WhiteHorse Finance: Media Portfolio Company Files Chapter 11

Summary

• We register the second bankruptcy filing of a BDC-financed company in 2021.
• The only BDC involved is WhiteHorse Finance (WHF).
• Re-published from The BDC Reporter Daily News.

Preamble

Every day – more or less – the BDC Credit Reporter searches the internet to see if any BDC-financed company has filed for Chapter 7 or 11.

Of late, there have been very few filings where BDC lenders/investors are concerned: one by our count in 2021.

However, we learned that on or around January 25, 2021 a radio broadcasting company named Alpha Media LLC filed for court protection, and has a plan in place for a debt for equity swap out.

This resulted in a frantic update of the BDC Credit Reporter’s database as this company – and the $5.0mn in debt involved – were carried as performing normally through IIIQ 2020.

The BDC involved – which may or may not soon become an equity owner in the recast company – is WhiteHorse Finance (WHF).

We’re re-publishing the BDC Credit Reporter article below.

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Alpha Media LLC: Files Chapter 11

January 25, 2021

BDC: WHF

According to trade publication Radio Online, the media company Alpha Media, LLC has filed for bankruptcy protection. We also learn that “certain lenders” have agreed to advance Debtor In Possession monies and additional capital in the future (and,, presumably, will forgive some legacy debt) to get the business back on its feet in return for 100% control of the company, alongside management. Now the lenders and management are seeking court approval of this plan. We also learned : “Alpha Media said it will continue operating its stations without interruption, providing engaging news, music, sports and entertainment to its communities. The company’s day-to-day operations will continue in the normal course during this process“.

For the BDC Credit Reporter, this was unexpected news as the only BDC that still has exposure to the company – in the form of a 2022 Term Loan to the tune of $5.0mn – last valued its position at close to par and as performing. That BDC is WhiteHorse Finance (WHF), who briefly mentioned Alpha Media in its last conference call and said its value was “improving”. No word of an imminent bankruptcy. However, with the benefit of hindsight, we notice that the pricing on the loan was hiked up in the IIIQ 2020 from LIBOR + 600bps to Prime + 750 bps. Never a good sign.

We’re in no position to suss out what the final resolution of this investment might be. We don’t even know if WHF is part of the rescue creditor group. What we can say is that this company has been added to our IMPORTANT list, which means we expect a material change to show up in upcoming results. Technically Alpha Media has gone Chapter 11 in IQ 2021 but the debt may have been placed on non accrual earlier. In any case, over half a million dollars of investment income a year is in danger of not being collected for some period. More will be learned when WHF reports IVQ 2020 results.

The amount at risk is relatively modest, but we’ll still be interested to see how the BDC approaches this situation: inject more capital, time, sweat and tears or walk away. This is a calculation many BDC lenders have had to make of late, with most voting for the former. Our money in on WHF – sitting at the top of Alpha’s balance sheet – opting for doubling down.