Chief Fire Intermediate: IIIQ 2020 Update

We’re playing catch-up in discussing Chief Fire Intermediate Inc. (aka Chief Fire Prevention and Mechanical Corp). The kitchen contractor, which serves the north-east, has been non performing since the IQ 2020. That was only one quarter after Capitala Finance (CPTA) first invested in the business with a mix of first lien debt, preferred and common, supporting an acquisition by Trinity Private Equity.

Unfortunately for the company, CPTA and Trinity this was a case of uber- bad timing. The company principally services the restaurant business in New York City, and you know what’s happening there. Within weeks of booking a $8.1mn first lien loan yielding 8.7%, the debt became non performing. The preferred and equity were written to zero. The debt is currently discounted by (25%) as of September 30, 2020 but began at a more modest (12%).

CPTA has said nothing since issuing a press release when the investment was first booked a year ago. As a result, we’re relying on the public record – which tells us nothing – and the quarterly CPTA valuations. The current value given is $6.1mn, an overall (33%) unrealized loss from a total cost of $9.0mn. For our purposes, we wouldn’t be surprised to see the downward valuation trend continue and result in a potential realized loss of (50%). Or more.

Also unknown is whether some sort of resolution is in the cards in the short run. Until then, CPTA’s capital – and potential income – is frozen. For our part, we’ll provide an update when we hear anything new and notable.