Great Elm Capital addresses questions on First Brands investment

IThe company said, “In response to numerous investor inquiries, GECC is providing additional details regarding its exposure to First Brands, a global automotive parts manufacturer and supplier that filed for Bankruptcy at the end of September. GECC placed its investments in both First Brands’ First Lien Term Loan and Second Lien Term Loan on non-accrual at the end of September in connection with the Bankruptcy. GECC’s direct exposure to First Brands includes: First Lien Loan: GECC held $9.3 million principal amount of the First Lien Loan and carried it at a fair market value of $8.8 million, equal to 94.3% of principal amount, as of June 30, 2025. In the third quarter, GECC sold $4.5 million principal amount of its First Lien Loan for $4.4 million, equal to 97.9% of principal amount. The First Lien Loan qualified as a Level 2 investment as of June 30, 2025 and was valued using third party vendor prices in accordance with GECC’s valuation policies and procedures. The Company anticipates using the same methodology to value the First Lien Loan as of September 30, 2025. Using third party vendor prices as of September 30, 2025, the remaining $4.8 million principal amount of First Lien Loan held by the Company has a fair market value as of such date of approximately $1.7 million, or 35.2% of principal amount, which is expected to result in an approximately $2.8 million adverse impact to net asset value in the quarter. The First Lien Loan interest rate was 3M SOFR + 5.00% as of June 30, 2025 per the Schedule of Investments filed in GECC’s latest 10-Q, implying an adverse impact of approximately $0.5 million to annualized cash total investment income, or approximately $0.03 per share based on GECC’s total outstanding shares as of September 30, 2025. Second Lien Loan: GECC held $16.2 million principal amount of First Brands Second Lien Loan and carried it at fair market value of $14.5 million, equal to 89.5% of principal amount, as of June 30, 2025. The Second Lien Loan qualified as a Level 2 investment as of June 30, 2025 and was valued using third party vendor prices in accordance with GECC’s valuation policies and procedures. The Company anticipates using the same methodology to value the Second Lien Loan as of September 30, 2025. Using third party vendor prices as of September 30, 2025, the $16.2 million principal amount of Second Lien Loan held by the Company has a fair market value as of such date of approximately $0.9 million, or 5.5% of principal value, which is expected to result in an approximately $13.6 million adverse impact to net asset value in the quarter. The Second Lien Loan interest rate was 3M SOFR + 8.50% as of June 30, 2025 per the Schedule of Investments filed in GECC’s latest 10-Q, implying an adverse impact of approximately $2.1 million of annualized cash total investment income, or approximately $0.15 per share based on GECC’s total outstanding shares as of September 30, 2025. Direct Net Asset Value Impact From First Brands: Approximately $16.5 million based on the above for the quarter ended September 30, 2025. Based on this information and capital activity to date, GECC currently estimates on a preliminary basis that the change in values of its directly held First Brands investments will adversely impact its net asset value by approximately $1.15-$1.25 per share, based on GECC’s total outstanding shares as of September 30, 2025.”