Medley SBIC LP, a small business investment company owned by publicly-traded business development company Medley Capital Corporation (NYSE: MCC), disclosed to the SEC that it received a letter from the U.S. Small Business Administration alleging certain regulatory issues constituting a default under the terms of the company’s outstanding debentures.
Specifics were not disclosed in the SEC filing, and requests for additional information were not provided at press time.
In March 2013, the United States Small Business Administration (SBA), a government agency that provides support to entrepreneurs and small businesses, approved Medley SBIC’s license to operate as a small business investment company. The license allows Medley SBIC to obtain leverage by issuing SBA-guaranteed debentures, subject to the issuance of a capital commitment by the SBA and customary procedures.
The SBA letter stated that Medley SBIC had until March 29, 2019 to provide certain additional information regarding the alleged regulatory issues, unless extended. The SBA agreed to extend the cure period until April 19, 2019.
According to the filing, Medley SBIC’s management has submitted a wind-down plan to the SBA and is in active dialogue with the agency to finalize the details for prepaying approximately $135 million of outstanding debentures.
As part of the wind-down plan, on March 29, 2019, Medley SBIC agreed to retire $50 million of outstanding debentures with available cash and expects to finalize the plan to retire the remaining debentures through refinancing and/or assets sales to third parties or Medley SBIC affiliates.
Medley SBIC said that it believes the wind-down plan, if approved, would not have a material impact on its net investment income per share or an adverse impact on its other operations.
Additionally, the company claims it has received the necessary consents and waivers under its merger agreement with affiliated non-traded BDC Sierra Income Corporation to permit the repayment of $50 million of outstanding SBIC debentures.
As of September 30, 2018, Medley SBIC had $135 million in SBA-guaranteed debentures outstanding.