SEC Provides Temporary Relief to Business Development Companies Related to COVID-19

On April 8, 2020, the SEC issued a temporary exemptive order that provides specific, technical relief to BDCs with respect to certain senior securities and joint transaction restrictions and prohibitions under the 1940 Act (Order).  The Order permits BDCs to issue senior securities subject to a modified asset coverage calculation that uses the value of the BDC’s portfolio companies held at December 31, 2019, rather than within 48 hours (excluding Sundays and holidays) prior to when the senior securities are issued, subject to the conditions and limitations described in the Order.

The Order also permits, subject to certain conditions, BDCs with co-investment orders to invest in “follow-on” investments alongside affiliated registered funds or private funds to a greater extent.  The relief provided by Order extends until the earlier of (i) December 31, 2020 or (ii) when the BDC ceases to rely on the Order.

The SEC’s press release and order are available at the links below:

https://www.sec.gov/news/press-release/2020-84

https://www.sec.gov/rules/exorders/2020/ic-33837.pdf