JZ writedown breaches loan covenant – JZ Capital expects to write off another $80m to $100m from the valuation of its property portfolio. A new revaluation takes into account the effect of COVID on the fund’s properties.
“As a consequence of the aforementioned write downs, the Company currently expects that it will require a waiver under its senior facility with Guggenheim Partners, as the Company will breach its minimum asset coverage ratio by the end of September 2020. The Company is working towards and expects to receive such a waiver. Absent this waiver (or otherwise obtaining consent), the Company will be prohibited from making an interest payment due on 30 September 2020 to the holders of its Convertible Unsecured Loan Stock due 2021 (“CULS”). Any interest not paid under the CULS in accordance with the terms of the subordination agreement to which the CULS are subject will not constitute a default under the CULS. Again, as mentioned above, the Company does expect to receive a waiver (or to otherwise obtain consent) to allow for the payment of the upcoming interest payment under the CULS.
Moreover, the Company and its lenders have made significant progress in their ongoing discussions to amend the current lending arrangements in a favourable way to the Company. As is the case for the real estate valuations, the Company will make further announcements as required in relation to the status of discussions with its lenders including their impact on the CULS as matters progress. Separately, the Company is pleased to report that its US micro-cap portfolio is performing quite well and positive progress is being made in relation to the previously announced secondary sale of certain of its US micro-cap assets. It is anticipated that the Company will reach an agreement in the near term on the secondary sale and an announcement will follow. The secondary sale if completed will provide the Company with the needed liquidity to repay a substantial portion of its senior debt. The Company remains committed to its strategy of realising value from its investment portfolio, and to paying down debt in the first order.”
Related party transaction
Separately, JZ Capital Partners has done another deal with Jay Jordan and David Zalaznick – the J & Z of JZ Capital. JZ Capital has sold them part of its investment in a fund called Orangewood. The price paid was equivalent to the amount invested plus interest at 8% per annum. Beforehand, JZ Capital had invested $7.85m and committed a further $15.4m to this fund. With this, and another deal with a third party, JZCP now has $4.72m invested and commitments of $9.28m.