SBIC Debenture Coupon Rates Remain at Historically Low Levels – Cost of Funds at 2.351%

March 27, 2013

On March 20, 2013, the SBIC Funding Corporation completed a pooling of SBA debentures in the amount of $1,063,910,000, the largest pooling in the history of the program, to be issued by 82 SBIC Funds. The Debentures have a coupon rate of 2.351%. This coupon rate is an increase over the previous pooling, which was at 2.240% in September 2012. Despite the increase, the coupon rates on SBA debentures remain at historically low levels.

The pricing of the pool is a critical component to the cost of funds used by SBIC Funds. Once pooled, the interest rate on the SBA debentures becomes fixed for a 10-year period. The SBIC Fund is responsible only for a semi-annual interest-only payment on the SBA debentures until the SBA debentures are repaid. The SBA debentures must be repaid within 10 years. In addition, there are no prepayment penalties.

The historical pooling information is reflected in our chart (click to view)

The Private Equity Practice Group at McGuireWoods LLP is dedicated to keeping clients advised of new legislative and business developments as they occur. If you have any questions regarding these issues, please feel free to contact Mark A. Kromkowski (312.849.8170), Bryan P. Bylica (312.750.3617), your primary attorney at McGuireWoods LLP, or any of the authors.

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