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May 24, 2018

Stroock Special Bulletin

On March 23, 2018, President Trump signed the Consolidated Appropriations Act of 2018, which included the Small Business Credit Availability Act (the “SBCAA”). The SBCAA was, at the time, a material “win” for BDCs. Pursuant to the SBCAA, business development companies or “BDCs” have the ability to elect for more lenient asset coverage requirements, thereby increasing their ability to take on more leverage for purposes of making investments.
While it seems that many BDCs have quickly sought (or are seeking) approval of the reduced asset coverage requirement, there are some BDCs that are rethinking their original position given the viewpoint shared by the ratings agencies.
This Stroock Special Bulletin examines the impact of the SBCAA and the new asset coverage requirements on BDCs and the market.

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