October 16, 2022
Only three days ago we wrote about Harland-Clarke Holdings Corp - now operating under the name Vericast- and suggested we "would not be surprised if we didn't hear something sooner rather than later because management has some tricky refinancing to tackle in an increasingly hostile environment". Apparently, truer words were never spoken because as we were typing out that surmise, the company was making its first lien lenders an offer they might - or might not refuse.
This will impact the only BDC with exposure: CION Investment with $9.3mn committed to that 2026 first lien debt. At this point we don't know if the first lien lenders will say yes or no to this restructuring proposal. If they say yes, both the first lien and second lien debt should remain performing for the short term. However, Moody's will consider the transaction a "distressed exchange" i.e. a restructuring. If the lenders say no, something more drastic is likely to happen shortly.
CION has already written the debt down by (22%). For our part, we rate the company CCR 4, as explained in the prior article, and could foresee an even bigger discount when this all plays out. In the short run, though, CION - and the company - might "cheat the hangman. "
Again, we are likely to be providing an update shortly.