Texas Disaster Number TX-00447, 38500 [2015-16429]
Download as PDF
<![CDATA[
Lhorne on DSK7TPTVN1PROD with NOTICES
38500
Federal Register / Vol. 80, No. 128 / Monday, July 6, 2015 / Notices
(d) What is the average balance and
settlement of credit lines extended to
SBICs?
(e) Based on SBA’s view that shortterm borrowings pose a lower credit
risk, what restrictions, if any, should
SBA consider placing on the length of
time a balance may remain outstanding
on an unsecured line?
(f) Should SBA permit such facilities
only during time periods of an SBIC’s
lifecycle when the risk to SBA is lower,
for example during the early years of the
SBIC’s life or before additional leverage
is drawn? If so, what considerations
should SBA take into account in
determining the timing and duration of
these periods?
(g) Are there certain provisions in
unsecured loan agreements that SBA
should be especially concerned about
with respect to credit risk (e.g., remedies
available to a lender such as specific
performance or injunctive relief) and
how should SBA deal with those
provisions?
(h) What type of credit risk policies
would be most effective in managing
SBA’s credit risk with respect to
unsecured lines of credit?
2. Determination of Equity Capital
Investments (ECI) in the calculation of
an SBIC’s maximum allowable Capital
Impairment Percentage (CIP). 13 CFR
107.1830(c) defines the maximum
allowable CIP for a leveraged SBIC that
is not an Early Stage SBIC. If an SBIC
exceeds its maximum allowable CIP, it
constitutes a condition of Capital
Impairment, which is an event of
default under the terms of its leverage.
13 CFR 107.1810(f)(5). An SBIC’s
maximum allowable CIP depends on
two variables: (1) the percentage at cost
of ECI in the SBIC’s portfolio, and (2)
the ratio of outstanding leverage to
Leverageable Capital.
Under 13 CFR 107.50, ECI generally
means investments in a small business
in the form of common or preferred
stock, limited partnership interests,
options, warrants, or similar equity
instruments, including subordinated
debt with equity features if such debt
provides only for interest payments
contingent upon and limited to the
extent of earnings. Further, Leverageable
Capital means, as more fully described
in 13 CFR 107.50, paid-in capital of an
SBIC.
SBA’s regulations permit a higher
maximum allowable CIP when the
percentage of ECI in an SBIC’s portfolio
is higher in recognition that equity-type
investment strategies are inherently
riskier and frequently require a longer
holding period relative to debt
investments before a successful exit can
be achieved.
VerDate Sep<11>2014
14:37 Jul 02, 2015
Jkt 235001
SBA has observed over the last few
years that SBICs seeking to avoid
Capital Impairment have converted nonECI investments to ECI solely for the
purpose of attaining an increase in
maximum allowable CIP. For example,
an SBIC can convert a loan into equity,
which would cause the investment to
then qualify as ECI. Depending on the
circumstances of the SBIC, the
converted security could cause the
SBIC’s maximum allowable CIP to
increase and artificially forestall the
SBIC from having a condition of Capital
Impairment, which creates risk to
taxpayers.
SBA has also observed the
deteriorating performance of portfolio
companies held in a particular SBIC can
likewise result in an SBIC’s maximum
allowable CIP increasing. Using the
example in the prior paragraph, the loan
could have been converted to equity as
a result of a distressed restructuring of
the company. In either case, the
increased ECI was not the result of the
SBIC making an ECI investment from
the outset, but instead converting nonECI based on the impairment status of
the SBIC or the deteriorated status of a
small concern.
SBA aims to prevent conversions
specifically and solely intended to
artificially increase maximum allowable
CIP, because such conversions result in
the SBIC having a reduced collateral
position in the portfolio company at a
time when that collateral may be critical
for SBA to obtain a recovery from the
SBIC. However, in considering any
policy changes to managing its credit
risk with respect to ECI, SBA does not
seek to create unnecessary burdens for
SBICs who may convert an investment
to ECI for business reasons unrelated to
solely avoiding Capital Impairment (e.g.,
the exercise of conversion rights prior to
a planned IPO). Accordingly, the
Agency welcomes comments from the
public on how to achieve this objective.
Comments may be general in nature
and/or answer the following questions:
(a) Other than the examples provided
in this notice, what transactions or
circumstances can result in an original
non-ECI becoming qualified as an ECI?
(b) What specific factors should SBA
consider in determining that
investments are disqualified as ECI for
the purposes of calculating an SBIC’s
maximum allowable CIP?
(c) Without creating an undue
reporting burden on SBICs, how can
SBA differentiate between investments
converted for legitimate business
reasons and those converted for other
reasons, including solely to inflate total
ECI in the SBIC’s portfolio?
PO 00000
Frm 00074
Fmt 4703
Sfmt 9990
Authority: 15 U.S.C. 681.
Javier Saade,
Associate Administrator for Investment and
Innovation.
[FR Doc. 2015–16430 Filed 7–2–15; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #14334 and #14335]
Texas Disaster Number TX–00447
U.S. Small Business
Administration.
AGENCY:
ACTION:
Amendment 4.
This is an amendment of the
Presidential declaration of a major
disaster for the State of Texas (FEMA–
4223–DR), dated 05/29/2015.
Incident: Severe Storms, Tornadoes,
Straight-Line Winds and Flooding.
Incident Period: 05/04/2015 through
06/19/2015.
Effective Date: 06/24/2015.
Physical Loan Application Deadline
Date: 07/28/2015.
EIDL Loan Application Deadline Date:
02/29/2016.
SUMMARY:
Submit completed loan
applications to: U.S. Small Business
Administration Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Alan Escobar, Office of Disaster
Assistance, U.S. Small Business
Administration, 409 3rd Street SW.,
Suite 6050, Washington, DC 20416.
The notice
of the Presidential disaster declaration
for the State of TEXAS, dated 05/29/
2015 is hereby amended to include the
following areas as adversely affected by
the disaster:
Primary Counties: (Physical Damage
and Economic Injury Loans): Fayette.
Contiguous Counties: (Economic Injury
Loans Only):
Texas; Colorado; Lavaca; Washington.
SUPPLEMENTARY INFORMATION:
All other information in the original
declaration remains unchanged.
(Catalog of Federal Domestic Assistance
Numbers 59002 and 59008)
James E. Rivera,
Associate Administrator for Disaster
Assistance.
[FR Doc. 2015–16429 Filed 7–2–15; 8:45 am]
BILLING CODE 8025–01–P
E:\FR\FM\06JYN1.SGM
06JYN1
]]>Agencies
[Federal Register Volume 80, Number 128 (Monday, July 6, 2015)]
[Notices]
[Page 38500]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-16429]
-----------------------------------------------------------------------
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #14334 and #14335]
Texas Disaster Number TX-00447
AGENCY: U.S. Small Business Administration.
ACTION: Amendment 4.
-----------------------------------------------------------------------
SUMMARY: This is an amendment of the Presidential declaration of a
major disaster for the State of Texas (FEMA-4223-DR), dated 05/29/2015.
Incident: Severe Storms, Tornadoes, Straight-Line Winds and
Flooding.
Incident Period: 05/04/2015 through 06/19/2015.
Effective Date: 06/24/2015.
Physical Loan Application Deadline Date: 07/28/2015.
EIDL Loan Application Deadline Date: 02/29/2016.
ADDRESSES: Submit completed loan applications to: U.S. Small Business
Administration Processing and Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: Alan Escobar, Office of Disaster
Assistance, U.S. Small Business Administration, 409 3rd Street SW.,
Suite 6050, Washington, DC 20416.
SUPPLEMENTARY INFORMATION: The notice of the Presidential disaster
declaration for the State of TEXAS, dated 05/29/2015 is hereby amended
to include the following areas as adversely affected by the disaster:
Primary Counties: (Physical Damage and Economic Injury Loans): Fayette.
Contiguous Counties: (Economic Injury Loans Only):
Texas; Colorado; Lavaca; Washington.
All other information in the original declaration remains
unchanged.
(Catalog of Federal Domestic Assistance Numbers 59002 and 59008)
James E. Rivera,
Associate Administrator for Disaster Assistance.
[FR Doc. 2015-16429 Filed 7-2-15; 8:45 am]
BILLING CODE 8025-01-P
