Infinite Care LLC: Returns To Performing Status

BDC managers do not like to name names – even when they have good news to report. On December 24, 2020 Harvest Capital (HCAP) – as part of a conference call devoted to its proposed merger with Portman Ridge (PTMN) – reviewed recent developments at two of its four non performing portfolio companies. In this regard we learned the following about an anonymous company: “..Another one of our longer-lived nonperformers is we recently took active management of the company, and its performance has improved dramatically in the last 6 months and is back on accrual status this quarter. And we’re hoping to be out of that investment potentially in the next 6 months“.

By a process of deduction, we’re 99% certain HCAP is talking about Infinite Care LLC – a home health care operator. The company has been on HCAP’s books since 2016 and in 2017 was completely restructured and the BDC took legal and operational control. The debt has remained non performing for years. Of late, though, despite having first lien debt remaining on non accrual, HCAP has been valuing one of the loans above cost, a suggestion something has been changing for the better.

As of September 2020 total HCAP exposure at cost to Infinite Care was $13.7mn, of which $7.8mn was in debt priced at a below market 3.0% and due 1/1/2021. The $5.9mn of equity involved is still valued at zero, but that may change based on the opaque disclosure on that conference call. Overall, HCAP’s outstandings were valued at $8.5mn.

It’s too early to assume HCAP will be making a full recovery – or better, but the trend is positive. At this point we’re guessing that a buyer is being negotiated with and that the New Year 2021 loan maturity will be extended. Maybe HCAP will get away with a small realized loss when all is said and done, and a greater value than what was showing at September 30, 2020. As importantly the capital tied up in this business for many years will get freed up to benefit whoever the future shareholders of the BDC will be.