Elyria Foundry Company, LLC

About

Founded in 1905, and based in Elyria, Ohio “Elyria Foundry Company, LLC manufactures iron castings for plastic and rubber processing, food processing, printing and paper making, petrochemical, and oil and gas field equipment. The company offers refrigeration and gas compressors, pumps and valves, process machinery, internal combustion engines, power and transmission equipment, and metal cutting and metal forming machine tools. It also provides large cylinder blocks, pans, and heads for stationary engines; and tighter grained iron for machine tools used in boring, broaching, milling, drilling, turning, grinding, and polishing. In addition, the company offers statistical process control, bar coding, and CAD/solidification analysis services.”. Bloomberg

Elyria Foundry Company LLC is majority owned by private investment funds managed by Wayzata Investment Partners LLC, a Minnesota-based registered investment adviser with significant experience in the US foundry industry. (Website). 

CORPORATE HIGHLIGHTS

January 2018: SAR reports on Conference Call  “the cycle is turning” for the Company’s business. 

September 2016: Company enters into joint venture with Cast-Fab Technologies.

March 2008: The Company acquires Hodge Foundry

BDC Credit Reporter View

SUMMARY: Due to exposure to the oil & gas industry, the Company’s business has been cyclical and on the decline, despite several acquisitions. This has required major lay-offs in the past and several restructurings over the years. The only BDC with exposure is Saratoga Investment (SAR) with both a Term Loan – which is PIK-ed-  and a substantial equity investment. SAR has a long history with the Company dating back to 2008. Reportedly, there is little debt on the Company, which is owned by a large Minnesota-based distressed assets firm and SAR has a “small minority investment”. The latest valuations suggest performance is trending downwards at Elyria. We assume there is a high risk of the Term Loan going on non accrual and the entire investment being essentially written off given the junior nature of SAR’s exposure. That could result in a $10.6mn Realized Loss and a further $2.7mn drop in fair market value. (Updated 10/16/2018). 

CREDIT HIGHLIGHTS

August 2018: The FMV of the equity drops to $1.8mn, or ($0.9mn). No reason given.

May 2018: SAR books an Unrealized Loss of ($0.8mn) “driven by a decline in oil and gas end markets since year-end”.

February 2018: SAR values the second lien loan at par and the equity at $3.4mn, a 65% discount.

February 2017: $0.4mn of the first lien loan restructured into a second lien loan.

February 2016: Maturity of the loan reduced to 3/31/2017.

February 2015: SAR restructures exposure  to $8.5mn loan maturing in 2020, and $9.2mn equity investment. Debt carried at par but equity discounted 26%. Remains on Watch List.

May 2013: SAR refinances 2013 loan with short term debt maturing in 2014 and increases exposure to $8.8mn

May 2011: SAR increases exposure to $7.3mn.

July 30 2010: SAR acquires 60,000 shares in the Company.

November 2008: Company added to Watch List, as value of debt drops 20%.

August 2008: SAR increases senior debt to $5.0mn.

February 2008: SAR books initial $2.9mn senior loan due 2013.