9/24/2022: A press release issued by “global wellbeing” company Isagenix International on September 23, 2022 did not provide many details but made clear that trouble was afoot:
Isagenix International (“Isagenix” or “the Company”), a leader in providing nutrition solutions for weight loss, performance, and healthy aging, announced today that it has entered into a forbearance agreement with an ad hoc group of the Company’s secured lenders. This forbearance agreement is an important first step as the Company works toward a holistic solution for its secured debt on terms that will ensure Isagenix’s continued market leadership and long-term growth. Isagenix is focused on operating business as usual — both during the forbearance period and well into the future. Isagenix International Press Release – September 23, 2022
No more substantive information was provided but that was sufficient to cause the BDC Credit Reporter to downgrade the company – which has been underperforming to varying degrees since IQ 2019 – to its lowest rung on our investment rating scale – CCR 5. The forbearance means the secured debt is non performing at the moment.
This is very similar to the situation back in 2019 and 2020, when the company’s performance deteriorated; ratings groups downgraded the debt and lenders started to worry. We last wrote about the company on August 28, 2020, just as Isagenix received an equity infusion along with more flexible terms from its senior lenders.
Almost exactly two years later, Isagenix is again in deep trouble; subject to downgrades from S&P and Moody’s and again needing concessions from its lenders. Back in 2020, there was $36mn at cost in BDC advances to Isagenix, discounted (60%). This time the exposure is not much different – $34mn. The first lien debt is mostly discounted (40%) at June 30, 2022 but that was before this need for “forbearance”, which just means “please don’t take any action on our defaults till we come up with a mutually agreeable solution”.
There are 7 BDCS with exposure to Isagenix, including 6 public players. Far and away the biggest exposure is held by Cion Investment (CION) with $14.7mn (and discounted the least), followed by Crescent Capital (CCAP) with $5.4mn. Main Street Capital (MAIN); Capital Southwest (CSWC); Barings BDC (BBDC) and First Eagle Alternative Credit (FCRD) – as well as non traded MSC Income Fund (not coincidentally managed by a MAIN affiliate) – all have relatively small positions in loans due 6/14/2025 and 6/30/2025. Most of the BDCs are discounting their debt by (40%) – a third quarter in a row of value depreciation. Until the forbearance we rated the company CCR 4.
We don’t know what ails this company – which some consider to be a multi level marketing business – but we are aware of lawsuits pending and speculative grade ratings from both S&P and Moody’s. The big discount applied even by supposedly “secured” first lien lenders hints at a possible significant realized loss down the road, and potential further write-downs on an unrealized basis in the short run. Income – with the “forbearance” has been interrupted and is unlikely to revert to the prior status quo.
For more of the history of the credit; the various downgrades we have applied and for background information read the Isagenix Company File below. For our part, we’ll be keeping tabs on what happens next and will update the Company File or write another article, or both.
For the public BDCs involved, the saving grace is that outside of CION – and maybe CCAP – the amounts involved are not needle moving, even if worst comes to worst.
See Company File.