Battery Solutions, Inc.

About

“Battery Solutions, Inc. provides battery-recycling kits, smart recycling systems, and services to corporations, organizations, governments, municipalities, and households in the United States. It offers iRecycle Kit and SmartRecycle System to collect spent dry-cell battery types and hand-held electronics together; sort, ship, receive, and recycle them; and handle logistics. The company also provides bulk battery recycling services for industrial-size batteries and small household-type batteries; and e-scrap, such as circuit boards, cell phones, handheld electronics, and other types of universal waste. In addition, Battery Solutions, Inc. offers de-installation, rigging, removal, logistics, transportation, battery storage, and battery recycling services for the de-installation, logistics, and recycling of uninterruptible power system batteries in medical, industrial, municipalities, schools, biotech, telecommunications, financial, retail, transportation, and other markets. Further, the company provides battery collection containers, such as tubes, drums, curbside, and lamp boxes. It sells its products through its online store. Battery Solutions, Inc. was founded in 1971 and is based in Howell, Michigan with a location in Mesa, Arizona”.-From Bloomberg

Corporate Highlights

IVQ 2018: According to ABDC, the Company had “earnings softness” due to “weather-related issues on delay on shipments, et cetera”.

BDC Credit Reporter View

5/22/2019: The investment was written down another $0.5mn at the equity level in the quarter ended March 31, 2019. In the transcript ABDC said little about what the troubles are at the Company, but did say that results since the valuation was made for the quarter. This is worth watching from an income standpoint. Besides the $1.2mn of subordinated debt priced at 14.0%, there’s a Preferred tranche with a cost of $4.6mn accruing a dividend at 8%. In total, that’s over $0.500mn in annual income that could be impacted.

4/8/2019: Added Company back to Watch List¬†after IVQ 2018 results published as one of two equity stakes written down to zero from $1.277mn in IIIQ 2018. See Corporate Highlights. This bears watching as the Company has been in trouble before and ABDC’s exposure of $6.8mn is in subordinated debt and equity. Debt outstanding at cost is modest at $1.2mn so impact , even in worst case, is likely to be minimal on ABDC.

5/7/2017: Battery Solutions is a major recycler, which is principally owned by PE Group Alston Capital since 2013. At the time of the acquisition- from another PE Group-the only BDC involved in the Company-Alcentra Capital-provided $10mn Subordinated Debt and equity, equally split. However, over the years, the total cost of the investment has been reduced to closer to $7mn. Not clear if there was a re-purchase of a portion of the equity or a write-down by Alcentra. However, there was a restructuring of the Subordinated Debt in the IIQ of 2015 where $3.7mn of debt was converted to Class E common units, with an 8% PIK component, alongside a $1.0mn in Class A common. In the IIQ of 2016 the remaining $2.2mn in Subordinated Debt had its maturity extended from 2018 maturity to 2021, and pays 6% cash and 8% PIK. As of the IIIQ of 2016, the Subordinated and Class E equity was carried at par, but the Class A was written down by three-quarters. Given three consecutive quarters of increasing Common stock write-downs; the extension of the debt maturity; and the low cash rate, the BDC Credit Reporter assumed the Company was under-performing and rated the Corporate Credit a 3, with a negative trend. However, there was an increase in the Class A equity in the IVQ 2016 and a return to par value in the IQ 2017. As a result, Company was upgraded to CCR 2 or Performing.

Highlights

IQ 2019: ABDC writes down valuation by $0.5mn

IVQ 2018: ABDC valuation decreased by $1.3mn from IIIQ 2018 to zero. Remaining debt and equity unchanged.