Sprint Industrial Holdings, LLC

About

Sprint Industrial Holdings LLC, is a private holding company with three operating subsidiaries: Tidal Tank, Sprint Safety, and Southern Tank Leasing. All three companies provide specialized industrial equipment and solutions to the upstream, downstream and midstream sectors of the energy industry

Founded in 2001, Tidal Tank is a leading rental provider of liquid and solid storage tanks on the Gulf Coast. Sprint Safety, also founded in 2001, provides safety equipment and turnaround solutions to the energy industry. To complement these two holdings, Sprint Industrial acquired Southern Tank Leasing, the largest dedicated stainless steel tank trailer rental and repair solutions provider in the United States.

Sprint Industrial Holdings is headquartered in Houston, Texas, with operations in several states throughout the Gulf Coast, Southeast, Midwest and California.

BDC Credit Reporter View

6/15/2019: Notwithstanding that Apollo Investment (AINV) upgraded its valuation on the Company’s first lien and second lien debt in the IQ 2019, we remain skeptical – influenced principally by the Moody’s May 2019 report downgrading the second lien debt and throwing shade at the maturity extension of the first lien debt by a few months. To date, despite the junior debt being on non accrual AINV has written down the $18mn of second lien debt by a couple of million. For our part, we’d be more conservative and expect a bigger loss, as much as 100%, perhaps offset by some swap for equity. For the moment, the $12mn in senior debt held by Cion Investment and Garrison Capital (GARS)  – still accruing – seems safe. However, if there was a default/Chapter 11, more income would be interrupted: $1.1mn on an annualized basis. We expect no recovery from the equity warrants held.

Highlights

5/14/2019: Moody’s downgrades second lien debt. 

Moody’s Investors Service (“Moody’s”) downgraded Sprint Industrial Holdings, LLC (“Sprint”) second lien term loan rating to C from Caa3, and the corporate family rating (CFR) to Ca from Caa2 and the Probability of Default Rating (PDR) to Ca-PD/LD from Caa2-PD. The outlook is changed to negative from stable. Moody’s appended Sprint’s PDR with an “/LD”, signifying a limited default…

Sprint’s lenders agreed to extend the maturity on its first lien senior secured term loan (unrated by Moody’s) to August 15, 2019 from May 14, 2019. The maturity on the second lien due November 2019 did not change. The /LD designation reflects Moody’s views the extension of the first lien term loan constitutes a distressed exchange, which is a default under Moody’s definition.  shortly.

The rating downgrades reflect the probability of a corporate restructuring due to the company’s poor liquidity and an unsustainable capital structure arising from insufficient cash generation from operations, absent a sale of the company. The second lien term loan rating at C reflect Moody’s view of the expected loss under a restructuring. The recovery is based on a multiple in the low 3x range of trailing EBITDA and a modest discount to net book value of the assets, compared to the total claims.

12/13/2018: S&P Downgrades Company/Debt. Expects Restructuring.

“The downgrade reflects our expectation that Sprint Industrial will likely undertake a debt restructuring that we classify as distressed over the next six months. In our view, the company is highly unlikely to refinance its first-lien credit facilities at par before maturity. The revolving credit facility and first-lien term loan mature in February 2019 and May 2019, respectively. The negative outlook on Sprint Industrial reflects our belief that the company will be unable to refinance its capital structure at par and is thus likely to pursue a distressed exchange or debt restructuring in the next six months. We would lower our rating on Sprint Industrial if the company announces a distressed exchange or debt restructuring or if we believe a default is a virtual certainty. Although highly unlikely, we could raise our ratings on Sprint Industrial if we expect it will refinance its upcoming debt maturities at par or extend the tenor of the loans such that lenders receive offsetting compensation that we deem to be equivalent to the original promise”.

5/18/2018: Comments made by AINV management after second lien placed on non accrual in calendar IQ 2018

“During the quarter, our second-lien debt investment in Sprint Industrial Holdings was placed on nonaccrual status. The company has experienced earnings pressure, but with the recent improvement in operating performance, we are hopeful that this firm will recover well above its current mark. No other investments were placed on or removed from nonaccrual status”.