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Goldman Sachs BDC expects full recovery on GK Holdings due to SPAC deal

Goldman Sachs BDC Inc. said it expects to receive full recovery on a first-lien debt investment in GK Holdings Inc., doing business as Global Knowledge Training LLC, as a result of that company's merger with a special purpose acquisition company.

In October, special purpose acquisition company Churchill Capital Corp II announced that it entered into a definitive agreement to acquire Skillsoft Ltd. in a transaction valued at approximately $1.3 billion and that it will acquire Global Knowledge Training LLC for roughly $233 million.

The transaction is expected to close early in the first quarter of 2021. The investment will likely become cash and performing debt.

"In the context of COVID, the company has made some strides in moving their offerings to the online domain, but that's been a process there. But the real value proposition here was merging with one of their big competitors. And the SPAC capital is coming in to effectuate that merger," said Brendan McGovern, CEO of Goldman Sachs BDC and head of Goldman Sachs Asset Management Private Credit Group, on an investor call Nov. 6.

"On the combined basis, and thinking of the synergies that are new to the company, the value that was offered to the debt holders of GK was effectively getting a full recovery on the first-lien, and a significant recovery back to the second-lien."

As of Sept. 30, Goldman Sachs BDC’s investment in GK Holdings comprised an $8.5 million first-lien loan due 2021 (L+800, 1% Libor floor), marked with a fair value of $4.5 million, and a $3 million second-lien loan due 2022 (L+1,225, 1% Libor floor), marked with a fair value of $750,000.

In October, Goldman Sachs BDC closed a merger with Goldman Sachs Middle Market Lending Corp., a transaction that more than doubled Goldman Sachs BDC's assets, to $3.5 billion.