Asset Coverage Ratio
Total assets (less liabilities other than senior securities) divided by total senior debt — the statutory leverage test for BDCs under the Investment Company Act of 1940. The default minimum is 200% (roughly 1:1 debt-to-equity); the 2018 Small Business Credit Availability Act lets a BDC elect 150% (roughly 2:1 debt-to-equity) with board or shareholder approval, and most BDCs have made the election. Falling below the applicable minimum blocks new senior-securities issuance, restricts distributions, and can trigger covenant violations. The ratio is the BDC credit analyst's first stop.
Lessons that use this term
Related terms
Absorption Rate · AFFO per Share · Allowed Return on Equity · Alternative Investments · Anchor Tenant · Antitrust Risk
Open this term in the app → — no account needed; browse the full glossary while you research.