A $2.5 Billion Business-Development-Corporation Fund Halts Redemptions After Limit Reached

April 12, 2016

Volatile markets have prompted rush of investors to exit nontraded business development companies

Updated April 10, 2016 7:51 p.m. ET | By KIRSTEN GRIND and JEAN EAGLESHAM | WSJ

It was never easy for investors to get their money out of funds called nontraded BDCs, but it is getting even harder now.

Business Development Corporation of America, a $2.5 billion fund, said in a securities filing last month that it is halting redemptions for the quarter after the fund’s pre-established limit was hit. The move came after a particularly rough period for the U.S. junk-bond market, including energy-related debt, toward the end of last year and beginning of this year.

Even in normal times, nontraded business development companies typically only allow investors to cash out every three months. This, however, appears to be the first time one has bumped up against internal restrictions that limit the amount of shares a fund is able to redeem at one time, experts say.

The fund had limited redemptions to 2.5% of its shares outstanding per quarter, which is typical for its peers.

A spokesman for BDCA declined to comment.

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