Practice/Industry Group Overview
Sutherland is the nation’s preeminent leader in all aspects of BDCs—a significant financing source for the growth of private U.S. businesses.
Sutherland has represented business development companies (BDCs) for almost two decades, advising clients in all phases of business and regulation. BDCs—publicly held investment funds that invest primarily in private and thinly traded public U.S. businesses—have emerged as a growing source of capital for a sector of the U.S. economy historically underserved by traditional financing providers. Our work for BDCs covers their Investment Company Act of 1940 (1940 Act) obligations, Securities Act of 1933 registration, Securities Exchange Act of 1934 reporting requirements, Investment Advisers Act of 1940 registration and reporting obligations, and all aspects of public and private securities offerings.
Sutherland advises BDC clients in structuring and organization, operations, compliance and capital formation, including public and private debt and equity offerings, rights offerings, and convertible debt for both externally and internally managed BDCs. We’ve been involved in a majority of all the initial public offerings in the industry and consistently work with more BDCs than any other firm in the country. Our team blazed the trail for our clients with the use of the shelf registration statement for follow-on issuances. We counsel BDC boards of directors in all aspects of public company operations such as board-level corporate governance, listing obligations imposed by the national exchanges and strategic planning. Sutherland also has extensive experience representing BDCs in portfolio company-level transactions in compliance with unique BDC rules. For example, we advise clients regarding limitations imposed on BDCs under the 1940 Act with respect to ownership of registered investment advisers and broker-dealers, as well as the treatment of financing vehicles for purposes of asset coverage tests.
Recently BDCs expanded the menu of capital raising options, and Sutherland understands all the new financing tools. We have managed all regulatory and corporate aspects of acquisitions and dispositions of majority-owned affiliates, pools of assets, and lines of business, as well as mergers, exchanges and other strategic transactions with BDCs for both issuers and underwriters. We also work with privately owned Small Business Investment Companies (SBICs), advising on formation, structure and operation; guiding clients through the licensing process and developing compliance systems. Our depth of experience makes us uniquely qualified to advise BDCs looking to form SBICs or to counsel SBICs in their efforts to convert to BDCs.
In at the beginning. We have been active in this market for almost two decades and have been involved with every aspect of BDC formation, operation, compliance and ongoing capital raising. We have been advisers in nearly every M&A transaction in the BDC industry since 1994. We have deep relationships with the service providers who are critical to the industry, including underwriters, bankers and valuation consultants.
Unrivaled record. Sutherland has advised BDCs through practically all aspects of corporate and portfolio company acquisitions, divestitures and roll-ups. We also advise our clients on every aspect of traditional corporate governance and operational matters including disclosure, proxy contests, compliance exams, bank custody matters, conflicts of interest, corporate policy development and implementation, and internal controls design and implementation.
Dominance. We have achieved critical mass in the BDC sector, with past successes breeding future strength. We have the largest, deepest BDC legal team in the nation, and we work with more BDCs than any other firm. In 2012 alone, the BDC industry registered or raised more than $12 billion in capital, and we were involved in more than $8 billion of that total.
Trendsetting. We have been instrumental in developing the non-traded BDC and the non-listed BDC structures, and interpretations of the regulations around them. Sutherland has strong working relationships with trade organizations that advise regulators. We have also obtained precedent-setting exemptive relief from the SEC for BDCs.
We understand the BDC/SBIC relationship. We have unparalleled experience with BDCs seeking SBIC licenses. The depth of our knowledge in both areas also makes us uniquely qualified to advise BDCs looking to form or invest in SBICs or to counsel SBICs as they convert to BDCs.
Leadership. Sutherland has organized and hosted the Annual BDC Roundtable conference event since 2002 to provide a forum for BDC executives to discuss current events and issues facing BDCs. Sutherland attorneys are joined by leading staff members from the SEC’s Division of Investment Management, senior management from BDCs, financial and investment banking firms and other service providers to the industry. We update the industry through regular conference calls, and our attorneys are highly sought after as speakers and panelists at other industry events.
Nuts and Bolts
Sutherland provides the comprehensive suite of services necessary for the formation, operation, and growth of BDCs, including:
- Fund formation
- Regulatory and compliance
- Debt and equity offerings
- Corporate governance
- Mergers and acquisitions
- Portfolio transactions
- Credit facilities
- Strategic alliances
- Formation and contractual arrangements with registered investment advisers
- Executive compensation
- Intellectual property
Business development companies are unique investment funds. Sutherland has the most BDC lawyers and largest BDC client base of any law firm in the country and has been active in every BDC merger since 1994. Private businesses need experience and connections when it comes to raising capital.
Sutherland advises Stellus Capital Investment Corporation in initial public offering.
From fund formation, to registration with the Securities and Exchange Commission, to working with the underwriters to launch and complete the initial public offering, Sutherland attorneys worked with Stellus management through very uncertain market conditions to complete this $120 million transaction.
Sutherland counsels Allied Capital throughout its merger with Ares Capital.
In 2009, Allied Capital Corporation and Ares Capital Corporation—both BDCs—entered into a merger agreement, with Ares acquiring Allied. Sutherland advised Allied Capital on every aspect of the transaction, which closed in April 2010.
Sutherland represents Goldman Sachs & Co., Wells Fargo Securities and Morgan Stanley in connection with New Mountain Finance Corp.'s $100 million IPO.
Sutherland advised as underwriters' counsel for a business development company, New Mountain Finance Corporation, in connection with its IPO. The offering raising approximately $130 million in total gross proceeds including proceeds from a concurrent private placement.