Markets
Capital Demand Keeping BDCs in Capital-Raising, Deal-Making Mode
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Business development companies are getting rock star treatment at the moment, soaking up the love from yield-hunting investors and small companies seeking capital for growth, recapitalizations and special situations like management buyouts. BDCs typically provide preferred equity and a variety of fixed and floating-rate debt, from mezzanine to senior secured first-lien loans, and often charge 10% to 20% for the capital. As regulated investment companies, BDCs are required to distribute at least 90% of their investment income to shareholders in dividends. Ten BDCs have completed IPOs since 2011, according to a recent report by law firm Sutherland Asbill & Brennan, and several are in registration. In late March, Goldman Sachs Group (GS) filed with the Securities and Exchange Commission to take a newly formed BDC public.
