HR-3868 : Still Just a Bill

Small Business Credit Availability Act

This bill directs the Securities and Exchange Commission (SEC) to promulgate regulations that codify a specified order in Investment Company Act Release No. 30024, dated March 30, 2012.

Under Investment Company Act Release No. 30024 the SEC permitted the Ares Capital Corporation to:

• continue to own (directly or indirectly) up to 100% of the outstanding equity interests of Ivy Hill ll Asset Management, L.P.; and
• make additional investments in Ivy Hill, in each case, following the time Ivy Hill shall be required to become a registered investment adviser under the Investment Advisers Act of 1940.

The bill entitles a business development company (BDC) to treat such regulations as having been completed if the SEC fails to complete the regulations required by this Act.

The Investment Company Act of 1940 is amended to deem certain securities to be permissible BDC assets to the extent necessary for the sum of the assets to equal 70% of the value of a BDC's total assets if the aggregate value of such securities does not exceed 20% of the value of the BDC's total assets.

Asset coverage requirements applicable to BDCs shall be reduced from 200% to 150% if the BDC makes specified disclosures on its website, and its directors or general partners approve of the modified asset.

(A registered closed-end investment company may not issue, or sell, any class of senior security unless it represents an indebtedness and, immediately after the issuance or sale, it will have an asset coverage of at least 300%. This asset coverage requirement currently is reduced to 200% for most BDCs.)

The SEC must revise various rules under the Securities Act of 1933, and related forms, so as to allow a BDC to use security offering rules available to other issuers who are required to file security issuance reports under the Securities Exchange Act of 1934.