Interest Rates Fall Again For SBICs: September 2021 Debenture Pooling – Corporate/Commercial Law

United States:

Interest rates for SBICs are falling again: Debenture pooling in September 2021

September 18, 2021

Winston & Strawn LLP

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The September 2021 consolidation of Notes of Small Business Investment Company (“SBIC”) was valued at 1.304%. This most recent semi-annual pricing of SBIC bonds reflected a decrease from the 1.667% rate set in March 2021.

The SBIC bond rate is set based on a market premium on 10 year Treasury bills. This rate had increased in the March 2021 survey period, but decreased in each of the four previous pooling periods.

SBICs that drawn Notes between March 2021 and September 2021 have set an interest rate of 1.304% for the 10-year term of the Notes. The interest payments on the bonds are due every six months; on the tenth anniversary of the merger, a balloon payment of the entire nominal amount of the bonds is due. The SBIC program also charges an annual fee on the Notes, which is currently set at 0.271%. After September 30, 2021, a new rate will be set for the annual fee. SBIC bonds can be prepaid in whole or in part at any time with no premium or penalty. Under current SBIC regulations, SBICs are not allowed to refinance outstanding debt securities to take advantage of the new interest rate.

The content of this article is intended to provide general guidance on the subject. Expert advice should be sought regarding your specific circumstances.

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