[House Report 115-215]
[From the U.S. Government Publishing Office]
115th Congress } { Report
HOUSE OF REPRESENTATIVES
1st Session } { 115-215
======================================================================
SMALL BUSINESS INVESTMENT OPPORTUNITY ACT OF 2017
_______
July 12, 2017.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Chabot, from the Committee on Small Business, submitted the
following
R E P O R T
[To accompany H.R. 2333]
The Committee on Small Business, to whom was referred the
bill (H.R. 2333) to amend the Small Business Investment Act of
1958 to increase the amount of leverage made available to small
business investment companies, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
CONTENTS
Page
I. Purpose of the Bill and Summary.................................2
II. Background and the Need for Legislation.........................2
III. Hearings........................................................2
IV. Committee Consideration.........................................2
V. Committee Votes.................................................3
VI. Section-by-Section Analysis of H.R. 2333........................6
VII. Unfunded Mandates...............................................6
VIII. New Budget Authority, Entitlement Authority and Tax Expenditures6
IX. Oversight Findings..............................................6
X. Statement of Constitutional Authority...........................6
XI. Congressional Accountability Act................................7
XII. Federal Advisory Committee Statement............................7
XIII. Statement of No Earmarks........................................7
XIV. Statement of Duplication of Federal Programs....................7
XV. Disclosure of Directed Rule Makings.............................7
XVI. Performance Goals and Objectives................................7
XVII. Changes in Existing Law Made by the Bill, as Reported...........7
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Investment Opportunity
Act of 2017''.
SEC. 2. INDIVIDUAL SBIC LEVERAGE LIMIT INCREASE.
Section 303(b)(2)(A)(ii) of the Small Business Investment Act of 1958
(15 U.S.C. 683(b)(2)(A)(ii)) is amended by striking ``$150,000,000''
and inserting ``$175,000,000''.
Cost Estimate of the Congressional Budget Office
The cost estimate prepared by the Director of the
Congressional Budget Office pursuant to 402 of the
Congressional Budget Act of 1974 was not submitted timely to
the Committee.
I. Purpose and Bill Summary
With the goal of growing the amount of equity capital
available to small businesses, H.R. 2333, the ``Small Business
Investment Opportunity Act of 2017,'' amends the Small Business
Investment Act of 1958 by increasing the Individual Leverage
Limit from $150 million to $175 million for those participating
in the Small Business Investment Company (SBIC) program.
II. Background and Need for Legislation
As the United States continues to see signs of an improved
economy, the nation's small businesses are still confronted
with a challenging lending environment. To help address the
many lending roadblocks that exist, the Small Business
Administration (SBA) offers numerous programs to increase
access to capital for small businesses. In particular, the
Small Business Investment Company (SBIC) program, which
utilizes a privately-owned and SBA-licensed model, focuses on
increasing the availability of venture and private equity
capital to small businesses.
To utilize the SBIC program to its full potential, H.R.
2333 amends the Small Business Investment Act of 1958 by
increasing the Individual Leverage Limit from $150 million to
$175 million. The Individual Leverage Limit stipulates how much
capital can be deployed to a small business by an SBIC that has
only one fund under management. It was last increased in 2009
with the limit increasing from $137 million to the present day
limit of $150 million.
Similar to legislation that was signed into law in 2015
that increased the leverage limit for an SBIC that manages
multiple funds, H.R. 2333 will enhance the ability of a small
business to expand and create jobs.
III. Hearings
In the 114th Congress, issues related to SBICs were
addressed at a hearing by the Subcommittee on Economic Growth,
Tax and Capital Access of the Committee on Small Business
entitled ``Improving Capital Access Programs within the SBA''
on May 19, 2015. As a result, no hearings have been held in the
115th Congress.
IV. Committee Consideration
The Committee on Small Business met in open session, with a
quorum being present, on June 15, 2017, and ordered H.R. 2333
be favorably reported, as amended, to the House by a recorded
vote of 21 yeas and 0 noes at 11:23 A.M.
Amendment Number One, filed by Mr. Marshall of Kansas,
makes a technical correction to the bill to reflect the correct
section of the United States Code that is amended. The
amendment was agreed to by a voice vote at 11:20 A.M.
V. Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the recorded
votes on the motion to report the legislation and amendments
thereto. The Committee voted 21-0 to report H.R. 2333, as
amended, to the House at 11:23 am.
Amendment to H.R. 2333
Offered by Mr. Marshall of Kansas
Page 1, line 8, strike ``682'' and insert ``683''.
VI. Section-by-Section Analysis of H.R. 2333
Section 1. Short title
This section designates the bill as the ``Small Business
Investment Opportunity Act of 2017.''
Sec. 2. Individual SBIC leverage limit increase
Since 1958, the Small Business Investment Company (SBIC)
program has operated a private-public partnership model,
whereby a privately owned and Small Business Administration
(SBA) licensed company supplies debt and equity capital to
small businesses. The program successfully runs at a zero
subsidy rate to the American taxpayer. The current cap for an
SBIC that manages just one company is capped at $150,000,000.
This section amends Sec. 303(b)(2)(A)(iii) of the Small
Business Investment Act of 1958, 15 U.S.C.
Sec. 682(b)(2)(A)(ii), by increasing the Individual Leverage
Limit to $175,000,000. While this provision comes at no cost to
the taxpayer, increasing this limit will enhance the flow of
capital to small businesses.
VII. Unfunded Mandates
H.R. 2333 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act, Pub.
L. No. 104-4, and would impose no costs on state, local or
tribal governments.
VIII. New Budget Authority, Entitlement Authority and Tax Expenditures
The Committee has not received an estimate of new budget
authority contained in the cost estimate prepared by the
Director of the Congressional Budget Office pursuant to
Sec. 402 of the Congressional Budget Act of 1974. In compliance
with clause 3(c)(2) of rule XIII of the Rules of the House, the
Committee opines that H.R. 2333 will not establish any new
budget or entitlement authority or create any tax expenditures.
IX. Oversight Findings
In accordance with clause 2(b)(1) of rule X of the Rules of
the House, the oversight findings and recommendations of the
Committee on Small Business with respect to the subject matter
contained in H.R. 2333 are incorporated into the descriptive
portions of this report.
X. Statement of Constitutional Authority
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
authority for this legislation in Art. I, Sec. 8, cl. 3 of the
Constitution of the United States.
XI. Congressional Accountability Act
H.R. 2333 does not relate to the terms and conditions of
employment or access to public services or accommodations
within the meaning of Sec. 102(b)(3) of Pub. L. No. 104-1.
XII. Federal Advisory Committee Act Statement
H.R. 2333 does not establish or authorize the establishment
of any new advisory committees as that term is defined in the
Federal Advisory Committee Act, 5 U.S.C. App. 2.
XIII. Statement of No Earmarks
Pursuant to clause 9 of rule XXI, H.R. 2333 does not
contain any congressional earmarks, limited tax benefits or
limited tariff benefits as defined in subsections (d), (e) or
(f) of clause 9 of rule XXI of the Rules of the House.
XIV. Statement of Duplication of Federal Programs
Pursuant to clause 3(c) of rule XIII of the Rules of the
House, no provision of H.R. 2333 establishes or reauthorizes a
program of the federal government known to be duplicative of
another federal program, a program that was included in any
report from the United States Government Accountability Office
pursuant to Sec. 21 of Pub. L. No. 111-139, or a program
related to a program identified in the most recent catalog of
federal domestic assistance.
XV. Disclosure of Directed Rule Makings
Pursuant to clause 3(c) of rule XIII of the Rules of the
House, H.R. 2333 does not direct any rule making.
XVI. Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House, the Committee establishes the following performance-
related goals and objectives in this legislation:
H.R. 2333 amends the Small Business Investment Act of
1958 to increase the amount of leverage made available
to small business investment companies.
XVII. Changes in Existing Law Made by the Bill, as Reported
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
SMALL BUSINESS INVESTMENT ACT OF 1958
* * * * * * *
TITLE III--INVESTMENT DIVISION PROGRAMS
Part A--Small Business Investment Companies
* * * * * * *
borrowing power
Sec. 303. (a) Each small business investment company shall
have authority to borrow money and to issue its securities,
promissory notes, or other obligations under such general
conditions and subject to such limitations and regulations as
the Administration may prescribe.
(b) To encourage the formation and growth of small business
investment companies the Administration is authorized when
authorized in appropriation Acts, to purchase, or to guarantee
the timely payment of all principal and interest as scheduled
on, debentures or participating securities issued by such
companies. Such purchases or guarantees may be made by the
Administration on such terms and conditions as it deems
appropriate, pursuant to regulations issued by the
Administration. The full faith and credit of the United States
is pledged to the payment of all amounts which may be required
to be paid under any guarantee under this subsection.
Debentures purchased or guaranteed by the Administration under
this subsection shall be subordinate to any other debenture
bonds, promissory notes, or other debts and obligations of such
companies, unless the Administration in its exercise of
reasonable investment prudence and in considering the financial
soundness of such company determines otherwise. Such debentures
may be issued for a term of not to exceed fifteen years and
shall bear interest at a rate not less than a rate determined
by the Secretary of the Treasury taking into consideration the
current average market yield on outstanding marketable
obligations of the United States with remaining periods to
maturity comparable to the average maturities on such
debentures, adjusted to the nearest one-eighth of 1 per centum,
plus, for debentures obligated after September 30, 2001, an
additional charge, in an amount established annually by the
Administration, as necessary to reduce to zero the cost (as
defined in section 502 of the Federal Credit Reform Act of 1990
(2 U.S.C. 661a)) to the Administration of purchasing and
guaranteeing debentures under this Act, which amount may not
exceed 1.38 percent per year, and which shall be paid to and
retained by the Administration. The debentures or participating
securities shall also contain such other terms as the
Administration may fix, and shall be subject to the following
restrictions and limitations:
(1) The total amount of debentures and participating
securities that may be guaranteed by the Administration
and outstanding from a company licensed under section
301(c) of this Act shall not exceed 300 per centum of
the private capital of such company: Provided, That
nothing in this paragraph shall require any such
company that on March 31, 1993, has outstanding
debentures in excess of 300 per centum of its private
capital to prepay such excess: And provided further,
That any such company may apply for an additional
debenture guarantee or participating security guarantee
with the proceeds to be used solely to pay the amount
due on such maturing debenture, but the maturity of the
new debenture or security shall be not later than
September 30, 2002.
(2) Maximum leverage.--
(A) In general.--The maximum amount of
outstanding leverage made available to any one
company licensed under section 301(c) of this
Act may not exceed the lesser of--
(i) 300 percent of such company's
private capital; or
(ii) [$150,000,000] $175,000,000.
(B) Multiple licenses under common control.--
The maximum amount of outstanding leverage made
available to two or more companies licensed
under section 301(c) of this Act that are
commonly controlled (as determined by the
Administrator) and not under capital impairment
may not exceed $350,000,000.
(C) Investments in low-income geographic
areas.--(i) In calculating the outstanding
leverage of a company for the purposes of
subparagraph (A), the Administrator shall not
include the amount of the cost basis of any
equity investment made by the company in a
smaller enterprise located in a low-income
geographic area (as defined in section 351), to
the extent that the total of such amounts does
not exceed 50 percent of the company's private
capital.
(ii) The maximum amount of
outstanding leverage made available
to--
(I) any 1 company described
in clause (iii) may not exceed
the lesser of 300 percent of
private capital of the company,
or $175,000,000; and
(II) 2 or more companies
described in clause (iii) that
are under common control (as
determined by the
Administrator) may not exceed
$250,000,000.
(iii) A company described in this
clause is a company licensed under
section 301(c) in the first fiscal year
after the date of enactment of this
clause or any fiscal year thereafter
that certifies in writing that not less
than 50 percent of the dollar amount of
investments of that company shall be
made in companies that are located in a
low-income geographic area (as that
term is defined in section 351).
(D) Investments in energy saving small
businesses.--
(i) In general.--Subject to clause
(ii), in calculating the outstanding
leverage of a company for purposes of
subparagraph (A), the Administrator
shall exclude the amount of the cost
basis of any Energy Saving qualified
investment in a smaller enterprise made
in the first fiscal year after the date
of enactment of this subparagraph or
any fiscal year thereafter by a company
licensed in the applicable fiscal year.
(ii) Limitations.--
(I) Amount of exclusion.--The
amount excluded under clause
(i) for a company shall not
exceed 33 percent of the
private capital of that
company.
(II) Maximum investment.--A
company shall not make an
Energy Saving qualified
investment in any one entity in
an amount equal to more than 20
percent of the private capital
of that company.
(III) Other terms.--The
exclusion of amounts under
clause (i) shall be subject to
such terms as the Administrator
may impose to ensure that there
is no cost (as that term is
defined in section 502 of the
Federal Credit Reform Act of
1990 (2 U.S.C. 661a)) with
respect to purchasing or
guaranteeing any debenture
involved.
(3) Subject to the foregoing dollar and percentage
limits, a company licensed under section 301(c) of this
Act may issue and have outstanding both guaranteed
debentures and participating securities: Provided, That
the total amount of participating securities
outstanding shall not exceed 200 per centum of private
capital.
For purposes of this subsection, the term ``venture capital''
includes such common stock, preferred stock, or other financing
with subordination or nonamortization characteristics as the
Administration determines to be substantially similar to equity
financing.
(c) Third Party Debt.--The Administrator--
(1) shall not permit a licensee having outstanding
leverage to incur third party debt that would create or
contribute to an unreasonable risk of default or loss
to the Federal Government;
(2) shall permit such licensees to incur third party
debt only on such terms and subject to such conditions
as may be established by the Administrator, by
regulation or otherwise.
(d) Investments in Smaller Enterprises.--The Administrator
shall require each licensee, as a condition of approval of an
application for leverage, to certify in writing that not less
than 25 percent of the aggregate dollar amount of financings of
that licensee shall be provided to smaller enterprises.
(e) Capital Impairment.--Before approving any application for
leverage submitted by a licensee under this Act, the
Administrator--
(1) shall determine that the private capital of the
licensee meets the requirements of section 302(a); and
(2) shall determine, taking into account the nature
of the assets of the licensee, the amount and terms of
any third party debt owed by such licensee, and any
other factors determined to be relevant by the
Administrator, that the private capital of the licensee
has not been impaired to such an extent that the
issuance of additional leverage would create or
otherwise contribute to an unreasonable risk of default
or loss to the Federal Government.
(f) Redemption or Repurchase of Preferred Stock.--
Notwithstanding any other provision of law--
(1) the Administrator may allow the issuer of any
preferred stock sold to the Administration before
November 1, 1989 to redeem or repurchase such stock,
upon the payment to the Administration of an amount
less than the par value of such stock, for a repurchase
price determined by the Administrator after
consideration of all relevant factors, including--
(A) the market value of the stock;
(B) the value of benefits provided and
anticipated to accrue to the issuer;
(C) the amount of dividends paid, accrued,
and anticipated; and
(D) the estimate of the Administrator of any
anticipated redemption; and
(2) any moneys received by the Administration from
the repurchase of preferred stock shall be available
solely to provide debenture leverage to licensees
having 50 percent or more in aggregate dollar amount of
their financings invested in smaller enterprises.
(g) In order to encourage small business investment companies
to provide equity capital to small businesses, the
Administration is authorized to guarantee the payment of the
redemption price and prioritized payments on participating
securities issued by such companies which are licensed pursuant
to section 301(c) of this Act, and a trust or a pool acting on
behalf of the Administration is authorized to purchase such
securities. Such guarantees and purchases shall be made on such
terms and conditions as the Administration shall establish by
regulation. For purposes of this section, (A) the term
``participating securities'' includes preferred stock, a
preferred limited partnership interest or a similar instrument,
including debentures under the terms of which interest is
payable only to the extent of earnings and (B) the term
``prioritized payments'' includes dividends on stock, interest
on qualifying debentures, or priority returns on preferred
limited partnership interests which are paid only to the extent
of earnings. Participating securities guaranteed under this
subsection shall be subject to the following restrictions and
limitations, in addition to such other restrictions and
limitations as the Administration may determine:
(1) Participating securities shall be redeemed not
later than 15 years after their date of issuance for an
amount equal to 100 per centum of the original issue
price plus the amount of any accrued prioritized
payment: Provided, That if, at the time the securities
are redeemed, whether as scheduled or in advance, the
issuing company (A) has not paid all accrued
prioritized payments in full as provided in paragraph
(2) below and (B) has not sold or otherwise disposed of
all investments subject to profit distributions
pursuant to paragraph (11), the company's obligation to
pay accrued and unpaid prioritized payments shall
continue and payment shall be made from the realized
gain, if any, on the disposition of such investments,
but if on disposition there is no realized gain, the
obligation to pay accrued and unpaid prioritized
payments shall be extinguished: Provided further, That
in the interim, the company shall not make any in-kind
distributions of such investments unless it pays to the
Administration such sums, up to the amount of the
unrealized appreciation on such investments, as may be
necessary to pay in full the accrued prioritized
payments.
(2) Prioritized payments on participating securities
shall be preferred and cumulative and payable out of
the retained earnings available for distribution, as
defined by the Administration, of the issuing company
at a rate determined by the Secretary of the Treasury
taking into consideration the current average market
yield on outstanding marketable obligations of the
United States with remaining periods to maturity
comparable to the average maturities on such
securities, adjusted to the nearest one-eighth of 1
percent, plus, for participating securities obligated
after September 30, 2001, an additional charge, in an
amount established annually by the Administration, as
necessary to reduce to zero the cost (as defined in
section 502 of the Federal Credit Reform Act of 1990 (2
U.S.C. 661a)) to the Administration of purchasing and
guaranteeing participating securities under this Act,
which amount may not exceed 1.46 percent per year, and
which shall be paid to and retained by the
Administration.
(3) In the event of liquidation of the company,
participating securities shall be senior in priority
for all purposes to all other equity interests in the
issuing company, whenever created.
(4) Any company issuing a participating security
under this Act shall commit to invest or shall invest
an amount equal to the outstanding face value of such
security solely in equity capital. As used in this
subsection, ``equity capital'' means common or
preferred stock or a similar instrument, including
subordinated debt with equity features which is not
amortized and which provides for interest payments from
appropriate sources, as determined by the
Administration.
(5) The only debt (other than leverage obtained in
accordance with this title) which any company issuing a
participating security under this subsection may have
outstanding shall be temporary debt in amounts limited
to not more than 50 per centum of private capital.
(6) The Administration may permit the proceeds of a
participating security to be used to pay the principal
amount due on outstanding debentures guaranteed by the
Administration, if (A) the company has outstanding
equity capital invested in an amount equal to the
amount of the debentures being refinanced and (B) the
Administration receives profit participation on such
terms and conditions as it may determine, but not to
exceed the per centums specified in paragraph (11).
(7) For purposes of computing profit participation
under paragraph (11), except as otherwise determined by
the Administration, the management expenses of any
company which issues participating securities shall not
be greater than 2.5 per centum per annum of the
combined capital of the company, plus $125,000 if the
company's combined capital is less than $20,000,000.
For purposes of this paragraph, (A) the term ``combined
capital'' means the aggregate amount of private capital
and outstanding leverage and (B) the term ``management
expenses'' includes salaries, office expenses, travel,
business development, office and equipment rental,
bookkeeping and the development, investigation and
monitoring of investments, but does not include the
cost of services provided by specialized outside
consultants, outside lawyers and outside auditors, who
perform services not generally expected of a venture
capital company nor does such term include the cost of
services provided by any affiliate of the company which
are not part of the normal process of making and
monitoring venture capital investments.
(8) Notwithstanding paragraph (9), if a company is
operating as a limited partnership or as a subchapter S
corporation or an equivalent pass-through entity for
tax purposes and if there are no accumulated and unpaid
prioritized payments, the company may make annual
distributions to the partners, shareholders, or members
in amounts not greater than each partner's,
shareholder's, or member's maximum tax liability. For
purposes of this paragraph, the term ``maximum tax
liability'' means the amount of income allocated to
each partner, shareholder, or member (including an
allocation to the Administration as if it were a
taxpayer) for Federal income tax purposes in the income
tax return filed or to be filed by the company with
respect to the fiscal year of the company immediately
preceding such distribution, multiplied by the highest
combined marginal Federal and State income tax rates
for corporations or individuals, whichever is higher,
on each type of income included in such return. For
purposes of this paragraph, the term ``State income
tax'' means the income tax of the State where the
company's principal place of business is located. A
company may also elect to make a distribution under
this paragraph at any time during any calendar quarter
based on an estimate of the maximum tax liability. If a
company makes 1 or more interim distributions for a
calendar year, and the aggregate amount of those
distributions exceeds the maximum amount that the
company could have distributed based on a single annual
computation, any subsequent distribution by the company
under this paragraph shall be reduced by an amount
equal to the excess amount distributed.
(9) After making any distributions as provided in
paragraph (8), a company with participating securities
outstanding may distribute the balance of income to its
investors, specifically including the Administration,
in the per centums specified in paragraph (11), if
there are no accumulated and unpaid prioritized
payments and if all amounts due the Administration
pursuant to paragraph (11) have been paid in full,
subject to the following conditions:
(A) As of the date of the proposed
distribution, if the amount of leverage
outstanding is more than 200 per centum of the
amount of private capital, any amounts
distributed shall be made to private investors
and to the Administration in the ratio of
leverage to private capital.
(B) As of the date of the proposed
distribution, if the amount of leverage
outstanding is more than 100 per centum but not
more than 200 per centum of the amount of
private capital, 50 per centum of any amounts
distributed shall be made to the Administration
and 50 per centum shall be made to the private
investors.
(C) If the amount of leverage outstanding is
100 per centum, or less, of the amount of
private capital, the ratio shall be that for
distribution of profits as provided in
paragraph (11).
(D) Any amounts received by the
Administration under subparagraph (A) or (B)
shall be applied first as profit participation
as provided in paragraph (11) and any remainder
shall be applied as a prepayment of the
principal amount of the participating
securities or debentures.
(10) After making any distributions pursuant to
paragraph (8), a company with participating securities
outstanding may return capital to its investors,
specifically including the Administration, if there are
no accumulated and unpaid prioritized payments and if
all amounts due the Administration pursuant to
paragraph (11) have been paid in full. Any
distributions under this paragraph shall be made to
private investors and to the Administration in the
ratio of private capital to leverage as of the date of
the proposed distribution: Provided, That if the amount
of leverage outstanding is less than 50 per centum of
the amount of private capital or $10,000,000, whichever
is less, no distribution shall be required to be made
to the Administration unless the Administration
determines, on a case by case basis, to require
distributions to the Administration to reduce the
amount of outstanding leverage to an amount less than
$10,000,000.
(11)(A) A company which issues participating
securities shall agree to allocate to the
Administration a share of its profits determined by the
relationship of its private capital to the amount of
participating securities guaranteed by the
Administration in accordance with the following:
(i) If the total amount of participating
securities is 100 per centum of private capital
or less, the company shall allocate to the
Administration a per centum share computed as
follows: the amount of participating securities
divided by private capital times 9 per centum.
(ii) If the total amount of participating
securities is more than 100 per centum but not
greater than 200 per centum of private capital,
the company shall allocate to the
Administration a per centum share computed as
follows:
(I) 9 per centum, plus
(II) 3 per centum of the amount of
participating securities minus private
capital divided by private capital.
(B) Notwithstanding any other provision of this
paragraph--
(i) in no event shall the total per centum
required by this paragraph exceed 12 per
centum, unless required pursuant to the
provisions of (ii) below,
(ii) if, on the date the participating
securities are marketed, the interest rate on
Treasury bonds with a maturity of 10 years is a
rate other than 8 per centum, the
Administration shall adjust the rate specified
in paragraph (A) above, either higher or lower,
by the same per centum by which the Treasury
bond rate is higher or lower than 8 per centum,
and
(iii) this paragraph shall not be construed
to create any ownership interest of the
Administration in the company.
(12) A company may elect to make an in-kind
distribution of securities only if such securities are
publicly traded and marketable. The company shall
deposit the Administration's share of such securities
for disposition with a trustee designated by the
Administration or, at its option and with the agreement
of the company, the Administration may direct the
company to retain the Administration's share. If the
company retains the Administration's share, it shall
sell the Administration's share and promptly remit the
proceeds to the Administration. As used in this
paragraph, the term ``trustee'' means a person who is
knowledgeable about and proficient in the marketing of
thinly traded securities.
(h) The computation of amounts due the Administration under
participating securities shall be subject to the following
terms and conditions:
(1) The formula in subsection (g)(11) shall be
computed annually and the Administration shall receive
distributions of its profit participation at the same
time as other investors in the company.
(2) The formula shall not be modified due to an
increase in the private capital unless the increase is
provided for in a proposed business plan submitted to
and approved by the Administration.
(3) After distributions have been made, the
Administration's share of such distributions shall not
be recomputed or reduced.
(4) If the company prepays or repays the
participating securities, the Administration shall
receive the requisite participation upon the
distribution of profits due to any investments held by
the company on the date of the repayment or prepayment.
(5) If a company is licensed on or before March 31,
1993, it may elect to exclude from profit participation
all investments held on that date and in such case the
Administration shall determine the amount of the future
expenses attributable to such prior investment:
Provided, That if the company issues participating
securities to refinance debentures as authorized in
subsection (g)(6), it may not elect to exclude profits
on existing investments under this paragraph.
(i) Leverage Fee.--With respect to leverage granted by the
Administration to a licensee, the Administration shall collect
from the licensee a nonrefundable fee in an amount equal to 3
percent of the face amount of leverage granted to the licensee
in the following manner: 1 percent upon the date on which the
Administration enters into any commitment for such leverage
with the licensee, and the balance of 2 percent (or 3 percent
if no commitment has been entered into by the Administration)
on the date on which the leverage is drawn by the licensee.
(j) Calculation of Subsidy Rate.--All fees, interest, and
profits received and retained by the Administration under this
section shall be included in the calculations made by the
Director of the Office of Management and Budget to offset the
cost (as that term is defined in section 502 of the Federal
Credit Reform Act of 1990) to the Administration of purchasing
and guaranteeing debentures and participating securities under
this Act.
(k) Energy Saving Debentures.--In addition to any other
authority under this Act, a small business investment company
licensed in the first fiscal year after the date of enactment
of this subsection or any fiscal year thereafter may issue
Energy Saving debentures.
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