Iqor US, Inc.: Files Chapter 11

On September 10, 2020 IQor Holdings and each of its subsidiaries (including Iqor US) filed for voluntary Chapter 11 protection in Texas. The company has a restructuring plan in place and above-average support in situations of this kind from its creditors. Furthermore, debtor in possession facilities have been negotiated with a value of $130mn. No wonder the company is optimistic about being in and out of bankruptcy in 45 days.

There is only one BDC with exposure to the company: non-traded Sierra Income with $20.6mn advanced at cost in two loans. As of June 2020, the smallest of those loans was already on non accrual and the total FMV of debt outstanding was $12.7mn. Given that a restructuring has been in the cards for some time we imagine the latest value may be close to where the debt will be marked when the restructuring occurs in the next few weeks. As a result, by year’s end we should see Sierra book a realized loss of ($8mn) or more. We’re not certain how the balance sheet will be restructured but a loss of income – given that most of the debt was still current through June – is likely as well.

This is the second BDC-financed company bankruptcy in September to date. As is the case in most bankruptcies in recent months a restructuring agreement was in place when the filing occurs. This propensity has resulted in more companies going out than coming out of court protection lately. As for the reason for Iqor ending up in this situation ? As the press release itself discloses, an acquisition gone wrong is the culprit rather than the usual suspect: Covid-19.