January 25, 2023
A news item for which we only have the headline caught our eye about Delphi Behavioral Health, LLC. Apparently, the mental health and substance abuse treatment company is closing 4 Florida based treatment facilities and laying off 100 staff. This probably does not bode well for the company, already underperforming since the IIIQ 2021. (In fact, Delphi was restructured in 2020, and a realized loss was taken by its BDC lender - Capital Southwest (CSWC) - which then doubled down and became both owner and creditor. For a while, the renamed entity performed as planned but has now been worrying us anew for over a year).
As of September 30, 2022, CSWC had $8.0mn invested at cost, $4.4mn in three senior debt facilities, and $3.6mn in equity. Only adding to our concern is the decrease in the value of the equity in the most recent quarter to a (63%) discount from (32%) in the second quarter. We last wrote about the company back on September 1, 2022, when a new CEO came aboard. At that point, we rated Delphi CCR 3. Click here for the Company File.
As of now, that rating remains unchanged until we get further information. The debt tranches outstanding, after all, are discounted by only a maximum of (15%). Maybe this company can still motor through, and these latest cost reductions will prove to be a positive. Delphi is on our Trending list because some sort of development should be with us before long, starting with CSWC's IVQ 2022 valuation, due in days.