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TNInvestco ranks may grow if idea gets legs
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(L-R) Kisber and Farr

Update 8:35 p.m.: Innova Fund II told VNC this afternoon it succeeded in raising its $20MM total credit commitment. Also this afternoon, Commissioners Matt Kisber and Reagan Farr told VNC, "In our November 5, 2009 announcement of the finalists for the TNInvestco program, we publicly stated our intention to seek two additional allocations of tax credits from the Tennessee General Assembly totaling $40 million dollars. Our goal is to award allocations to the Tennessee Angel Fund and Solidus-TNInvestco, LLC, which were both selected as alternate funds. Subsequently, we've been approached about our support for an additional allocation over and above the $40 million we intend to seek. Our position is that while we believe an expansion of the program beyond our request has merit, any additional allocation over and above our request would need to be initiated by members of the General Assembly." Our original story published this morning follows:

The ranks of TNInvestco winners may eventually grow from six firms to ten, sharing access to up to $200 million in bankable credits.

According to VNC sources, most of whom spoke on condition of anonymity, a proposal to expand the complement of TNInvestco participants to ten firms was among topics discussed by State ECD Commissioner Matt Kisber and Revenue Commissioner Reagan Farr during a meeting with TNInvestco finalists, Nov. 10.

The commissioners are said to have met with the six firms that were identified Nov. 5 as the winners of a total $120 million in TNInvestco tax-credit allocations. However, sources said that in addition to the six winning firms, representatives of the two official TNInvestco backup designees, as well as two finalists that initially finished out of the money, participated in the commissioners' meeting earlier this month.

VNC has not yet determined whether the Nov. 10 meeting was deemed an open or closed meeting, or whether confidential information exempt from public scrutiny was discussed at that time.

Kisber and Farr publicly announced Nov. 5 their intention to pursue an additional $40 million in tax-credit allocations for the two backup funds: Tennessee Angel Fund, closely tied to Nashville Capital Network; and, Solidus-TNInvestco LLC.

In the interim since then, the commissioners are said to have have signaled TNInvestco participants they may be willing to pursue a further $40 million to cover the remaining two TNInvestco finalists that were not among the six outright winners: Memphis Biomed Ventures Tennessee; and, NEST-TN LLC.

VNC preliminary research suggests such strategems do not run counter to the enabling TNInvestco legislation. However, such moves do not seem to have been anticipated in the commissioners' original September 14 memo, in which they outlined how, at that time, they planned to manage the TNInvestco process.

As of 2 p.m. today, there was no change in the process posted on the TNInvestco site. Meanwhile, VNC has also been told the original Nov. 30 deadline for TNInvestco firms to secure insurance-company commitments has been extended to Dec. 15.

A spokeswoman for Chattanooga-based Unum confirmed for VNC today that her company is "looking at" participating in the TNInvestco program. Other sources told VNC that while some insurance companies have already committed to participation, some others have proven hesitant to commit, without more certainty on key issues.

Department of Revenue spokesperson Sara Houghland told VNC this afternoon, in part, "we are still working through the final details. Once this information has been finalized and is appropriate to give out, we will let you know. Right now we are focusing on the implementation and rolling this program out successfully."

Heretofore, TNInvestco has at some point made public major changes at each juncture. This round, there may be new wrinkles: Not only is there the prospect of additional tax-credit commitments and a possible need to re-approach the General Assembly for needed latitude. There may also be need to create a "trust fund" that would receive and-or hold the State-issued tax credits. In that scenario, participating TNInvestco funds would drawdown credit-assets, as they sell them to participating investors.

If such a trust fund is created, according to several sources, there may be need for the involvement of a firm such as Enhanced Capital Partners in operating the fund. Enhanced is partnering with Council Ventures in launching Council & Enhanced Tennessee Fund. Enhanced is one of three out-of-state headquartered firms that sparked the exploration that led to creating TNInvestco, even though Enhanced and its allies had originally offered a less attractive "CAPCO" model, which was discarded in favor of TNInvestco.

An Enhanced spokesperson declined to comment on the matter this morning, when queried by VNC, but indicated the firm may be willing to comment in future, if appropriate. VNC has chosen in this article not to identify most sources, in an effort to protect the anonymity of those who requested it. ♦

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Tags: capital formation, Council and Enhanced Tennessee Fund, Council Capital, Council Ventures, economic development, Innova Fund II, Mark Drury, Matt Kisber, Reagan Farr, Sara Houghland, TNInvestco, Unum

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