Investment funds sue struggling Brinks parent company over debt plan

Click here to view original web page at www.bizjournals.com

A group of funds is suing the struggling parent company of Dallas home security firm Brinks over how executives are scrambling to cover their upcoming debt payments.

Brinks Home Security has been losing more accounts than it’s been signing over the last year as it faces incoming competition from outsiders like retail giant Amazon.

Its parent securities company, Monitronics, which was acquired by Ascent Capital Group in 2010, has fallen into financial distress – losing money every year since 2013 – and is facing a steep amount of debt that must be refinanced next fall.

Certain funds, including KLS Diversified Asset Management, Silverback Asset Management, Sound Point Capital and Whitebox Advisors, own a set of notes owed by Ascent. They are worried that a proposed transfer of $100 million from Ascent to partially pay down Monitronics’ debts would jeopardize their holdings.

The funds claim Monitronics is insolvent and the transfer is a “Hail Mary pass in the hope that (Monitronics’) business miraculously turns around,” according to the lawsuit filed in Delaware.

They claim Ascent is risking its own balance sheet through the transfer and depleting what cash it has. Ascent also owns an insurance line of businesses that has taken losses from Hurricane Maria in Puerto Rico.

The funds allege they were “lulled…into inactivity” while executives “secretly engaged” with Monitronics’ debt holders about their plan to bail out their subsidiary.

They want the company to negotiate a restructuring for Monitronics or risk losing it and Brinks in bankruptcy.

A spokesperson for Ascent declined to comment on the lawsuit.

Ascent Capital Group CEO Bill Niles told analysts on an Aug. 2 call they the firm is “continuing to evaluate (its) options” about how to handle the upcoming notes.

Brinks is banking on a rebrand this year and its partnership with Nest to help boost sales. Brinks CEO Jeff Gardner told investors on the August call that so far, the entry of new competitors to the market has not had a big effect, but indicated that would likely change.

“We certainly believe that Amazon is going to be a formidable competitor over time,” Gardner said.

The List

Largest North Texas Investment Banking Firms

Ranked by # Local Banking Professionals

Rank Business Name # Local Banking Professionals
1 Houlihan Lokey Inc. 52
2 Stephens Inc. 50
3 Commerce Street Capital LLC 25
View This List

A group of funds is suing the struggling parent company of Dallas home security firm Brinks over how executives are scrambling to cover their upcoming debt payments.

Leave a Reply

Your email address will not be published. Required fields are marked *