Imagine Print Solutions: Restructuring & Sale Complete

We last wrote about Imagine ! Print Solutions Inc. (recently renamed The Imagine Group) back in early 2020, when some of its debt was on non accrual. We wrote at the time “Clearly the company is highly likely to file for Chapter 11 or restructure shortly“. We were right, except about the time frame, but now the reckoning has occurred. We now know from Moody’s, which is bowing out as a rating group, that :

On 22 January 2020 [we imagine Moody’s meant 2021] , Imagine completed a restructuring whereby first lien and second lien debt holders were either converted to equity or eliminated. Moody’s views these transactions as distressed exchanges and events of default as they reflect a failure to meet the original promise under the debt agreements and results in significant losses to lenders“.

The company will now be owned “by a combination of its former lenders and funds managed by Cerberus Capital Management, L.P. (“Cerberus”), the Goldman Sachs Merchant Banking Division and Arbour Lane Capital Management, LP.“.

Where this leaves the only BDC with remaining exposure to the company – Oxford Square (OXSQ) – is unclear. As of September 30, 2020, OXSQ had $14mn invested at cost in $15mn of second lien 2023 Term debt, with a FMV of under $0.2mn. The debt has been non-performing and depriving OXSQ of $1.35mn in annual investment Income since the IVQ of 2019. Along the way, non-traded Audax Credit BDC and Capital Southwest (CSWC) – through its joint venture – have sold off their positions, which amounted to $1.5mn and $3mn respectively at cost, leaving OXSQ the only BDC standing.

We don’t know if OXSQ is somehow involved with the new ownership or will just be writing off its entire exposure as a result of this transaction. Either way, though, the BDC seems almost certain to record a significant loss from this investment. Technically this was not a Chapter 11 filing but is being treatedas a distressed exchange and thus a default” by Moody’s, and will be added to the BDC Credit Reporter’s list of companies that went bankrupt. Given that OXSQ has essentially already written off the investment, we expect no impact on either book value or income going forwards. Tentatively we have re-rated Imagine from CCR 5 to CCR 6, which indicates sold or no longer held.