Carestream Health: Debt For Equity Exchange Planned

We hear from Moody’s that medical film company Carestream Health, Inc plans to restructure its debt, including a debt for equity exchange. As a result, the rating agency has “downgraded Carestream Health Inc.’s (“Carestream”) Probability of Default Rating (PDR) to Caa3-PD from B3-PD“. This is considered a “distressed exchange”.

There is only one BDC with exposure to the company: Portman Ridge (PTMN), which has invested $1.7mn in second lien debt and owns no cost equity. As of March 202, the debt was valued at a slight premium and the equity at zero. The yield on the debt is high at 13.50% and will – presumably – go away if converted to equity as envisaged by the restructuring.

We don’t quite know what to make of this and the amounts involved are small. Still, we are adding Carestream to the underperformers list for the first time, with a rating of CCR 3. We might learn more when the BDC reports second or third quarter 2022 results.