Equus Shareholders Grant New Authorization to Withdraw BDC Election
August 28 2017 - 4:30PM
Equus Total Return, Inc. (NYSE:EQS) (“Equus” or the “Company”)
today announced that its shareholders have granted a new
authorization to the Company’s Board of Directors (hereinafter, the
“Board”) to cause the Company’s withdrawal of its election to be
classifed as a business development company (“BDC”) under the
Investment Company Act of 1940 (the “1940 Act”). A previous
authorization was given to the Board on January 6, 2017 and expired
on July 31, 2017. The new authorization given to the Board by
the Equus shareholders expires on December 31, 2017. These
authorizations are a consequence of the Company’s Plan of
Reorganization announced on May 15, 2014 (also referred to herein
as the “Plan”).
In announcing the Plan, Equus stated its intention to implement
the Plan which entailed, among other things: (i) the restructuring
of the Company by way of an acquisition of, or merger with, an
operating company (referred to in the Plan as a “Consolidation”),
and (ii) a withdrawal of the Company’s election to be classified as
a BDC. Although Equus has been authorized to withdraw and
terminate the Company’s BDC election under the 1940 Act, it will
not submit any such withdrawal unless and until Equus has entered
into a definitive agreement to effect a Consolidation – which will
entail acquiring or merging with an operating company.
On April 24, 2017, Equus entered into an agreement to acquire
U.S. Gas & Electric, Inc. (“USG&E”), a retail and
commercial energy services provider. This agreement was
terminated on May 30, 2017 by USG&E when it notified Equus that
the USG&E board had received an acquisition offer from a third
party that was deemed by USG&E to constitute a “Superior
Proposal” to the terms and conditions offered to the USG&E
shareholders by the Company.
Notwithstanding the termination of the Company’s agreement to
acquire USG&E, Equus is presently evaluating other suitable
target companies which the Company may acquire or with which Equus
or a special purpose subsidiary may merge into to accomplish a
Consolidation.
The completion of the Plan and the restructuring of Equus into
an operating company are subject to various conditions, risks, and
uncertainties, among which include the following:
- Although the Equus shareholders have authorized the Company’s
withdrawal as a BDC, they have not approved a Consolidation, the
consummation of which is the final step in the Plan.
Moreover, the Equus Board has not, at this time, either reviewed or
approved any proposed Consolidation and the Company cannot
guarantee that, once such Board approval is obtained, the Equus
shareholders will in turn approve the same. Consequently, the
Company cannot guarantee that it will withdraw its BDC election, or
the exact timing of such withdrawal, or that Equus will otherwise
complete the Consolidation and become an operating company not
subject to the 1940 Act.
- Even if Equus enters into a definitive agreement that would
result in a Consolidation, it may not be able to fulfill the
closing conditions thereunder and, therefore, may ultimately not
complete a Consolidation within the time frame authorized by the
Equus shareholders to withdraw the Company’s BDC
election.
- If Equus is able to be restructured as an operating company
instead of a closed-end fund, it will continue to be subject to
various investor protections afforded to operating company
shareholders pursuant to Delaware corporate law, and the Securities
Exchange Act of 1934. Further, assuming that Equus, following
the Consolidation, meets the operating company listing standards of
the New York Stock Exchange (“NYSE”), the Company’s shareholders
will also be afforded protections under applicable NYSE
rules. Nevertheless, since Equus will not be regulated under
the 1940 Act following a Consolidation, the Company will not be
subject to a number of limitations and restrictions of the 1940 Act
intended to protect shareholders, including, for example,
restrictions on leverage, types and domicile of investments, and
restrictions on the Company’s ability to change its business.
Further, even though Equus would continue to be subject to various
restrictions concerning its securities and interested transactions
under the Securities Exchange Act, applicable stock exchange rules,
and Delaware law, it would not also be subject to more restrictive
1940 Act provisions concerning similar issues, such as share
repurchases below net asset value, the issuance of Equus securities
other than common stock for investments and acquisitions, the ratio
of independent to interested directors on the Equus Board, related
party transactions, and director and officer incentive
compensation.
These risks should be considered in addition to the items
identified as “Risk Factors” in the Company’s most recent Annual
Report on Form 10-K filed with the Securities and Exchange
Commission (the “SEC”) on March 13, 2017.
Forward-Looking Statements
This press release contains certain forward-looking statements
regarding possible future circumstances. These forward-looking
statements are based upon the Company’s current expectations and
assumptions and are subject to various risks and uncertainties that
could cause actual results to differ materially from those
contemplated in such forward-looking statements including, in
particular, the performance of the Company, including our ability
to achieve our expected financial and business objectives, our
ability to execute our reorganization (including a possible
Consolidation) and complete the transactions contemplated thereby,
the other risks and uncertainties described herein, as well as
those contained in the Company’s filings with the SEC. Actual
results, events, and performance may differ. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as to the date hereof. The
Company undertakes no obligation to release publicly any revisions
to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. The inclusion of any statement
in this release does not constitute an admission by the Company or
any other person that the events or circumstances described in such
statements are material.
Contacts:
Patricia Baronowski
Pristine Advisers, LLC
(631) 756-2486
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