A private BDC is a type of non-traded business development company that incorporates many characteristics of private equity funds. Private BDCs raise capital from accredited investors through private placement offerings.
Capital Call Structure
Most private BDCS use a capital call structure. Investors will enter into a subscription agreement, and make a capital commitment to purchase a certain amount of shares. The private BDC will then issue drawdown notices to call capital as they find investment opportunities. Typically private BDCs issue drawdown notices 10 days before investor funds are required. If an investor makes a subsequent capital commitment they might be required to fund a catch-up drawdown, so that all investors have contributed the same percentage of their capital commitment.
Private BDC Reporting Requirements
Reporting and governance. requirements for private BDCs are similar to public non-traded BDCS because they must remain in compliance with the Exchange Act of 1934 and the Investment Company Act of 1940 They must file detailed financial information on a quarterly basis using Form’s 10-Q and 10-K with. Their financial statement disclosures must contain a detailed schedule of investments. They are also required to file proxy statements. Ownership filings(13D, 13G, Forms 3,4,5) are similar to other public companies.
However, since private BDCs conduct private placements rather than public offerings they are not required to complete the blue sky registration process that is required for non-traded BDCS conducting continuous offerings.
For additional information on the reporting requirements for BDCS, click here.
Like traditional non-traded public funds, private BDCS can provide liquidity for investors through a public listing, merger, or liquidation. They can also spin off or transfer assets into a publicly traded entity. Some private BDCS launch with a definite timeline for liquidity. Others plan to stay non-traded in perpetuity.