Capital Markets

SEC Probes Private-Company Lender

The commission has reportedly asked to see records concerning the transfer of $9 million in loans to Allied Capital's balance sheet.
Stephen TaubJune 25, 2004

Allied Capital Corp. said the Securities and Exchange Commission has launched an informal investigation related to allegations against the company made by short sellers over the last two years.

The charges concern Business Loan Express, an Allied Capital company. Allied Capital, which provides loans to private companies, said the investigation “should not be construed as an indication by the Commission or its staff that any violation of law has occurred.”

During the past two years, the company has “consistently refuted frivolous allegations made by short sellers based upon false and misleading information and distorted facts,” said Bill Walton, Chairman and CEO of Allied Capital, in a statement. “We welcome the opportunity to fully cooperate with the SEC, provide all the facts, and demonstrate once and for all that the short sellers’ allegations are false.”

The SEC has asked to see records concerning last year’s transfer of $9 million in loans to Allied’s balance sheet, Reuters reported, citing Allied attorney Lanny Davis of the firm Orrick, Herrington & Sutcliffe as the source. The loans were previously held by Business Loan Express, a small business lender, according to the report.

Business Loan Express is Alllied’s biggest holding, making up 11.2 percent of its equity portfolio, according to the news service, which reported that Allied owns 95 percent of the company.

One short seller that has reportedly accused Allied is Greenlight Capital, a hedge fund. Allied’s stock plunged 9 percent on the news of the SEC investigation.