Main Street Capital partially exited two portfolio company investments during June 2010.
Main Street completed the partial exit of its equity interest in Gulf Manufacturing through a recapitalisation transaction with a third party institutional investor.
As part of the recapitalisation, Main Street sold all of its equity warrant interest and a portion of its direct equity interest in Gulf for USD3.9m in total consideration.
Main Street recognised a USD2.1m long-term capital gain for tax purposes related to the recapitalisation.
Due to a portion of the total Gulf investment being held by Main Street Capital II and the purchase accounting associated with the January 2010 MSC II exchange offer, Main Street will recognise a USD1.1m realised gain for financial accounting purposes.
Subsequent to the recapitalisation, Main Street will maintain an approximate 34 per cent direct equity interest in the fully diluted equity of Gulf.
Main Street also completed the partial exit of its warrant interest in Laurus Healthcare. In the transaction Laurus repurchased approximately 25 per cent of Main Street’s total warrant interest in Laurus for USD1.1m.
Main Street recognised a USD1.0m long-term capital gain for tax purposes, and an equal amount in realised gain for financial accounting purposes, related to the repurchase.
The consideration received in the repurchase equalled the pro rata portion of Main Street’s most recently reported fair value for its warrant investment in Laurus.
Subsequent to the repurchase, Main Street continues to hold an approximate 13 per cent warrant interest in the fully diluted equity of Laurus.
Main Street is an investment firm that primarily provides long-term debt and equity capital to lower middle market companies.