Kohlberg Capital Corp. Long Term Investor Alert: Investigation
An investor in Kohlberg Capital Corp. (Public, NASDAQ:KCAP) filed a lawsuit in the United States District Court for the Southern District of New York on behalf of all purchasers of Kohlberg Capital Corporation (NASDAQ: KCAP) securities between March 16, 2009 and December 24, 2009. Meanwhile an investigation on behalf of current long term shareholders in Kohlberg Capital Corp. (Public, NASDAQ:KCAP) concerning possible mismanagement was announced.
A Kohlberg Capital Corp investor filed a lawsuit in the United States District Court for the Southern District of New York alleging that Kohlberg and its two top executive officers violated of Sections 10(b) and 20(a) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder by issuing false and misleading financial statements between March 16, 2009 and December 24, 2009.The complaint alleges that defendants violated Generally Accepted Accounting Principles by failing to properly account for the fair value of its investment portfolio. The complaint further alleges that the Company misrepresented its efforts with its auditor, Deloitte and Touche LLP ("Deloitte"), to resolve issues regarding the Company's fair value accounting.
On November 9, 2009, Kohlberg announced its auditor, Deloitte & Touche LLP ("Deloitte"), raised questions concerning the Company's methodology and process in valuing its loan portfolio under GAAP. As a result of these questions, the Company stated it would not be able to timely file with the SEC its third quarter results for the period ended September 30, 2009. As a result, the Company's stock price fell $0.56 per share, or more than 10%, to close at $4.96. Kohlberg Capital Corporation, located in New York, is an internally managed, non-diversified, closed-end investment company. The Company originates, structures and invests in senior secured term loans, mezzanine debt and selected equity securities primarily in privately held middle market companies. In addition to the Company’s middle market investment business, its wholly owned portfolio company, Katonah Debt Advisors and its affiliates manage collateralized loan obligation funds (CLO Funds) that invest in syndicated loans, bonds and other corporate credit instruments.
Kohlberg Capital Corp. reported in 2007 Total Revenue of $38.48million and in 2008 Total Revenue of $49.21million with a Net Income of $26.14million. Shares of Kohlberg Capital (KCAP) traded recently at $3.89 per share, down from its 52weekHigh of $6.90 per share, $10.99 per share in August ’08, $13.35 per share in May 08, and over $19 per share in 2007. On December 15, 2009 Kohlberg announced that its financial statements for the fiscal year ended December 31, 2008 and the first two quarters of 2009 should no longer be relied upon, due to issues regarding valuation of the Company's loan portfolio, and on December 24, 2009, Kohlberg filed with the SEC a letter it received from Deloitte, in which Deloitte disagreed with many of Kohlberg's contentions in its recent disclosures and on this news, the next two trading days, shares of Kohlberg declined $0.44 per share or 8.5% per share, to close at $4.72 on December 29, 2009, so the lawsuit.