SBIC Liquidation
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SBA SOP 10 07 1 ___________________________ SBIC Liquidation Office of SBIC Liquidation U.S. Small Business Administration SOP 10 07 1 Effective Date: December 21, 2007 Page 2 SOP 10 07 1 Contents CHAPTER 1 - Office of SBIC Liquidation:General Scope and Authority...................................9 1. Application of SOP. ..................................................................................9 2. How to Read this SOP...............................................................................9 3. What are the Structure, Goals, and Duties of the Office of SBIC Liquidation? .....9 4. What are the Goals of the Office of Liquidation?.......................................... 10 5. What are the Duties of the Office of Liquidation? ......................................... 11 6. Definitions............................................................................................. 12 7. What are the Statutory References and Applications?.................................... 14 8. Who has Decision Making Authority Over the Office of Liquidation? ............... 15 CHAPTER 2-Transfers of SBICs to Liquidation............................................................................19 1. What is OSO's Role in the Transfer Process?............................................... 19 2. Preparation for Transfer.......................................................................... 19 3. What is a Pre Liquidation Conference Memorandum?................................... 19 4. What are the Procedures for and the Purpose of the Liquidation Conference?.... 20 CHAPTER 3- Account Resolution Procedures: Establishing the Method of Liquidation .......23 1. What are the Preliminary Steps Taken by Account Resolution?....................... 23 2. How Do You Develop a Liquidation Strategy for Debenture Cases?.................. 24 3. How do You Develop a Liquidation Strategy for PS SBIC Cases? .................... 26 4. How do you Prepare the Liquidation Plan? ................................................. 28 5. When should you Charge Off PS SBIC Prioritized Payments?......................... 28 6. How do you Refer/Transfer Cases for Receivership or Other Litigation?........... 28 CHAPTER 4 - Self-Liquidation Settlement Agreements for Debenture SBICs.........................29 1. What is a Self-Liquidation Settlement Agreement?........................................ 29 2. What Should You Consider When Recommending a Settlement Agreement? ..... 29 3. Negotiating, Obtaining Approval, and Closing the Settlement Agreement. ......... 32 4. What are the Servicing Requirements for Settlement Agreements?................... 33 5. What if There is a Default of the Settlement Agreement? ............................... 34 6. What are the Criteria for Transferring a Debenture SBIC from OL to OSO? .... 35 Chapter 5- Wind Down Agreements For PS SBICs .......................................................................37 1. What is a Participating Security Wind Down Agreement? .............................. 37 2. What Should You Consider When Recommending a Wind Down Agreement? ... 37 3. What Items Must You Consider in Order to Allow a Wind Down?................... 38 4. When Should a Valuation be Ordered?....................................................... 39 5. What are the Steps in Obtaining a Wind Down Agreement? ........................... 39 Effective Date: December 21, 2007 Page 3 SOP 10 07 1 6. What should you include in a Liquidation Memorandum?.............................. 40 7. What is SBA’s Principal Role in a Wind Down? ........................................... 40 8. What are the PS SBIC’s Duties and Responsibilities in a Wind Down?.............. 40 9. What are the SBA’s Servicing/Monitoring Requirements for a Wind Down?...... 41 10. How do you Monitor the Wind Down Agreement? ........................................ 41 11. When Should You Consider Deferring a Decision to Wind Down a PS SBIC? .... 43 12. What Items Should You Consider When Recommending a Deferred Decision? ...... 43 13. How Long Should a Wind Down Decision be Deferred? ................................. 43 14. How Do You Monitor a PS SBIC During the Deferral Period? ........................ 43 15. What Happens Upon Conclusion of the Deferral Period?................................ 44 16. What Happens When a PS SBIC Does Not Meet the Wind Down Criteria?........ 44 17. What Happens When a PS SBIC Fails to Meet the Terms of the Wind Down? ... 44 CHAPTER 6 -Litigation Other Than Receivership.......................................................................45 1. Introduction. ......................................................................................... 45 2. What are SBA's Responsibilities for SBICs Which are "In Litigation" Status?.... 46 3. Legal representation in non-receivership litigation......................................... 46 4. Why Seek a Money Judgment Against an SBIC Outside of Receivership?.......... 46 5. SBA Claims Against Obligors in Bankruptcy. .............................................. 47 6. Claims Against Deceased Obligors. ............................................................ 49 CHAPTER 7- Receivership ..............................................................................................................51 1. What is a Receivership?........................................................................... 51 2. What is SBA's Role in SBIC Receiverships? ................................................ 52 3. Why is Receivership Utilized as a Liquidation Alternative? ............................ 52 4. How is a Receivership Obtained?............................................................... 53 5. What are the Duties and Responsibilities of the OL Staff Pre-Receivership?...... 54 6. How is a Receivership Commenced?........................................................... 55 7. What are the Duties of the Receiver?.......................................................... 56 8.. How Do You Establish Control of the Receivership?...................................... 56 9. How Does the Receivership Operate? ......................................................... 58 10. What are Receivership Liquidation Activities? ............................................. 63 11. How are Claims Against the Receivership Resolved? ..................................... 65 12. How Do You Close the Receivership? ......................................................... 66 13. What Happens to the Assets of a Receivership when the Receivership is Closing? 68 CHAPTER 8 - Sale of SBA’s Preferred Limited Partnership Interest........................................71 1. Participating Securities and SBA’s Preferred Limited Partnership Interest?....... 71 2. What are the Benefits of Selling SBA’s Preferred Limited Partnership Interest? . 71 3. What are the Drawbacks to Selling SBA’s PLP Interest?................................ 71 4. What Factors Should You Consider for a Successful Sale of SBA’s PLP Interest?72 Effective Date: December 21, 2007 Page 4 SOP 10 07 1 5. What are the Challenges/Barriers to a Sale of SBA’s PLP Interest?.................. 72 6. How is the Partnership Agreement Amended?............................................. 73 7. How do You Evaluate the Prospects for a Sale of SBA’s PLP Interest? ............ 73 9. Retention of a Secondary Market Broker. ................................................... 74 10. How do You Assess Offers to Purchase SBA’s PLP Interest? .......................... 75 11. What Warranties does SBA Provide Upon the Sale of its PLP Interest? ............ 76 12. What Documents are Needed to Complete a Sale of SBA’s PLP Interest? ......... 76 13. Why Time is of the Essence in Completing a Sale of SBA’s PLP Interest. .......... 76 14. What are Your Servicing Requirements While Attempting to Complete a Sale? .. 77 CHAPTER 9 - Follow On Investments .............................................................................................79 1. What is a Follow On Investment? .............................................................. 79 2. How are Follow On Investments financed? .................................................. 79 3. How does the Follow On Investment process begin? ...................................... 79 4. What other information may be required? .................................................. 79 5. How are Follow On Investments authorized? ............................................... 80 7. What additional documents are required for SBA Funded Follow On Investments?.. 81 8. How are Follow On Investments tracked?........................................................ 81 CHAPTER 10 - Set-Up and Servicing of SBA Owned Assets .......................................................83 1. How Does SBA Acquire Assets? ................................................................ 83 2. Step 1 - Valuing Acquired Assets. .............................................................. 83 3. Step 2 - Setting Up Acquired Assets on the SBA LAS. ................................... 84 4. Step 3 - Preparing the Liquidation Strategy. ................................................ 85 5. Step 4 - Servicing SBA Acquired Assets. ..................................................... 85 CHAPTER 11- Asset Liquidation Procedures.................................................................................87 1. What are the Policies Concerning Liquidation of SBA Owned Assets? .............. 87 2. What Issues Must I Consider Prior to the Sale of Assets? ..............................