Teligent, Inc. : To Liquidate, Part Repay Lenders

4/12/2022: Good news (of a sort): Teligent, Inc. is being liquidated. We wrote about the troubled pharmaceutical manufacturer twice previously. Bankruptcy was filed back in 2021 and has now become a liquidation after assets were sold to a third party. From the very sparse public record, we learn on April 11, 2022 from Bloomberg Law that the company will be paying its lender $33mn out of the $90mn owed. (Unsecured creditors – who’ve been battling in court with the lender – will receive 11 cents on the dollar).

The lender in this case is Ares Capital (ARCC) or “its affiliates”. Previously, given the serious troubles at Teligent that we won’t regurgitate here, we were concerned that ARCC might have to write off 100% of its $77mn of exposure reported as of December 31, 2021. We’re not sure what the difference is between the IVQ 2021 stated exposure and the $90mn mentioned by Bloomberg Law. Most likely, the difference consists of post-bankruptcy monies advanced by ARCC not on the books at year-end and which kept Teligent afloat long enough to achieve the asset sale.

The numbers being thrown around imply that ARCC will end up booking a realized loss of ($57mn) on Teligent when all is said and done. To put that into context ARCC has booked $17mn in annual realized gains over the last 3 years (ARCC had a very good 2021, but losses in 2019-2020). Net assets at 2021 year end were in excess of $20bn, so this loss – while notable – may not move the needle much and any income once earned on this investment has not been received since IQ 2020.

As of the IVQ 2021, ARCC had already written down its exposure by ($38mn). If we’re right about the final bill, the BDC will be ultimately booking another ($19mn) in losses. This probably means a further unrealized drop in the upcoming IQ 2022 results and a final realized loss in the IIQ 2022 numbers.

Although we were overly-conservative about ARCC’s prospective loss, the BDC itself seems to have been somewhat over optimistic about its recovery, based on the numbers at year end. As always, these are very hard outcomes to handicap once the courts – and other parties get involved.