Interest Rates Are On the Decline for SBICs: March 2019 Debenture Pooling

The March 2019 pooling of Small Business Investment Company (“SBIC”) debentures was priced at 3.113%. This most recent semi-annual pricing of SBIC debentures reflected a decrease in the rate set in September 2018 at 3.548%.  

The SBIC debenture rate is set based on a market-driven premium to 10-year Treasury Notes. The decrease in the March 2019 pooling resulted from the fact that yields on 10-year Treasury Notes decreased from September 2018 to March 2019. 

SBICs that drew down debentures between the September 2018 and March 2019 poolings locked in the 3.113% interest rate for the 10-year term of the debentures. Debenture interest payments are due semi-annually, and a balloon payment of the entire principal amount of the debentures is due on the tenth anniversary of the pooling. The SBIC program also imposes an annual fee on the debentures, which is currently set at 0.094%. A new rate for the annual fee will be set after October 1, 2019. SBIC debentures may be prepaid in whole or in part at any time, without premium or penalty. Under current SBIC regulations, SBICs are not permitted to refinance outstanding debentures to take advantage of the new rate. 

If you have questions regarding pricing of debentures or the SBIC program in general, please contact your SBIC counsel at Winston & Strawn LLP.