We last wrote about Limetree Bay Ventures LLC, which owns a much troubled refinery in St Croix back on July 31, 2021, shortly after its bankruptcy filing, which we’d also covered in an earlier article. Since then, the only BDC with exposure – FS Energy & Power – has faced the inevitable and taken a huge realized loss on the investment, which we estimate at ($283mn) on $300mn invested. As of the IIQ 2021, the BDC had only $13mn advanced in first lien, debtor-in-possession debt and $19.1mn in equity, valued at par.
The DIP debt, though, was already discounted by (28%) to $10mn. That’s because – as becomes clearer with every day – the risk of the refinery not re-opening increases with every day. This is confirmed by a WSJ article describing what is being said by the company and potential buyers at a bankruptcy court hearing . What the EPA will or will not agree to where the re-opening of the refinery is concerned is critical.
If that wasn’t enough, one of the refinery’s post-bankruptcy lenders has not been paid in full and could trigger a default, as we heard a week ago in another WSJ article.
All of this makes the prospects of FS Energy – which has already taken a beating – recovering any monies very bleak. We expect this will all resolve itself relatively quickly if the EPA gives a flat no answer to the re-opening of the refinery, regardless of who might be the owner. This looks like FS Energy & Power is saddled with one of the largest credit losses in recent BDC history.