’s “BDC Bankruptcies” table for the constantly updated list of every company that has filed for Chapter 7 or 11 in 2020). Currently Mood Media is at the top but – the way things are going – will soon be displaced by new entrants.