Tennenbaum Opportunities Fund V, LLC, et al.; Notice of Application, 63654-63657 [2014-25302]
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63654
Federal Register / Vol. 79, No. 206 / Friday, October 24, 2014 / Notices
ESTIMATE OF ANNUAL RESPONDENT BURDEN—Continued
Annual
responses
Form No.
Time
(minutes)
Burden
(hours)
RL–11D ........................................................................................................................................
RL–250 ........................................................................................................................................
250
11,950
10
10
42
1,992
Total ......................................................................................................................................
35,900
........................
10,001
Additional Information or Comments:
To request more information or to
obtain a copy of the information
collection justification, forms, and/or
supporting material, contact Dana
Hickman at (312) 751–4981 or
Dana.Hickman@RRB.GOV. Comments
regarding the information collection
should be addressed to Charles
Mierzwa, Railroad Retirement Board,
844 North Rush Street, Chicago, Illinois
60611–2092 or emailed to
Charles.Mierzwa@RRB.GOV. Written
comments should be received within 60
days of this notice.
Charles Mierzwa,
Chief of Information Resources Management.
[FR Doc. 2014–25312 Filed 10–23–14; 8:45 am]
BILLING CODE 7905–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
31296; File No. 812–14296]
Tennenbaum Opportunities Fund V,
LLC, et al.; Notice of Application
October 20, 2014.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order pursuant to sections 6(c), 17(b),
and 57(c) of the Investment Company
Act of 1940 (the ‘‘Act’’) for an
exemption from sections 17(a) and 57(a)
of the Act permitting certain
transactions.
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AGENCY:
SUMMARY OF THE APPLICATION:
Applicants request a time-limited
exemptive order (the ‘‘Order’’) that
would permit applicant investment
companies registered under the Act to
sell certain assets to applicant business
development companies (‘‘BDCs’’) that
share a common investment adviser in
transactions that would otherwise be
prohibited by sections 17(a)(2) and
57(a)(1) of the Act.
APPLICANTS: Tennenbaum Opportunities
Fund V, LLC (‘‘TOF’’); Tennenbaum
Opportunities Partners V, LP (‘‘TOP,’’
and, together with TOF, the ‘‘Registered
Fund’’); TCP Capital Corp. (‘‘TCPC’’);
Special Value Continuation Partners, LP
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(‘‘SVCP,’’ and, together with TCPC, the
‘‘BDC Applicant’’); and Tennenbaum
Capital Partners, LLC (the ‘‘Manager’’)
(collectively, the ‘‘Applicants’’).
The application was filed
on April 2, 2014, and amended on May
16, 2014, June 9, 2014, July 11, 2014,
August 8, 2014, October 14, 2014, and
October 17, 2014.
FILING DATES:
An
order granting the application 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 November 14, 2014, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to Rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, 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.
HEARING OR NOTIFICATION OF HEARING:
The Commission: Brent J.
Fields, Secretary, U.S. Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–1090.
Applicants: Howard M. Levkowitz, c/o
Tennenbaum Capital Partners, LLC,
2951 28th Street, Suite 1000, Santa
Monica, CA 90405.
ADDRESSES:
Anil
K. Abraham, Senior Special Counsel, at
(202) 551–2614, or Daniele Marchesani,
Branch Chief, at (202) 551–6821
(Division of Investment Management,
Chief Counsel’s Office).
FOR FURTHER INFORMATION CONTACT:
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 an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
SUPPLEMENTARY INFORMATION:
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Applicants’ Representations
1. TOF is a limited liability company
organized in Delaware and registered
under the Act as a non-diversified
closed-end management investment
company. TOP is a limited partnership
organized in Delaware and registered
under the Act as a non-diversified
closed-end management investment
company. TOF invests substantially all
of its assets in, and operates through,
TOP. All of TOP’s common limited
partner interests are owned by TOF.
TOP also has preferred limited partner
interests and debt outstanding.
2. TCPC is a Delaware corporation
and a non-diversified closed-end
management investment company that
has elected to be regulated as a BDC
under the Act.1 TCPC’s common shares
trade on the NASDAQ Global Select
Market. SVCP is a Delaware limited
partnership and a non-diversified
closed-end management investment
company that also has elected to be
regulated as a BDC under the Act. TCPC
invests substantially all of its assets in,
and operates through, SVCP. All of
SVCP’s common limited partner
interests are owned by TCPC. SVCP also
has issued preferred limited partner
interests under its leverage program to
the same institutions that acquired its
debt.
3. The Manager is a Delaware limited
liability company registered as an
investment adviser under the
Investment Advisers Act of 1940
(‘‘Advisers Act’’). The Manager serves as
investment adviser both to the
Registered Fund and the BDC Applicant
(each, a ‘‘Fund,’’ and, collectively, the
‘‘Funds’’) and manages both Funds in
accordance with their respective
investment objectives and strategies.
Each Fund is governed by a board of
directors (‘‘Board’’).
4. The Registered Fund seeks to
achieve high total returns while
minimizing losses and invests in high
yielding debt, distressed debt, equity
1 Section 2(a)(48) of the Act 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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securities and mezzanine investments of
all kinds (the Registered Fund’s
investment objectives, strategies, and
limitations, as stated in its registration
statement and periodic shareholder
reports, are the ‘‘Registered Fund
Objectives and Strategies’’). The BDC
Applicant’s investment objective is to
achieve high total returns through
current income and capital
appreciation, with an emphasis on
principal protection. It seeks to achieve
this investment objective primarily
through investments in debt securities
of middle-market companies, and its
primary investment focus is investing in
and originating leveraged loans to
performing middle-market companies
(the BDC Applicant’s investment
objectives, strategies, and limitations, as
stated in its registration statement and
periodic shareholder reports, are the
‘‘BDC Applicant Objectives and
Strategies’’).
5. The BDC Applicant expects to
continue to grow as attractive
investment opportunities arise and as
additional capital becomes available on
attractive terms. However, both TOF
and TOP are scheduled to terminate
their existence in October 2016. TOF
may extend its existence for up to two
one-year extensions if requested by the
Manager and approved by the holders of
a majority of its common shares, and
TOP may do so if requested by the
Manager and approved by the holders of
a majority of its common and preferred
limited partner interests.
6. The Registered Fund is considering
how best to conduct its remaining
operations and plan for the unwinding
of its leverage and its scheduled
termination, including the disposition
of its portfolio assets. The Applicants
seek the requested relief to permit the
Registered Fund to sell to the BDC
Applicant certain portfolio assets that
are consistent with the BDC Applicant
Objectives and Strategies.2
7. As of September 30, 2014, the
Registered Fund’s portfolio included 52
assets with a fair value of $460,735,948
that were consistent with the BDC
Applicant Objectives and Strategies
(‘‘Eligible Assets’’). As of that date, the
Eligible Assets were composed of: (1)
$289.1 million of floating rate fully
performing commercial loans; (2) $127.5
million of fixed rate fully performing
2 The Registered Fund and the BDC Applicant
have co-invested in various Eligible Assets (defined
below) in reliance on a prior Commission order
pursuant to rule 17d–1 under the Act (the ‘‘CoInvestment Order’’) permitting certain joint
transactions among themselves and certain other
entities. Special Value Opportunities Fund, LLC, et
al., Investment Company Act Release Nos. IC–27287
(April 11, 2006) (notice) and 27316 (May 9, 2006)
(order).
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commercial debt maturing between
2015 and 2021; (3) $12.8 million in
equity received in connection with the
foregoing debt investments; and (4)
$31.3 million in aircraft mortgage and
lease interests.3
8. Any follow-on investments in the
securities of issuers of Eligible Assets
owned by the Registered Fund that may
be made subsequent to the issuance of
the requested Order (‘‘follow-on
investments’’) also would be considered
Eligible Assets for purposes of the
requested relief. The Applicants
represent that the Registered Fund
might undertake such follow-on
investments to protect or enhance
existing investments by, for example,
enhancing the Registered Fund’s legal
rights in a bankruptcy of the issuer.
9. Subject to the terms and conditions
of the Order, the Registered Fund would
seek to sell to the BDC Applicant all of
the Eligible Assets owned by the
Registered Fund prior to the expiration
of the requested Order. The only
Eligible Assets held by the Registered
Fund that would not be sold to the BDC
Applicant would be those that are sold
in Bona Fide Third-Party Transactions
to a third party pursuant to Conditions
3 and 4 below, those that do not satisfy
the Conditions below, and those that the
Manager believes would not be
appropriate for the BDC Applicant to
acquire based on investment
considerations, such as concerns about
credit quality or overconcentration in a
particular industry sector.
10. The Manager’s determination to
sell any particular Eligible Asset of the
Registered Fund to the BDC Applicant
would be required to be approved by a
‘‘Required Majority’’ 4 of the Board of
each Fund.5 The Applicants note that
there is no overlap among the directors
of the Registered Fund and the BDC
Applicant who are not ‘‘interested
persons,’’ as defined in section 2(a)(19)
of the Act, of their respective Funds
(‘‘Independent Directors’’), so that both
sets of Independent Directors would
have no conflict of interest in reviewing
and determining whether to approve
each Proposed Transaction (defined
below) undertaken in reliance on the
3 All of the Eligible Assets are securities under the
Act except for the aircraft lease interests, which, as
of September 30, 2014, comprised approximately
7% of the value of the Eligible Assets.
4 In the case of the Registered Fund, the Board
members that make up the Required Majority will
be determined as if the Registered Fund were a BDC
subject to section 57(o) of the Act.
5 In approving any Proposed Transaction, as
defined below, the Required Majority of each Fund
will be required specifically to consider the effect
that such transaction, and the Proposed
Transactions taken together, would have on the
investment advisory fees paid by the relevant Fund.
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requested relief. The Eligible Assets that
the Manager determines to sell from the
Registered Fund to the BDC Applicant,
that satisfy the Conditions below, and
that are approved for such sale by a
Required Majority of each Fund are
referred to hereinafter as the
‘‘Qualifying Assets,’’ and the proposed
sales of the Qualifying Assets by the
Registered Fund to the BDC Applicant
are referred to hereinafter as the
‘‘Proposed Transactions.’’
11. The Applicants believe that the
Proposed Transactions would be in the
best interests of both Funds. The
Registered Fund earns income on those
assets that may be Qualifying Assets at
a rate in excess of the expense
associated with its outstanding debt and
preferred stock, and in excess of the rate
at which it expects it could prudently
reinvest the proceeds of a sale of
Qualifying Assets, in light of its
scheduled termination. As a result, the
Applicants believe that it would be
beneficial to the Registered Fund and its
shareholders to own its assets, including
Qualifying Assets, for as long as
practicable before needing to sell them
in order to repay its debt and wind
down its operations. The Applicants
believe that having a known potential
buyer—the BDC Applicant—for
substantially all of the Eligible Assets
would permit the Registered Fund to
hold and earn a favorable return on such
assets for a longer period of time than
if the requested relief was not granted.
Additionally, a sale of such assets
directly from the Registered Fund to the
BDC Applicant would permit the
Registered Fund to conduct the
transactions without paying
intermediary compensation, such as a
sales commission or a known spread.
12. The Applicants also believe that
the BDC Applicant’s acquisition of the
Qualifying Assets directly from the
Registered Fund would be in the best
interests of the BDC Applicant and its
shareholders. The Manager believes that
the Proposed Transactions would
benefit the BDC Applicant and its
shareholders because the BDC
Applicant is growing, is familiar with
the assets held in the Registered Fund’s
portfolio,6 would have an interest in
acquiring all or a portion of the
Registered Fund’s Eligible Assets, and
could do so without paying any
commission or spread.
13. As of September 30, 2014,
approximately 97.8% by value of the
Eligible Assets were owned by both
Funds and were valued identically.
Each of the Funds employs the same
valuation methods, policies, and
6 See
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procedures, which have been reviewed
and approved by each Fund’s Board.7
Each Fund’s Independent Directors
review and approve the valuations
quarterly.
14. Before selling a Qualifying Asset
to the BDC Applicant in reliance on the
requested relief, the Registered Fund
would establish a bona fide market price
by selling an institutional-sized portion
of the Qualifying Asset, as prescribed in
Conditions 3 and 6 below, to an
independent third-party buyer at arm’slength. Such third-party transactions are
defined in the application as ‘‘Bona Fide
Third-Party Transactions.’’ Applicants
will be able to enter into a Proposed
Transaction in reliance on the requested
Order only if the price of the related
Bona Fide Third-Party Transaction falls
within a certain range above or below
the Registered Fund’s valuation of the
relevant Qualifying Asset, as described
in Condition 4.8 In such cases, the BDC
Applicant would contemporaneously
pay the same price in the Proposed
Transaction for the balance of the asset
held by the Registered Fund (less any
intermediary compensation, such as a
sales commission or known spread, paid
by the Registered Fund on the Bona
Fide Third-Party Transaction).
15. Finally, the Manager would be
required to represent to the Independent
Directors of each Fund that it has no
reason to believe that the sale price of
the Qualifying Asset in each Bona Fide
Third-Party Transaction does not
reasonably approximate (on a pro rata
basis) the sale price of such Qualifying
Asset—had the Registered Fund’s entire
interest been sold—and that, in the
Manager’s judgment, the Proposed
Transaction would not preclude the
BDC Applicant from acquiring an asset
more beneficial to its shareholders’
interests.
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Applicants’ Legal Analysis
1. The Applicants request an Order
under sections 6(c), 17(b), and 57(c) of
the Act granting them exemptive relief
from sections 17(a) and 57(a) of the Act
in order to permit the Registered Fund
to sell to the BDC Applicant the
Qualifying Assets.
2. Section 17(a)(2) of the Act generally
prohibits an affiliated person of a
registered investment company, acting
as principal, from purchasing from such
7 The Funds’ valuation policies and procedures
differ with respect to the procedures to obtain
approvals from their respective Boards, but those
differences are immaterial for purposes of the
requested relief.
8 As described in the application, the Applicants
proposed the ranges specified in Condition 4 below
based on the results of forensic testing that
compared the sale prices of assets to their most
recent valuations over a period of several years.
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company any security or other property.
Section 2(a)(3)(C) of the Act defines an
‘‘affiliated person’’ of another person to
include any person directly or indirectly
controlling, controlled by, or under
common control with, the other person.
Section 57(a)(1) of the Act generally
prohibits a person related to the BDC in
a manner described in section 57(b)
from selling any security or other
property to such BDC. Section 57(b)
includes, among others, any person
directly or indirectly controlling,
controlled by, or under common control
with the BDC. By virtue of being under
the common control of the Manager or
common executive officers, the BDC
Applicant could be viewed as an
affiliated person of the Registered Fund
within the meaning of section 2(a)(3)(C),
and the Registered Fund could be
viewed as a person related to the BDC
Applicant within the meaning of section
57(b). Consequently, section 17(a)(2)
would prohibit the BDC Applicant from
purchasing the Qualifying Assets from
the Registered Fund, and section
57(a)(1) would prohibit the Registered
Fund from selling the Qualifying Assets
to the BDC Applicant.
3. Sections 17(b) and 57(c) of the Act
authorize the Commission upon
application to exempt a transaction from
the prohibitions of sections 17(a)(2) and
57(a)(1), respectively, if the evidence
establishes that (1) the terms of the
proposed transaction, including the
consideration to be paid or received, are
reasonable and fair and do not involve
overreaching on the part of any person
concerned; (2) the proposed transaction
is consistent with the policy of each
registered investment company or
business development company
involved; and (3) the proposed
transaction is consistent with the
general purposes of the Act. Section 6(c)
authorizes the Commission upon
application to conditionally or
unconditionally exempt any person or
transaction or any class or classes of
persons or transactions from any
provision or provisions of the Act or of
any rule or regulation thereunder, if and
to the extent that such exemption is
necessary or appropriate in the public
interest and consistent with the
protection of investors and the purposes
fairly intended by the policy and
provisions of the Act.
4. Applicants state that the Proposed
Transactions satisfy the standards of
sections 6(c), 17(b), and 57(c) of the Act.
Applicants believe that the proposed
safeguards described in the application
provide a basis for the Commission to
conclude that the Proposed
Transactions will satisfy such standards.
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5. The Applicants believe the terms of
the Proposed Transactions would
benefit both Funds and are in the best
interests of their respective
shareholders. The Applicants also
believe that the fact that the Proposed
Transactions would involve
substantially all of the Eligible Assets
held by the Registered Fund would
serve to reduce any potential for
overreaching. The Applicants further
point to the fact that both Funds already
own many of the same Eligible Assets
and have the same valuation methods,
policies, and procedures, which have
been approved by each Fund’s Board.9
6. The Applicants also state that,
before selling any Qualifying Assets to
the BDC Applicant in reliance on the
requested Order, the Registered Fund
would be required to establish a bona
fide market price for the Qualifying
Asset by executing a Bona Fide ThirdParty Transaction in that asset, as
prescribed in Conditions 3 and 6
below.10 The price for such Bona Fide
Third-Party Transaction would be
required to fall within a certain range
above or below the Registered Fund’s
valuation of the relevant Qualifying
Asset, as described in Condition 4
below, in order for a Proposed
Transaction to occur in reliance on the
requested Order. The Applicants believe
that these price range constraints will
help to ensure that the sale is fair and
approximates the appropriate price of
each Qualifying Asset, while
recognizing that it is unlikely that the
sale price of each Qualifying Asset will
be exactly the same as the value
assigned by the Registered Fund to such
Qualifying Asset.
7. Finally, the Proposed Transactions
will be presented to the Required
Majority of each Fund and must be
approved by such Required Majority in
order to be consummated. The Required
Majority of each Fund will be required
specifically to consider the effect that
each such transaction, and such
transactions taken together, would have
9 See
note 7, supra.
Applicants note that the asset sale amounts
set forth in Condition 3 below seek to balance the
interest of the Funds in transacting with each other
for as much of the Qualifying Assets as possible
against the interest of ensuring that the Bona Fide
Third-Party Transactions are executed at a genuine
and current market price. The Applicants believe
that the Bona Fide Third-Party Transactions would
achieve an appropriate balance by providing for a
sale of a portion of the Qualifying Asset in an
amount approximating what the Manager believes
is, for this type of asset, a bid size that will attract
sufficient attention from the institutional debt
market. The Manager believes that the dollar and
percentage amounts set forth in Condition 3 below
will result in the sale of a sufficiently large amount
of each Qualifying Asset to obtain a representative
market price for the asset.
10 The
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on the investment advisory fees paid by
the relevant Fund.
Applicants’ Conditions
Applicants agree that the Order
granting the requested relief will be
subject to the following Conditions:
1. The Registered Fund will sell to the
BDC Applicant, prior to the expiration
of the requested Order, all of the
Qualifying Assets owned by the
Registered Fund. In approving any
Proposed Transaction under the
requested Order, the Required Majority
of each Fund will be required
specifically to consider the effect that
such transaction, and the Proposed
Transactions taken together, would have
on the investment advisory fees paid by
the relevant Fund. If any Eligible Assets
are acquired in follow-on investments
made after the date the Order was
granted, the Manager will document
contemporaneously why it believes each
follow-on investment helps protect the
assets previously owned by the
Registered Fund to which the follow-on
investment relates.
2. Each of the Eligible Assets shall
have been subject to periodic valuation
in accordance with methods adopted
and reviewed at least annually by the
independent directors, as defined in
section 2(a)(19) of the 1940 Act, of each
Fund in accordance with rule 38a–1
under the 1940 Act.
3. The Registered Fund shall have
sold in Bona Fide Third-Party
Transactions subject to broad market
exposure or competitive bidding to
independent third-party buyers (none of
whom are the issuer of the respective
asset to the knowledge of the Applicants
or are affiliated persons of the
Applicants under the 1940 Act) (i) for
each Qualifying Asset valued at greater
than $10 million, at least the greater of
(A) 10% of the holdings by the
Registered Fund of each Qualifying
Asset or (B) $5,000,000 in proceeds of
such Qualifying Asset or (ii) for each
Qualifying Asset valued at $10,000,000
or less, at least 30% of the holdings by
the Registered Fund of each Qualifying
Asset.
4. In any transaction between the
Funds under the requested Order, (i) the
trade date for sale to the BDC Applicant
shall be the same as the trade date for
the independent sale of a portion of the
Qualifying Asset under Condition 3, (ii)
the transaction price shall be such
independent sale price less any
intermediary compensation, such as a
sales commission or known spread, paid
by the Registered Fund in the open
market sale, (iii) 66.7%, or two-thirds, of
the transactions will have a sale price
within 1.5% of the fair value most
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recently assigned by the Registered
Fund pursuant to its valuation methods,
policies, and procedures, and 100% of
the transactions will have a sale price in
the market within 2.5% of the fair value
most recently assigned by the Registered
Fund pursuant to its valuation methods,
policies, and procedures (iv) the
Manager shall represent to the
Independent Directors of the Registered
Fund and the BDC Applicant that it has
no reason to believe that the sale price
received by the Registered Fund
pursuant to Condition 3 above does not
reasonably approximate (on a pro rata
basis) the sale price that would have
been received by the Registered Fund
had the Registered Fund’s entire interest
been sold in such transaction and that,
in the Manager’s judgment, the
Proposed Transaction between the
Funds would not, at the time of such
transaction, preclude the BDC Applicant
from acquiring an asset more beneficial
to its shareholders’ interests, and (v) the
price shall be payable in cash at
settlement.
5. Any transaction under the
requested Order involving Eligible
Assets jointly owned under the CoInvestment Order (including a decision
not to include an Eligible Asset as a
Qualifying Asset) shall comply with the
terms and conditions of the CoInvestment Order, as applicable.
6. No Proposed Transaction or Bona
Fide Third-Party Transaction shall
involve any consideration other than
cash payment against prompt delivery
of Qualifying Assets. No brokerage
commission, fee, or other remuneration
shall be paid in connection with any
Proposed Transaction. A Bona Fide
Third-Party Transaction may include
customary transaction expenses paid to
persons who are not affiliated persons of
the Applicants, but no Bona Fide ThirdParty Transaction will involve any
arrangement, understanding, or any
direct or indirect quid pro quo that goes
beyond the market terms of such
transaction. No Bona Fide Third-Party
Transaction shall involve any
arrangement or understanding directed
at facilitating the Applicants’ reliance
on the requested Order. For any Bona
Fide Third-Party Transaction, the
Registered Fund will not knowingly sell
any Qualifying Asset to the issuer of
such asset. The Applicants will not
attempt to circumvent the above
restrictions by entering into any
arrangements or understandings that are
economically similar to the ones
proscribed by the above restrictions.
7. The Registered Fund and the BDC
Applicant shall maintain records
demonstrating satisfaction of each of the
foregoing Conditions in the manner and
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63657
for the periods set forth in rule 17a–7(g)
under the 1940 Act.
8. The requested Order, if granted,
shall expire upon the earlier of the date
of termination of TOF or October 10,
2018.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–25302 Filed 10–23–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73391; File No. SR–FICC–
2014–07]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Notice of
Filing of Proposed Rule Change To
Amend the Clearing Rules of the
Mortgage-Backed Securities Division
To Establish a Membership Category
and Minimum Financial Requirements
for Insured Credit Unions
October 20, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
15, 2014, Fixed Income Clearing
Corporation (‘‘FICC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by FICC. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The purpose of this filing is to amend
the Clearing Rules (the ‘‘Rules’’) of the
Mortgage-Backed Securities Division
(‘‘MBSD’’) of FICC in order to establish
a membership category and financial
minimum requirements for insured
credit unions.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission,
FICC included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
1 15
2 17
E:\FR\FM\24OCN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
24OCN1
]]>Agencies
[Federal Register Volume 79, Number 206 (Friday, October 24, 2014)]
[Notices]
[Pages 63654-63657]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-25302]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31296; File No. 812-14296]
Tennenbaum Opportunities Fund V, LLC, et al.; Notice of
Application
October 20, 2014.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order pursuant to sections
6(c), 17(b), and 57(c) of the Investment Company Act of 1940 (the
``Act'') for an exemption from sections 17(a) and 57(a) of the Act
permitting certain transactions.
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Summary of the Application: Applicants request a time-limited exemptive
order (the ``Order'') that would permit applicant investment companies
registered under the Act to sell certain assets to applicant business
development companies (``BDCs'') that share a common investment adviser
in transactions that would otherwise be prohibited by sections 17(a)(2)
and 57(a)(1) of the Act.
Applicants: Tennenbaum Opportunities Fund V, LLC (``TOF''); Tennenbaum
Opportunities Partners V, LP (``TOP,'' and, together with TOF, the
``Registered Fund''); TCP Capital Corp. (``TCPC''); Special Value
Continuation Partners, LP (``SVCP,'' and, together with TCPC, the ``BDC
Applicant''); and Tennenbaum Capital Partners, LLC (the ``Manager'')
(collectively, the ``Applicants'').
Filing Dates: The application was filed on April 2, 2014, and amended
on May 16, 2014, June 9, 2014, July 11, 2014, August 8, 2014, October
14, 2014, and October 17, 2014.
Hearing or Notification of Hearing: An order granting the application
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 November 14, 2014, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to Rule 0-5 under the Act, hearing
requests should state the nature of the writer's interest, any facts
bearing upon the desirability of a hearing on the matter, 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: The Commission: Brent J. Fields, Secretary, U.S. Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
Applicants: Howard M. Levkowitz, c/o Tennenbaum Capital Partners, LLC,
2951 28th Street, Suite 1000, Santa Monica, CA 90405.
FOR FURTHER INFORMATION CONTACT: Anil K. Abraham, Senior Special
Counsel, at (202) 551-2614, or Daniele Marchesani, Branch Chief, at
(202) 551-6821 (Division of Investment Management, Chief Counsel's
Office).
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 an applicant
using the Company name box, at https://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. TOF is a limited liability company organized in Delaware and
registered under the Act as a non-diversified closed-end management
investment company. TOP is a limited partnership organized in Delaware
and registered under the Act as a non-diversified closed-end management
investment company. TOF invests substantially all of its assets in, and
operates through, TOP. All of TOP's common limited partner interests
are owned by TOF. TOP also has preferred limited partner interests and
debt outstanding.
2. TCPC is a Delaware corporation and a non-diversified closed-end
management investment company that has elected to be regulated as a BDC
under the Act.\1\ TCPC's common shares trade on the NASDAQ Global
Select Market. SVCP is a Delaware limited partnership and a non-
diversified closed-end management investment company that also has
elected to be regulated as a BDC under the Act. TCPC invests
substantially all of its assets in, and operates through, SVCP. All of
SVCP's common limited partner interests are owned by TCPC. SVCP also
has issued preferred limited partner interests under its leverage
program to the same institutions that acquired its debt.
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\1\ Section 2(a)(48) of the Act 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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3. The Manager is a Delaware limited liability company registered
as an investment adviser under the Investment Advisers Act of 1940
(``Advisers Act''). The Manager serves as investment adviser both to
the Registered Fund and the BDC Applicant (each, a ``Fund,'' and,
collectively, the ``Funds'') and manages both Funds in accordance with
their respective investment objectives and strategies. Each Fund is
governed by a board of directors (``Board'').
4. The Registered Fund seeks to achieve high total returns while
minimizing losses and invests in high yielding debt, distressed debt,
equity
[[Page 63655]]
securities and mezzanine investments of all kinds (the Registered
Fund's investment objectives, strategies, and limitations, as stated in
its registration statement and periodic shareholder reports, are the
``Registered Fund Objectives and Strategies''). The BDC Applicant's
investment objective is to achieve high total returns through current
income and capital appreciation, with an emphasis on principal
protection. It seeks to achieve this investment objective primarily
through investments in debt securities of middle-market companies, and
its primary investment focus is investing in and originating leveraged
loans to performing middle-market companies (the BDC Applicant's
investment objectives, strategies, and limitations, as stated in its
registration statement and periodic shareholder reports, are the ``BDC
Applicant Objectives and Strategies'').
5. The BDC Applicant expects to continue to grow as attractive
investment opportunities arise and as additional capital becomes
available on attractive terms. However, both TOF and TOP are scheduled
to terminate their existence in October 2016. TOF may extend its
existence for up to two one-year extensions if requested by the Manager
and approved by the holders of a majority of its common shares, and TOP
may do so if requested by the Manager and approved by the holders of a
majority of its common and preferred limited partner interests.
6. The Registered Fund is considering how best to conduct its
remaining operations and plan for the unwinding of its leverage and its
scheduled termination, including the disposition of its portfolio
assets. The Applicants seek the requested relief to permit the
Registered Fund to sell to the BDC Applicant certain portfolio assets
that are consistent with the BDC Applicant Objectives and
Strategies.\2\
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\2\ The Registered Fund and the BDC Applicant have co-invested
in various Eligible Assets (defined below) in reliance on a prior
Commission order pursuant to rule 17d-1 under the Act (the ``Co-
Investment Order'') permitting certain joint transactions among
themselves and certain other entities. Special Value Opportunities
Fund, LLC, et al., Investment Company Act Release Nos. IC-27287
(April 11, 2006) (notice) and 27316 (May 9, 2006) (order).
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7. As of September 30, 2014, the Registered Fund's portfolio
included 52 assets with a fair value of $460,735,948 that were
consistent with the BDC Applicant Objectives and Strategies (``Eligible
Assets''). As of that date, the Eligible Assets were composed of: (1)
$289.1 million of floating rate fully performing commercial loans; (2)
$127.5 million of fixed rate fully performing commercial debt maturing
between 2015 and 2021; (3) $12.8 million in equity received in
connection with the foregoing debt investments; and (4) $31.3 million
in aircraft mortgage and lease interests.\3\
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\3\ All of the Eligible Assets are securities under the Act
except for the aircraft lease interests, which, as of September 30,
2014, comprised approximately 7% of the value of the Eligible
Assets.
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8. Any follow-on investments in the securities of issuers of
Eligible Assets owned by the Registered Fund that may be made
subsequent to the issuance of the requested Order (``follow-on
investments'') also would be considered Eligible Assets for purposes of
the requested relief. The Applicants represent that the Registered Fund
might undertake such follow-on investments to protect or enhance
existing investments by, for example, enhancing the Registered Fund's
legal rights in a bankruptcy of the issuer.
9. Subject to the terms and conditions of the Order, the Registered
Fund would seek to sell to the BDC Applicant all of the Eligible Assets
owned by the Registered Fund prior to the expiration of the requested
Order. The only Eligible Assets held by the Registered Fund that would
not be sold to the BDC Applicant would be those that are sold in Bona
Fide Third-Party Transactions to a third party pursuant to Conditions 3
and 4 below, those that do not satisfy the Conditions below, and those
that the Manager believes would not be appropriate for the BDC
Applicant to acquire based on investment considerations, such as
concerns about credit quality or overconcentration in a particular
industry sector.
10. The Manager's determination to sell any particular Eligible
Asset of the Registered Fund to the BDC Applicant would be required to
be approved by a ``Required Majority'' \4\ of the Board of each
Fund.\5\ The Applicants note that there is no overlap among the
directors of the Registered Fund and the BDC Applicant who are not
``interested persons,'' as defined in section 2(a)(19) of the Act, of
their respective Funds (``Independent Directors''), so that both sets
of Independent Directors would have no conflict of interest in
reviewing and determining whether to approve each Proposed Transaction
(defined below) undertaken in reliance on the requested relief. The
Eligible Assets that the Manager determines to sell from the Registered
Fund to the BDC Applicant, that satisfy the Conditions below, and that
are approved for such sale by a Required Majority of each Fund are
referred to hereinafter as the ``Qualifying Assets,'' and the proposed
sales of the Qualifying Assets by the Registered Fund to the BDC
Applicant are referred to hereinafter as the ``Proposed Transactions.''
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\4\ In the case of the Registered Fund, the Board members that
make up the Required Majority will be determined as if the
Registered Fund were a BDC subject to section 57(o) of the Act.
\5\ In approving any Proposed Transaction, as defined below, the
Required Majority of each Fund will be required specifically to
consider the effect that such transaction, and the Proposed
Transactions taken together, would have on the investment advisory
fees paid by the relevant Fund.
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11. The Applicants believe that the Proposed Transactions would be
in the best interests of both Funds. The Registered Fund earns income
on those assets that may be Qualifying Assets at a rate in excess of
the expense associated with its outstanding debt and preferred stock,
and in excess of the rate at which it expects it could prudently
reinvest the proceeds of a sale of Qualifying Assets, in light of its
scheduled termination. As a result, the Applicants believe that it
would be beneficial to the Registered Fund and its shareholders to own
its assets, including Qualifying Assets, for as long as practicable
before needing to sell them in order to repay its debt and wind down
its operations. The Applicants believe that having a known potential
buyer--the BDC Applicant--for substantially all of the Eligible Assets
would permit the Registered Fund to hold and earn a favorable return on
such assets for a longer period of time than if the requested relief
was not granted. Additionally, a sale of such assets directly from the
Registered Fund to the BDC Applicant would permit the Registered Fund
to conduct the transactions without paying intermediary compensation,
such as a sales commission or a known spread.
12. The Applicants also believe that the BDC Applicant's
acquisition of the Qualifying Assets directly from the Registered Fund
would be in the best interests of the BDC Applicant and its
shareholders. The Manager believes that the Proposed Transactions would
benefit the BDC Applicant and its shareholders because the BDC
Applicant is growing, is familiar with the assets held in the
Registered Fund's portfolio,\6\ would have an interest in acquiring all
or a portion of the Registered Fund's Eligible Assets, and could do so
without paying any commission or spread.
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\6\ See note 2, supra.
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13. As of September 30, 2014, approximately 97.8% by value of the
Eligible Assets were owned by both Funds and were valued identically.
Each of the Funds employs the same valuation methods, policies, and
[[Page 63656]]
procedures, which have been reviewed and approved by each Fund's
Board.\7\ Each Fund's Independent Directors review and approve the
valuations quarterly.
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\7\ The Funds' valuation policies and procedures differ with
respect to the procedures to obtain approvals from their respective
Boards, but those differences are immaterial for purposes of the
requested relief.
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14. Before selling a Qualifying Asset to the BDC Applicant in
reliance on the requested relief, the Registered Fund would establish a
bona fide market price by selling an institutional-sized portion of the
Qualifying Asset, as prescribed in Conditions 3 and 6 below, to an
independent third-party buyer at arm's-length. Such third-party
transactions are defined in the application as ``Bona Fide Third-Party
Transactions.'' Applicants will be able to enter into a Proposed
Transaction in reliance on the requested Order only if the price of the
related Bona Fide Third-Party Transaction falls within a certain range
above or below the Registered Fund's valuation of the relevant
Qualifying Asset, as described in Condition 4.\8\ In such cases, the
BDC Applicant would contemporaneously pay the same price in the
Proposed Transaction for the balance of the asset held by the
Registered Fund (less any intermediary compensation, such as a sales
commission or known spread, paid by the Registered Fund on the Bona
Fide Third-Party Transaction).
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\8\ As described in the application, the Applicants proposed the
ranges specified in Condition 4 below based on the results of
forensic testing that compared the sale prices of assets to their
most recent valuations over a period of several years.
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15. Finally, the Manager would be required to represent to the
Independent Directors of each Fund that it has no reason to believe
that the sale price of the Qualifying Asset in each Bona Fide Third-
Party Transaction does not reasonably approximate (on a pro rata basis)
the sale price of such Qualifying Asset--had the Registered Fund's
entire interest been sold--and that, in the Manager's judgment, the
Proposed Transaction would not preclude the BDC Applicant from
acquiring an asset more beneficial to its shareholders' interests.
Applicants' Legal Analysis
1. The Applicants request an Order under sections 6(c), 17(b), and
57(c) of the Act granting them exemptive relief from sections 17(a) and
57(a) of the Act in order to permit the Registered Fund to sell to the
BDC Applicant the Qualifying Assets.
2. Section 17(a)(2) of the Act generally prohibits an affiliated
person of a registered investment company, acting as principal, from
purchasing from such company any security or other property. Section
2(a)(3)(C) of the Act defines an ``affiliated person'' of another
person to include any person directly or indirectly controlling,
controlled by, or under common control with, the other person. Section
57(a)(1) of the Act generally prohibits a person related to the BDC in
a manner described in section 57(b) from selling any security or other
property to such BDC. Section 57(b) includes, among others, any person
directly or indirectly controlling, controlled by, or under common
control with the BDC. By virtue of being under the common control of
the Manager or common executive officers, the BDC Applicant could be
viewed as an affiliated person of the Registered Fund within the
meaning of section 2(a)(3)(C), and the Registered Fund could be viewed
as a person related to the BDC Applicant within the meaning of section
57(b). Consequently, section 17(a)(2) would prohibit the BDC Applicant
from purchasing the Qualifying Assets from the Registered Fund, and
section 57(a)(1) would prohibit the Registered Fund from selling the
Qualifying Assets to the BDC Applicant.
3. Sections 17(b) and 57(c) of the Act authorize the Commission
upon application to exempt a transaction from the prohibitions of
sections 17(a)(2) and 57(a)(1), respectively, if the evidence
establishes that (1) the terms of the proposed transaction, including
the consideration to be paid or received, are reasonable and fair and
do not involve overreaching on the part of any person concerned; (2)
the proposed transaction is consistent with the policy of each
registered investment company or business development company involved;
and (3) the proposed transaction is consistent with the general
purposes of the Act. Section 6(c) authorizes the Commission upon
application to conditionally or unconditionally exempt any person or
transaction or any class or classes of persons or transactions from any
provision or provisions of the Act or of any rule or regulation
thereunder, if and to the extent that such exemption is necessary or
appropriate in the public interest and consistent with the protection
of investors and the purposes fairly intended by the policy and
provisions of the Act.
4. Applicants state that the Proposed Transactions satisfy the
standards of sections 6(c), 17(b), and 57(c) of the Act. Applicants
believe that the proposed safeguards described in the application
provide a basis for the Commission to conclude that the Proposed
Transactions will satisfy such standards.
5. The Applicants believe the terms of the Proposed Transactions
would benefit both Funds and are in the best interests of their
respective shareholders. The Applicants also believe that the fact that
the Proposed Transactions would involve substantially all of the
Eligible Assets held by the Registered Fund would serve to reduce any
potential for overreaching. The Applicants further point to the fact
that both Funds already own many of the same Eligible Assets and have
the same valuation methods, policies, and procedures, which have been
approved by each Fund's Board.\9\
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\9\ See note 7, supra.
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6. The Applicants also state that, before selling any Qualifying
Assets to the BDC Applicant in reliance on the requested Order, the
Registered Fund would be required to establish a bona fide market price
for the Qualifying Asset by executing a Bona Fide Third-Party
Transaction in that asset, as prescribed in Conditions 3 and 6
below.\10\ The price for such Bona Fide Third-Party Transaction would
be required to fall within a certain range above or below the
Registered Fund's valuation of the relevant Qualifying Asset, as
described in Condition 4 below, in order for a Proposed Transaction to
occur in reliance on the requested Order. The Applicants believe that
these price range constraints will help to ensure that the sale is fair
and approximates the appropriate price of each Qualifying Asset, while
recognizing that it is unlikely that the sale price of each Qualifying
Asset will be exactly the same as the value assigned by the Registered
Fund to such Qualifying Asset.
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\10\ The Applicants note that the asset sale amounts set forth
in Condition 3 below seek to balance the interest of the Funds in
transacting with each other for as much of the Qualifying Assets as
possible against the interest of ensuring that the Bona Fide Third-
Party Transactions are executed at a genuine and current market
price. The Applicants believe that the Bona Fide Third-Party
Transactions would achieve an appropriate balance by providing for a
sale of a portion of the Qualifying Asset in an amount approximating
what the Manager believes is, for this type of asset, a bid size
that will attract sufficient attention from the institutional debt
market. The Manager believes that the dollar and percentage amounts
set forth in Condition 3 below will result in the sale of a
sufficiently large amount of each Qualifying Asset to obtain a
representative market price for the asset.
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7. Finally, the Proposed Transactions will be presented to the
Required Majority of each Fund and must be approved by such Required
Majority in order to be consummated. The Required Majority of each Fund
will be required specifically to consider the effect that each such
transaction, and such transactions taken together, would have
[[Page 63657]]
on the investment advisory fees paid by the relevant Fund.
Applicants' Conditions
Applicants agree that the Order granting the requested relief will
be subject to the following Conditions:
1. The Registered Fund will sell to the BDC Applicant, prior to the
expiration of the requested Order, all of the Qualifying Assets owned
by the Registered Fund. In approving any Proposed Transaction under the
requested Order, the Required Majority of each Fund will be required
specifically to consider the effect that such transaction, and the
Proposed Transactions taken together, would have on the investment
advisory fees paid by the relevant Fund. If any Eligible Assets are
acquired in follow-on investments made after the date the Order was
granted, the Manager will document contemporaneously why it believes
each follow-on investment helps protect the assets previously owned by
the Registered Fund to which the follow-on investment relates.
2. Each of the Eligible Assets shall have been subject to periodic
valuation in accordance with methods adopted and reviewed at least
annually by the independent directors, as defined in section 2(a)(19)
of the 1940 Act, of each Fund in accordance with rule 38a-1 under the
1940 Act.
3. The Registered Fund shall have sold in Bona Fide Third-Party
Transactions subject to broad market exposure or competitive bidding to
independent third-party buyers (none of whom are the issuer of the
respective asset to the knowledge of the Applicants or are affiliated
persons of the Applicants under the 1940 Act) (i) for each Qualifying
Asset valued at greater than $10 million, at least the greater of (A)
10% of the holdings by the Registered Fund of each Qualifying Asset or
(B) $5,000,000 in proceeds of such Qualifying Asset or (ii) for each
Qualifying Asset valued at $10,000,000 or less, at least 30% of the
holdings by the Registered Fund of each Qualifying Asset.
4. In any transaction between the Funds under the requested Order,
(i) the trade date for sale to the BDC Applicant shall be the same as
the trade date for the independent sale of a portion of the Qualifying
Asset under Condition 3, (ii) the transaction price shall be such
independent sale price less any intermediary compensation, such as a
sales commission or known spread, paid by the Registered Fund in the
open market sale, (iii) 66.7%, or two-thirds, of the transactions will
have a sale price within 1.5% of the fair value most recently assigned
by the Registered Fund pursuant to its valuation methods, policies, and
procedures, and 100% of the transactions will have a sale price in the
market within 2.5% of the fair value most recently assigned by the
Registered Fund pursuant to its valuation methods, policies, and
procedures (iv) the Manager shall represent to the Independent
Directors of the Registered Fund and the BDC Applicant that it has no
reason to believe that the sale price received by the Registered Fund
pursuant to Condition 3 above does not reasonably approximate (on a pro
rata basis) the sale price that would have been received by the
Registered Fund had the Registered Fund's entire interest been sold in
such transaction and that, in the Manager's judgment, the Proposed
Transaction between the Funds would not, at the time of such
transaction, preclude the BDC Applicant from acquiring an asset more
beneficial to its shareholders' interests, and (v) the price shall be
payable in cash at settlement.
5. Any transaction under the requested Order involving Eligible
Assets jointly owned under the Co-Investment Order (including a
decision not to include an Eligible Asset as a Qualifying Asset) shall
comply with the terms and conditions of the Co-Investment Order, as
applicable.
6. No Proposed Transaction or Bona Fide Third-Party Transaction
shall involve any consideration other than cash payment against prompt
delivery of Qualifying Assets. No brokerage commission, fee, or other
remuneration shall be paid in connection with any Proposed Transaction.
A Bona Fide Third-Party Transaction may include customary transaction
expenses paid to persons who are not affiliated persons of the
Applicants, but no Bona Fide Third-Party Transaction will involve any
arrangement, understanding, or any direct or indirect quid pro quo that
goes beyond the market terms of such transaction. No Bona Fide Third-
Party Transaction shall involve any arrangement or understanding
directed at facilitating the Applicants' reliance on the requested
Order. For any Bona Fide Third-Party Transaction, the Registered Fund
will not knowingly sell any Qualifying Asset to the issuer of such
asset. The Applicants will not attempt to circumvent the above
restrictions by entering into any arrangements or understandings that
are economically similar to the ones proscribed by the above
restrictions.
7. The Registered Fund and the BDC Applicant shall maintain records
demonstrating satisfaction of each of the foregoing Conditions in the
manner and for the periods set forth in rule 17a-7(g) under the 1940
Act.
8. The requested Order, if granted, shall expire upon the earlier
of the date of termination of TOF or October 10, 2018.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-25302 Filed 10-23-14; 8:45 am]
BILLING CODE 8011-01-P
