Casper Sleep is a mixed e-commerce and brick and mortar retailer of “sleep products” – i.e. mattresses. Through the dint of good marketing, the company gained a celebrity following and became a growth story in a highly competitive, non glamorous corner of retail. In February 2020, the company went public but already the bloom was off the rose as the final price was half the initial target. Since then, matters have gotten worse as the company has been burning through cash to fuel its growth, and its stock price has dropped sharply. A few days ago, though, the Board agreed to a take-private buyout offer by Durational Management, whose offer is supported by debt from KKR Credit and Callodine Commercial Finance. $30mn in bridge finance is being made immediately available and has been agreed to by the existing lenders.
Right in the middle of all this is publicly-traded BDC TriplePoint Venture Growth (TPVG), a subordinated lender and investor in Casper since 2017. (Wells Fargo administers a secured, asset based revolver, senior to TPVG). As of the IIIQ 2021, the venture-debt BDC had invested $32.0mn to the company, mostly in the form of two subordinated term loans due in 2022 and 2023. The debt is valued at par. Also, the BDC has invested $1.2mn of preferred and equity, which has been almost completely written down. (By the way, Casper in its official filings says TriplePoint has invested $50mn. The discrepancy might be a related TriplePoint fund being also involved).
We imagine that upon hearing of the buy-out offer TPVG sighed in relief. In recent months, Casper’s liquidity has greatly tightened and management has taken a hacksaw to costs to survive. Lenders have had to waive defaults while a solution was found by the stakeholders. In any case, both Wells Fargo and TPVG quickly agreed to the $30mn of additional “bridge financing” involved.
Based on what we’ve heard, TPVG is likely to get out of this sticky situation with nary a credit scratch, with even its equity stake valued a little higher than just before the LBO announcement. However, the transaction has not yet been consummated, so neither TPVG, nor the BDC Credit Reporter, can count its chickens as yet.
For the moment, we’re rating the company CCR 3, where the likelihood of full repayment is greater than of loss. That could change in a New York minute should something go wrong. We are tagging this company as Trending for obvious reasons. We will provide an update whenever a material new development occurs. We expect the company – even in the best of circumstances – will remain on TPVG’s books through the end of 2021.