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When times are good, the BDCs are great. During the last downturn many of the BDCs were caught violating bank covenants because the market values of their investments droped and they couldn't meet their requirement of having their debt less than 50% of their assets. They were forced to sell off positions at large losses. Companies such as Allied capital dropped from $20 to under $2 and was acquired by Ares. The largest, ACAS, survived but is now selling for a third of its value 5 years ago. Given the history, you are taking a lot of risk in exchange for the great distributions.
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