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Cynthia Krus, a D.C.-based partner with Sutherland Asbill & Brennan, heads the firm’s securities and corporate governance practice. She has helped build a novel securities practice at the firm, developing business structures that allow private equity funds to access public capital markets. Last week she sat down to lunch with Legal Times Alexia Garamfalvi.
LT: A lot of your practice involves helping private equity funds access the public capital markets. It seems fairly paradoxical. Krus: It’s fairly uncommon even today, because most of the time when you are talking about a fund where they are doing privately negotiated transactions, you are talking about going to high-net-worth individuals. But there are several types of vehicles that people are using these days to access public dollars. We work quite a bit with one of the models-business development companies, which are regulated by the SEC. The companies are listed on the New York Stock Exchange and Nasdaq, and if you want to trade securities, you can go to the exchanges. The good thing about that is, unlike a private fund, there’s a lot more liquidity. It allows more retail-based investors to get into these private equity investments. It’s been very popular, especially in the last couple of years.
LT: What’s the advantage of the BDC model? Krus: If you are a NYSE-listed company, raising $75 million could be done overnight, whereas if you were doing it privately, it could take months. The market has become more accepting of these vehicles as private equity has become more popular. You can’t open a [news]paper these days without reading about a private equity deal closing. As money is flowing into that industry, everyone’s trying to figure out how to get to the general public. It’s basically drawing it down to the much more everyday person.
LT: What’s the appeal for investors? Krus: Basically, they are looking at the different types of returns on different types of investment. It allows them to participate in pre-public returns where otherwise they couldn’t.
LT: How much has the BDC industry grown? Krus: They’ve been around since the 1980s, but they hadn’t really taken off. There are about 15 to 20 of these [BDCs] that are out there today. They went from a market capitalization of $2 billion in 1997 to $17 billion today.
LT: How much BDC work has your firm done? Krus: This year we’ve raised at least $1 billion in equity for BDCs. We represent about 90 percent of the industry in some capacity.
LT: How did Sutherland create such a niche in this area? How did you come to represent so many of these companies? Krus: There weren’t a lot of attorneys who had knowledge about BDCs, about how they worked or how they were regulated. We got called in by a client, Allied Capital, to do a regulatory review in 1997. The company was a BDC, and we grew with that company, and since there was no one else out there with the knowledge, people gravitated toward us.
LT: So, you also teach a course on corporate governance at Georgetown and on mergers & acquisitions at George Washington University Law School. What do you like about teaching? Krus: It reinvigorates you to get back to some of the more fundamental issues and it keeps you up to speed. Sometimes, the students make you think about things in a different way than you are allowed to in your everyday work.
LT: I hear you are a bit of an extreme sports nut and learned to surf in Costa Rica for your 40th birthday. Tell me about another one of your adventure vacations. Krus: I went bungee jumping in New Zealand off the Carrara Bridge, where they first started bungee jumping. We spent three weeks in New Zealand. We started at the very tip of the South Island, hiked the Milford Track, went to the north of the country where the two oceans meet, and flew in a small plane up there. I scared my husband, because the pilot let me fly.
LT: You’ve also been on safari in Tanzania and Botswana, whitewater rafting on the Zambezi River below Victoria Falls, skydiving with your mother and sister. Where do you find time for it all? Krus: When you are working really hard, you have to play hard. I’m always just ready to go when the opportunity presents itself. I found that around Christmastime, no matter what you do, you can usually get away for a week or two weeks. And I also have extremely experienced associates.
Working Lunch runs every other week in Legal Times .

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