The AG Kings Holdings story is coming to a conclusion. We’ve been covering the company since June 2019 with a series of updates. The retail chain has been sold to Albertson’s Acme Markets in January 2021, according to BDC lender Capital Southwest (CSWC). The sale was known about previously, but not its final closing, which seems to have occurred.
This means that the debtor-in-possession financing provided by CSWC – and by WhiteHorse Finance (WHF) – has been repaid in full. However, some legacy debt will be written off.
CSWC revealed that its 2021 term debt with a cost of $3.5mn was valued at $0.7mn at year end 2020 but was repaid at a higher value in January, but the exact amount was not given. Here’s what CSWC’s management said on its most recent conference call: “So our exit was higher than where it was valued last quarter. So that’s the first thing I would say. And then the $739,000 that’s left is basically the last interest. I mean, there’s a litigation trust and the final bankruptcy cleanup and there’s a final working capital adjustment and some final economics, which, candidly, we believe, is going to be meaningfully higher than the $740,000, we have it valued right now. So we think there’s upside in NAV from that perspective. And then our all-in recovery at the end of the day, will be about $0.80 on the dollar“.
We expect CSWC will end up taking a realized loss of ($2.5mn-$3.0mn). WHF will, in all likelihood, book a loss as well. Nonetheless, the absolute amounts are relatively small. The BDCs were fortunate that the pandemic boosted AG Kings business and its prospects at this critical juncture and resulted in better than might have been expected proceeds from the company’s sale. Once the final payouts are made we’ll re-rate AG Kings from CCR 5 to CCR 6, reflecting the end of all BDC exposure.