HMS Proposes New Advisory Agreement, Suspends Distributions

July 7, 2020 | Luke Schmidt | Blue Vault

On July 1, 2020, HMS Income Fund (“HMS” or “the Company”) filed a preliminary proxy statement with the SEC which includes a proposal for shareholder approval of a new advisory agreement.  Under the proposed agreement, the subsidiary of Main Street Capital Corporation that currently serves as the Company’s sub-adviser would become the sole adviser of the Company.  Main Street has served as the Company’s sub-adviser and has been represented on the board of directors since the Company’s launch in 2012.  Main Street will take the place of Hines Interest Limited Partnership, a subsidiary of Hines, which currently acts as the adviser to the Company.  If this transition is approved, the annual asset management fee would be reduced from 2.00% to 1.75%.

On June 29, 2020, the board of directors unanimously approved the suspension of all distributions to its stockholders, effective immediately.  The board determined this suspension was in the best interest of the Company in order to preserve financial flexibility and liquidity given the potential prolonged impact of COVID-19.  Upon consideration of a return to its regular distributions, the Company intends to move from a quarterly distribution declaration to a monthly declaration in order to maintain flexibility to reinstate a distribution if and when market circumstances change.

The Company operates as an externally managed nontraded BDC.  As of March 31, 2020, the Company reported total assets of $927.3 million with total investments of $894.9 million.  The Company raised approximately $773.2 million in its public offering which commenced in June of 2012 and ended in September of 2017.

Sources:  SEC, Blue Vault