[Congressional Record Volume 148, Number 105 (Monday, July 29, 2002)]
[Extensions of Remarks]
[Page E1457]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




INTRODUCTION OF THE INCREASED CAPITAL ACCESS FOR GROWING BUSINESSES ACT

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                           HON. SUE W. KELLY

                              of new york

                    in the house of representatives

                         Friday, July 26, 2002

  Mrs. KELLY. Mr. Speaker, today I am introducing the Increased Capital 
Access for Growing Businesses Act. In 1980 Congress enacted changes to 
the securities laws to allow for the creation of Business Development 
Companies (BDCs)--publicly traded companies that would invest in small 
and medium sized business that needed access to capital. Today there 
are about 20 active BDCs that are in the business of providing capital 
and management expertise to grow companies into larger success stories.
  There have been many success stories as a result of the BDC 
legislation. Companies that would never have had access to capital to 
grow and expand today owe their success to the securities law structure 
that was enacted more than twenty years ago. However, after twenty 
years it is important for Congress to modernize and update the BDC 
provisions.
  In order to maintain status as a BDC, in general a company must 
invest at least 70 percent of its assets in securities issued by 
something called ``eligible portfolio companies.'' There are different 
categories in the law of companies that qualify for status as an 
``eligible portfolio company.'' However, the principal category on 
which BDCs rely for eligibility of their portfolio companies are 
companies that do not have a class of securities on which, ``margin'' 
credit can be extended pursuant to rules or the Federal Reserve. 
According to the legislative history of the 1980 Amendments, it was 
estimated that the definition of eligible portfolio company would 
include two-thirds of all publicly held operating companies.
  Since 1980 when Congress adopted the definition of eligible portfolio 
company, the Federal Reserve has changed the requirements for 
marginability, and, effective January 1, 1999, margin securities 
include any securities listed on the Nasdaq Stock Market. This change 
has dramatically decreased the number of eligible portfolio companies.
  The proposed legislation would allow BDCs to provide financing to a 
larger number of companies that are in dire need of capital and which 
cannot access the public markets or obtain conventional financing, 
consistent with the policy of the 1980 law. Specifically, it would add 
to the definition of ``eligible portfolio company'' any company with a 
market capitalization of not more than $1 billion. It would not, 
however, affect the requirement that the securities must be acquired in 
privately negotiated transactions.
  Today more and more companies are finding that credit is simply 
unavailable. The ability for companies to grow and increase jobs is 
dependent on their ability to tap the capital markets. While this 
legislation may not be the answer for every small and medium sized 
company, it offers an opportunity for many companies that would 
otherwise find the capital market doors closed.
  I urge my colleagues to join me in supporting this important 
legislation.

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