WASHINGTON — A limited partnership managed by arbitrageur and inside trader Ivan F. Boesky asked the Securities and Exchange Commission on Thursday for permission to pay off $640 million in debt and shut down as an active broker.
Seemala Partners LP asked the SEC for permission to withdraw as a registered broker-dealer in securities and to repay $640 million in subordinated debt, most of it at a reduced 9% interest rate.
The noteholders, in return for payment of the principal, would waive their rights to collect more than $100 million in prepayment penalties and additional interest. Seemala said those claims could wipe out the partnership before any other creditors are paid.
Method of Repayment
The payment would be made to Ivan F. Boesky & Co., which would then repay the noteholders, the SEC said.
The commission said that the identity of the noteholders was not public information. In response to questions, however, Mark Fitterman, the agency's associate director for inspections, said that Boesky himself was not among them.
Seemala asked the SEC to rule on its petition by March 12, saying that ordinary interest on the notes was accumulating at the rate of $6.9 million a month. The commission said it would act by then.
Subordinated debt ordinarily takes a back seat in repayment priorities. But Seemala, in its petition, contended that giving the debt a higher priority would benefit everyone.
Seemala, named for Boesky's wife, Seema, said it now has an estimated $944 million in assets. After liquidation, the assets could earn interest at about 7%, or about $5.5 million a month.
However, the partnership said, the noteholders have claims of $776 million against it, plus ordinary and default interest at the rate of 16% to 18%, or at least $9 million a month.
'Assets Would Be Exhausted'
"Without compounding the interest or considering litigation expenses, the assets of Seemala and the partnership would be exhausted by these noteholder claims in three years," Seemala said.
If the SEC approves the agreement, Seemala added, it would be left with a pool of about $278 million to pay other claims, in addition to $50 million paid by Boesky as part of his civil penalty and $11.4 million paid by fellow inside trader Dennis B. Levine.
Boesky agreed last November to pay a $100-million penalty to settle charges of trading on insider information supplied by Levine in 1985 and 1986. He also agreed to cooperate with investigators and to plead guilty to a single unspecified criminal charge.