First Capital’s BDC Forms Special Committee to Deal with Bankrupt Investment
The board of First Capital Investment Corporation, a publicly registered non-traded business development company, is establishing a special committee to evaluate and arrange for the disposition of the company’s investments in First Capital Retail LLC and to review the company’s investment portfolio, according to a filing with the Securities and Exchange Commission.
The board appointed independent directors Dr. Bob Froehlich, who will chair the committee, as well as Frank Grant and Jeff Davi.
Earlier this year, First Capital Retail was wholly-owned by First Capital Real Estate Investments, an entity controlled by the BDC’s secretary and chairman, Suneet Singal.
Unbeknownst to First Capital Investment Corporation, First Capital Retail filed for bankruptcy protection last month and subsequently amended the filing to name the BDC as a creditor.
Following discussions with its counsel, First Capital Investment Corporation alleges that the bankruptcy filing materially impaired the fair value of its investments in First Capital Retail and has complicated efforts to sell those investments to an unaffiliated third party within a reasonable timeframe.
As previously reported by The DI Wire, First Capital Investment Corporation’s recently dismissed independent public accounting firm, RSM US LLP, submitted a letter to the Securities and Exchange Commission stating that it believed that the dismissal was the result of a disagreement on accounting principles and financial statement disclosure relating to the First Capital Retail investment.
Specifically, the BDC’s investments in First Capital Retail may be deemed as a transaction with an affiliate which could materially impact the reliability of certain financial statements of the company.
First Capital Investment Corporation, which seeks to invest in private U.S. small- and middle-market companies, has invested approximately $6.64 million in seven portfolio companies and raised approximately $6.1 million in investor equity.
