SBIC Debenture Priced at Historical Lows

September 16, 2020

On Sept. 15, 2020, the Small Business Investor Alliance announced that $685,450,000 of Small Business Investment Companies (SBIC) debentures were priced at an interest rate of 1.034 percent — the lowest interest rate of SBIC debentures ever, cutting nearly in half from the previous all-time low of 2.051 percent. This price reflects a 38 basis point spread from the 10-year Treasury rate and a 35 basis point spread from the 10-year mid swaps rate.

This rate of 1.034 percent is the new base rate applied to the SBIC leverage drawn between the last pooling in March and Sept. 8, 2020. This rate does not include the annual, reserving or drawing fees. SBIC debentures are non-amortizing, fixed-rate notes with no prepayment penalty. The base rate does not include a number of additional fees that the U.S. Small Business Administration charges SBICs. The previous pool of debentures priced in March 2020 at 2.078 percent, in September 2019 at 2.283 percent and in March 2019 at 3.113 percent.

The historical pooling is reflected in our chart.

SBIC Debentures Chart: Sept. 2020

The private equity practice group at McGuireWoods is dedicated to keeping clients advised of new legislative and business developments as they occur. If you have any questions regarding these issues, please contact Mark A. Kromkowski (+1 312 849 8170), Bryan P. Bylica (+1 312 750 3617), your primary attorney at McGuireWoods or any of the other authors.

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