SBIA Update: January 31, 2020
SBIA Update is a way to stay up-to-date on the latest industry news, SBIA member information, and policies that impact the lower middle market. Below are a few articles featured in this edition of SBIA Update. For the full news update, please refer to the SBIA Update email in your inbox.
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Legislative & Regulatory Update
Federal Regulators Release Proposed Rulemaking on Covered Funds and the Volcker Rule
Federal regulators on January 30 released a long-awaited proposed rulemaking on covered funds and the Volcker Rule. The Volcker Rule is part of the 2010 Dodd-Frank Act that generally prohibits banks from conducting certain investment activities with their own funds and limits their dealings with “covered funds” such as hedge and private equity funds.
Regulators propose expanding the current Volcker Rule exemption for bank investments in SBICs to cover SBICs that voluntarily surrender their licenses and do not make new investments after surrender. Regulators explain that “continuing to apply the SBIC exclusion…is appropriate because…banking entities may become discouraged from investing in SBICs due to concern that an SBIC may become a covered fund during its wind-down period.” Regulators also seek public input on whether to expand the exemption to Rural Business Investment Companies.
Additionally, regulators propose expanding the “covered funds” exclusion to include: (i) credit funds; (ii) a bank’s role as a “customer facilitation” vehicle; (iii) family wealth management vehicles; and (iv) certain qualifying venture capital funds. SBIA continues to review the 170-page proposed rule and will provide additional pertinent information as it becomes available. SBIA will submit comments on the proposed rulemaking for “covered funds”, which are due to federal regulators by April 1, 2020.
Corbel Completes Three New Investments, Deploys Over $42M to the Lower Middle-Market, and Realizes Four Platform Investments in 2019
Corbel Capital Partners is pleased to announce a very productive 2019. Accomplishments include new and follow-on investments, successful realizations, and the expansion of our team. Recent transactions consist of independent sponsor buyouts, partnerships with management in support of growth, and add-on financing for existing portfolio companies. Realizations involved four investments from Fund I that generated beneficial outcomes for all parties. New additions to the team include Michelle Rogers, Vice President of Business Development, and Graham Gallaher, Associate. Corbel also welcomed three Senior Operating Advisors: Gary Guseinov, Jerry Jao, and Alejandro Phillips, doubling its bench of in-house operationally-focused advisors.
Corbel also welcomes a new investments, the Independent Sponsor Recapitalization Access Dental Management, a portfolio company of Surge Private Equity, is a Texas-based Dental Support Organization (DSO) that provides multi-specialty clinical dental services to patients throughout the Austin, Corpus Christi, and Golden Triangle regions.
Regarding new investments, Corbel provided follow-on financing for the acquisition of the Respiratory Assets of Midwest Respiratory Care, Inc under On Great Elm DME, Inc., a portfolio company of Great Elm Capital Group, Inc. that provides durable medical equipment (DME) and sleep studies with a focus on Continuous Positive Airway Pressure (CPAP) equipment, ventilators, oxygen equipment, and disposable supplies. In addition, Corbel partnered with management to provide growth capital to Upstrēm, Inc., a technology-enabled liquidator of post-retail soft goods for inventory purchases.
Brookside Mezzanine Partners and Valesco Industries Invest in Express Home Services, LLC
Brookside Mezzanine Partners is pleased to announce its investment in Express Home Services, LLC (Express Flooring). Founded in 2004 and headquartered in Phoenix, AZ, Express Flooring is a leading regional provider of replacement flooring solutions throughout the state of Arizona. It operates under two business segments, residential flooring and commercial flooring, and offers a wide-range of products from the industry’s top manufacturers, including carpet and carpet pad, luxury vinyl plank, tile, vinyl composite tile, among others.
Brookside Mezzanine Partners provided subordinated debt and an equity co-investment to facilitate the acquisition of Express Flooring by Valesco Industries, LLC, HighGrove Companies and Longhouse Partners.
Centerfield Capital Partners and Guardian Capital Partners Invests in Flat River Group
Centerfield is pleased to announce its investment in Flat River Group, LLC, an eCommerce distributor, marketer and service provider focused on niche and mainstream consumer products. Centerfield supported the acquisition of the company by Guardian Capital Partners providing subordinated debt and an equity co-investment to finance the transaction.
Headquartered in Belding, MI, Flat River is an industry-leading value-added distributor of consumer products. Flat River primarily focuses on board games, card games and specialty toys, acting as a product category manager, vendor and fulfillment arm to the major eCommerce platforms in the US and Canada. The company’s capabilities include product sourcing, inventory management, warehousing, order fulfillment and high volume drop shipping.
Aldine Invests in Aptus Group USA
Aldine is pleased to announce its investment in Aptus Group USA (Aptus). Aptus is a turnkey utility infrastructure services business, providing inspection, engineering, installation, and maintenance services for bridge-attached utilities, primarily water drainage systems and conduit piping. Additionally, the company provides inspection, protection, and remediation services for above-ground gas lines. Aptus’ customers include power utilities, telecommunications, natural gas providers, and general contractors for Departments of Transportation, predominately in the eastern half of the United States. Aldine provided a subordinated note and equity investment alongside 3 Rivers Capital.
SBIA is the voice and advocate for the lower middle market. Go to www.SBIA.org/about to learn more about the Small Business Investor Alliance.