Clock is ticking for SEC to implement new leverage rules

Author: John Crabb | Published: 21 Sep 2018

The deadline is approaching for the Securities and Exchange Commission (SEC) to make the necessary revisions to the Investment Company Act that will allow business development companies (BDCs) to increase their leverage. The SEC is yet to take the necessary actions as required by the new legislation, which is causing market uncertainty as BDCs look to increase the debt that they take on.

Following the passing of the S.2324 - Small Business Credit Availability Act in March of this year, BDCs were allowed to increase the amount of debt they can borrow against their equity by 200%, provided they gain either board or shareholder approval.

BDCs are able to double the amount of leverage they are able to utilise"We are headed into the period where one would assume that the SEC is going to begin to take action," said Anna Pinedo, partner at Mayer Brown. "They only have a year...