Maxus Carbon: IQ 2021 Update

With Apollo Investment’s (AINV) IQ 2021 filings, we can provide our fifth update on Maxus Carbon (aka Carbonfree Chemicals). The BDC valued the now all equity investment with a cost of $77.8mn at $25.4mn. That’s essentially unchanged from the prior two quarters and since AINV’s debt to the business was converted into equity.

The valuation might suggest that nothing much – good or bad – is happening at Maxus Carbon but what was said on the May 20, 2021 AINV conference call suggests otherwise. Here is what was said by AINV’s CEO Howard Widra:

[Maxus Carbon] has some really good developments there. And that’s an all equity debt investment that had been converted to our equity. But that’s all equity and is a carbon-efficient business that has a lot of demand, obviously, where the world is going right now. And so, we hope that over the next year can have some real significant positive things happen to it”.

We can’t tell if the above is something specific getting underway or just hopeful comments from the BDC. It’s about time something happened at Maxus Carbon – on the books since 2013, and non-income producing since IIIQ 2020.

We are retaining our CCR 4 rating and not adding Maxus to our Trending List given the unchanged nature of the recent valuations and the vague nature of management’s status update. In the current environment, though, where capital is loose, it’s not impossible that SOMETHING might happen of a positive nature where this long standing “zombie” investment is concerned. That’s at variance with our earlier thoughts that the most likely resolution would be a write-off of the project and a complete loss. At this stage, both good news or bad news are equally likely.