According to news reports Mood Media Corp. has been sold to Vector Capital for an unknown amount. Current lenders are to continue to provide debt financing under the new ownership. The BDC Reporter has written about the company on three prior occasions. Most recently, we wrote about Mood Media when the business re-structured and emerged from bankruptcy for a second time in recent years.
For the three BDCs with exposure – publicly traded FS KKR Capital (FSK) and FS KKR Capital II (FSKR) and non-traded Business Development Corporation Of America (“BDCA”) – this company has been a major disaster from a credit standpoint. As of June 2020, total exposure at cost – both in the form of senior debt and equity – totaled $122mn. Then came the most recent restructuring in August 2020 and huge realized losses had to be recognized. As far as we can tell (the BDCs themselves are coy in the filings about the specifics and on their conference calls) $110mn or more was permanently written off.
As of September – FSK and FSKR held an equity stake in restructured Mood Media but that had no cost or FMV attached. We assume the two sister BDCs permanently wrote off ($108mn) in August and do not seem to have participated in any post-restructuring debt facilities. By contrast, BDCA still has $12.4mn of debt and equity at cost and $14.4mn at FMV. (We have no explanation for these discrepancies as this is a privately-held company which does not disclose much in the way of information).
Now that Mood Media has been sold, we expect FSK and FSKR will just move on, but BDCA might continue as lender. We’ll be curious to see if the $4.4mn value of restructured equity will be reflected in the IVQ 2020 BDCA results.
For FSK and FSKR it’s been a long and winding road that begin in 2011 and 2012 respectively and quadrupled in size over time. Given that the two BDCs at the end of the day had to write off essentially every dollar advanced is a black mark. Even for BDCs of this size realized losses of ($50mn) plus are material.