Private lenders have proposed a potential debt restructuring for 48Forty Solutions, less than a year after Summit Partners acquired a majority stake in the pallet management company, according to people with knowledge of the matter.
The company’s debt includes around $1.75 billion of private credit, said the people, who asked not to be identified discussing private information. The lenders, which include Antares Capital, KKR & Co. and BlackRock Inc., provided the financing in a recapitalization deal in October, the people said.
Representatives for Antares, KKR and BlackRock declined to comment, while representatives for 48Forty and Summit didn’t respond to requests for comment.
The $1.7 trillion private credit industry has started to see more signs of stress, as companies grapple with persistently high interest rates and a weakening consumer. Investors are eyeing how the asset class would handle a potential downturn, as the market has not yet been tested by one after growing rapidly in recent years.
FS KKR Capital Corp., a business development company jointly managed by KKR and FS Investments, marked down the value of the 48Forty loan to 76 cents on the dollar in the first quarter, according to a May regulatory filing.
On a call discussing first-quarter earnings, Daniel Pietrzak, the chief investment officer of the BDC, said 48Forty had been affected by “labour costs and excess inventory.” 48Forty has also suffered from a pullback in consumer spending, the people said.
48Forty provides recycled wood pallets and pallet management services across the US and Canada.
As of March 31, the company was paying the majority of the interest on its debt, priced at 6 percentage points over the base rate, in kind, according to regulatory filings. Payment-in-kind deals allow borrowers to defer making cash interest payments typically until maturity.
The October recapitalization deal also saw Summit Partners, which first invested in the company in 2022, take a majority stake in 48Forty.
If the restructuring happens, 48Forty would join a growing list of companies that have restructured their private credit loans over the past year, with others including Alacrity Solutions, Zips Car Wash and Pluralsight Inc.
The default rate for US private credit ticked up slightly in May to reach 4.6%, according to a Fitch Ratings report. Fitch cited “weakening North American corporate credit environment and ongoing macroeconomic challenges such as higher interest rates and slowing growth” as a cause of the increase.
Source: Reuters.com