Corporate Capital Trust, Inc., et al.; Notice of Application, 25490-25495 [2013-10238]
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25490
Federal Register / Vol. 78, No. 84 / Wednesday, May 1, 2013 / Notices
where the written consent specifically
references this system of records.
As set out in IPS–1–12 .10(d), any
resignation in lieu of administrative
separation and any final decision that
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DISPOSING OF RECORDS IN THE SYSTEM:
SYSTEM MANAGER(S) AND ADDRESS:
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Office of the General Counsel, Peace
Corps, 1111 20th St. NW., Washington,
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NOTIFICATION PROCEDURE:
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notification that this system of records
contains a record about him or her
should make a written request to the
System Manager. Requesters will be
required to provide adequate
identification, such as a driver’s license,
employee identification card, or other
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CFR Part 308.
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identifying documentation. Additional
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instances. Complete Peace Corps
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CFR Part 308. See also MS 897,
Attachment B.
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Act procedures are set out in 22 CFR
Part 308.
2. Financial Matters.
3. Pricing.
4. Personnel Matters and
Compensation Issues.
5. Governors’ Executive Session—
Discussion of prior agenda items and
Board Governance.
Friday, May 10 at 8:30 a.m. (Open)
1. Remarks of the Chairman of the
Board.
2. Remarks of the Postmaster General
and CEO.
3. Approval of Minutes of Previous
Meetings.
4. Committee Reports.
5. Quarterly Report on Financial
Performance.
6. Quarterly Report on Service
Performance.
7. Tentative Agenda for the June 18,
2013, meeting in Washington, DC.
Friday, May 10 at 10:30 a.m. (Closed—
If Needed)
1. Continuation of Thursday’s closed
session agenda.
CONTACT PERSON FOR MORE INFORMATION:
Julie S. Moore, Secretary of the Board,
U.S. Postal Service, 475 L’Enfant Plaza
SW., Washington, DC 20260–1000.
Telephone: (202) 268–4800.
Julie S. Moore,
Secretary.
[FR Doc. 2013–10344 Filed 4–29–13; 11:15 am]
BILLING CODE 7710–12–P
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Participants in the proceeding.
EXEMPTIONS CLAIMED FOR THE SYSTEM:
Documents originating from the Office
of Inspector General will be handled
under the applicable Office of Inspector
General System of Records.
[FR Doc. 2013–10225 Filed 4–30–13; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–30494; File No. 812–13844]
Corporate Capital Trust, Inc., et al.;
Notice of Application
April 25, 2013.
BILLING CODE 6051–01–P
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under sections 57(a)(4) and 57(i)
of the Investment Company Act of 1940
(the ‘‘Act’’) and rule 17d–1 under the
Act to permit certain joint transactions
otherwise prohibited by section 57(a)(4)
of the Act and rule 17d–1 under the Act.
AGENCY:
POSTAL SERVICE
Board of Governors; Sunshine Act
Meeting
Thursday, May 9,
2013, at 10:00 a.m.; and Friday, May 10,
at 8:30 a.m. and 10:30 a.m.
PLACE: Washington, DC, at U.S. Postal
Service Headquarters, 475 L’Enfant
Plaza SW., in the Benjamin Franklin
Room.
STATUS: Thursday, May 9 at 10:00
a.m.—Closed; Friday, May 10 at 8:30
a.m.—Open; and at 10:30 a.m.—Closed
DATES AND TIMES:
Matters To Be Considered
Thursday, May 9, at 10:00 a.m. (Closed)
1. Strategic Issues.
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Applicants
request an order to permit a business
development company (‘‘BDC’’) to coinvest with certain affiliated investment
funds and accounts in portfolio
companies.
APPLICANTS: Corporate Capital Trust,
Inc. (the ‘‘Company’’); CNL Fund
Advisors Company (‘‘CFA’’); KKR Asset
Management LLC (‘‘KAM’’ and together
with CFA, the ‘‘Advisers’’); KKR Asset
SUMMARY OF APPLICATION:
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Management LTD., KKR CS Advisors I
LLC, KKR FI Advisors LLC, KKR FI
Advisors IV LLC, KKR FI Advisors
Cayman LTD., KKR Financial Advisors
LLC, KKR Financial Advisors II LLC,
and KKR Mezzanine I Advisors LLC
(collectively, with KAM, the ‘‘KAM
Affiliated Advisers’’); Kohlberg Kravis
Roberts & Co. L.P. (‘‘KKR & Co.’’); KKR
CS III Limited, KKR Associates CS III
L.P., KKR Mezzanine GP LLC, KKR
Associates Mezzanine I L.P., KKR CS II
Limited, KKR Associates CS II L.P., KKR
CS I Limited, and KKR Associates CS I
L.P. (collectively, with KKR & Co., the
‘‘KKR & Co. Affiliated Advisers’’ and,
together with the KAM Affiliated
Advisers, the ‘‘KKR Affiliated
Advisers’’); KKR Capital Markets
Holdings L.P., KKR Capital Markets
LLC, KKR Capital Markets Limited, KKR
Capital Markets Asia Limited, KKR
Corporate Lending LLC, KKR Corporate
Lending (Cayman) Limited, and KKR
Corporate Lending (UK) LLC
(collectively, the ‘‘KCM Companies’’);
and KKR Debt Investors II (2006) Ireland
LP, KKR DI 2006 LP, 8 Capital Partners
L.P., KKR Financial CLO 2005–1, LTD.,
KKR Financial CLO 2005–2, LTD., KKR
Financial CLO 2006–1, LTD., KKR
Financial CLO 2007–1, LTD., KKR
Financial CLO 2007–A, LTD., KKR
Financial CLO 2009–1, LTD., KKR
Financial Holdings, Inc., KKR Financial
Holdings, LTD., KKR Financial
Holdings LLC (‘‘KFN’’), KKR Financial
Holdings II, LLC, KKR Financial
Holdings III, LLC, KKR Financial
Holdings IV, LLC, KKR Corporate Credit
Partners L.P., KKR Mezzanine Partners
I L.P., KKR Mezzanine Partners I SideBy-Side L.P., KKR TRS Holdings, LTD.,
KKR-Keats Capital Partners L.P., KKRMilton Capital Partners L.P., and KKRMilton Co-Investments L.P.
(collectively, and together with the
Existing KKR Proprietary Accounts
(defined below), the ‘‘Existing Affiliated
Investors’’).
FILING DATES: The application was filed
on November 15, 2010, and amended on
May 13, 2011, October 21, 2011, April
6, 2012, July 17, 2012, November 16,
2012, and March 28, 2013. Applicants
have agreed to file an amendment
during the notice period, the substance
of which is reflected in this notice.
HEARING OR NOTIFICATION OF HEARING:
An order granting the requested relief
will be issued unless the Commission
orders a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on May 20, 2013, and
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should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F St.
NE., Washington, DC 20549–1090.
Applicants: the Company and CFA, 450
S. Orange Avenue, Orlando, FL; KAM,
the KAM Affiliated Advisers, KKR &
Co., the KKR & Co. Affiliated Advisers,
the KCM Companies, and the Existing
Affiliated Investors, 555 California
Street, 50th Floor, San Francisco, CA
94104.
FOR FURTHER INFORMATION CONTACT:
Christine Y. Greenlees, Senior Counsel,
at (202) 551–6879 or David P. Bartels,
Branch Chief, at (202) 551–6821 (Office
of Investment Company Regulation,
Division of Investment Management).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Applicants’ Representations
1. The Company is a closed-end
management investment company that
has elected to be regulated as a BDC
under the Act.1 The Company’s
investment objective is to provide
shareholders with current income and,
to a lesser extent, long-term capital
appreciation. The Company has a fivemember board of directors (the
‘‘Board’’), of which three members are
not ‘‘interested persons’’ of the
Company as defined in section 2(a)(19)
of the Act (‘‘Independent Directors’’).
2. CFA, a subsidiary of CNL Financial
Group, LLC, is registered as an
investment adviser under the
Investment Advisers Act of 1940 (the
‘‘Advisers Act’’) and serves as the
Company’s investment adviser.
3. KKR & Co. L.P. (‘‘KKR’’) is an
alternative asset manager that conducts
its business through various
subsidiaries, which include investment
1 Section 2(a)(48) defines a BDC to be any closedend investment company that operates for the
purpose of making investments in securities
described in sections 55(a)(1) through 55(a)(3) of the
Act and makes available significant managerial
assistance with respect to the issuers of such
securities.
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25491
advisers and broker-dealers. KAM, a
subsidiary of KKR, is registered as an
investment adviser under the Advisers
Act and serves as the Company’s subadviser. CFA and KAM are not affiliated
persons (as defined in the Act).
4. The KCM Companies are indirect,
wholly- or majority-owned subsidiaries
of KKR and, from time to time, may
hold various financial assets in a
principal capacity (in such capacity, the
‘‘Existing KKR Proprietary Accounts’’
and, together with any Future KKR
Proprietary Account (as defined below),
the ‘‘KKR Proprietary Accounts’’)
5. Applicants seek an order (‘‘Order’’)
under sections 57(a)(4), and 57(i) of the
Act and rule 17d–1 under the Act to
permit the Company, on one hand, and
one or more Affiliated Investors,2 on the
other hand, to participate in the same
investment opportunities through a
proposed co-investment program where
such participation would otherwise be
prohibited under section 57 of the Act
(the ‘‘Co-Investment Program’’). For
purposes of the application, a ‘‘CoInvestment Transaction’’ means any
transaction in which the Company (or a
Blocker Subsidiary, as defined below)
participated together with one or more
Affiliated Investors in reliance on the
Order. ‘‘Potential Co-Investment
Transaction’’ means any investment
opportunity in which the Company (or
a Blocker Subsidiary) could not
participate together with one or more
Affiliated Investors without obtaining
and relying on the Order.3
2 ‘‘Affiliated Investor’’ means (a) any Existing
Affiliated Investor (as defined above under
‘‘Applicants’’); (b) any Future KKR Proprietary
Account; or (c) any Future Affiliated Fund. An
Existing Affiliated Investor, other than KFN, is an
entity (a) whose investment adviser is a KKR
Affiliated Adviser; and (b) that would be an
investment company but for section 3(c)(1) or
3(c)(7) of the Act. KFN is an exchange-listed
specialty finance company that is externally
advised by KAM. KFN is a holding company that
engages in its specialty finance business through
various wholly-owned subsidiaries that rely on one
or more exemptions or exceptions from the
definition of investment company. Thus, applicants
state that KFN itself does not come within the
definition of an investment company in section
3(a)(1) of the Act. Applicants do not believe that
allowing the Company to co-invest with KFN raises
any additional legal or policy issues because KFN
is a client of KAM in the same way that Existing
Affiliated Investors which rely on section 3(c)(1) or
3(c)(7) are clients of a KKR Affiliated Adviser.
‘‘Future KKR Proprietary Account’’ means an
indirect, wholly- or majority-owned subsidiary of
KKR that is formed in the future and, from time to
time, may hold various financial assets in a
principal capacity. ‘‘Future Affiliated Fund’’ means
an entity (a) whose investment adviser is a KKR
Affiliated Adviser or an investment adviser
controlling, controlled by or under common control
with KAM; and (b) that would be an investment
company but for section 3(c)(1) or 3(c)(7) of the Act.
3 All existing entities that currently intend to rely
on the Order have been named as applicants and
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6. Applicants anticipate that KAM or
another KKR Affiliated Adviser (as
defined above under ‘‘Applicants’’) will
periodically determine that certain
investments KAM recommends for the
Company would also be appropriate
investments for one or more Affiliated
Investors. Such a determination may
result in the Company, on one hand,
and one or more of the Affiliated
Investors, on the other hand, coinvesting in certain investment
opportunities. When considering
Potential Co-Investment Transactions
for the Company, each of KAM and CFA
(together, the ‘‘Advisers’’), will
independently analyze and evaluate the
investment opportunity as to its
appropriateness for the Company taking
into consideration the Company’s
Objectives and Strategies (as defined
below).
7. KAM would notify CFA of the
Potential Co-Investment Transaction
and KAM’s recommended allocation for
the Company. CFA would review
KAM’s recommendation for the
Company and would have the ability to
ask questions of KAM and request
additional information from KAM. If
CFA approved the investment for the
Company, the investment and all
relevant allocation information would
then be presented to the Company’s
Board for its approval in accordance
with the conditions of the application.4
Co-Investment Transaction will be
consummated only upon approval by a
required majority of the directors of the
Company eligible to vote under section
57(o) of the Act (the ‘‘Eligible
Directors’’) within the meaning of
section 57(o) (‘‘Required Majority’’).5
Applicants believe the investment
process between KAM and CFA, prior to
seeking approval from the Company’s
Board, is significant and provides for
additional procedures and processes to
ensure that the Company is being
treated fairly in respect of Potential CoInvestment Transactions.
8. Applicants state that, in accordance
with KAM’s allocation policies and
procedures, Potential Co-Investment
Transactions will be offered to, and
allocated among, KAM-advised funds,
including the Company, based on each
client’s particular investment objective
any existing or future entities that may rely on the
Order in the future will comply with the terms and
conditions of the application.
4 Applicants state that both CFA and the
Company’s Board will be provided with all relevant
information regarding KAM’s proposed allocations
to the Company and Affiliated Investors, including
KKR Proprietary Accounts, as contemplated by the
conditions of the application.
5 Applicants state that no Independent Director
will have a financial interest in any Co-Investment
Transaction.
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and strategies.6 If the aggregate amount
recommended by KAM to be invested
by KAM-advised funds, including the
Company, in a Potential Co-Investment
Transaction were equal to or more than
the amount of the investment
opportunity, a KKR Proprietary Account
would not participate in the investment
opportunity. If the aggregate amount
recommended by KAM to be invested
by KAM-advised funds, including the
Company, in a Potential Co-Investment
Transaction were less than the amount
of the investment opportunity, a KKR
Proprietary Account would then have
the opportunity to participate in the
Potential Co-Investment Transaction in
a principal capacity. Applicants note
that a KKR Proprietary Account broker/
dealer would generally seek to privately
place such an investment opportunity to
one or more unaffiliated third-parties
before investing in the investment
opportunity in a principal capacity.
9. With respect to the pro rata
dispositions and follow-on investments
provided in conditions 7 and 8, the
Company may participate in a pro rata
disposition or follow-on investment
without obtaining prior approval of the
Required Majority if, among other
things: (i) The proposed participation of
each Affiliated Investor and the
Company in such disposition is
proportionate to its outstanding
investments in the issuer immediately
preceding the disposition or follow-on
investment, as the case may be; and (ii)
the Company’s Board has approved the
Company’s participation in pro rata
dispositions and follow-on investments
as being in the best interests of the
Company. If the Board does not so
approve, any such disposition or followon investment will be submitted to the
Company’s Eligible Directors. The
Company’s Board may at any time
rescind, suspend or qualify its approval
of pro rata dispositions and follow-on
investments with the result that all
dispositions and/or follow-on
investments must be submitted to the
Eligible Directors.
6 Applicants note that KAM, as a registered
investment adviser, has developed a robust
allocation process as part of its overall compliance
policies and procedures. Applicants also state that
KAM’s allocation process is designed to allocate
investment opportunities fairly and equitably
among its clients over time. Applicants further state
that, while each KAM client may not participate in
each investment opportunity because, for example,
the client’s allocation would be less than its
minimum investment size, over time each KAM
client would participate in investment
opportunities fairly and equitably. In the case of a
Potential Co-Investment Transaction, KAM would
apply its allocation policies and procedures in
determining the proposed allocation for the
Company as required under condition 2.
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10. To allow for an independent
review of co-investment activities,
condition 4 states that the Board will
receive, on a quarterly basis, a record of
all investments made by Affiliated
Investors during the preceding quarter
that: (1) Were consistent with the
Company’s then current Objectives and
Strategies, but (2) were not made
available to the Company. This record
will include an explanation of why such
investment opportunities were not
offered to the Company. Presently,
KAM’s allocation procedures prohibit
the Company from participating in
Potential Co-Investment Transactions.
As a result, KAM’s allocation system
reports investments in which the
Company would have been able to
invest but for it not having been granted
the requested relief. If the requested
relief is granted, KAM will amend its
allocation procedures to allow the
Company to invest in Potential CoInvestment Transactions in accordance
with the conditions below. Applicants
represent that KAM’s allocation process
is capable of tracking all of the
information required to be delivered to
the Board by condition 4 (as described
above), which will be presented to CFA
and the Company’s Board on a regular
basis.
11. The Company may, from time to
time, form a special purpose subsidiary
(a ‘‘Blocker Subsidiary’’) (a) whose sole
business purpose is to hold one or more
investments on behalf of the Company;
(b) that is wholly-owned by the
Company (with the Company at all
times holding, beneficially and of
record, 100% of the voting and
economic interests); (c) with respect to
which the Company’s Board has the sole
authority to make all determinations
with respect to the Blocker Subsidiary’s
participation under the conditions to
this Application; (d) that does not pay
a separate advisory fee, including any
performance-based fee, to any person;
and (e) that is an entity that would be
an investment company but for Section
3(c)(1) or 3(c)(7) of the Act. A Blocker
Subsidiary would be prohibited from
investing in a Co-Investment
Transaction with any Affiliated Investor
because it would be a company
controlled by the Company for purposes
of Section 57(a)(4) and rule 17d–1.
Applicants request that a Blocker
Subsidiary be permitted to participate in
Co-Investment Transactions in lieu of
the Company and that the Blocker
Subsidiary’s participation in any such
transaction be treated, for purposes of
the Order, as though the Company were
participating directly. Applicants
represent that this treatment is justified
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because a Blocker Subsidiary would
have no purpose other than serving as
a holding vehicle for the Company’s
investments and, therefore, no conflicts
of interest could arise between the
Company and the Blocker Subsidiary.
The Company’s Board would make all
relevant determinations under the
conditions with regard to a Blocker
Subsidiary’s participation in a CoInvestment Transaction, and the
Company’s Board would be informed of,
and take into consideration, any
proposed use of a Blocker Subsidiary in
the Company’s place. If the Company
proposes to participate in the same CoInvestment Transaction with any of its
Blocker Subsidiaries, the Company’s
Board will also be informed of, and take
into consideration, the relative
participation of the Company and the
Blocker Subsidiary.
Applicants’ Legal Analysis
1. Section 57(a)(4) of the Act prohibits
certain affiliated persons of a BDC from
participating in joint transactions with
the BDC (or a company controlled by
such BDC) in contravention of rules as
prescribed by the Commission. Under
section 57(b)(2) of the Act, in general,
any person who is directly or indirectly
controlling, controlled by, or under
common control with a BDC, is subject
to section 57(a)(4). Section 57(i) of the
Act provides that, until the Commission
prescribes rules under section 57(a)(4),
the Commission’s rules under section
17(d) of the Act applicable to registered
closed-end investment companies will
be deemed to apply to transactions
subject to section 57(a)(4). Because the
Commission has not adopted any rules
under section 57(a)(4), rule 17d–1
applies.
2. Rule 17d–1 under the Act prohibits
affiliated persons of a registered
investment company from participating
in joint transactions with the company
unless the Commission has granted an
order permitting such transactions. In
passing upon applications under rule
17d–1, the Commission considers
whether the company’s participation in
the joint transaction is consistent with
the provisions, policies, and purposes of
the Act and the extent to which such
participation is on a basis different from
or less advantageous than that of other
participants.
3. Applicants submit that KAM and
any Affiliated Investors that it advises
could be deemed to be persons related
to the Company in a manner described
by section 57(b) and therefore
prohibited by section 57(a)(4) and rule
17d–1 from participating in the CoInvestment Program. In addition,
because other KKR Affiliated Advisers
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are ‘‘affiliated persons’’ of KAM,
Affiliated Investors advised by any of
them could be deemed to be persons
related to the Company (or a company
controlled by the Company) in a manner
described by section 57(b) and also
prohibited from participating in the CoInvestment Program. Finally, because
KKR Proprietary Accounts are under
common control with KAM and,
therefore, are ‘‘affiliated persons’’ of
KAM, KKR Proprietary Accounts could
be deemed to be persons related to the
Company (or a company controlled by
the Company) in a manner described by
Section 57(b) and also prohibited from
participating in the Co-Investment
Program.
4. Applicants state that they expect
that co-investment in portfolio
companies by the Company and the
Affiliated Investors will increase the
number of favorable investment
opportunities for the Company and that
the Co-Investment Program will be
implemented only if the Required
Majority approves it on the basis that it
would be advantageous to the Company.
5. Applicants submit that the
Required Majority’s approval of each
Co-Investment Transaction before
investment, and other protective
conditions set forth in the application,
will ensure that the Company will be
treated fairly. Applicants state that the
Company’s participation in the CoInvestment Transactions will be
consistent with the provisions, policies
and purposes of the Act and on a basis
that is not different from or less
advantageous than that of other
participants. Applicants further state
that the terms and conditions of the
application will ensure that all such
transactions are reasonable and fair to
the Company and the Affiliated
Investors and do not involve
overreaching by any person concerned,
including CFA or KAM.
6. Applicants acknowledge that some
of the Affiliated Investors may not be
funds advised by KAM or an affiliate
because they are KKR Proprietary
Accounts (i.e., a KCM Company
investing in a principal capacity).
Applicants further acknowledge that
previously ordered exemptive
applications seeking similar coinvestment relief have been limited to
co-investment transactions between a
BDC and its affiliated funds only.
However, applicants do not believe
these KKR Proprietary Accounts should
raise issues under the conditions of the
application because, consistent with
condition 14, KKR’s and KAM’s
allocation policies and procedures
provide that investment opportunities
are offered to client accounts before they
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25493
are offered to KKR Proprietary
Accounts.
Applicants’ Conditions
Applicants agree that any Order
granting the requested relief will be
subject to the following conditions:
1. Each time KAM or an adviser to
any Affiliated Investor considers a
Potential Co-Investment Transaction for
an Affiliated Investor that falls within
the Company’s then-current Objectives
and Strategies,7 the Advisers will make
an independent determination of the
appropriateness of the investment for
the Company in light of the Company’s
then-current circumstances.
2. a. If the Advisers deem the
Company’s participation in any
Potential Co-Investment Transaction to
be appropriate for the Company, the
Advisers will then determine an
appropriate level of investment for the
Company.
b. If the aggregate amount
recommended by the Advisers to be
invested in the Potential Co-Investment
Transaction by the Company, together
with the amount proposed to be
invested by the Affiliated Investors,
collectively, in the same transaction,
exceeds the amount of the investment
opportunity, the amount of the
investment opportunity will be
allocated among the Company and such
Affiliated Investors, pro rata based on
the ratio of the Company’s capital
available for investment in the asset
class being allocated, on the one hand,
and the Affiliated Investors’ capital
available for investment in the asset
class being allocated, on the other hand,
to the aggregated capital available for
investment for the asset class being
allocated of all parties involved in the
investment opportunity, up to the
amount proposed to be invested by
each. The Advisers will provide the
Eligible Directors with information
concerning each party’s available capital
to assist the Eligible Directors with their
review of the Company’s investments
for compliance with these allocation
procedures.
c. After making the determinations
required in conditions 1 and 2(a) above,
the Advisers will distribute written
information concerning the Potential
Co-Investment Transaction, including
the amount proposed to be invested by
the Company and any Affiliated
7 ‘‘Objectives and Strategies’’ means the
Company’s investment objectives and strategies, as
described in the Company’s registration statement
on Form N–2, other filings the Company has made
with the Commission under the Securities Act of
1933, as amended (the ‘‘1933 Act’’), or under the
Securities and Exchange Act of 1934, as amended,
and the Company’s reports to shareholders.
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Investor to the Eligible Directors for
their consideration. The Company will
co-invest with an Affiliated Investor
only if, prior to the Company’s and the
Affiliated Investors’ participation in the
Potential Co-Investment Transaction, a
Required Majority of the Eligible
Directors concludes that:
(i) the terms of the Potential CoInvestment Transaction, including the
consideration to be paid, are reasonable
and fair and do not involve
overreaching in respect of the Company
or its shareholders on the part of any
person concerned;
(ii) the Potential Co-Investment
Transaction is consistent with:
(a) the interests of the Company’s
shareholders; and
(b) the Company’s then-current
Objectives and Strategies;
(iii) the investment by an Affiliated
Investor would not disadvantage the
Company, and participation by the
Company is not on a basis different from
or less advantageous than that of any
Affiliated Investor; provided, that if an
Affiliated Investor, but not the
Company, gains the right to nominate a
director for election to a portfolio
company’s board of directors or the
right to have a board observer, or any
similar right to participate in the
governance or management of the
portfolio company, such event shall not
be interpreted to prohibit a Required
Majority of the Eligible Directors from
reaching the conclusions required by
this condition 2(c)(iii), if:
(a) the Eligible Directors will have the
right to ratify the selection of such
director or board observer, if any; and
(b) the Advisers agree to, and do,
provide periodic reports to the
Company’s Board with respect to the
actions of such director or the
information received by such board
observer or obtained through the
exercise of any similar right to
participate in the governance or
management of the portfolio company;
and
(c) any fees or other compensation
that any Affiliated Investor or any
affiliated person of an Affiliated
Investor receives in connection with the
right of the Affiliated Investor to
nominate a director or appoint a board
observer or otherwise to participate in
the governance or management of the
portfolio company will be shared
proportionately among the participating
Affiliated Investors (who may, in turn,
share their portion with their affiliated
persons) and the Company in
accordance with the amount of each
party’s investment; and
(iv) the proposed investment by the
Company will not benefit the Advisers
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or the Affiliated Investors or any
affiliated person of either of them (other
than the parties to the Co-Investment
Transaction), except (A) to the extent
permitted by condition 13, (B) to the
extent permitted under Sections 17(e)
and 57(k) of the Act, as applicable, (C)
in the case of fees or other
compensation described in condition
2(c)(iii)(c), or (D) indirectly, as a result
of an interest in the securities issued by
one of the parties to the Co-Investment
Transaction.
3. The Company will have the right to
decline to participate in any Potential
Co-Investment Transaction or to invest
less than the amount proposed.
4. The Advisers will present to the
Board, on a quarterly basis, a record of
all investments made by the Affiliated
Investors during the preceding quarter
that fell within the Company’s thencurrent Objectives and Strategies that
were not made available to the
Company, and an explanation of why
the investment opportunities were not
offered to the Company. All information
presented to the Board pursuant to this
condition will be kept for the life of the
Company and at least two years
thereafter, and will be subject to
examination by the Commission and its
staff.
5. Except for follow-on investments
made in accordance with condition 8,
the Company will not invest in reliance
on the Order in any issuer in which an
Affiliated Investor or any affiliated
person of an Affiliated Investor is an
existing investor.
6. The Company will not participate
in any Potential Co-Investment
Transaction unless the terms,
conditions, price, class of securities to
be purchased, settlement date, and
registration rights will be the same for
the Company as for any Affiliated
Investor. The grant to an Affiliated
Investor, but not the Company, of the
right to nominate a director for election
to a portfolio company’s board of
directors, the right to have an observer
on the board of directors or similar
rights to participate in the governance or
management of the portfolio company
will not be interpreted so as to violate
this condition 6, if conditions
2(c)(iii)(a), (b) and (c) are met.
7. a. If any Affiliated Investor elects to
sell, exchange or otherwise dispose of
an interest in a security that was
acquired by the Company and any of the
Affiliated Investors in a Co-Investment
Transaction, the Advisers will:
(i) notify the Company of the
proposed disposition at the earliest
practical time; and
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(ii) formulate a recommendation as to
participation by the Company in the
disposition.
b. The Company will have the right to
participate in such disposition on a
proportionate basis, at the same price
and on the same terms and conditions
as those applicable to the Affiliated
Investors.
c. The Company may participate in
such disposition without obtaining prior
approval of the Required Majority if: (i)
The proposed participation of the
Company and each Affiliated Investor in
such disposition is proportionate to its
outstanding investments in the issuer
immediately preceding the disposition;
(ii) the Company’s Board has approved
as being in the best interests of the
Company the ability to participate in
such dispositions on a pro rata basis (as
described in greater detail in this
Application); and (iii) the Company’s
Board is provided on a quarterly basis
with a list of all dispositions made in
accordance with this condition. In all
other cases, the Advisers will provide
their written recommendation as to the
Company’s participation to the Eligible
Directors, and the Company will
participate in such disposition solely to
the extent that a Required Majority
determines that it is in the Company’s
best interests.
d. The Company and each of the
Affiliated Investors will bear its own
expenses in connection with the
disposition.
8. a. If any Affiliated Investor desires
to make a ‘‘follow-on investment’’ (i.e.,
an additional investment in the same
entity, including through the exercise of
warrants or other rights to purchase
securities of the issuer) in a portfolio
company whose securities were
acquired by the Company and any of the
Affiliated Investors in a Co-Investment
Transaction, the Advisers will:
(i) notify the Company of the
proposed transaction at the earliest
practical time; and
(ii) formulate a recommendation as to
the proposed participation, including
the amount of the proposed follow-on
investment, by the Company.
b. The Company may participate in
such follow-on investment without
obtaining prior approval of the Required
Majority if: (i) The proposed
participation of the Company and each
Affiliated Investor in such investment is
proportionate to its outstanding
investments in the issuer immediately
preceding the follow-on investment; (ii)
the Company’s Board has approved as
being in the best interests of the
Company the ability to participate in
follow-on investments on a pro rata
basis (as described in greater detail in
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this Application); and (iii) the
Company’s Board is provided on a
quarterly basis with a list of all followon investments made in accordance
with this condition. In all other cases,
the Advisers will provide their written
recommendation as to the Company’s
participation to the Eligible Directors,
and the Company will participate in
such follow-on investment solely to the
extent that a Required Majority
determines that it is in the Company’s
best interests.
c. If, with respect to any follow-on
investment:
(i) the amount of a follow-on
investment is not based on the
Company’s and the Affiliated Investors’
outstanding investments immediately
preceding the follow-on investment; and
(ii) the aggregate amount
recommended by the Advisers to be
invested by the Company in the followon investment, together with the
amount proposed to be invested by the
Affiliated Investors in the same
transaction, exceeds the amount of the
opportunity; then the amount invested
by each such party will be allocated
among them pro rata based on the ratio
of the Company’s capital available for
investment in the asset class being
allocated, on the one hand, and the
Affiliated Investors’ capital available for
investment in the asset class being
allocated, on the other hand, to the
aggregated capital available for
investment for the asset class being
allocated of all parties involved in the
investment opportunity, up to the
amount proposed to be invested by
each.
d. The acquisition of follow-on
investments as permitted by this
condition will be considered a CoInvestment Transaction for all purposes
and subject to the other conditions set
forth in the Application.
9. The Independent Directors will be
provided quarterly for review all
information concerning Potential CoInvestment Transactions and CoInvestment Transactions, including
investments made by the Affiliated
Investors that the Company considered
but declined to participate in, so that
the Independent Directors may
determine whether all investments
made during the preceding quarter,
including those investments which the
Company considered but declined to
participate in, comply with the
conditions of the Order. In addition, the
Independent Directors will consider at
least annually the continued
appropriateness for the Company of
participating in new and existing CoInvestment Transactions.
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10. The Company will maintain the
records required by section 57(f)(3) of
the Act as if each of the investments
permitted under these conditions were
approved by a Required Majority of the
Eligible Directors under section 57(f).
11. No Independent Director will also
be a director, general partner, managing
member or principal, or otherwise an
‘‘affiliated person’’ (as defined in the
Act) of any Affiliated Investor.
12. The expenses, if any, associated
with acquiring, holding or disposing of
any securities acquired in a CoInvestment Transaction (including,
without limitation, the expenses of the
distribution of any such securities
registered for sale under the 1933 Act)
shall, to the extent not payable by the
Advisers under the Company’s and the
Affiliated Investors’ investment
advisory agreements, be shared by the
Company and the Affiliated Investors in
proportion to the relative amounts of
their securities to be acquired or
disposed of, as the case may be.
13. Any transaction fee (including
break-up or commitment fees but
excluding broker’s fees contemplated by
section 17(e) or 57(k) of the Act, as
applicable) received in connection with
a Co-Investment Transaction will be
distributed to the Company and
Affiliated Investors on a pro rata basis
based on the amount they invested or
committed, as the case may be, in such
Co-Investment Transaction. If any
transaction fee is to be held by an
Adviser pending consummation of the
transaction, the fee will be deposited
into an account maintained by the
Adviser at a bank or banks having the
qualifications prescribed in section
26(a)(1) of the Act, and the account will
earn a competitive rate of interest that
will also be divided pro rata among the
Company and the Affiliated Investors
based on the amount they invest in the
Co-Investment Transaction. None of the
Affiliated Investors, the Advisers nor
any affiliated person of the Company
will receive additional compensation or
remuneration of any kind as a result of
or in connection with a Co-Investment
Transaction (other than (a) in the case
of the Company and the Affiliated
Investors, the pro rata transaction fees
described above and fees or other
compensation described in condition
2(c)(iii)(c) and (b) in the case of the
Advisers, investment advisory fees paid
in accordance with the Company’s and
the Affiliated Investors’ investment
advisory agreements).
14. The KKR Proprietary Accounts
will not be permitted to invest in a
Potential Co-Investment Transaction
except to the extent the demand from
the Company and the other Affiliated
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25495
Investors is less than the total
investment opportunity.
15. The Advisers and the advisers to
the Affiliated Investors will maintain
written policies and procedures
reasonably designed to ensure
compliance with the foregoing
conditions. These policies and
procedures will require, among other
things, that each of KAM and CFA will
be notified of all Potential CoInvestment Transactions that fall within
the Company’s then-current Objectives
and Strategies and will be given
sufficient information to make its
independent determination and
recommendations under conditions 1,
2(a), 7 and 8.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–10238 Filed 4–30–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given, pursuant to
the provisions of the Government in the
Sunshine Act, Public Law 94–409, that
the Securities and Exchange
Commission will hold an Open Meeting
on Wednesday, May 1, 2013 at 10:00
a.m., in the Auditorium, Room L–002.
The subject matters of the Open
Meeting will be:
• Item 1: The Commission will
consider whether to propose new rules
and interpretive guidance for crossborder security-based swap activities
and to re-propose Regulation SBSR and
certain rules and forms relating to the
registration of security-based swap
dealers and major security-based swap
participants.
• Item 2: The Commission will
consider whether to reopen the
comment periods and receive new
information for certain rulemaking
releases and the policy statement
applicable to security-based swaps
proposed pursuant to the Securities
Exchange Act of 1934 and the DoddFrank Wall Street Reform and Consumer
Protection Act.
Commissioner Aguilar, as duty
officer, determined that no earlier notice
thereof was possible.
At times, changes in Commission
priorities require alterations in the
scheduling of meeting items.
For further information and to
ascertain what, if any, matters have been
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]]>Agencies
[Federal Register Volume 78, Number 84 (Wednesday, May 1, 2013)]
[Notices]
[Pages 25490-25495]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-10238]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-30494; File No. 812-13844]
Corporate Capital Trust, Inc., et al.; Notice of Application
April 25, 2013.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under sections 57(a)(4) and
57(i) of the Investment Company Act of 1940 (the ``Act'') and rule 17d-
1 under the Act to permit certain joint transactions otherwise
prohibited by section 57(a)(4) of the Act and rule 17d-1 under the Act.
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Summary of Application: Applicants request an order to permit a
business development company (``BDC'') to co-invest with certain
affiliated investment funds and accounts in portfolio companies.
Applicants: Corporate Capital Trust, Inc. (the ``Company''); CNL Fund
Advisors Company (``CFA''); KKR Asset Management LLC (``KAM'' and
together with CFA, the ``Advisers''); KKR Asset
[[Page 25491]]
Management LTD., KKR CS Advisors I LLC, KKR FI Advisors LLC, KKR FI
Advisors IV LLC, KKR FI Advisors Cayman LTD., KKR Financial Advisors
LLC, KKR Financial Advisors II LLC, and KKR Mezzanine I Advisors LLC
(collectively, with KAM, the ``KAM Affiliated Advisers''); Kohlberg
Kravis Roberts & Co. L.P. (``KKR & Co.''); KKR CS III Limited, KKR
Associates CS III L.P., KKR Mezzanine GP LLC, KKR Associates Mezzanine
I L.P., KKR CS II Limited, KKR Associates CS II L.P., KKR CS I Limited,
and KKR Associates CS I L.P. (collectively, with KKR & Co., the ``KKR &
Co. Affiliated Advisers'' and, together with the KAM Affiliated
Advisers, the ``KKR Affiliated Advisers''); KKR Capital Markets
Holdings L.P., KKR Capital Markets LLC, KKR Capital Markets Limited,
KKR Capital Markets Asia Limited, KKR Corporate Lending LLC, KKR
Corporate Lending (Cayman) Limited, and KKR Corporate Lending (UK) LLC
(collectively, the ``KCM Companies''); and KKR Debt Investors II (2006)
Ireland LP, KKR DI 2006 LP, 8 Capital Partners L.P., KKR Financial CLO
2005-1, LTD., KKR Financial CLO 2005-2, LTD., KKR Financial CLO 2006-1,
LTD., KKR Financial CLO 2007-1, LTD., KKR Financial CLO 2007-A, LTD.,
KKR Financial CLO 2009-1, LTD., KKR Financial Holdings, Inc., KKR
Financial Holdings, LTD., KKR Financial Holdings LLC (``KFN''), KKR
Financial Holdings II, LLC, KKR Financial Holdings III, LLC, KKR
Financial Holdings IV, LLC, KKR Corporate Credit Partners L.P., KKR
Mezzanine Partners I L.P., KKR Mezzanine Partners I Side-By-Side L.P.,
KKR TRS Holdings, LTD., KKR-Keats Capital Partners L.P., KKR-Milton
Capital Partners L.P., and KKR-Milton Co-Investments L.P.
(collectively, and together with the Existing KKR Proprietary Accounts
(defined below), the ``Existing Affiliated Investors'').
Filing Dates: The application was filed on November 15, 2010, and
amended on May 13, 2011, October 21, 2011, April 6, 2012, July 17,
2012, November 16, 2012, and March 28, 2013. Applicants have agreed to
file an amendment during the notice period, the substance of which is
reflected in this notice.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on May 20, 2013, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
St. NE., Washington, DC 20549-1090. Applicants: the Company and CFA,
450 S. Orange Avenue, Orlando, FL; KAM, the KAM Affiliated Advisers,
KKR & Co., the KKR & Co. Affiliated Advisers, the KCM Companies, and
the Existing Affiliated Investors, 555 California Street, 50th Floor,
San Francisco, CA 94104.
FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior
Counsel, at (202) 551-6879 or David P. Bartels, Branch Chief, at (202)
551-6821 (Office of Investment Company Regulation, Division of
Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or for an
applicant using the Company name box, at https://www.sec.gov/search/search.htm or by calling (202) 551-8090.
Applicants' Representations
1. The Company is a closed-end management investment company that
has elected to be regulated as a BDC under the Act.\1\ The Company's
investment objective is to provide shareholders with current income
and, to a lesser extent, long-term capital appreciation. The Company
has a five-member board of directors (the ``Board''), of which three
members are not ``interested persons'' of the Company as defined in
section 2(a)(19) of the Act (``Independent Directors'').
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\1\ Section 2(a)(48) defines a BDC to be any closed-end
investment company that operates for the purpose of making
investments in securities described in sections 55(a)(1) through
55(a)(3) of the Act and makes available significant managerial
assistance with respect to the issuers of such securities.
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2. CFA, a subsidiary of CNL Financial Group, LLC, is registered as
an investment adviser under the Investment Advisers Act of 1940 (the
``Advisers Act'') and serves as the Company's investment adviser.
3. KKR & Co. L.P. (``KKR'') is an alternative asset manager that
conducts its business through various subsidiaries, which include
investment advisers and broker-dealers. KAM, a subsidiary of KKR, is
registered as an investment adviser under the Advisers Act and serves
as the Company's sub-adviser. CFA and KAM are not affiliated persons
(as defined in the Act).
4. The KCM Companies are indirect, wholly- or majority-owned
subsidiaries of KKR and, from time to time, may hold various financial
assets in a principal capacity (in such capacity, the ``Existing KKR
Proprietary Accounts'' and, together with any Future KKR Proprietary
Account (as defined below), the ``KKR Proprietary Accounts'')
5. Applicants seek an order (``Order'') under sections 57(a)(4),
and 57(i) of the Act and rule 17d-1 under the Act to permit the
Company, on one hand, and one or more Affiliated Investors,\2\ on the
other hand, to participate in the same investment opportunities through
a proposed co-investment program where such participation would
otherwise be prohibited under section 57 of the Act (the ``Co-
Investment Program''). For purposes of the application, a ``Co-
Investment Transaction'' means any transaction in which the Company (or
a Blocker Subsidiary, as defined below) participated together with one
or more Affiliated Investors in reliance on the Order. ``Potential Co-
Investment Transaction'' means any investment opportunity in which the
Company (or a Blocker Subsidiary) could not participate together with
one or more Affiliated Investors without obtaining and relying on the
Order.\3\
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\2\ ``Affiliated Investor'' means (a) any Existing Affiliated
Investor (as defined above under ``Applicants''); (b) any Future KKR
Proprietary Account; or (c) any Future Affiliated Fund. An Existing
Affiliated Investor, other than KFN, is an entity (a) whose
investment adviser is a KKR Affiliated Adviser; and (b) that would
be an investment company but for section 3(c)(1) or 3(c)(7) of the
Act. KFN is an exchange-listed specialty finance company that is
externally advised by KAM. KFN is a holding company that engages in
its specialty finance business through various wholly-owned
subsidiaries that rely on one or more exemptions or exceptions from
the definition of investment company. Thus, applicants state that
KFN itself does not come within the definition of an investment
company in section 3(a)(1) of the Act. Applicants do not believe
that allowing the Company to co-invest with KFN raises any
additional legal or policy issues because KFN is a client of KAM in
the same way that Existing Affiliated Investors which rely on
section 3(c)(1) or 3(c)(7) are clients of a KKR Affiliated Adviser.
``Future KKR Proprietary Account'' means an indirect, wholly- or
majority-owned subsidiary of KKR that is formed in the future and,
from time to time, may hold various financial assets in a principal
capacity. ``Future Affiliated Fund'' means an entity (a) whose
investment adviser is a KKR Affiliated Adviser or an investment
adviser controlling, controlled by or under common control with KAM;
and (b) that would be an investment company but for section 3(c)(1)
or 3(c)(7) of the Act.
\3\ All existing entities that currently intend to rely on the
Order have been named as applicants and any existing or future
entities that may rely on the Order in the future will comply with
the terms and conditions of the application.
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[[Page 25492]]
6. Applicants anticipate that KAM or another KKR Affiliated Adviser
(as defined above under ``Applicants'') will periodically determine
that certain investments KAM recommends for the Company would also be
appropriate investments for one or more Affiliated Investors. Such a
determination may result in the Company, on one hand, and one or more
of the Affiliated Investors, on the other hand, co-investing in certain
investment opportunities. When considering Potential Co-Investment
Transactions for the Company, each of KAM and CFA (together, the
``Advisers''), will independently analyze and evaluate the investment
opportunity as to its appropriateness for the Company taking into
consideration the Company's Objectives and Strategies (as defined
below).
7. KAM would notify CFA of the Potential Co-Investment Transaction
and KAM's recommended allocation for the Company. CFA would review
KAM's recommendation for the Company and would have the ability to ask
questions of KAM and request additional information from KAM. If CFA
approved the investment for the Company, the investment and all
relevant allocation information would then be presented to the
Company's Board for its approval in accordance with the conditions of
the application.\4\ Co-Investment Transaction will be consummated only
upon approval by a required majority of the directors of the Company
eligible to vote under section 57(o) of the Act (the ``Eligible
Directors'') within the meaning of section 57(o) (``Required
Majority'').\5\ Applicants believe the investment process between KAM
and CFA, prior to seeking approval from the Company's Board, is
significant and provides for additional procedures and processes to
ensure that the Company is being treated fairly in respect of Potential
Co-Investment Transactions.
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\4\ Applicants state that both CFA and the Company's Board will
be provided with all relevant information regarding KAM's proposed
allocations to the Company and Affiliated Investors, including KKR
Proprietary Accounts, as contemplated by the conditions of the
application.
\5\ Applicants state that no Independent Director will have a
financial interest in any Co-Investment Transaction.
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8. Applicants state that, in accordance with KAM's allocation
policies and procedures, Potential Co-Investment Transactions will be
offered to, and allocated among, KAM-advised funds, including the
Company, based on each client's particular investment objective and
strategies.\6\ If the aggregate amount recommended by KAM to be
invested by KAM-advised funds, including the Company, in a Potential
Co-Investment Transaction were equal to or more than the amount of the
investment opportunity, a KKR Proprietary Account would not participate
in the investment opportunity. If the aggregate amount recommended by
KAM to be invested by KAM-advised funds, including the Company, in a
Potential Co-Investment Transaction were less than the amount of the
investment opportunity, a KKR Proprietary Account would then have the
opportunity to participate in the Potential Co-Investment Transaction
in a principal capacity. Applicants note that a KKR Proprietary Account
broker/dealer would generally seek to privately place such an
investment opportunity to one or more unaffiliated third-parties before
investing in the investment opportunity in a principal capacity.
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\6\ Applicants note that KAM, as a registered investment
adviser, has developed a robust allocation process as part of its
overall compliance policies and procedures. Applicants also state
that KAM's allocation process is designed to allocate investment
opportunities fairly and equitably among its clients over time.
Applicants further state that, while each KAM client may not
participate in each investment opportunity because, for example, the
client's allocation would be less than its minimum investment size,
over time each KAM client would participate in investment
opportunities fairly and equitably. In the case of a Potential Co-
Investment Transaction, KAM would apply its allocation policies and
procedures in determining the proposed allocation for the Company as
required under condition 2.
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9. With respect to the pro rata dispositions and follow-on
investments provided in conditions 7 and 8, the Company may participate
in a pro rata disposition or follow-on investment without obtaining
prior approval of the Required Majority if, among other things: (i) The
proposed participation of each Affiliated Investor and the Company in
such disposition is proportionate to its outstanding investments in the
issuer immediately preceding the disposition or follow-on investment,
as the case may be; and (ii) the Company's Board has approved the
Company's participation in pro rata dispositions and follow-on
investments as being in the best interests of the Company. If the Board
does not so approve, any such disposition or follow-on investment will
be submitted to the Company's Eligible Directors. The Company's Board
may at any time rescind, suspend or qualify its approval of pro rata
dispositions and follow-on investments with the result that all
dispositions and/or follow-on investments must be submitted to the
Eligible Directors.
10. To allow for an independent review of co-investment activities,
condition 4 states that the Board will receive, on a quarterly basis, a
record of all investments made by Affiliated Investors during the
preceding quarter that: (1) Were consistent with the Company's then
current Objectives and Strategies, but (2) were not made available to
the Company. This record will include an explanation of why such
investment opportunities were not offered to the Company. Presently,
KAM's allocation procedures prohibit the Company from participating in
Potential Co-Investment Transactions. As a result, KAM's allocation
system reports investments in which the Company would have been able to
invest but for it not having been granted the requested relief. If the
requested relief is granted, KAM will amend its allocation procedures
to allow the Company to invest in Potential Co-Investment Transactions
in accordance with the conditions below. Applicants represent that
KAM's allocation process is capable of tracking all of the information
required to be delivered to the Board by condition 4 (as described
above), which will be presented to CFA and the Company's Board on a
regular basis.
11. The Company may, from time to time, form a special purpose
subsidiary (a ``Blocker Subsidiary'') (a) whose sole business purpose
is to hold one or more investments on behalf of the Company; (b) that
is wholly-owned by the Company (with the Company at all times holding,
beneficially and of record, 100% of the voting and economic interests);
(c) with respect to which the Company's Board has the sole authority to
make all determinations with respect to the Blocker Subsidiary's
participation under the conditions to this Application; (d) that does
not pay a separate advisory fee, including any performance-based fee,
to any person; and (e) that is an entity that would be an investment
company but for Section 3(c)(1) or 3(c)(7) of the Act. A Blocker
Subsidiary would be prohibited from investing in a Co-Investment
Transaction with any Affiliated Investor because it would be a company
controlled by the Company for purposes of Section 57(a)(4) and rule
17d-1. Applicants request that a Blocker Subsidiary be permitted to
participate in Co-Investment Transactions in lieu of the Company and
that the Blocker Subsidiary's participation in any such transaction be
treated, for purposes of the Order, as though the Company were
participating directly. Applicants represent that this treatment is
justified
[[Page 25493]]
because a Blocker Subsidiary would have no purpose other than serving
as a holding vehicle for the Company's investments and, therefore, no
conflicts of interest could arise between the Company and the Blocker
Subsidiary. The Company's Board would make all relevant determinations
under the conditions with regard to a Blocker Subsidiary's
participation in a Co-Investment Transaction, and the Company's Board
would be informed of, and take into consideration, any proposed use of
a Blocker Subsidiary in the Company's place. If the Company proposes to
participate in the same Co-Investment Transaction with any of its
Blocker Subsidiaries, the Company's Board will also be informed of, and
take into consideration, the relative participation of the Company and
the Blocker Subsidiary.
Applicants' Legal Analysis
1. Section 57(a)(4) of the Act prohibits certain affiliated persons
of a BDC from participating in joint transactions with the BDC (or a
company controlled by such BDC) in contravention of rules as prescribed
by the Commission. Under section 57(b)(2) of the Act, in general, any
person who is directly or indirectly controlling, controlled by, or
under common control with a BDC, is subject to section 57(a)(4).
Section 57(i) of the Act provides that, until the Commission prescribes
rules under section 57(a)(4), the Commission's rules under section
17(d) of the Act applicable to registered closed-end investment
companies will be deemed to apply to transactions subject to section
57(a)(4). Because the Commission has not adopted any rules under
section 57(a)(4), rule 17d-1 applies.
2. Rule 17d-1 under the Act prohibits affiliated persons of a
registered investment company from participating in joint transactions
with the company unless the Commission has granted an order permitting
such transactions. In passing upon applications under rule 17d-1, the
Commission considers whether the company's participation in the joint
transaction is consistent with the provisions, policies, and purposes
of the Act and the extent to which such participation is on a basis
different from or less advantageous than that of other participants.
3. Applicants submit that KAM and any Affiliated Investors that it
advises could be deemed to be persons related to the Company in a
manner described by section 57(b) and therefore prohibited by section
57(a)(4) and rule 17d-1 from participating in the Co-Investment
Program. In addition, because other KKR Affiliated Advisers are
``affiliated persons'' of KAM, Affiliated Investors advised by any of
them could be deemed to be persons related to the Company (or a company
controlled by the Company) in a manner described by section 57(b) and
also prohibited from participating in the Co-Investment Program.
Finally, because KKR Proprietary Accounts are under common control with
KAM and, therefore, are ``affiliated persons'' of KAM, KKR Proprietary
Accounts could be deemed to be persons related to the Company (or a
company controlled by the Company) in a manner described by Section
57(b) and also prohibited from participating in the Co-Investment
Program.
4. Applicants state that they expect that co-investment in
portfolio companies by the Company and the Affiliated Investors will
increase the number of favorable investment opportunities for the
Company and that the Co-Investment Program will be implemented only if
the Required Majority approves it on the basis that it would be
advantageous to the Company.
5. Applicants submit that the Required Majority's approval of each
Co-Investment Transaction before investment, and other protective
conditions set forth in the application, will ensure that the Company
will be treated fairly. Applicants state that the Company's
participation in the Co-Investment Transactions will be consistent with
the provisions, policies and purposes of the Act and on a basis that is
not different from or less advantageous than that of other
participants. Applicants further state that the terms and conditions of
the application will ensure that all such transactions are reasonable
and fair to the Company and the Affiliated Investors and do not involve
overreaching by any person concerned, including CFA or KAM.
6. Applicants acknowledge that some of the Affiliated Investors may
not be funds advised by KAM or an affiliate because they are KKR
Proprietary Accounts (i.e., a KCM Company investing in a principal
capacity). Applicants further acknowledge that previously ordered
exemptive applications seeking similar co-investment relief have been
limited to co-investment transactions between a BDC and its affiliated
funds only. However, applicants do not believe these KKR Proprietary
Accounts should raise issues under the conditions of the application
because, consistent with condition 14, KKR's and KAM's allocation
policies and procedures provide that investment opportunities are
offered to client accounts before they are offered to KKR Proprietary
Accounts.
Applicants' Conditions
Applicants agree that any Order granting the requested relief will
be subject to the following conditions:
1. Each time KAM or an adviser to any Affiliated Investor considers
a Potential Co-Investment Transaction for an Affiliated Investor that
falls within the Company's then-current Objectives and Strategies,\7\
the Advisers will make an independent determination of the
appropriateness of the investment for the Company in light of the
Company's then-current circumstances.
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\7\ ``Objectives and Strategies'' means the Company's investment
objectives and strategies, as described in the Company's
registration statement on Form N-2, other filings the Company has
made with the Commission under the Securities Act of 1933, as
amended (the ``1933 Act''), or under the Securities and Exchange Act
of 1934, as amended, and the Company's reports to shareholders.
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2. a. If the Advisers deem the Company's participation in any
Potential Co-Investment Transaction to be appropriate for the Company,
the Advisers will then determine an appropriate level of investment for
the Company.
b. If the aggregate amount recommended by the Advisers to be
invested in the Potential Co-Investment Transaction by the Company,
together with the amount proposed to be invested by the Affiliated
Investors, collectively, in the same transaction, exceeds the amount of
the investment opportunity, the amount of the investment opportunity
will be allocated among the Company and such Affiliated Investors, pro
rata based on the ratio of the Company's capital available for
investment in the asset class being allocated, on the one hand, and the
Affiliated Investors' capital available for investment in the asset
class being allocated, on the other hand, to the aggregated capital
available for investment for the asset class being allocated of all
parties involved in the investment opportunity, up to the amount
proposed to be invested by each. The Advisers will provide the Eligible
Directors with information concerning each party's available capital to
assist the Eligible Directors with their review of the Company's
investments for compliance with these allocation procedures.
c. After making the determinations required in conditions 1 and
2(a) above, the Advisers will distribute written information concerning
the Potential Co-Investment Transaction, including the amount proposed
to be invested by the Company and any Affiliated
[[Page 25494]]
Investor to the Eligible Directors for their consideration. The Company
will co-invest with an Affiliated Investor only if, prior to the
Company's and the Affiliated Investors' participation in the Potential
Co-Investment Transaction, a Required Majority of the Eligible
Directors concludes that:
(i) the terms of the Potential Co-Investment Transaction, including
the consideration to be paid, are reasonable and fair and do not
involve overreaching in respect of the Company or its shareholders on
the part of any person concerned;
(ii) the Potential Co-Investment Transaction is consistent with:
(a) the interests of the Company's shareholders; and
(b) the Company's then-current Objectives and Strategies;
(iii) the investment by an Affiliated Investor would not
disadvantage the Company, and participation by the Company is not on a
basis different from or less advantageous than that of any Affiliated
Investor; provided, that if an Affiliated Investor, but not the
Company, gains the right to nominate a director for election to a
portfolio company's board of directors or the right to have a board
observer, or any similar right to participate in the governance or
management of the portfolio company, such event shall not be
interpreted to prohibit a Required Majority of the Eligible Directors
from reaching the conclusions required by this condition 2(c)(iii), if:
(a) the Eligible Directors will have the right to ratify the
selection of such director or board observer, if any; and
(b) the Advisers agree to, and do, provide periodic reports to the
Company's Board with respect to the actions of such director or the
information received by such board observer or obtained through the
exercise of any similar right to participate in the governance or
management of the portfolio company; and
(c) any fees or other compensation that any Affiliated Investor or
any affiliated person of an Affiliated Investor receives in connection
with the right of the Affiliated Investor to nominate a director or
appoint a board observer or otherwise to participate in the governance
or management of the portfolio company will be shared proportionately
among the participating Affiliated Investors (who may, in turn, share
their portion with their affiliated persons) and the Company in
accordance with the amount of each party's investment; and
(iv) the proposed investment by the Company will not benefit the
Advisers or the Affiliated Investors or any affiliated person of either
of them (other than the parties to the Co-Investment Transaction),
except (A) to the extent permitted by condition 13, (B) to the extent
permitted under Sections 17(e) and 57(k) of the Act, as applicable, (C)
in the case of fees or other compensation described in condition
2(c)(iii)(c), or (D) indirectly, as a result of an interest in the
securities issued by one of the parties to the Co-Investment
Transaction.
3. The Company will have the right to decline to participate in any
Potential Co-Investment Transaction or to invest less than the amount
proposed.
4. The Advisers will present to the Board, on a quarterly basis, a
record of all investments made by the Affiliated Investors during the
preceding quarter that fell within the Company's then-current
Objectives and Strategies that were not made available to the Company,
and an explanation of why the investment opportunities were not offered
to the Company. All information presented to the Board pursuant to this
condition will be kept for the life of the Company and at least two
years thereafter, and will be subject to examination by the Commission
and its staff.
5. Except for follow-on investments made in accordance with
condition 8, the Company will not invest in reliance on the Order in
any issuer in which an Affiliated Investor or any affiliated person of
an Affiliated Investor is an existing investor.
6. The Company will not participate in any Potential Co-Investment
Transaction unless the terms, conditions, price, class of securities to
be purchased, settlement date, and registration rights will be the same
for the Company as for any Affiliated Investor. The grant to an
Affiliated Investor, but not the Company, of the right to nominate a
director for election to a portfolio company's board of directors, the
right to have an observer on the board of directors or similar rights
to participate in the governance or management of the portfolio company
will not be interpreted so as to violate this condition 6, if
conditions 2(c)(iii)(a), (b) and (c) are met.
7. a. If any Affiliated Investor elects to sell, exchange or
otherwise dispose of an interest in a security that was acquired by the
Company and any of the Affiliated Investors in a Co-Investment
Transaction, the Advisers will:
(i) notify the Company of the proposed disposition at the earliest
practical time; and
(ii) formulate a recommendation as to participation by the Company
in the disposition.
b. The Company will have the right to participate in such
disposition on a proportionate basis, at the same price and on the same
terms and conditions as those applicable to the Affiliated Investors.
c. The Company may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of the Company and each Affiliated Investor in such
disposition is proportionate to its outstanding investments in the
issuer immediately preceding the disposition; (ii) the Company's Board
has approved as being in the best interests of the Company the ability
to participate in such dispositions on a pro rata basis (as described
in greater detail in this Application); and (iii) the Company's Board
is provided on a quarterly basis with a list of all dispositions made
in accordance with this condition. In all other cases, the Advisers
will provide their written recommendation as to the Company's
participation to the Eligible Directors, and the Company will
participate in such disposition solely to the extent that a Required
Majority determines that it is in the Company's best interests.
d. The Company and each of the Affiliated Investors will bear its
own expenses in connection with the disposition.
8. a. If any Affiliated Investor desires to make a ``follow-on
investment'' (i.e., an additional investment in the same entity,
including through the exercise of warrants or other rights to purchase
securities of the issuer) in a portfolio company whose securities were
acquired by the Company and any of the Affiliated Investors in a Co-
Investment Transaction, the Advisers will:
(i) notify the Company of the proposed transaction at the earliest
practical time; and
(ii) formulate a recommendation as to the proposed participation,
including the amount of the proposed follow-on investment, by the
Company.
b. The Company may participate in such follow-on investment without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of the Company and each Affiliated Investor in such
investment is proportionate to its outstanding investments in the
issuer immediately preceding the follow-on investment; (ii) the
Company's Board has approved as being in the best interests of the
Company the ability to participate in follow-on investments on a pro
rata basis (as described in greater detail in
[[Page 25495]]
this Application); and (iii) the Company's Board is provided on a
quarterly basis with a list of all follow-on investments made in
accordance with this condition. In all other cases, the Advisers will
provide their written recommendation as to the Company's participation
to the Eligible Directors, and the Company will participate in such
follow-on investment solely to the extent that a Required Majority
determines that it is in the Company's best interests.
c. If, with respect to any follow-on investment:
(i) the amount of a follow-on investment is not based on the
Company's and the Affiliated Investors' outstanding investments
immediately preceding the follow-on investment; and
(ii) the aggregate amount recommended by the Advisers to be
invested by the Company in the follow-on investment, together with the
amount proposed to be invested by the Affiliated Investors in the same
transaction, exceeds the amount of the opportunity; then the amount
invested by each such party will be allocated among them pro rata based
on the ratio of the Company's capital available for investment in the
asset class being allocated, on the one hand, and the Affiliated
Investors' capital available for investment in the asset class being
allocated, on the other hand, to the aggregated capital available for
investment for the asset class being allocated of all parties involved
in the investment opportunity, up to the amount proposed to be invested
by each.
d. The acquisition of follow-on investments as permitted by this
condition will be considered a Co-Investment Transaction for all
purposes and subject to the other conditions set forth in the
Application.
9. The Independent Directors will be provided quarterly for review
all information concerning Potential Co-Investment Transactions and Co-
Investment Transactions, including investments made by the Affiliated
Investors that the Company considered but declined to participate in,
so that the Independent Directors may determine whether all investments
made during the preceding quarter, including those investments which
the Company considered but declined to participate in, comply with the
conditions of the Order. In addition, the Independent Directors will
consider at least annually the continued appropriateness for the
Company of participating in new and existing Co-Investment
Transactions.
10. The Company will maintain the records required by section
57(f)(3) of the Act as if each of the investments permitted under these
conditions were approved by a Required Majority of the Eligible
Directors under section 57(f).
11. No Independent Director will also be a director, general
partner, managing member or principal, or otherwise an ``affiliated
person'' (as defined in the Act) of any Affiliated Investor.
12. The expenses, if any, associated with acquiring, holding or
disposing of any securities acquired in a Co-Investment Transaction
(including, without limitation, the expenses of the distribution of any
such securities registered for sale under the 1933 Act) shall, to the
extent not payable by the Advisers under the Company's and the
Affiliated Investors' investment advisory agreements, be shared by the
Company and the Affiliated Investors in proportion to the relative
amounts of their securities to be acquired or disposed of, as the case
may be.
13. Any transaction fee (including break-up or commitment fees but
excluding broker's fees contemplated by section 17(e) or 57(k) of the
Act, as applicable) received in connection with a Co-Investment
Transaction will be distributed to the Company and Affiliated Investors
on a pro rata basis based on the amount they invested or committed, as
the case may be, in such Co-Investment Transaction. If any transaction
fee is to be held by an Adviser pending consummation of the
transaction, the fee will be deposited into an account maintained by
the Adviser at a bank or banks having the qualifications prescribed in
section 26(a)(1) of the Act, and the account will earn a competitive
rate of interest that will also be divided pro rata among the Company
and the Affiliated Investors based on the amount they invest in the Co-
Investment Transaction. None of the Affiliated Investors, the Advisers
nor any affiliated person of the Company will receive additional
compensation or remuneration of any kind as a result of or in
connection with a Co-Investment Transaction (other than (a) in the case
of the Company and the Affiliated Investors, the pro rata transaction
fees described above and fees or other compensation described in
condition 2(c)(iii)(c) and (b) in the case of the Advisers, investment
advisory fees paid in accordance with the Company's and the Affiliated
Investors' investment advisory agreements).
14. The KKR Proprietary Accounts will not be permitted to invest in
a Potential Co-Investment Transaction except to the extent the demand
from the Company and the other Affiliated Investors is less than the
total investment opportunity.
15. The Advisers and the advisers to the Affiliated Investors will
maintain written policies and procedures reasonably designed to ensure
compliance with the foregoing conditions. These policies and procedures
will require, among other things, that each of KAM and CFA will be
notified of all Potential Co-Investment Transactions that fall within
the Company's then-current Objectives and Strategies and will be given
sufficient information to make its independent determination and
recommendations under conditions 1, 2(a), 7 and 8.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-10238 Filed 4-30-13; 8:45 am]
BILLING CODE 8011-01-P
