Posts for GSO Blackstone

Electronics For Imaging: Downgraded By Moody’s

According to S&P Global Market Intelligence Moody’s has downgraded Electronics for Imaging’s corporate credit rating to Caa1, from B3, and changed the outlook to negative from stable. The ratings group “expects the company’s adjusted leverage and liquidity will fall short of forecasts through 2022 as the company’s revenue recovers from an expected significant decline in 2020“. Thankfully, liquidity is “adequate” for the time being, but the business is facing economic headwinds, a not uncommon challenge going forward. BTW, Electronics for Imaging provides digital imaging and print management solutions for commercial and enterprise printing.

First lien debt has been downgraded to B3, from B2 and second lien to Caa3, from Caa2. Both loans are trading at wide discounts to par. Five BDC lenders – with an aggregate of $95mn at cost – are invested in both, so it’s worth noting. The public BDCs involved are (in order of investment size) FS-KKR Capital (FSK); FS KKR Capital II (FSKR); Bain Capital Specialty Finance (BCSF) and Garrison Capital (GARS). Non-listed GSO-Blackstone also has a big position in the first lien debt.

We first placed the company on the underperformers list in the IQ 2020, when the debt was up to (17%). [Each BDC has very different values]. Our initial rating was CCR 3. However, this latest development is causing us to downgrade the company further to CCR 4. Given the dollars involved, there’s a lot of investment income in play: nearly $6.5mn. Thankfully, we’re not placing the company on our Weakest Links register. Yet.

Still, of the four dozen companies we’ve dealt with this week in the BDC Credit Reporter, this is the largest in terms of FMV: $84.1mn so bears watching closely. This seems to be an example of a business that we would characterize as being part of the “second wave” of troubled credits: performing well enough before Covid-19 wreaked havoc on its growth prospects. The company undertook a major acquisition last year. Even though the synergies promised from that transaction have largely been realized that has not been enough to keep the company’s prior B3 rating.

Bass Pro Group: Moody’s Revises Outlook

According to a news report, Moody’s Investors Servicerevised Bass Pro Group, L.L.C’s outlook to stable from positive and affirmed the company’s Ba3 Corporate Family Rating, Ba3-PD Probability of Default rating and B1 senior secured rating“. The change was caused by “revenue and earnings weakness“. Please read the article for the key details.

We’re far from panicking based on what we’ve learned to date but have just added the Bass Pro Group to our under-performing list, with an initial CCR 3 rating (Watch List). BDC exposure is a modest $14.4mn, shared by three BDCs. Income at risk is just over $1.0mn annually.

We’ll be keeping close tabs on this credit – leveraged over 5x – going forward.