We hear from S&P that Boardriders Inc. has recently been significantly restructured by its sponsor Oaktree and with the support of some of its lenders and other parties:
“S&P noted that Boardrider recently issued $155 million of new money debt, including:
- $65 million contributed by Boardriders’ financial sponsor owner, Oaktree, consisting of a $45 million initial term loan and a $20 million delayed draw term loan (currently undrawn);
- $45 million contributed by other existing lenders; and
- $45 million via a facility backed by a European government.
The transaction provides needed liquidity and fund an operational turnaround“
S&P considers the new debt “distressed” and has lowered its rating to SD or Selective Default, but may raise it back to CCC shortly. (This is part of the complex mechanics of rating groups). S&P is not optimistic about the medium term outlook given “[Boardriders] still-unsustainable debt leverage, high debt service commitments, and our view that the company will likely have difficulty generating consistently positive free cash flow before its next significant debt maturity in 2023].
Great Elm Corporation (GECC) remains the only BDC with exposure. What we don’t know is whether the BDC participated in the restructuring and advanced new monies or did not and became structurally subordinated to the new debt in what sounds like a controversial move by the principals. We are retaining the CCR 4 rating on the company that dates back to May and are not choosing to add Boardriders to the Weakest Links list as all the new cash will temporarily help liquidity and ensure debt service. Nonetheless, the outlook for GECC – one way or another – remains highly uncertain. The BDC has discounted its 2024 Term Loan position by (28%) at the end of June, but current market indicators shown by Advantage Data suggest – not surprisingly – that the discount might be (40%).
We’ll be checking the IIIQ 2020 GECC results to learn more about how the BDC acted when asked for more funds and what that has done to total exposure and valuation. In any case, this is a credit whose tribulations are likely to continue for some time to come so – unless GECC sells out its position – expect to hear more. Attached, though, are our prior two articles.