“Advanced Lighting Technologies, Inc. , formed in 1995, is a market-leading innovator and manufacturer of energy efficient lighting materials and finished products. The Company provides innovative lighting solutions to the growing global movement to decrease energy consumption. In addition to its innovation leadership and core focus on ‘green’ lighting products, ADLT holds a low-cost producer status of its Lighting Group to provide competitive pricing. The Company’s Materials Group produces unique metal halide specialty chemicals, ultra high temperature thin film coatings and precision glass optics to create leadership products for a wide range of energy efficient lighting systems.” From the Website.
BDC Credit Reporter View
Advanced Lighting Technologies is a designer, manufacturer and distributor of commercial lighting products. The Company was founded in 1995 and taken private in 2012 in a transaction which included an asset-based loan from Bank of America and $170mn in privately-placed Senior Notes due 2019. All the $132mn in BDC exposure to the Company is in the Senior Notes, spread over 4 different BDCs. Information about the Company is sparse, but valuation trends show initial deterioration from the IIQ of 2013, with an acceleration in the 2016. At 9-30-2016, the Notes had been written down by the BDCs involved by 66% to 75%. As of the end of 2016, the publicly traded Rule 144 Notes were trading at a nearly 80% discount to par. One BDC (BKCC) has the Senior Notes on non-accrual. On January 31, 2017, the Company offered 2019 Note holders the opportunity to swap into PIK Notes with an interest rate of 12.5% and shares of its Series C Preferred.
Given the long deterioration in loan value (and notwithstanding the proposed PIK Note restructuring);and the amount of the discount from par, we have a Corporate Credit Rating of 4, and the Credit Trend-given the latest market price-is Down. Barring a dramatic change, a full scale restructuring or bankruptcy looks very likely. Given the Notes are structurally subordinated to the asset based lender, a Realized Loss appears more likely than not, as well as an interruption reduction in income from the Notes that yield 10.5%. The biggest BDC exposure is with FS KKR Capital (FSK) and FS Investment II ( FSIC II) with $78mn and $33mn respectively.