BDC Reform Bills Face Uncertain Future

Three bills introduced in the House of Representatives that would ease leverage restrictions on business development companies (BDCs) face an uncertain future in light of concerns expressed by the Chair of the Securities and Exchange Commission.  BDCs are closed-end investment companies that invest in small- and medium-sized private companies.

H.R. 1800, the Small Business Credit Availability Act, introduced in April 2013, would:

• reduce from 200 percent to 150 percent the asset coverage requirements that apply to BDCs;
• allow BDCs to invest in shares of investment advisers to BDCs;
• eliminate certain protections for holders of preferred stock issued by BDCs; and
• amend certain SEC rules and forms to allow BDCs to use streamlined securities offerings provisions that are available to other public companies.