In a press release on December 29, 2021 Canadian oil & gas outfit Prairie Provident Resources announced a one year renewal of its secured revolver and of subordinated notes owed. Furthermore, the agreement between the company and its borrowers requires all subordinated interest payments to be paid in kind. As a result, Prairie Provident will have a modest amount of borrowing capacity under its revolver and more time to turn around the ailing business. The company is publicly traded but it’s stock trades at just $0.07 Canadian per share.
Not to be unkind, this is another classic case of kicking the can down the road, presumably on the hope that higher oil prices may rescue the business. We’ve read the latest quarterly results, and are not very optimistic that the business can ultimately be saved, but we’re not oil & gas experts.
The only BDC with exposure – and also not expecting much – is Goldman Sachs BDC (GSBD). Since 2016 (!), the BDC has had $9.2mn invested in the company’s equity. The fair market value of its position has been negligible for years, making this one of those “zombie” investments that generate no income, has little hope for recovery but takes up space in the BDC’s portfolio company list. At its nadir in the IQ 2020, GSBD valued its investment at $38,000. Since then, though, the value has increased – as of September 2021 – to $244,000. That’s 6x higher but still means the position has been discounted (97%)…
At the moment the position is immaterial to GSBD but – given that anything can happen – that could change for the better down that can laden road. We’re tracking what happens to the publicly traded stock and will report back if and when a significant valuation increase occurs. Or a final write-off. Prairie Provident is rated CCR 4 in our 5 point rating system.