Ambrosia Buyer: Debt Placed On Non Accrual

As we noted at the top of our earlier article on November 26, 2020 about Ambrosia Buyer Corp., there are actually three different names used by different BDCs for the same borrower. Here’s what we wrote:

Occasionally BDCs use different corporate names for portfolio companies, which is very confusing for the BDC Credit Reporter and requires much checking and double checking. In this case we are going to discuss Ambrosia Buyer Corp; Trimark USA LLC and TMK Hawk Parent Corp. Three names but one company and set of debt. As CreditRisk Monitor explains: “Ambrosia Buyer, Corp. was formed by Centerbridge Partners, L.P. to facilitate its acquisition of TMK Hawk Parent Corp. d/b/a TriMark USA, LLC (“TriMark”) from Warburg Pincus LLC. TriMark is a leading distributor of foodservice equipment and supplies in North America serving over 80,000 customers”. Several BDC lenders are involved in a first lien Term Loan due August 2024 and a second lien maturing one year later. Total BDC exposure is a material $63.5mn at cost, split between four firms: Apollo Investment (AINV); New Mountain Finance (NMFC); Audax Credit BDC and Cion Investment, which is related to AINV.”

We also predicted in that same article that a default was a likely outcome: “As half of Ambrosia/Trimark’s customers – according to Moody’s – are restaurants and that the group already has a Caa rating on the company, we are not optimistic. We don’t know enough to add the company to the Weakest Links list, so we’re not “calling” an imminent payment default. Would we be surprised if one occurred ? No, given the dire economic conditions and the 10X debt to EBITDA remarked on by Moody’s as far back as April 2020″.

Now – thanks to AINV IVQ 2020 results disclosure – and a brief comment on its conference call, we know that company is non performing: “We placed 1 new investment on nonaccrual status during the quarter: our second lien investment in Ambrosia Buyer, or TriMark, was placed on nonaccrual status. The company is the distributor of food service equipment and supplies in North America and has been struggling during the pandemic as its restaurant customers were forced to close. We continue to receive scheduled cash interest payments from the company, but we’ll be applying those proceeds to the amortized cost of our position“.

From an income standpoint, that’s ($1.9mn) forgone on an annual basis, or about 1.7% of the BDC’s latest Net Investment Income Per Share annualized. (The second lien has a principal value of $21.4mn and an interest rate of 9.0%). As of the IIIQ 2020, there were still 4 BDCs involved with the multi-named company, with $63mn invested in first and second lien debt. Only Cion – besides AINV – holds a second lien position ($13.4mn). The remainder are in the first lien debt and may, or may not, also be in default.

AINV dropped its value in Ambrosia 30 percentage points from $16.6mn to $10mn, so it’s likely other BDCs will – at least – discount their debt further. Last quarter the senior loan was already haircut by (33%). For our part, we are downgrading the company from CCR 4 to CCR 5 and will provide an additional update when we hear from NMFC.