5/24/2022: By its nature, the BDC Credit Reporter deals mostly in bad news. Historically, that's certainly been the case where energy companies are concerned. However, oil prices have surged and that has changed the narrative. Take Great Western Petroleum and the exposure to the company of FS Energy & Power. As recently as the IIIQ 2020, the non-traded BDC had advanced $94mn in the form of subordinated debt and preferred, which was discounted by a third overall.
Fast forward to this year, when exposure as of March 2022 was $85mn at cost, restructured into first lien debt and equity. Because Great Western was under contract to be acquired by publicly traded PDC Energy since February 2022, the BDC values its entire position at $139mn - a 63% overall gain. The transaction closed on May 6, 2022 and the BDC's 12% senior notes appear to have been paid off on May 20, 2022, according to Fitch.
For a change, FS Energy & Power - long battered by falling energy values - will be able to report a large realized gain from the transaction when IIQ 2022 results are published in the summer.
For the historians amongst you, the improvement in Great Western's value - which was rated CCR 4 through the IVQ 2020 - began in the IQ 2021 and has accelerated ever since. By our standards, the company was back to "performing normally" status from IQ 2021 - a year ago. This is a "all's well that ends well" for FS Energy & Power, but does leave the BDC with a 12% senior note to replace, with a face value of $55mn.
Anyway, we are terminating coverage of Great Western.