Converting from a BDC
California based VII PEAKS CO-OPTIVIST INCOME BDC II, INC. , has begun the process of converting from a BDC to interval fund. Last week it released a preliminary proxy.
BDC to Interval Fund Conversion Process
According to the proxy:
The Board has decided … to revoke the Company’s election to be treated as a business development company. As a closed-end fund, the Company intends to adopt a fundamental policy of making quarterly redemption offerings under Rule 23c-1 of the 1940 Act, effectively making the Company an interval fund. The Company will also adopt a fundamental policy of repurchasing between five percent (5%) and twenty-five percent (25%) of its outstanding stock at periodic intervals pursuant to repurchase offers made to all holders of common stock, under Rule 23c-3 of the 1940 Act. Shareholders are not required to accept these offers and sell their shares back to the fund.
Page 20 of the proxy also contains a detailed chart comparing BDCs and closed end funds such as interval funds. Many non-traded BDC and REIT Sponsors are in the process of launching new interval funds. Will any others follow VII Peaks Capital and convert an already existing fund？
Griffin Capital on Interval Fund Advantages
Griffin Capital is also exploring the possibility of converting its BDC(Griffin-Benefit Street Partners BDC Corp.) to an interval fund.
According to Griffin Capital’s Chairman and CEO Kevin Shields: the interval fund structure offers a number of potential advantages to investors over the business development company structure including:
- Greater Net Asset Value Transparency – daily pricing frequency;
- Enhanced Liquidity – given the ’40 Act mandate requiring an interval fund to offer shareholders periodic redemptions of at least 5% of the fund’s outstanding shares, typically on a quarterly basis;
- Wider Range of Investment Opportunities. A BDC must have 70% of its assets in certain types of issuers, but an interval fund has greater flexibility.
- Lower Fees
For further information, Public Listing Update provides data on newly launched 40-act Funds.