HMS Income Fund (“HMSIF”), a publicly registered, non-traded business development company, announced a suspension of its share repurchase program and decreased its monthly distribution reinvestment plan share sale price, citing the COVID-19 pandemic.
HMSIF will suspend repurchases for the second quarter of 2020 and will reevaluate its program depending on circumstances going forward. HMSIF also announced a reduction of the price at which it sells shares to investor pursuant to its monthly distribution reinvestment plan (known as a “DRIP”) from $7.80 to $6.65 a share beginning with the April 1, 2020 distribution.
HMSIF focuses on loans and investment in small and mid-size companies throughout the United States. HMSIF reportedly has raised approximately $236.3 million in its public offerings including proceeds from the DRIP of approximately $104.6 million.
BDCs have been around since the early 1980’s, when Congress first enacted legislation amending federal securities laws allowing for BDCs — which are simply types of closed-end funds — to make investments in developing companies and firms that would otherwise have difficulty accessing financing. Because they provide financing solutions for smaller, private companies, BDCs have been likened to private equity investment vehicles for retail investors in various marketing pitches by BDC sponsors and the financial advisors who recommend these financial products.
BDCs characteristically offer high yields to investors, both as a function of their collecting much higher than average interest income on loans to more thinly capitalized businesses, as well as their use of internal leverage. In light of a BDC’s leveraged structure and its typical investment portfolio, however, uninformed investors may come to learn too late that their investment carries considerable risk. Moreover, non-traded BDCs such as HMSIF carry additional drawbacks, including their lack of liquidity and high upfront fees and commissions.
For investors seeking immediate liquidity on their non-traded HMSIF shares, there does exist a limited and fragmented secondary market. Unfortunately, however, recent pricing suggests that HMSIF investors wishing to sell on a thinly traded secondary market may only do so at disadvantageous pricing. Recent sales have reportedly occurred at prices of approximately $5.25 to $5.50 a share.
Investors in HMSIF and other non-traded BDCs may have viable FINRA arbitration claims if their stockbroker or financial advisor made an unsuitable recommendation to purchase the investments or solicited the investments via a misleading sales presentation. Attorneys at the firm are admitted in New York, New Jersey and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules). Investors may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at email@example.com for a no-cost, confidential consultation.