Remains Rated CCR 5 & Important Underperformer But Assets Just Sold. Losses Expected and Re-Rating Coming.
February 2, 2024
Impel Pharmaceuticals was one of four companies added to Oaktree Specialty Lending's (OCSL) non-performing company list in the IVQ 2023, which we've been assiduously writing about in the last two days. However, our readers will have been long aware that OCSL is not being paid because we wrote an article on December 28, 2023 when Impel filed for bankruptcy protection. At that point, the company was downgraded from CCR 2 to CCR 5 and added to the Important Underperformers list.
Total exposure - mostly in first lien debt - was $28mn in the IIIQ 2023, and how now risen to $31mn. The BDC is discounting various tranches of the debt from (15%) to (44%) and the equity held has been written to zero. Overall, the investment is discounted by (41%). This is less extreme than the (75%-100%) range of loss we were projecting in December 2023.
However, we've just heard that none of the 93 potential buyers who initially expressed interest have come through and the assets have been sold to the "stalking horse": JN Holdco. The purchase price is $17.5mn. Given that the company reported $127mn in secured claims, it appears our initial pessimism about recovery was justified and only a tiny fraction of the what is owed will be recovered by this sale.
Sadly, despite spending quite some time looking into the bankruptcy documents and other places, we can't tell if "JN Holdco" is a special purpose company owned by the lenders or a third party. Either way, though, the Oaktree BDCs involved seem doomed to book a near-complete loss on this migraine-relief business. Given the sale has happened so quickly, we should have final numbers by the time of the IQ 2024 OCSL results. At that time we'll either re-rate Impel as CCR 6 - no longer on the books - or CCR 3 or CCR 4 if still financed/owned by OCSL through JN Holdco. At that point, we'll provide a final damage assessment.
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