GK Holdings: Company Acquired

As we reported all the way back in October 2020 , Global Knowledge or GK Holdings has been acquired by a special purpose acquisition company (“SPAC”) , which itself is going public on June 14, 2021. The new company is being called Skillsoft Corp, under the ticker SKIL. Skillsoft – of course – is a leading training company, which was also gobbled up by the new public entity, which has put its name on the new public business.

Where the BDC lenders to GK Holdings are concerned, this must be good news. According to Advantage Data, there are nominally 6 lenders to the company, with a total cost of $31.1mn. However, these include Harvest Capital and Portman Ridge (PTMN). The former has just been acquired by the latter, so there are only 5 BDCs involved. (Then there’s non-traded Audax Credit whose exposure to the company is carried under the name Global Knowledge Training LLC, albeit the amount advanced at cost is minimal at $0.9mn).

The FMV of all this BDC exposure at March 31, 2021 was $20.9mn. The roughly ($10mn) discounted was from both first lien and second lien debt held, all of which was on non accrual at March 31, 2021. Unless we are very mistaken, all that debt should be repaid in full with the IPO of Skillsoft and the unrealized loss reversed. All the BDCs involved – led by Goldman Sachs BDC (GSBD); non traded Sierra Income and Stellus Capital (SCM) – should be able to record material unrealized gains and re-deploy the proceeds into new investments.

All the above is based on surmise rather than an explicit acknowledgment by any of the BDCs involved, so we’ll wait till the IIQ 2021 results come out before changing the credit rating from CCR 5 – non performing – to CCR 6, or “repaid”. (The exception to that statement is GSBD, which went on the record months ago about its expectation of not incurring any loss on GK Holdings thanks to the SPAC deal, and is the principal basis for our optimism in this regard for all the lenders involved). However, we’re certainly adding the company to our Trending list as we expect both value and income to drastically change in the IIQ 2021 results.