Monitronics International, Inc.

About

Ascent Capital Group, Inc. (NASDAQ: ASCMA) is a holding company whose primary subsidiary, Monitronics International, Inc.  operates as Brinks Home SecurityTM, one of the largest home security and alarm monitoring companies in the U.S. Headquartered in the Dallas Fort-Worth area, Brinks Home Security secures approximately 1 million residential and commercial customers through highly responsive, simple security solutions backed by expertly trained professionals. Brinks Home Security has the nation’s largest network of independent authorized dealers – providing products and support to customers in the U.S., Canada and Puerto Rico – as well as direct-to-consumer sales of DIY and professionally installed products.

Corporate Highlights

5/20/2019: Company announces plan of reverse merger with parent Ascent Capital Group.

4/8/2019: Company faces a reverse in court re: Telephone Consumer Protection Act, according to legal article.

BDC Credit Reporter View

May 22,2019: As we expected, Monitronics could not handle its mountain of debt and entered into a Restructuring Support Agreement on May 20, 2019. (See Investment Highlights).  This will involve a debt for equity swap; the infusion of new capital and the merger of the parent into Monitronics, currently its wholly owned subsidiary. We have downgraded the Company to non-performing, but Monitronics should be back in the performing column before long, given the consensus on a restructuring plan. Still for the 5 BDC lenders – all with positions in the 2020 Term Debt – this seems to involve exchanging debt for common stock in what will continue to be a highly leveraged Monitronics. (The restructured company will have close to a $1bn in debt when the dust settles and $41mn a month of recurring monthly income from it’s alarm business). Furthermore, the restructuring seems to involve existing lenders ponying up $200mn in new equity, which is earmarked to repay some of the existing debt. There’s also a modest amount of cash being received from the parent when that entity merges into what will now be a privately owned Monitronics. There are too many moving parts to be certain, but chances are there will be both Realized Losses booked by the BDCs involved; reclassification of debt to equity (and the resulting loss of income at LIBOR + 550); some debt repayment  and new capital invested in common stock. This is a set-back and far from over as the lenders are taking over and digging in for the long haul.

December 13, 2018: Added the Company to our Watch List, immediately with a CCR 4 rating due to the “Going Concern” qualification in the parent’s financial statements, and the uncertainty regarding an ongoing debt exchange and multiple shareholder lawsuits. Beyond and above all that there is a mountain of debt to contend with. The BDCs involved are in the senior Term Loan and have marked their IIIQ 2018 positions close to par, but we’re not so sure till we learn more.