Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. AMERITRANS CAPITAL CORP (1064015) 10-Q published on May 15, 2013 at 4:41 pm
Reporting Period: Mar 30, 2013
The significant unobservable inputs used in the fair value measurement of the Company’s debt and equity securities are primarily earnings before interest, taxes, depreciation and amortization (“EBITDA”) comparable multiples and market discount rates. The Company uses EBITDA comparable multiples on its equity securities to determine the fair value of investments. The Company uses market discount rates for debt securities to determine if the effective yield on a debt security is commensurate with the market yields for that type of debt security. If a debt security’s effective yield is significantly less than the market yield for a similar debt security with a similar credit profile, then the resulting fair value of the debt security may be lower. Significant increases or decreases in either of these inputs in isolation would result in a significantly lower or higher fair value measurement. The significant unobservable inputs used in the fair value measurement of the collateralized loan obligations include the discount rate applied in the valuation models in addition to default and recovery rates applied to projected cash flows in the valuation models. Specifically, when a discounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate applied to present value the projected cash flows. Increases in the discount rate can significantly lower the fair value of an investment; conversely decreases in the discount rate can significantly increase the fair value of an investment. The discount rate is determined based on the market rates an investor would expect for a similar investment with similar risks.
On April 25, 2013, the Court entered the Consent Order in the Receivership Proceeding. The Court appointed the SBA as the receiver of Elk for the purpose of marshaling and liquidating all of Elk’s assets and satisfying the claims of creditors therefrom in the order of priority as determined by the Court. The Court entered judgment in the total sum of $21,175,000.00 (less the $1.2 million paid to the SBA on January 4, 2013) as of October 26, 2012, plus accrued interest of approximately $1,166,000 through April 25, 2013, plus post-judgment interest at the rate allowed by law. The Consent Order dismissed all of the existing officers, directors and agents of Elk.
As a result of the deconsolidation of Elk as of April 25, 2013 for financial reporting, Ameritrans subsequent financial statements will report a liability due to Elk. As of March 31, 2013, such liability was approximately $14.3 million. See Note 14. Pro Forma Financial Information.
The Unaudited Pro Forma Consolidated Financial Statements and the related Notes presented reflect the deconsolidation of Elk as a result of the entry of a Consent Order appointing the SBA as permanent, liquidating receiver of Elk, effective as of April 25, 2013 (the “Entry Date”). (See Note 8.) The Company has determined that as a result of the Consent Order and beginning on the Entry Date, that it will no longer consolidate Elk for financial reporting purposes. The Unaudited Pro Forma Consolidated Financial Statements have been prepared by applying pro forma adjustments to the amounts previously reported in the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012 and the amounts reported herein as of and for the period ended March 31, 2013. The Unaudited Pro Forma Consolidated Statements of Income for the nine months ended March 31, 2013 and the year ended June 30, 2012 reflect the deconsolidation` of Elk, assuming the Consent Order had been entered and effective as of the beginning of the respective fiscal year. The Unaudited Pro Forma Consolidated Balance Sheet reflects the deconsolidation of Elk, assuming the Consent Order had been entered and effective on March 31, 2013. The pro forma adjustments, as described in the Notes to the Unaudited Pro Forma Consolidated Financial Statements, are based on currently available information.
Ameritrans acquired Elk on December 16, 1999. Elk is an SBIC that had been operating since 1980, making loans to (and, to a limited extent, investments in) small businesses, who qualified under SBA Regulations until October 31, 2012. However, on October 31, 2012, Elk and the SBA entered into a Settlement Agreement and Mutual Release with respect to Elk’s pending lawsuit against the SBA, pursuant to which Elk agreed to pay the SBA $7,900,000 by December 15, 2012, as extended through subsequent amendments to January 18, 2013, and surrender its SBIC license, in full and final satisfaction of all outstanding SBA leverage owed to the SBA through such date plus all additional interest which may accrue through the date the settlement payment is made. Elk did not remit the entire amount due under the Settlement Agreement and, accordingly, on April 25, 2013, the Court entered the Consent Order in the Receivership Proceeding, appointing the SBA as the receiver of Elk for the purpose of marshaling and liquidating all of Elk’s assets and satisfying the claims of creditors therefrom in the order of priority as determined by the Court. The Court entered judgment in the total sum of $21,175,000.00 (less the $1.2 million paid to the SBA on January 4, 2013) as of October 26, 2012, plus accrued interest of approximately $1,166,000 through April 25, 2013, plus post-judgment interest at the rate allowed by law. The Consent Order dismissed all of the existing officers, directors and agents of Elk.
On April 25, 2013, the United Stated District Court for the Eastern District of New York (the “Court”) entered the Consent Order in the proceeding entitled United States of America, on behalf of its agency, the United States Small Business Administration v. Elk Associates Funding Corp. (Case No. 2:13-cv-01326-LDW-GRB). The Court appointed the SBA as the receiver of Elk for the purpose of marshaling and liquidating all of Elk’s assets and satisfying the claims of creditors therefrom in the order of priority as determined by the Court. The Court entered judgment in the total sum of $21,175,000 (less the $1.2 million paid to the SBA on January 4, 2013) as of October 26, 2012, plus accrued interest of approximately $1,166,000 through April 25, 2013, plus post-judgment interest at the rate allowed by law. The Consent Order dismissed all of the existing officers, directors and agents of Elk.