WASHINGTON (June 12, 2000) – How are retail investors able to make private equity investments like the big money venture capitalists? Business Development Companies (BDCs) may be the answer.
The Committee for Modernization of BDC Regulation, whose purpose is to represent the common interests of business development companies, today announced its organization and its intention to seek to modernize BDC regulations. Companies represented on the Committee include Allied Capital Corporation (Nasdaq: ALLC), American Capital Strategies, Ltd. (Nasdaq: ACAS), Harris & Harris Group, Inc. (Nasdaq: HHGP), meVC.com, Inc. (NYSE: MVC), Renaissance Capital Group, Inc. (Nasdaq: RENN) and Brantley Capital Corporation (Nasdaq: BBDC).
BDCs were created by Congress in 1980 to encourage the flow of public capital into private growing businesses, including start-ups, later stage companies, and pre-IPOs. Often referred to as the general public's private equity funds, BDCs are actually hybrids between operating companies and investment companies. Typically, BDCs provide either long-term debt or equity capital to small and middle-market private companies.
"The Committee is trying to make it less cumbersome to operate BDCs in order to encourage the growth of the industry, which provides the average retail investor the unique opportunity to invest in private equity with the liquidity of buying any other publicly traded stock," said Steve Boehm, counsel for the Committee and a partner at Sutherland Asbill & Brennan in DC.
Like other public investment companies, BDCs' shares are typically sold through underwritten offerings and are traded on exchanges. Unlike closed-end funds, however, BDCs' shares may trade at a premium to their net asset values, due to the unique nature of the business of investing in private companies.
"Recent volatility in the public debt and equity capital markets have made it necessary to increase investor access to the private debt and equity capital markets. We need to modernize BDC regulations to facilitate access to private investing for the individual investor and to make BDCs more competitive in the capital markets," explained Bill Walton, Chairman and CEO of Allied Capital Corporation, the largest BDC in the United States.
"There has recently been a renewed interest in this unique investment vehicle, particularly in the high tech industry with the incubator funds. We intend to seek guidance and support from the SEC to assist us in our efforts to develop the industry. Improving BDC regulations will be beneficial for individual investors and for growing private companies as well," Walton continued.
The Committee will address issues by working with regulators at the SEC.
For further information about the Committee, please contact:
Steven B. Boehm, Esq.
Cynthia M. Krus, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, NW
Washington, DC 20004