School Specialty, Inc: To Explore Strategic Alternatives

Publicly traded School Specialty Inc. announced on October 9, 2019 “has commenced a formal process to explore and evaluate potential strategic alternatives focused on maximizing shareholder value”. Previously, the company had announced the hiring of a financial adviser to assist with re-jigging its financial structure. Now the company aims to review “all options”.

We reviewed the latest quarterly financials, which showed the company generating just $10mn of EBITDA and a net income loss of ($6mn). Debt, though, was very high at close to $200mn, and trade payables are growing as sales are dropping. Trouble clearly lies ahead, and the stock price has dropped to $2.50, down from a high of $17.10 within the last 52 weeks.

This must be worrisome news for the only BDC lender: non-listed TCW Direct Lending, which has a material exposure of $43.1mn, all in the publicly traded 2022 Term Loan, which itself is structurally subordinated to an asset-based loan. At June 2019, TCW had discounted its position by as much as (8%). The current market value of the debt is slightly lower at time of writing. The possibility of an even greater write-down – and some sort of write-off – is growing by the day.

We are downgrading the debt from “performing” – or CCR 2 in our 5 point rating system – to CCR 4, or Worry List in a single bound. Given the high interest rate being charged (11.4%), the potential loss of income could be high: close to $5.0mn. We get the impression that School Specialty – only now arriving on our under-performer list – may be here for awhile.

Murray Energy: Forbearance Extended Two Weeks

On October 16, 2019 Murray Energy announced that its lenders “amended a forbearance agreement regarding debt payments until Oct. 28 at 11:59 p.m. The company originally had until Oct. 14 at 11:59 p.m., but the deal allowed the agreement to be extended. Lenders have agreed to not exercise available remedies related to payments due on Sept. 30“. We had previously discussed the initial forbearance in a post on October 3.

The coal company took the opportunity to also announce its intention not to pay debt service due on two other debt agreements.

This only means that the day of reckoning – which is unlikely to be favorable to the company and its lenders – has been slightly delayed. Given the continuing weakness in the coal sector, we are not optimistic. However, we should note that the bulk of $52.4mn in BDC exposure is in the 2021 Term Loan, which continues to trade at only a (2%) discount to par.

However, non-listed Business Development Corporation of America and Cion Investment with $12.5mn of exposure in the 2022 Term Loan may be less sanguine. According to Advantage Data, that debt is trading at a (66%) discount. Last time the position was valued the discount was (33%), suggesting further unrealized write-downs are coming in the third quarter. If we get a Chapter 11 filing there’s $5.6mn of investment income at risk. A little further down the road: material Realized Losses.

United Sporting Companies: Justice Department Objects

One step forward, one step back. A day after we heard that United Sporting Companies had repaid Prospect Capital (PSEC) a seventh of its loan, we hear that the Justice Department is not happy. According to Bloomberg Law:

…[the] bankruptcy watchdog division objected to firearms distributor United Sporting Companies’ proposed liquidation plan, concerned that it grants pre-bankruptcy lenders immunity from lawsuits related to the case.

The Chapter 11 plan’s exculpation provision goes too far, the U.S. Trustee said in its Oct. 15 objection filed at the U.S. Bankruptcy Court for the District of Delaware.

We don’t know how to evaluate this new spinnet. We’ll just have to wait and see if anything further develops.

United Sporting Companies: Prospect Capital Partly Repaid

Details are sparse but in an SEC filing Prospect Capital (PSEC) revealed receipt of “$19.5 million of our Second Lien Term Loan investment in USC [United Sporting Companies] using proceeds relating to their June Chapter 11 bankruptcy filing and ongoing asset liquidation“. That’s good news for the BDC, which is in the hook for a massive $127mn at cost invested in the debt of the bankrupt sports supply business. (We wrote about United Sporting – and PSEC’s predicament- back in June 2019 ). This is a sliver of good news (one seventh) for the BDC about to take a very big realized loss on what used to be one of its largest portfolio companies.

Ferrellgas Partners: In Default ?

On October 15, 2019 Ferrellgas Partners published its full year results. For the last quarter of the fiscal year, the giant propane distributor reported a net loss of ($72mn) and Adjusted EBITDA of $4mn, while interest expense and maintenance capital expenditures and the gains from minor assets sales were $41mn. Or, in other words, the company is performing very badly. The stock price dropped by a third, to close at $0.65.

If that wasn’t enough, the 10-K reveals a dispute between the company and its senior lender TPG Specialty Lending . The latter is claiming that by not delivering certain financial information within a prescribed period, the company is in default under its credit agreement – even though the said information was subsequently forwarded. Moreover TPG believes the auditor’s opinion contains language suggesting doubt about Ferrellgas remaining a “going concern”. The company reads the document differently. In any case the parties have not agreed and the lender is expected – both by Ferrellgas and us – to take further action. That might include attempting to force an involuntary bankruptcy.

The company has been headed south for some time, so we’re not surprised about the poor results – or the likely bankruptcy – but only about the manner in which the company and its secured lender have fallen apart, which will add to the complexity. Total BDC exposure is very high: $101mn. Of that $82mn at cost is held by TPG Specialty (TSLX) in the senior secured debt, nominally to mature in 2023 but which the company is now carrying as a short term liability. See pages 52-53 of the 10-K. FS Energy and Power Fund holds two junior tranches of the debt for the remainder. TSLX is very confident that its senior secured status will ensure no loss under most imaginable circumstances. Still, there’s $8.3mn of investment income in play. We hope that TSLS – which has a very good track record of financing troubled businesses in just the right way – knows what they’re doing where propane assets are concerned.

Roscoe Medical: Update

The medical supplies company Roscoe Medical has been in financial trouble since late 2018 and its debt on non accrual since the IVQ 2018. Back on May 9, 2019 one of the BDC lenders to the company – Saratoga Investment (SAR) – explained that Roscoe faced “both fundamental weakened performance as well as operational issues. While we believe the operational issues have been largely addressed, we expect the company to continue to face headwinds in a competitive industry“. At the time, SAR had written down its second lien debt by (40%). A second BDC – Portman Ridge (PTMN) discounted its position in the same loan by (57%).

On October 10, 2019 SAR discussed its latest results and increased the discount on the second lien loan to (56%). PTMN has not yet reported. An equity stake stake held by SAR has been long ago written down to nothing. However, the BDC did not have much news to report: “There is no real update since we last reported, these marks reflect both fundamental weakened performance as well as operational issues. We continue to work with the senior lenders and sponsors to pursue strategic alternatives in the near to medium term.

We’ve not found any other public information, but the SAR valuation and commentary is not encouraging. Should the company default, $1.25mn of investment income is at risk. Total BDC exposure at cost is $11.9mn, with PTMN having a slightly bigger share.

Sequential Brands: To Sell Brands

On October 14, 2019 Sequential Brands, Inc. announced its intention to explore various strategic options, including a sale of some of its brands. Other alternatives were also mooted including a stock buyback; making an acquisition and “others”, but the sale is the most likely. The Chairman of the company said the decision was triggered by interest expressed by third parties in acquiring some of the company’s retail lines.

We’ve been tracking Sequential for some time and get the impression the Board is putting a good face on a bad situation. As we reported back on May 29, 2019, the company is under-performing financially and highly leveraged – a deadly combination. As noted on April 19, 2019 Sequential already sold two brands, but with little lasting impact. More recently, in another ominous sign, its CEO has resigned and Stifel has been hired to help explore its options.

Something is going to happen here before long but exactly what is unclear, though our money in on an asset sale or a bankruptcy filing. The lenders involved – which includes 4 BDCs and exposure at cost of $292mn – will be very interested in the outcome. All but $13mn of the BDC exposure is held by one of three KS-KKR BDCs, including $61mn by publicly traded FSK. The only unrelated BDC is Apollo Investment (AINV). The $10mn invested in the equity of the company – all by FS-KKR entities – seems a lost cause as Sequential’s stock price continues to reach new all-time lows and currently is a penny stock with a value just $0.27.

More important will be how the 2024 Term debt in which all the remaining BDC exposure lies- currently trading at a modest (3%) discount – will fare. The lenders will be hoping that Sequential will sell assets sufficient to pay off some or all its debt. That could happen, but nothing is for certain in the retail sector these days, so we’ll be staying tuned to what is likely to be a major news story in the weeks ahead, given the size of BDC exposure, and the urgent tone of the proceedings.

ALM Media: Downgraded

On October 9, ALM Media was downgraded by S&P Global Ratings to CCC, from CCC+, on increased refinancing risk associated with upcoming debt maturities in July 2020 and 2021. The issuer’s most current maturity, its B term loan due July 2020 (L+450, 1% LIBOR floor) was downgraded to CCC+, from B–.  The downgrade reflects the increased potential for a liquidity event if there are delays in the refinancing of its debt. The first-lien term loan was quoted around a 94.25 bid today.

There is only one BDC with $22.7mn of exposure, but in both a first lien and second lien loan. That’s non-listed Cion Investment, whose $10mn in second lien debt was already discounted (35%) and remains there when we checked Advantage Data’s real-time market price records today. This company has been on the under-performing list since IIIQ 2017 and does not seem to be likely to return to performing status any time soon. We have a CCR 3 (Watch List) rating.

AAC Holdings: Directors Resign.

On October 1, 2019 4 of 7 directors at AAC Holdings (aka American Addiction Centers) resigned. Shortly afterwards, the SEC warned that the troubled public company was not in compliance with rules regarding the minimum number of audit committee members because of the departures. At the same time, the stock price of AAC continues to plumb new lows, dropping to $0.50 a share at time of writing.

In our minds this more evidence that AAC is close to filing Chapter 11 or restructuring out of court. We’ve added AAC to our Bankruptcy Imminent list (our version of Fitch Ratings Loans Of Concern), and the company is already rated CCR 4.

To be fair, the 2020 and 2023 debt in which several BDCs are invested are publicly traded – as reported by Advantage Data – and the former is trading almost at par and the latter at a (11%) discount, not that much worse than the valuations at June 2019. Nonetheless, if we are right and the markets are wrong ( a tall order admittedly) there is a lot at stake for the 4 BDCs involved with $66.3mn of exposure at cost and valued almost at full value, and with over $7.0mn of investment income involved.

Constellis Holdings: Hires Restructuring Firm

The Wall Street Journal reports on October 9 that defense contractor Constellis Holdingshas engaged PJT Partners Inc. to engineer a plan for restructuring the company’s debt-laden balance sheet, according to people familiar with the matter“. PJT Parners is an investment bank, often used in turnaround work.

Otherwise, the WSJ article has no new information, except a recap of some of the highlights from the most recent financial filings. Some of that data is admittedly dire. We noticed that even after a recent asset sale – the subject of our last post about Constellis – “the company’s liquidity remained tight, amounting to just $33 million of cash and $18 million of availability on a revolving credit facility as of June 30“. That alone should send chills down the spines of anyone concerned about the company.

Anyway, the advent of a restructuring firm and those slim liquidity numbers suggests a day of reckoning is coming – and fast.

We discussed BDC exposure before when we first added Constellis to the under-performing list back in August. Judging by the current market valuations (source: Advantage Data) of the three different loans outstanding in which BDC lenders are involved, the debt is discounted from (8%) to (70%), higher than in June. Thankfully, 90% of of BDC exposure is in the 2022 Term Loan, which is valued the highest even after the news of a prospective restructure. Nonetheless, at current levels – and things could get much worse – potential ultimate realized losses could reach $20mn on the $109mn invested at cost, most of which has not been recognized even on an unrealized basis as of June 2019. Not to mention the loss of investment income, which we’ve previously pegged at $9mn annually.

Unfortunately Constellis has the possibility of being one of the biggest credit hotspots of the fourth quarter (if that’s when the rubber meets the road) for the BDC sector. The prospective damage will be widespread. There are 4 FS-KKR related non-listed funds with $90mn at cost lent to Constellis. OFS Capital (OFS) and Garrison Capital (GARS) and – to a lesser degree – two non-listed BDCs are also exposed.

Fusion Connect: New CEO Appointed.

The BDC Credit Reporter has tracked Fusion Connect from under-performing to Chapter 11 filing and, most recently, to getting ready to exit bankruptcy, expected by the end of the year.

Now we hear that the existing CEO is departing and a new chief executive has been promoted internally to take that key position on an interim basis. The company will be head hunting for a permanent CEO once Chapter 11 is exited. The new interim CEO will be very busy as he has also been appointed President and COO as the individual wearing those two hats has also resigned.

Given that Fusion will shortly be owned by its lenders, which includes Garrison Capital (GARS) and Investcorp Credit Management BDC (ICMB) – formerly CM Finance – these changes – and those to come – deserve watching. We still rate Fusion Connect a CCR 5 because it’s non-performing but expect to maintain the company on our under-performing list with a rating of CCR 3 (Watch List) once operating normally again. We still have a lot to learn about the ultimate balance sheet of the restructured entity; its strategy going forward – and we see from this news – who will be at the helm long term.

Deluxe Entertainment: Files Pre-Packaged Chapter 11

On October 3, 2019 Deluxe Entertainment Group filed for a pre-packaged Chapter 11. As we had reported on September 4, 2019, the “debt burdened post-production company” had been considering a bankruptcy filing earlier but had chosen instead to undertake a debt for equity swap with its lenders out of the bankruptcy system.

A month later, Deluxe filed Chapter 11 anyway. As before, there will be debt for equity swap with its lenders which will reduce debt by half, and a further cash infusion by the new owners of $115mn. “All lenders will be offered the chance to participate“, say sources to Bloomberg. The decision to choose bankruptcy court after all was agreed to by both sides as a way to speed along the restructuring, which will see the lenders own 100% of the business. Chances are Deluxe won’t be under court protection for long. An October 24 confirmation hearing is being requested.

This means the day of reckoning is nigh for the three BDCs with exposure to the company: Cion Investment, Harvest Capital (HCAP) and TP Flexible Income Fund, with a combined $20.7mn of senior debt. Seems like half that amount will continue to be yield producing in some new loan and the rest written off or converted into equity. What we don’t know how much new capital will be forthcoming from these BDCs to fund the $115mn capital infusion.

For HCAP – the only public BDC in the group – their existing $4.7mn loan at cost, which was performing at June 30 2019 and valued at par, will end the September 30 period in non-performing status and -presumably – written down to some degree. We may have to wait till the end of the fourth quarter 2019 to ascertain HCAP’s total exposure, values and any realized loss.

Finally, we have to wonder why HCAP purchased the loan to Deluxe – as recently as March 4, 2019 – when some of the troubles facing the company must have been on the wall ? Was it a deliberate strategy or poor credit underwriting ? (The other two BDCs have been lenders for a much longer period).

Murray Energy: Lenders Agree To Forebear

On October 2, 2019 coal producer Murray Energy announced by press release its intention not to pay principal and interest payments due on September 30, 2019. However, the company was also able to announce a majority of lenders under its most senior loan agreements agreed to “forbear”, or hold back from acting on the upcoming payment default. This is not much to write home about as the forbearance only lasts till October 14. We assume – as we wrote in an earlier update – that Murray will be using the extra time on the clock to complete its ongoing negotiations with stakeholders in an effort to keep from falling into involuntary bankruptcy proceedings.

For the 6 BDCs with $52.4mn invested at risk, this development does not move the valuation needle but suggests that some sort of resolution will be coming shortly. Very shortly. Judging by what little we know that will mean some sort of Realized Loss is likely, which is why Murray Energy is rated CCR 4 (Worry List), and could be at CCR 5 (Non Performing) within a fortnight. Back on September 13 we wrote that we expected to hear more about Murray Energy “before long”. After the latest news, the same prediction continues to apply.

Bellatrix Exploration: Files For Bankruptcy Protection, Up For Sale

On October 2, 2019 publicly traded Canadian oil and gas company Bellatrix Exploration – burdened with heavy debt – threw in the towel and sought bankruptcy protection in its home country. A court will now supervise a restructuring of some kind, which includes the possibility of the sale of some or all the assets of the business. Here is what the company’s chief executive said:

Bellatrix has for an extended period of time focused on its key strategic priorities of reducing debt levels, improving liquidity and strengthening its financial position, including transactions completed by the Company in 2018 and 2019 to, among other things, provide additional needed liquidity and to reduce its overall senior note and convertible debenture obligations,” said Brent Eshleman, President and Chief Executive Officer of Bellatrix. “In light of industry challenges facing the Western Canadian oil and natural gas sector, including prolonged and continued poor natural gas and natural gas liquids prices, we believe that the commencement of the CCAA restructuring proceedings at this time will provide the Company with the time and stability required to continue operating our business while we work to implement the Strategic Process and achieve an outcome that is in the best interests of Bellatrix and our stakeholders.”

 This must be bad news for the four BDCs with $96mn of exposure to Bellatrix in the form of second lien and equity. All are part of the FS-KKR complex. $8.2mn of annual interest income is about to be suspended. The Biggest Loser of the four BDCs is non-listed FS Energy & Power, which has four-fifths of the exposure.

We don’t know what the ultimate resolution might be but there is a reasonable risk – given that all BDC exposure is junior on the balance sheet – that there will be a 100% write-off. Should that occur, the fact that the BDCs managers marked the debt as of June 2019 at a very slight discount will result in a large capital loss; not to mention the loss of substantial income. Publicly traded FS-KKR (FSK), though, should only be modestly impacted as its investment cost is “only” $6.0mn and FMV $5.8mn as of June 2019.

In a bigger picture sense, the failure of Bellatrix is a reminder – if one was needed – that the E&P sector in North America remains under pressure. The Calgary-Herald – while discussing the Bellatrix situation – mentioned other difficulties encountered by producers in the region of late:

In April, junior gas company Trident Energy Corp. announced it was shutting its doors. Last month, the City of Medicine Hat, which owns its own energy division, said it will shut more than 2,000 of its 2,600 natural gas wells over the next three years. Tristan Goodman, president of the Explorers and Producers Association of Canada, said in an interview there is no question the industry is in crisis. He said additional bankruptcies and insolvencies in the sector are a possibility.

For the BDC Credit Reporter’s prior posts about Bellatrix, starting as far back as April 17, 2019, click here.

U.S. Well Services: New 52 Week Low

On October 2, 2019 the stock price of publicly traded U.S. Well Services (USWS) reached a 52 week and all-time low price in its short history of $1.82. That was more bad news for the three BDCs with $66mn of equity at cost invested in the company. Ever since the company underwent a reverse capitalization back in November 2018 and was listed on the NASDAQ, its price has headed downward. That impacted the BDCs involved, whose fair market value at June 2019 was lower than at March, as the stock price dropped from $7.98 to $4.20. That put a dent in the FMV values of PennantPark Investment (PNNT), Capitala Finance (CPTA) and – most of all – BlackRock Capital (BKCC). Coincidentally or otherwise, all 3 BDCs reported lower NAV Per Share in the quarter.

Look for a repeat in the third quarter as the stock price of USWS dropped to $2.19 at the end of the IIIQ. That’s roughly another (50%) drop in the last 3 months and should result in a further unrealized loss of ($16mn) or more. At the 52 week low price, the loss would be even higher.

Unfortunately for the BDCs involved their common stock holdings are “locked up” and cannot be disposed off till November. By then, the value of the USWS common will be down by (75%) or more compared to cost. Not inconceivable is that the oil services company – which we wrote about last on July 13, 2019 – could file for Chapter 11, wiping out all $66mn of the stock – mostly received as part of a debt for equity swap last year.

Not to rub things in, but this story is part of the broader troubles in the oil field services sector, which the BDC Credit Reporter has been warning bout for months and which we most recently opined about on September 6, 2019.

Oil & Gas Sector: Banks To Tighten Reserve-Based Loans

A trade article – based on multiple sources – suggests bank lenders to U.S. oil & gas exploration and production companies are about to tighten advances against reserves. Reportedly, these asset-based lenders are concerned about 2020 oil prices and are pro-actively seeking to manage potential credit risk.

One does not have to be an energy expert to recognize that more conservative secured senior lending to E&P borrowers could have a deleterious effect on the companies liquidity; cost of capital and business prospects.

In our still incomplete database we count at least 17 BDC portfolio companies in the E&P space which might be directly affected if the new approach is widely adopted. There could be an indirect impact as well on oil services company of every stripe if the E&P sector has less capital available going forward. See our earlier post about risks in the oil field services sector on September 6, 2019.

Geo Group: Banks Pledge To End Relationship.

According to a September 30, 2019 news report: “All of the existing banking partners to private prison leader GEO Group have now officially committed to ending ties with the private prison and immigrant detention industry. These banks are JPMorgan Chase, Wells Fargo, Bank of America, SunTrust, BNP Paribas, Fifth Third Bancorp, Barclays, and PNC“.

This is notable because of existing BDC exposure to the private prison operator of $48.2mn, provided by two major players: Cion Investment and publicly listed New Mountain Finance (NMFC). At June 2019, the 2025 senior debt held by the two BDCs was carried at par and the traded loan maintains that value at time of writing. Nonetheless, we’ve chosen to add Geo Group to our under-performers list with an initial rating of CCR 3 (Watch List). That’s because of the risk that the bank boycott of the company – which follows lobbying by activist groups – could impact refinancing of existing debt when due, or even cause financial failure. Our sister publication – the BDC Reporterdiscussed the subject of the boycott in a recent Twitter post.

Bass Pro Group: Moody’s Revises Outlook

According to a news report, Moody’s Investors Servicerevised Bass Pro Group, L.L.C’s outlook to stable from positive and affirmed the company’s Ba3 Corporate Family Rating, Ba3-PD Probability of Default rating and B1 senior secured rating“. The change was caused by “revenue and earnings weakness“. Please read the article for the key details.

We’re far from panicking based on what we’ve learned to date but have just added the Bass Pro Group to our under-performing list, with an initial CCR 3 rating (Watch List). BDC exposure is a modest $14.4mn, shared by three BDCs. Income at risk is just over $1.0mn annually.

We’ll be keeping close tabs on this credit – leveraged over 5x – going forward.

Foresight Energy: Skips Interest Payment

Here we go again: another coal miner is in deep trouble. The Wall Street Journal, and multiple other publications, report that “struggling coal miner” Foresight Energy LP has decided to miss making a scheduled bond interest payment and is preparing to restructure its balance sheet. On the other side, lenders and bond holders have hired specialist financial advisers for the negotiations ahead.

There are 4 BDCs – all non listed – with $22.4mn exposure to the troubled coal miner: Business Development Corporation of America (BDCA), and three FS-KKR entities, Corporate Capital Trust II, FSIC II and FSIC III. All are in the 2022 Term Loan and all are looking at a significant unrealized depreciation write-down in the coming quarter. As of June 2019, the debt was valued at a (18%) discount by the most conservative valuation. At time of writing on October 1, 2019 Advantage Data’s middle market real-time loan pricing shows the discount has risen to (46%). That’s , at least, an extra ($6mn) write-down from the mid year number. Annual income at risk is $1.8mn. Also very likely a little way down the road is a debt for equity swap of some kind and some sort of material realized loss.

We note – wryly – that the debt at Foresight was valued close to par all the way through the IQ 2019 valuations, suggesting the lenders involved were not expecting the upcoming financial crisis. Only in the IIQ of 2019 was the debt written down sufficiently to be automatically added to our under-performing list as the Watch List level (CCR 3).

As most everyone must know, the coal mining sector has been in trouble for some time, and the recent trend is for ever greater problems. In the few months we’ve been publishing the BDC Credit Reporter, we’ve written about Murray Energy and Blackhawk Mining. One is considering Chapter 11 and the other is already there. As we’ve said before, why any BDC lender would invest in this notoriously challenging corner of the energy sector is beyond us. Admittedly, Corporate Capital Trust II has been involved for some time and might be able to argue that the risks have increased since writing their cheque. However BDCA only invested for the first time in the IQ 2019 and FSIC III in the IVQ of 2018.

TridentUSA Health Services: Settles Whistleblower Suits

TridentUSA is already in bankruptcy, and has been since February of this year. On September 26, 2019 the company settled two outstanding whistleblower lawsuits brought by the government, agreeing to pay out $8.5mn, as reported by the Baltimore Business Journal.Trident provides mobile diagnostic services to residents of nursing homes. The company earns federal money to provide mobile x-rays to Medicare and Medicaid participants in the nursing homes. The whistleblowers had alleged that Trident had violated federal law by engaging in a kickback scheme, which led to a government investigation of Trident’s pricing arrangements and its costs to provide mobile x-rays at these facilities“.

In a round-about way, this settlement might be a Good Thing for the embattled company and facilitate its exit from Chapter 11. This report tells us nothing of the bigger picture.

For the BDCs involved, there is nowhere to go but up from here. Four well known public BDCs have $108mn in first and second lien loans to the company or its equally compromised sister entities. The exposure has been almost completely written off as of June 2019 and well over $10mn of investment income lost. The BDCs involved are all publicly listed: Solar Senior Capital (SUNS), Oaktree Strategic Income (OCSI), Gladstone Capital (GLAD) and the biggest player of all Ares Capital (ARCC).

Trident is one of a series of significant healthcare failures due to some kind of fraud that we’ve come across of late. Most recently, we discussed Oaktree Medical Centre in a similar vein on these pages. In recent memory, but before the advent of the BDC Credit Reporter, there have been at least two other similar cases of healthcare fraud or other catastrophic difficulty involving BDC lenders. One notable example would be RockDale BlackHawk. Maybe we should ask harder questions about the due diligence capabilities of the BDC underwriters or are stories like these just the exceptions to the rule ?