October 17, 2022
In the past, due to the large number of underperforming companies, the BDC Credit Reporter has not always been able to keep up with developments at every BDC-financed company that is underperforming. We're trying to change that going forward in order to "keep the thread" on every company featured in our ever expanding database.
In any case, we turn now to Allied Wireline Services, an oil services company that has been financed by First Eagle Alternative Credit (FCRD) since when the BDC was called THL Credit, and by non-traded FS Energy & Power. The two BDCs - according to Advantage Data's records - has been involved with the company since 2014 and currently have $70mn advanced at cost, $65mn of which is from FS Energy.
Over the years, though, realized losses have been booked as this has been a troubled company - serving a highly volatile sector - since 2019. FCRD realized a ($5.3mn) realized loss in March 2020 when debt due in 2020 was exchanged for a new loan due in 2025 and two tranches of equity. Moreover, as far as we can tell from reading FRCD's 10-Q notes, the debt is considered a "Restructured loan for which income is not being recognized as of June 30, 2022".
FCRD, as of the IIQ 2022, discounts the first lien debt by (31%), but FS Energy - involved with many more dollars in the same loan - applies only a (16%) discount. Go figure. Adding to the confusion, FCRD has been increasing its discount of late while the KKR managed FS Energy has been going the other way. As we said, go figure. Both players, though, value their equity stakes at zero.
We've not been able to get any update, either from the BDCs involved or from the public record, as to what how the company has been performing of late. Presumably there is still a chance Allied could return to a normal, performing status. For the moment - and being conservative as Advantage Data does not carry the debt as being on non accrual - we rate the company CCR 5 - the lowest level on our 5 point scale, given the "income not being recognized". At the moment, we're assuming an ultimate loss of between 25%-50%, or up to ($35mn) but we'll be the first to concede it's just a wild guess.