Yak Access LLC – as is not obvious from the name – is a manufacturer of mats for heavy equipment, including for the oil services business. As multiple sources have been reporting, the company had a weak IIQ 2021, and its lenders are beginning to worry about the sustainable servicing of its near $1bn in debt. On October 5, we heard that those same lenders were working with investment bank Evercore to bolster the company’s liquidity and viability. Here’s what Bloomberg said:
“A group of first-lien lenders to Yak Access are working with investment bank Evercore to help navigate the mat supplier’s weak earnings and liquidity pressures, according to people with knowledge of the situation…The lenders’ mobilization came after Yak reported double-digit declines in its profit and revenue for the second quarter. The Platinum Equity-backed company, which mainly serves midstream pipeline and utility clients, suffered from delays and loss of projects. Yak also burned cash during the second quarter, reversing previous trends. Its liquidity includes $23.7 million of revolver availability and $3.4 million in cash.”Bloomberg quoted by Petition on October 17, 2021
For three BDC lenders with exposure, this is hardly breaking news. The debt has been underperforming (i.e. valued at a greater than 10% discount to cost) since IQ 2020. As of IIQ 2021, Guggenheim Credit Income Fund had $4.7mn invested, and discounted (13%). Both First Eagle Alternative Credit (FCRD) and FS KKR Capital (FSK) had modest amounts advanced in the company’s 2026 Term Loan. The former has discounted its position by (6%) and FSK – for reasons unclear – is valuing the debt at a 33% premium. (Both positions – for what it’s worth – are owned through their respective joint ventures and don’t get talked about on conference calls).
In any case, that’s all in the rear view mirror given the latest developments, so we expect to see different valuations applied in the IIIQ 2021 and – possibly – going forward. Exposure here is modest, even by Guggenheim and FSK holds less than a million dollars so we won’t spend much time on digging into the case and its outlook as yet. For the moment, we’ll limit ourselves to bringing the matter to our readers attention and initiating Yak Access at a corporate credit rating of 4. As far as we know, interest payments remain current.