Cox Capital Pilots Loans for Investors Stuck in Gated Non-traded BDCs

Cox Capital Partners has launched a pilot lending program that lets large shareholders of non-traded business development companies borrow against their holdings while they wait to redeem at net asset value.

Eligible investors can pledge shares and receive an advance of 50% to 65% of NAV, depending on the fund and underwriting. Loans are expected to carry a fixed rate and an initial two-year term with extension options, financed by Cox affiliates and institutional partners.

Cox will submit pledged shares in each of the fund’s redemption windows. Repurchase proceeds go toward paying down the loan, and distributions above interest owed pass through to the shareholder. Borrowers aren’t expected to face prepayment penalties when fund repurchases retire principal, and they may sell remaining shares to Cox at its current bid, with the loan settled from the proceeds.

The pilot targets advisors and directly registered shareholders with positions of at least $1 million in non-traded BDCs managing more than $1 billion. Such positions typically make up 1% to 5% of shareholder accounts, Cox said. Only taxable accounts qualify; IRAs and other retirement accounts are excluded.

CEO John Cox said some shareholders want to exit immediately and accept the firm’s bid, while others prefer to borrow and keep seeking redemptions at NAV. “A seller pays a discount, a borrower pays a rate, and the investor decides how and when to access their capital,” he said.

Cox already runs tender offers, at discounts to NAV, for funds including HPS Corporate Lending Fund, Apollo Debt Solutions, Ares Strategic Income Fund and two Blue Owl BDCs.