On January 5, 2021 substance abuse chain Community Intervention Services Inc. filed Chapter 11. At the same time – as reported by the WSJ – the company’s assets are to be sold to the Mentor Network, which is based in Boston, for $39.5mn.
The only BDC with exposure – as featured in an earlier article on March 14, 2020 is OFS Capital (OFS), which has invested $7.639mn at cost in the subordinated debt. The loan has been on non accrual since June 2016, and valued at zero since IVQ 2017. Chances do not look good that OFS, or any junior creditors, will receive anything from any eventual assert sale.
We expect a realized loss will be booked at some point in 2021 by OFS when the transaction is fully settled. There should be no further impact. OFS long ago ceased to discuss the company in its quarterly conference calls: the last time Community Intervention was mentioned was in 2018.
More notable is that – as far as we can tell – this is the first bankruptcy of a BDC-financed portfolio company in 2021. The substance abuse sector has not been kind to BDC lenders of late, with a public company recently filing for Chapter 11. This was an HIG portfolio company , acquired in 2013 and seems to be a complete write-off for the sponsor and the junior creditors as well.