THL Credit, Inc., et al.; Notice of Application, 71895-71900 [2015-29204]
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Federal Register / Vol. 80, No. 221 / Tuesday, November 17, 2015 / Notices
from the Exchange’s general pricing
structure.
The Exchange believes that the
additional clarifying changes and
corrections proposed in this filing are
reasonable, fair and equitable and nondiscriminatory because each is intended
to improve the understandability of the
Exchange’s fee schedule and to avoid
confusion.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
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The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that any of
the proposed changes to the Exchange’s
tiered pricing structure burden
competition, but instead, that they
enhance competition as they are
intended to increase the
competitiveness of BZX Options by
offering new pricing incentives or
modifying and eliminating pricing
incentives in order to provide such
incentives. Also, the Exchange believes
that the increase to certain thresholds
necessary to meet tiers offered by the
Exchange contributes to rather than
burdens competition, as such changes
are intended to incentivize participants
to increase their participation on the
Exchange. Similarly, the introduction of
new tiers is intended to provide
incentives to Members to encourage
them to enter orders to BZX Options,
and thus is again intended to enhance
competition.
Similarly, the Exchange does not
believe that its proposed pricing for
routing to EDGX Options burdens
competition, as such rates are intended
to approximate the cost of routing to
EDGX Options. As stated above, the
Exchange notes that it operates in a
highly competitive market in which
market participants can readily direct
order flow to competing venues if they
deem fee levels to be excessive or
providers of routing services if they
deem routing fee levels to be excessive.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any written
comments from members or other
interested parties.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 23 and paragraph (f) of Rule
19b–4 thereunder.24 At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposal is
consistent with the Act. Comments may
be submitted by any of the following
methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File No. SR–
BATS–2015–98 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BATS–2015–98. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing will also be available for
23 15
24 17
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U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–BATS–
2015–98 and should be submitted on or
before December 8, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–29231 Filed 11–16–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–31899; File No. 812–14256]
THL Credit, Inc., et al.; Notice of
Application
November 10, 2015.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of application for an
order under sections 17(d) 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 sections 17(d)
and 57(a)(4) of the Act and rule 17d–1
under the Act.
AGENCY:
Summary of Application: Applicants
request an order to permit a business
development company and certain other
closed-end management investment
companies to co-invest in portfolio
companies with each other and with
affiliated investment funds.
Applicants: THL Credit, Inc.
(‘‘TCRD’’), THL Credit Holdings, Inc.
(‘‘TCRD Subsidiary’’), THL Credit Direct
Lending Fund III LLC (‘‘THL Credit
Fund III’’), THL Credit Advisors LLC
(‘‘BDC Adviser’’) on behalf of itself and
its successors,1 and THL Credit Senior
Loan Strategies LLC (‘‘Subsidiary
Adviser’’) on behalf of itself and its
successors.
DATES: Filing Dates: The application was
filed on December 23, 2013, and
amended on February 10, 2015, May 20,
2015, September 11, 2015, and
November 6, 2015.
Hearing or Notification of Hearing: An
order granting the requested relief will
25 17
CFR 200.30–3(a)(12).
term ‘‘successor,’’ as applied to an Adviser,
means an entity that results from a reorganization
into another jurisdiction or change in the type of
business organization.
1 The
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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 December 7, 2015, 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: Brent J. Fields, Secretary,
U.S. Securities and Exchange
Commission, 100 F St. NE., Washington,
DC 20549–1090. Applicants: 100
Federal St., 31st Floor, Boston, MA
02110.
FOR FURTHER INFORMATION CONTACT:
Courtney S. Thornton, Senior Counsel,
at (202) 551–6812 or David P. Bartels,
Branch Chief, at (202) 551–6821 (Chief
Counsel’s Office, 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. TCRD is an externally managed,
non-diversified closed-end management
investment company incorporated in
Delaware that has elected to be
regulated as a business development
company (‘‘BDC’’) under Section 54(a)
of the Act.2 TCRD’s Objectives and
Strategies 3 are to generate both current
income and capital appreciation,
primarily through investments in
privately negotiated debt and equity
securities of middle market companies.
2 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.
3 ‘‘Objectives and Strategies’’ means the
investment objectives and strategies of a Regulated
Fund (as defined below), as described in the
Regulated Fund’s registration statement on Form N–
2, other filings the Regulated Fund has made with
the Commission under the Securities Act of 1933
(the ‘‘Securities Act’’), or under the Securities
Exchange Act of 1934, and the Regulated Fund’s
reports to shareholders.
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The board of directors (‘‘Board’’) of
TCRD is comprised of seven directors,
six of whom are Non-Interested
Directors. A majority of the directors of
each of the Regulated Funds will be
persons who are not ‘‘interested
persons’’ as defined in section 2(a)(19)
of the Act (‘‘Non-Interested Directors’’).
2. THL Credit Fund III is a private
fund organized in Delaware that has not
yet formally commenced principal
operations. THL Credit Fund III’s
investment objective is to generate
current income consistent with capital
preservation by investing primarily in
first lien and second lien secured loans.
THL Credit Fund III is not registered
under the Act in reliance on the
exclusion from the definition of
‘‘investment company’’ in section
3(c)(7) of the Act.
3. The BDC Adviser is a Delaware
limited liability company and is
registered as an investment adviser
under the Advisers Act. The BDC
Adviser serves as the investment adviser
to TCRD and will serve as investment
adviser to THL Credit Fund III. The
Subsidiary Adviser is a Delaware
limited liability company that is
registered under the Advisers Act.
4. Applicants seek an order (‘‘Order’’)
to permit one or more Regulated Funds 4
and/or one or more Affiliated Funds 5 to
participate in the same investment
opportunities through a proposed coinvestment program (the ‘‘CoInvestment Program’’) where such
participation would otherwise be
prohibited under section 57(a)(4) and
rule 17d–1 by (a) co-investing with each
other in securities issued by issuers in
private placement transactions in which
an Adviser negotiates terms in addition
to price; 6 and (b) making additional
investments in securities of such
issuers, including through the exercise
of warrants, conversion privileges, and
4 ‘‘Regulated Fund’’ means TCRD and any Future
Regulated Fund. ‘‘Future Regulated Fund’’ means
any closed-end management investment company
(a) that is registered under the Act or has elected
to be regulated as BDC, (b) whose investment
adviser is an Adviser, and (c) that intends to
participate in the Co-Investment Program. The term
‘‘Adviser’’ means (a) the BDC Adviser and the
Subsidiary Adviser and (b) any future investment
adviser that controls, is controlled by or is under
common control with the BDC Adviser and is
registered as an investment adviser under the
Advisers Act.
5 ‘‘Affiliated Fund’’ means THL Credit Fund III
and any Future Affiliated Funds. ‘‘Future Affiliated
Funds’’ means any entity (a) whose investment
adviser is an Adviser, (b) that would be an
investment company but for section 3(c)(1) or
3(c)(7) of the Act, and (c) that intends to participate
in the Co-Investment Program.
6 The term ‘‘private placement transactions’’
means transactions in which the offer and sale of
securities by the issuer are exempt from registration
under the Securities Act.
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other rights to purchase securities of the
issuers (‘‘Follow-On Investments’’). ‘‘CoInvestment Transaction’’ means any
transaction in which a Regulated Fund
(or its Wholly-Owned Investment Sub,
as defined below) participated together
with one or more other Regulated Funds
and/or one or more Affiliated Funds in
reliance on the requested Order.
‘‘Potential Co-Investment Transaction’’
means any investment opportunity in
which a Regulated Fund (or its WhollyOwned Investment Sub) could not
participate together with one or more
Affiliated Funds and/or one or more
other Regulated Funds without
obtaining and relying on the Order.7
5. Applicants state that a Regulated
Fund may, from time to time, form one
or more Wholly-Owned Investment
Subs.8 Such a subsidiary would be
prohibited from investing in a CoInvestment Transaction with any
Affiliated Fund or other Regulated Fund
because it would be a company
controlled by its parent Regulated Fund
for purposes of section 57(a)(4) of the
Act and rule 17d–1. Applicants request
that each Wholly-Owned Investment
Sub be permitted to participate in Co7 All existing entities that currently intend to rely
upon the requested Order have been named as
applicants. Any other existing or future entity that
subsequently relies on the Order will comply with
the terms and conditions of the application. TCRD
manages two limited term investment funds, THL
Credit Greenway Fund LLC and THL Credit
Greenway Fund II LLC (together, the ‘‘Greenway
Entities’’). TCRD and the Greenway Entities
previously agreed to conditions that would apply to
any co-investment transactions between them, but
the Greenway Entities are not applicants to the
Order. Accordingly, the Greenway Entities would
not be able to rely on the requested Order to
participate in Co-Investment Transactions pursuant
to the Order. Moreover, the Greenway Entities will
not be making any new or follow-on co-investments
with TCRD because the Greenway Entities are fully
invested and do not, and will not at any point, have
any capital to invest. No Greenway Entity will have
an interest in any issuer that is the subject of a CoInvestment Transaction completed pursuant to the
Order, and TCRD will not form or manage another
entity structured in the same manner as the
Greenway Entities. Additionally, THL Credit Logan
JV LLC (‘‘Logan JV’’), a joint venture with TCRD,
would not be able to rely on the requested Order
and, accordingly, would not participate in CoInvestment Transactions pursuant to the Order. No
entity that holds an interest in Logan JV is or would
be an affiliated person, or an affiliated person of an
affiliated person, of TCRD within the meaning of
section 2(a)(3) of the Act, other than by virtue of
its ownership interest in Logan JV.
8 The term ‘‘Wholly-Owned Investment Sub’’
means an entity (i) that is wholly-owned by a
Regulated Fund (with the Regulated Fund at all
times holding, beneficially and of record, 100% of
the voting and economic interests); (ii) whose sole
business purpose is to hold one or more
investments on behalf of the Regulated Fund; (iii)
with respect to which the Regulated Fund’s Board
has the sole authority to make all determinations
with respect to the entity’s participation under the
conditions of the application; and (iv) that would
be an investment company but for Section 3(c)(1)
or 3(c)(7) of the Act.
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Investment Transactions in lieu of its
parent Regulated Fund and that the
Wholly-Owned Investment Sub’s
participation in any such transaction be
treated, for purposes of the requested
order, as though the parent Regulated
Fund were participating directly.
Applicants represent that this treatment
is justified because a Wholly-Owned
Investment Sub would have no purpose
other than serving as a holding vehicle
for the Regulated Fund’s investments
and, therefore, no conflicts of interest
could arise between the Regulated Fund
and the Wholly-Owned Investment Sub.
The Regulated Fund’s Board would
make all relevant determinations under
the conditions with regard to a WhollyOwned Investment Sub’s participation
in a Co-Investment Transaction, and the
Regulated Fund’s Board would be
informed of, and take into
consideration, any proposed use of a
Wholly-Owned Investment Sub in the
Regulated Fund’s place. If the Regulated
Fund proposes to participate in the
same Co-Investment Transaction with
any of its Wholly-Owned Investment
Subs, the Board will also be informed
of, and take into consideration, the
relative participation of the Regulated
Fund and the Wholly-Owned
Investment Sub. TCRD Subsidiary is a
Wholly-Owned Investment Sub of
TCRD, which is structured as a
Delaware corporation. In reliance on the
exclusion from the definition of
‘‘investment company’’ provided by
section 3(c)(7) of the Act, TCRD
Subsidiary is not registered under the
Act.
6. When considering Potential CoInvestment Transactions for a Regulated
Fund, the applicable Adviser will
consider only the Objectives and
Strategies, investment policies,
investment positions, Available Capital
(defined below),9 and other pertinent
factors applicable to that Regulated
Fund. The Board of each Regulated
Fund, including the Non-Interested
Directors, has (or will have prior to
relying on the requested Order)
determined that it is in the best interests
9 The amount of each Regulated Fund’s capital
available for investment (‘‘Available Capital’’) will
be determined based on the amount of cash on
hand, existing commitments and reserves, if any,
the targeted leverage level, targeted asset mix, and
other investment policies and restrictions set from
time to time by the Board of the applicable
Regulated Fund or imposed by applicable laws,
rules, regulations, or interpretations. Likewise, an
Affiliated Fund’s Available Capital will be
determined based on the amount of cash on hand,
existing commitments and reserves, if any, the
targeted leverage level, targeted asset mix and other
investment policies and restrictions set by the
Affiliated Fund’s directors, general partners or
adviser or imposed by applicable laws, rules,
regulations or interpretations.
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of the Regulated Fund to participate in
Co-Investment Transactions. The
Regulated Fund Advisers expect that
any portfolio company that is an
appropriate investment for a Regulated
Fund should also be an appropriate
investment for one or more other
Regulated Funds and/or Affiliated
Funds, with certain exceptions based on
Available Capital or diversification.10
7. Other than pro rata dispositions
and Follow-On Investments as provided
in conditions 7 and 8, and after making
the determinations required in
conditions 1 and 2(a), the Adviser will
present each Potential Co-Investment
Transaction and the proposed allocation
to the directors of the Board eligible to
vote under section 57(o) of the Act
(‘‘Eligible Directors’’), and the ‘‘required
majority,’’ as defined in section 57(o) of
the Act (‘‘Required Majority’’) 11 will
approve each Co-Investment
Transaction prior to any investment by
the participating Regulated Fund.
8. With respect to the pro rata
dispositions and Follow-On Investments
provided in conditions 7 and 8, a
Regulated Fund 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 Regulated Fund
and Affiliated Fund 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 Board of the Regulated Fund has
approved that Regulated Fund’s
participation in pro rata dispositions
and Follow-On Investments as being in
the best interests of the Regulated Fund.
If the Board does not so approve, any
such disposition or Follow-On
Investment will be submitted to the
Regulated Fund’s Eligible Directors. The
Board of any Regulated Fund 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.
9. No Non-Interested Director of a
Regulated Fund will have a financial
interest in any Co-Investment
Transaction, other than indirectly
through share ownership in one of the
Regulated Funds.
10 The Regulated Funds, however, will not be
obligated to invest, or co-invest, when investment
opportunities are referred to them.
11 In the case of a Regulated Fund that is a
registered closed-end fund, the Board members that
make up the Required Majority will be determined
as if the Regulated Fund were a BDC subject to
Section 57(o).
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10. If an Adviser or its principals, or
any person controlling, controlled by, or
under common control with the Adviser
or its principals, and any Affiliated
Fund (collectively, the ‘‘Holders’’) own
in the aggregate more than 25 per cent
of the outstanding voting shares of a
Regulated Fund, then the Holders will
vote such shares as directed by an
independent third party (such as the
trustee of a voting trust or a proxy
adviser) when voting on (1) the election
of directors; (2) the removal of one or
more directors; or (3) the vote of a
majority of the outstanding voting
securities, as defined in section 2(a)(42)
of the Act. Applicants believe that this
condition will ensure that the NonInterested Directors will act
independently in evaluating the CoInvestment Program, because the ability
of the Adviser or its principals to
influence the Non-Interested Directors
by a suggestion, explicit or implied, that
the Non-Interested Directors can be
removed will be limited significantly.
The Non-Interested Directors shall
evaluate and approve any such voting
trust or proxy adviser, taking into
account its qualifications, reputation for
independence, cost to the shareholders,
and other factors that they deem
relevant.
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 a
BDC in contravention of rules as
prescribed by the Commission. Under
section 57(b)(2) of the Act, any person
who is directly or indirectly controlling,
controlled by, or under common control
with a BDC is subject to section 57(a)(4).
Applicants submit that each of the
Regulated Funds and Affiliated Funds
could be deemed to be a person related
to each Regulated Fund in a manner
described by section 57(b) by virtue of
being under common control. 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 also
applies to joint transactions with
Regulated Funds that are BDCs. Section
17(d) of the Act and rule 17d–1 under
the Act are applicable to Regulated
Funds that are registered closed-end
investment companies.
2. Section 17(d) of the Act and rule
17d–1 under the Act prohibit affiliated
persons of a registered investment
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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 state that in the absence
of the requested relief, the Regulated
Funds would be, in some
circumstances, limited in their ability to
participate in attractive and appropriate
investment opportunities. Applicants
believe that the proposed terms and
conditions will ensure that the CoInvestment Transactions are consistent
with the protection of each Regulated
Fund’s shareholders and with the
purposes intended by the policies and
provisions of the Act. Applicants state
that the Regulated Funds’ 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’ Conditions:
Applicants agree that the Order will
be subject to the following conditions:
1. Each time an Adviser considers a
Potential Co-Investment Transaction for
an Affiliated Fund or another Regulated
Fund that falls within a Regulated
Fund’s then-current Objectives and
Strategies, the Regulated Fund’s Adviser
will make an independent
determination of the appropriateness of
the investment for such Regulated Fund
in light of the Regulated Fund’s thencurrent circumstances.
2. (a) If the Adviser deems a Regulated
Fund’s participation in any Potential
Co-Investment Transaction to be
appropriate for the Regulated Fund, it
will then determine an appropriate level
of investment for the Regulated Fund.
(b) If the aggregate amount
recommended by the applicable Adviser
to be invested by the applicable
Regulated Fund in the Potential CoInvestment Transaction, together with
the amount proposed to be invested by
the other participating Regulated Funds
and Affiliated Funds, collectively, in the
same transaction, exceeds the amount of
the investment opportunity, the
investment opportunity will be
allocated among them pro rata based on
each participant’s Available Capital, up
to the amount proposed to be invested
by each. The applicable Adviser will
provide the Eligible Directors of each
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participating Regulated Fund with
information concerning each
participating party’s Available Capital to
assist the Eligible Directors with their
review of the Regulated Fund’s
investments for compliance with these
allocation procedures.
(c) After making the determinations
required in conditions 1 and 2(a), the
applicable Adviser will distribute
written information concerning the
Potential Co-Investment Transaction
(including the amount proposed to be
invested by each participating Regulated
Fund and Affiliated Fund) to the
Eligible Directors of each participating
Regulated Fund for their consideration.
A Regulated Fund will co-invest with
one or more other Regulated Funds and/
or one or more Affiliated Funds only if,
prior to the Regulated Fund’s
participation in the Potential CoInvestment Transaction, a Required
Majority concludes that:
(i) The terms of the Potential CoInvestment Transaction, including the
consideration to be paid, are reasonable
and fair to the Regulated Fund and its
shareholders and do not involve
overreaching in respect of the Regulated
Fund or its shareholders on the part of
any person concerned;
(ii) the Potential Co-Investment
Transaction is consistent with:
(A) The interests of the shareholders
of the Regulated Fund; and
(B) the Regulated Fund’s then-current
Objectives and Strategies;
(iii) the investment by any other
Regulated Funds or Affiliated Funds
would not disadvantage the Regulated
Fund, and participation by the
Regulated Fund would not be on a basis
different from or less advantageous than
that of other Regulated Funds or
Affiliated Funds; provided that, if any
other Regulated Fund or Affiliated
Fund, but not the Regulated Fund itself,
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 the Required Majority 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;
(B) the applicable Adviser agrees to,
and does, provide periodic reports to
the Regulated Fund’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
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management of the portfolio company;
and
(C) any fees or other compensation
that any Affiliated Fund or any
Regulated Fund or any affiliated person
of any Affiliated Fund or any Regulated
Fund receives in connection with the
right of an Affiliated Fund or a
Regulated Fund 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 Funds (who
each may, in turn, share its portion with
its affiliated persons) and the
participating Regulated Funds in
accordance with the amount of each
party’s investment; and
(iv) the proposed investment by the
Regulated Fund will not benefit the
Advisers, the Affiliated Funds or the
other Regulated Funds or any affiliated
person of any 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 by Section 17(e) or
57(k) of the Act, as applicable, (C)
indirectly, as a result of an interest in
the securities issued by one of the
parties to the Co-Investment
Transaction, or (D) in the case of fees or
other compensation described in
condition 2(c)(iii)(C).
3. Each Regulated Fund has the right
to decline to participate in any Potential
Co-Investment Transaction or to invest
less than the amount proposed.
4. The applicable Adviser will present
to the Board of each Regulated Fund, on
a quarterly basis, a record of all
investments in Potential Co-Investment
Transactions made by any of the other
Regulated Funds or Affiliated Funds
during the preceding quarter that fell
within the Regulated Fund’s thencurrent Objectives and Strategies that
were not made available to the
Regulated Fund, and an explanation of
why the investment opportunities were
not offered to the Regulated Fund. All
information presented to the Board
pursuant to this condition will be kept
for the life of the Regulated Fund 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 8,12
a Regulated Fund will not invest in
reliance on the Order in any issuer in
which another Regulated Fund,
Affiliated Fund, or any affiliated person
12 This exception applies only to Follow-On
Investments by a Regulated Fund in issuers in
which that Regulated Fund already holds
investments.
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of another Regulated Fund or Affiliated
Fund is an existing investor.
6. A Regulated Fund will not
participate in any Potential CoInvestment Transaction unless the
terms, conditions, price, class of
securities to be purchased, settlement
date, and registration rights will be the
same for each participating Regulated
Fund and Affiliated Fund. The grant to
an Affiliated Fund or another Regulated
Fund, but not the Regulated Fund, 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 Fund or any
Regulated Fund elects to sell, exchange
or otherwise dispose of an interest in a
security that was acquired in a CoInvestment Transaction, the applicable
Advisers will:
(i) Notify each Regulated Fund that
participated in the Co-Investment
Transaction of the proposed disposition
at the earliest practical time; and
(ii) formulate a recommendation as to
participation by each Regulated Fund in
the disposition.
(b) Each Regulated Fund 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
participating Affiliated Funds and
Regulated Funds.
(c) A Regulated Fund may participate
in such disposition without obtaining
prior approval of the Required Majority
if: (i) The proposed participation of each
Regulated Fund and each Affiliated
Fund in such disposition is
proportionate to its outstanding
investments in the issuer immediately
preceding the disposition; (ii) the Board
of the Regulated Fund has approved as
being in the best interests of the
Regulated Fund the ability to participate
in such dispositions on a pro rata basis
(as described in greater detail in the
application); and (iii) the Board of the
Regulated Fund is provided on a
quarterly basis with a list of all
dispositions made in accordance with
this condition. In all other cases, the
Adviser will provide its written
recommendation as to the Regulated
Fund’s participation to the Eligible
Directors, and the Regulated Fund will
participate in such disposition solely to
the extent that a Required Majority
determines that it is in the Regulated
Fund’s best interests.
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18:14 Nov 16, 2015
Jkt 238001
(d) Each Affiliated Fund and each
Regulated Fund will bear its own
expenses in connection with any such
disposition.
8. (a) If any Affiliated Fund or any
Regulated Fund desires to make a
Follow-On Investment in a portfolio
company whose securities were
acquired in a Co-Investment
Transaction, the applicable Advisers
will:
(i) Notify each Regulated Fund that
participated in the Co-Investment
Transaction 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 each Regulated Fund.
(b) A Regulated Fund may participate
in such Follow-On Investment without
obtaining prior approval of the Required
Majority if: (i) The proposed
participation of each Regulated Fund
and each Affiliated Fund in such
investment is proportionate to its
outstanding investments in the issuer
immediately preceding the Follow-On
Investment; and (ii) the Board of the
Regulated Fund has approved as being
in the best interests of the Regulated
Fund the ability to participate in
Follow-On Investments on a pro rata
basis (as described in greater detail in
the application). In all other cases, the
Adviser will provide its written
recommendation as to the Regulated
Fund’s participation to the Eligible
Directors, and the Regulated Fund will
participate in such Follow-On
Investment solely to the extent that a
Required Majority determines that it is
in the Regulated Fund’s best interests.
(c) If, with respect to any Follow-On
Investment:
(i) The amount of the opportunity is
not based on the Regulated Funds’ and
the Affiliated Funds’ outstanding
investments immediately preceding the
Follow-On Investment; and
(ii) the aggregate amount
recommended by the applicable Adviser
to be invested by the applicable
Regulated Fund in the Follow-On
Investment, together with the amount
proposed to be invested by the other
participating Regulated Funds and
Affiliated Funds, collectively, in the
same transaction, exceeds the amount of
the opportunity, then the investment
opportunity will be allocated among
them pro rata based on each
participant’s Available Capital, up to the
maximum 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
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Frm 00130
Fmt 4703
Sfmt 4703
71899
and subject to the other conditions set
forth in the application.
9. The Non-Interested Directors of
each Regulated Fund will be provided
quarterly for review all information
concerning Potential Co-Investment
Transactions and Co-Investment
Transactions, including investments
made by other Regulated Funds or
Affiliated Funds that the Regulated
Fund considered but declined to
participate in, so that the Non-Interested
Directors may determine whether all
investments made during the preceding
quarter, including those investments
that the Regulated Fund considered but
declined to participate in, comply with
the conditions of the Order. In addition,
the Non-Interested Directors will
consider at least annually the continued
appropriateness for the Regulated Fund
of participating in new and existing CoInvestment Transactions.
10. Each Regulated Fund will
maintain the records required by
Section 57(f)(3) of the Act as if each of
the Regulated Funds were a BDC and
each of the investments permitted under
these conditions were approved by the
Required Majority under Section 57(f) of
the Act.
11. No Non-Interested Director of a
Regulated Fund will also be a director,
general partner, managing member or
principal, or otherwise an ‘‘affiliated
person’’ (as defined in the Act) of an
Affiliated Fund.
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 Securities
Act) will, to the extent not payable by
the Advisers under their respective
investment advisory agreements with
Affiliated Funds and the Regulated
Funds, be shared by the Regulated
Funds and the Affiliated Funds in
proportion to the relative amounts of the
securities held or 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 participating
Regulated Funds and Affiliated Funds
on a pro rata basis based on the amounts
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 such Adviser at a bank or
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Federal Register / Vol. 80, No. 221 / Tuesday, November 17, 2015 / Notices
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 participating
Regulated Funds and Affiliated Funds
based on the amounts they invest in
such Co-Investment Transaction. None
of the Affiliated Funds, the Advisers,
the other Regulated Funds or any
affiliated person of the Regulated Funds
or Affiliated Funds 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 Regulated Funds and the
Affiliated Funds, 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 an Adviser, investment advisory fees
paid in accordance with the agreement
between the Adviser and the Regulated
Fund or Affiliated Fund.
14. If the Holders own in the aggregate
more than 25 percent of the shares of a
Regulated Fund, then the Holders will
vote such shares as directed by an
independent third party (such as the
trustee of a voting trust or a proxy
adviser) when voting on (1) the election
of directors; (2) the removal of one or
more directors; or (3) any matters
requiring approval by the vote of a
majority of the outstanding voting
securities, as defined in section 2(a)(42)
of the Act.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Robert W. Errett,
Deputy Secretary.
Supervision Act’’) 1 and Rule 19b–
4(n)(1)(i) under the Securities Exchange
Act of 1934,2 notice is hereby given that
on October 5, 2015, The Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
advance notice as described in Items I
and II below, which Items have been
prepared by OCC.3 The Commission is
publishing this notice to solicit
comments on the advance notice from
interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Advance
Notice
This advance notice is filed by The
Options Clearing Corporation (‘‘OCC’’)
in connection with a proposed change
that would modify OCC’s margin
methodology by incorporating
variations in implied volatility for
‘‘shorter tenor’’ options within the
System for Theoretical Analysis and
Numerical Simulations (‘‘STANS’’).
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Advance Notice
In its filing with the Commission,
OCC included statements concerning
the purpose of and basis for the advance
notice and discussed any comments it
received on the advance notice. The text
of these statements may be examined at
the places specified in Item IV below.
OCC has prepared summaries, set forth
in sections (A) and (B) below, of the
most significant aspects of these
statements.
SECURITIES AND EXCHANGE
COMMISSION
(A) Clearing Agency’s Statement on
Comments on the Advance Notice
Received From Members, Participants or
Others
Written comments were not and are
not intended to be solicited with respect
to the proposed change and none have
been received.
[Release No. 34–76421; File No. SR–OCC–
2015–804]
(B) Advance Notices Filed Pursuant to
Section 806(e) of the Payment, Clearing
and Settlement Supervision Act
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing of an Advance Notice To
Modify the Options Clearing
Corporation’s Margin Methodology by
Incorporating Variations in Implied
Volatility
Description of the Proposed Change
The proposed change would modify
OCC’s margin methodology by more
broadly incorporating variations in
implied volatility within STANS. As
explained below, OCC believes that
[FR Doc. 2015–29204 Filed 11–16–15; 8:45 am]
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BILLING CODE 8011–01–P
1 12
November 10, 2015.
Pursuant to Section 806(e)(1) of Title
VIII of the Dodd-Frank Wall Street
Reform and Consumer Protection Act
entitled the Payment, Clearing, and
Settlement Supervision Act of 2010
(‘‘Payment, Clearing and Settlement
VerDate Sep<11>2014
18:14 Nov 16, 2015
Jkt 238001
U.S.C. 5465(e)(1).
CFR 240.19b–4(n)(1)(i).
3 OCC also filed a proposed rule change with the
Commission pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 and Rule 19b–4
thereunder, seeking approval of changes to its rules
necessary to implement the proposal. 15 U.S.C.
78s(b)(1) and 17 CFR 240.19b–4, respectively. See
SR–OCC–2015–016.
2 17
PO 00000
Frm 00131
Fmt 4703
Sfmt 4703
expanding the use of variations in
implied volatility within STANS for
substantially all 4 option contracts
available to be cleared by OCC that have
a residual tenor 5 of less than three years
(‘‘Shorter Tenor Options’’) would
enhance OCC’s ability to ensure that
option prices and the margin coverage
related to such positions more
appropriately reflect possible future
market value fluctuations and better
protect OCC in the event it must
liquidate the portfolio of a suspended
Clearing Member.
Implied Volatility in STANS Generally
STANS is OCC’s proprietary risk
management system that calculates
Clearing Members’ margin requirements
in accordance with OCC’s Rules.6 The
STANS methodology uses Monte Carlo
simulations to forecast price movement
and correlations in determining a
Clearing Member’s margin requirement.
Under STANS, the daily margin
calculation for each Clearing Member
account is constructed to comply with
Commission Rule 17Ad–22(b)(2),7
ensuring OCC maintains sufficient
financial resources to liquidate a
defaulting member’s positions, without
loss, within the liquidation horizon of
two business days.
The STANS margin requirement for
an account is composed of two primary
components: 8 a base component and a
4 OCC is proposing to exclude: (i) Binary options,
(ii) options on energy futures, and (iii) options on
U.S. Treasury securities. These relatively new
products were introduced as the implied volatility
margin methodology changes were in the process of
being completed by OCC. Subsequent to the
implementation of the revised implied volatility
margin methodology discussed in this filing, OCC
would plan to modify the margin methodology to
accommodate the above new products. In addition,
due to de minimus open interest in those options,
OCC does not believe there is a substantive risk if
the products would be excluded from the implied
volatility margin methodology modifications at this
time.
5 The ‘‘tenor’’ of an option is the amount of time
remaining to its expiration.
6 Pursuant to OCC Rule 601(e)(1), however, OCC
uses the Standard Portfolio Analysis of Risk Margin
Calculation System (‘‘SPAN’’) to calculate initial
margin requirements for segregated futures
accounts. No changes are proposed to OCC’s use of
SPAN because the proposed changes do not
concern futures. See Securities Exchange Act
Release No. 72331 (June 5, 2014), 79 FR 33607 (June
11, 2014) (SR–OCC–2014–13).
7 17 CFR 240.17Ad–22(b)(2). As a registered
clearing agency that performs central counterparty
services, OCC is required to ‘‘use margin
requirements to limit its credit exposures to
participants under normal market conditions and
use risk-based models and parameters to set margin
requirements and review such margin requirements
and the related risk-based models and parameters
at least monthly.’’
8 The two primary components referenced relate
to the risk calculation and are associated with the
99% two-day expected shortfall (i.e., ES) and the
concentration/dependence margin add-on (i.e.,
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]]>Agencies
[Federal Register Volume 80, Number 221 (Tuesday, November 17, 2015)]
[Notices]
[Pages 71895-71900]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29204]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-31899; File No. 812-14256]
THL Credit, Inc., et al.; Notice of Application
November 10, 2015.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application for an order under sections 17(d) 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 sections 17(d) and 57(a)(4) of the Act and rule 17d-1
under the Act.
-----------------------------------------------------------------------
Summary of Application: Applicants request an order to permit a
business development company and certain other closed-end management
investment companies to co-invest in portfolio companies with each
other and with affiliated investment funds.
Applicants: THL Credit, Inc. (``TCRD''), THL Credit Holdings, Inc.
(``TCRD Subsidiary''), THL Credit Direct Lending Fund III LLC (``THL
Credit Fund III''), THL Credit Advisors LLC (``BDC Adviser'') on behalf
of itself and its successors,\1\ and THL Credit Senior Loan Strategies
LLC (``Subsidiary Adviser'') on behalf of itself and its successors.
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\1\ The term ``successor,'' as applied to an Adviser, means an
entity that results from a reorganization into another jurisdiction
or change in the type of business organization.
DATES: Filing Dates: The application was filed on December 23, 2013,
and amended on February 10, 2015, May 20, 2015, September 11, 2015, and
November 6, 2015.
Hearing or Notification of Hearing: An order granting the requested
relief will
[[Page 71896]]
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
December 7, 2015, 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: Brent J. Fields, Secretary, U.S. Securities and Exchange
Commission, 100 F St. NE., Washington, DC 20549-1090. Applicants: 100
Federal St., 31st Floor, Boston, MA 02110.
FOR FURTHER INFORMATION CONTACT: Courtney S. Thornton, Senior Counsel,
at (202) 551-6812 or David P. Bartels, Branch Chief, at (202) 551-6821
(Chief Counsel's Office, 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. TCRD is an externally managed, non-diversified closed-end
management investment company incorporated in Delaware that has elected
to be regulated as a business development company (``BDC'') under
Section 54(a) of the Act.\2\ TCRD's Objectives and Strategies \3\ are
to generate both current income and capital appreciation, primarily
through investments in privately negotiated debt and equity securities
of middle market companies. The board of directors (``Board'') of TCRD
is comprised of seven directors, six of whom are Non-Interested
Directors. A majority of the directors of each of the Regulated Funds
will be persons who are not ``interested persons'' as defined in
section 2(a)(19) of the Act (``Non-Interested Directors'').
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\2\ 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.
\3\ ``Objectives and Strategies'' means the investment
objectives and strategies of a Regulated Fund (as defined below), as
described in the Regulated Fund's registration statement on Form N-
2, other filings the Regulated Fund has made with the Commission
under the Securities Act of 1933 (the ``Securities Act''), or under
the Securities Exchange Act of 1934, and the Regulated Fund's
reports to shareholders.
---------------------------------------------------------------------------
2. THL Credit Fund III is a private fund organized in Delaware that
has not yet formally commenced principal operations. THL Credit Fund
III's investment objective is to generate current income consistent
with capital preservation by investing primarily in first lien and
second lien secured loans. THL Credit Fund III is not registered under
the Act in reliance on the exclusion from the definition of
``investment company'' in section 3(c)(7) of the Act.
3. The BDC Adviser is a Delaware limited liability company and is
registered as an investment adviser under the Advisers Act. The BDC
Adviser serves as the investment adviser to TCRD and will serve as
investment adviser to THL Credit Fund III. The Subsidiary Adviser is a
Delaware limited liability company that is registered under the
Advisers Act.
4. Applicants seek an order (``Order'') to permit one or more
Regulated Funds \4\ and/or one or more Affiliated Funds \5\ to
participate in the same investment opportunities through a proposed co-
investment program (the ``Co-Investment Program'') where such
participation would otherwise be prohibited under section 57(a)(4) and
rule 17d-1 by (a) co-investing with each other in securities issued by
issuers in private placement transactions in which an Adviser
negotiates terms in addition to price; \6\ and (b) making additional
investments in securities of such issuers, including through the
exercise of warrants, conversion privileges, and other rights to
purchase securities of the issuers (``Follow-On Investments''). ``Co-
Investment Transaction'' means any transaction in which a Regulated
Fund (or its Wholly-Owned Investment Sub, as defined below)
participated together with one or more other Regulated Funds and/or one
or more Affiliated Funds in reliance on the requested Order.
``Potential Co-Investment Transaction'' means any investment
opportunity in which a Regulated Fund (or its Wholly-Owned Investment
Sub) could not participate together with one or more Affiliated Funds
and/or one or more other Regulated Funds without obtaining and relying
on the Order.\7\
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\4\ ``Regulated Fund'' means TCRD and any Future Regulated Fund.
``Future Regulated Fund'' means any closed-end management investment
company (a) that is registered under the Act or has elected to be
regulated as BDC, (b) whose investment adviser is an Adviser, and
(c) that intends to participate in the Co-Investment Program. The
term ``Adviser'' means (a) the BDC Adviser and the Subsidiary
Adviser and (b) any future investment adviser that controls, is
controlled by or is under common control with the BDC Adviser and is
registered as an investment adviser under the Advisers Act.
\5\ ``Affiliated Fund'' means THL Credit Fund III and any Future
Affiliated Funds. ``Future Affiliated Funds'' means any entity (a)
whose investment adviser is an Adviser, (b) that would be an
investment company but for section 3(c)(1) or 3(c)(7) of the Act,
and (c) that intends to participate in the Co-Investment Program.
\6\ The term ``private placement transactions'' means
transactions in which the offer and sale of securities by the issuer
are exempt from registration under the Securities Act.
\7\ All existing entities that currently intend to rely upon the
requested Order have been named as applicants. Any other existing or
future entity that subsequently relies on the Order will comply with
the terms and conditions of the application. TCRD manages two
limited term investment funds, THL Credit Greenway Fund LLC and THL
Credit Greenway Fund II LLC (together, the ``Greenway Entities'').
TCRD and the Greenway Entities previously agreed to conditions that
would apply to any co-investment transactions between them, but the
Greenway Entities are not applicants to the Order. Accordingly, the
Greenway Entities would not be able to rely on the requested Order
to participate in Co-Investment Transactions pursuant to the Order.
Moreover, the Greenway Entities will not be making any new or
follow-on co-investments with TCRD because the Greenway Entities are
fully invested and do not, and will not at any point, have any
capital to invest. No Greenway Entity will have an interest in any
issuer that is the subject of a Co-Investment Transaction completed
pursuant to the Order, and TCRD will not form or manage another
entity structured in the same manner as the Greenway Entities.
Additionally, THL Credit Logan JV LLC (``Logan JV''), a joint
venture with TCRD, would not be able to rely on the requested Order
and, accordingly, would not participate in Co-Investment
Transactions pursuant to the Order. No entity that holds an interest
in Logan JV is or would be an affiliated person, or an affiliated
person of an affiliated person, of TCRD within the meaning of
section 2(a)(3) of the Act, other than by virtue of its ownership
interest in Logan JV.
---------------------------------------------------------------------------
5. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment Subs.\8\ Such a subsidiary
would be prohibited from investing in a Co-Investment Transaction with
any Affiliated Fund or other Regulated Fund because it would be a
company controlled by its parent Regulated Fund for purposes of section
57(a)(4) of the Act and rule 17d-1. Applicants request that each
Wholly-Owned Investment Sub be permitted to participate in Co-
[[Page 71897]]
Investment Transactions in lieu of its parent Regulated Fund and that
the Wholly-Owned Investment Sub's participation in any such transaction
be treated, for purposes of the requested order, as though the parent
Regulated Fund were participating directly. Applicants represent that
this treatment is justified because a Wholly-Owned Investment Sub would
have no purpose other than serving as a holding vehicle for the
Regulated Fund's investments and, therefore, no conflicts of interest
could arise between the Regulated Fund and the Wholly-Owned Investment
Sub. The Regulated Fund's Board would make all relevant determinations
under the conditions with regard to a Wholly-Owned Investment Sub's
participation in a Co-Investment Transaction, and the Regulated Fund's
Board would be informed of, and take into consideration, any proposed
use of a Wholly-Owned Investment Sub in the Regulated Fund's place. If
the Regulated Fund proposes to participate in the same Co-Investment
Transaction with any of its Wholly-Owned Investment Subs, the Board
will also be informed of, and take into consideration, the relative
participation of the Regulated Fund and the Wholly-Owned Investment
Sub. TCRD Subsidiary is a Wholly-Owned Investment Sub of TCRD, which is
structured as a Delaware corporation. In reliance on the exclusion from
the definition of ``investment company'' provided by section 3(c)(7) of
the Act, TCRD Subsidiary is not registered under the Act.
---------------------------------------------------------------------------
\8\ The term ``Wholly-Owned Investment Sub'' means an entity (i)
that is wholly-owned by a Regulated Fund (with the Regulated Fund at
all times holding, beneficially and of record, 100% of the voting
and economic interests); (ii) whose sole business purpose is to hold
one or more investments on behalf of the Regulated Fund; (iii) with
respect to which the Regulated Fund's Board has the sole authority
to make all determinations with respect to the entity's
participation under the conditions of the application; and (iv) that
would be an investment company but for Section 3(c)(1) or 3(c)(7) of
the Act.
---------------------------------------------------------------------------
6. When considering Potential Co-Investment Transactions for a
Regulated Fund, the applicable Adviser will consider only the
Objectives and Strategies, investment policies, investment positions,
Available Capital (defined below),\9\ and other pertinent factors
applicable to that Regulated Fund. The Board of each Regulated Fund,
including the Non-Interested Directors, has (or will have prior to
relying on the requested Order) determined that it is in the best
interests of the Regulated Fund to participate in Co-Investment
Transactions. The Regulated Fund Advisers expect that any portfolio
company that is an appropriate investment for a Regulated Fund should
also be an appropriate investment for one or more other Regulated Funds
and/or Affiliated Funds, with certain exceptions based on Available
Capital or diversification.\10\
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\9\ The amount of each Regulated Fund's capital available for
investment (``Available Capital'') will be determined based on the
amount of cash on hand, existing commitments and reserves, if any,
the targeted leverage level, targeted asset mix, and other
investment policies and restrictions set from time to time by the
Board of the applicable Regulated Fund or imposed by applicable
laws, rules, regulations, or interpretations. Likewise, an
Affiliated Fund's Available Capital will be determined based on the
amount of cash on hand, existing commitments and reserves, if any,
the targeted leverage level, targeted asset mix and other investment
policies and restrictions set by the Affiliated Fund's directors,
general partners or adviser or imposed by applicable laws, rules,
regulations or interpretations.
\10\ The Regulated Funds, however, will not be obligated to
invest, or co-invest, when investment opportunities are referred to
them.
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7. Other than pro rata dispositions and Follow-On Investments as
provided in conditions 7 and 8, and after making the determinations
required in conditions 1 and 2(a), the Adviser will present each
Potential Co-Investment Transaction and the proposed allocation to the
directors of the Board eligible to vote under section 57(o) of the Act
(``Eligible Directors''), and the ``required majority,'' as defined in
section 57(o) of the Act (``Required Majority'') \11\ will approve each
Co-Investment Transaction prior to any investment by the participating
Regulated Fund.
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\11\ In the case of a Regulated Fund that is a registered
closed-end fund, the Board members that make up the Required
Majority will be determined as if the Regulated Fund were a BDC
subject to Section 57(o).
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8. With respect to the pro rata dispositions and Follow-On
Investments provided in conditions 7 and 8, a Regulated Fund 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 Regulated Fund and
Affiliated Fund 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 Board of the
Regulated Fund has approved that Regulated Fund's participation in pro
rata dispositions and Follow-On Investments as being in the best
interests of the Regulated Fund. If the Board does not so approve, any
such disposition or Follow-On Investment will be submitted to the
Regulated Fund's Eligible Directors. The Board of any Regulated Fund
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.
9. No Non-Interested Director of a Regulated Fund will have a
financial interest in any Co-Investment Transaction, other than
indirectly through share ownership in one of the Regulated Funds.
10. If an Adviser or its principals, or any person controlling,
controlled by, or under common control with the Adviser or its
principals, and any Affiliated Fund (collectively, the ``Holders'') own
in the aggregate more than 25 per cent of the outstanding voting shares
of a Regulated Fund, then the Holders will vote such shares as directed
by an independent third party (such as the trustee of a voting trust or
a proxy adviser) when voting on (1) the election of directors; (2) the
removal of one or more directors; or (3) the vote of a majority of the
outstanding voting securities, as defined in section 2(a)(42) of the
Act. Applicants believe that this condition will ensure that the Non-
Interested Directors will act independently in evaluating the Co-
Investment Program, because the ability of the Adviser or its
principals to influence the Non-Interested Directors by a suggestion,
explicit or implied, that the Non-Interested Directors can be removed
will be limited significantly. The Non-Interested Directors shall
evaluate and approve any such voting trust or proxy adviser, taking
into account its qualifications, reputation for independence, cost to
the shareholders, and other factors that they deem relevant.
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 a BDC in contravention of rules as prescribed by
the Commission. Under section 57(b)(2) of the Act, any person who is
directly or indirectly controlling, controlled by, or under common
control with a BDC is subject to section 57(a)(4). Applicants submit
that each of the Regulated Funds and Affiliated Funds could be deemed
to be a person related to each Regulated Fund in a manner described by
section 57(b) by virtue of being under common control. 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
also applies to joint transactions with Regulated Funds that are BDCs.
Section 17(d) of the Act and rule 17d-1 under the Act are applicable to
Regulated Funds that are registered closed-end investment companies.
2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
affiliated persons of a registered investment
[[Page 71898]]
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 state that in the absence of the requested relief,
the Regulated Funds would be, in some circumstances, limited in their
ability to participate in attractive and appropriate investment
opportunities. Applicants believe that the proposed terms and
conditions will ensure that the Co-Investment Transactions are
consistent with the protection of each Regulated Fund's shareholders
and with the purposes intended by the policies and provisions of the
Act. Applicants state that the Regulated Funds' 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' Conditions:
Applicants agree that the Order will be subject to the following
conditions:
1. Each time an Adviser considers a Potential Co-Investment
Transaction for an Affiliated Fund or another Regulated Fund that falls
within a Regulated Fund's then-current Objectives and Strategies, the
Regulated Fund's Adviser will make an independent determination of the
appropriateness of the investment for such Regulated Fund in light of
the Regulated Fund's then-current circumstances.
2. (a) If the Adviser deems a Regulated Fund's participation in any
Potential Co-Investment Transaction to be appropriate for the Regulated
Fund, it will then determine an appropriate level of investment for the
Regulated Fund.
(b) If the aggregate amount recommended by the applicable Adviser
to be invested by the applicable Regulated Fund in the Potential Co-
Investment Transaction, together with the amount proposed to be
invested by the other participating Regulated Funds and Affiliated
Funds, collectively, in the same transaction, exceeds the amount of the
investment opportunity, the investment opportunity will be allocated
among them pro rata based on each participant's Available Capital, up
to the amount proposed to be invested by each. The applicable Adviser
will provide the Eligible Directors of each participating Regulated
Fund with information concerning each participating party's Available
Capital to assist the Eligible Directors with their review of the
Regulated Fund's investments for compliance with these allocation
procedures.
(c) After making the determinations required in conditions 1 and
2(a), the applicable Adviser will distribute written information
concerning the Potential Co-Investment Transaction (including the
amount proposed to be invested by each participating Regulated Fund and
Affiliated Fund) to the Eligible Directors of each participating
Regulated Fund for their consideration. A Regulated Fund will co-invest
with one or more other Regulated Funds and/or one or more Affiliated
Funds only if, prior to the Regulated Fund's participation in the
Potential Co-Investment Transaction, a Required Majority concludes
that:
(i) The terms of the Potential Co-Investment Transaction, including
the consideration to be paid, are reasonable and fair to the Regulated
Fund and its shareholders and do not involve overreaching in respect of
the Regulated Fund or its shareholders on the part of any person
concerned;
(ii) the Potential Co-Investment Transaction is consistent with:
(A) The interests of the shareholders of the Regulated Fund; and
(B) the Regulated Fund's then-current Objectives and Strategies;
(iii) the investment by any other Regulated Funds or Affiliated
Funds would not disadvantage the Regulated Fund, and participation by
the Regulated Fund would not be on a basis different from or less
advantageous than that of other Regulated Funds or Affiliated Funds;
provided that, if any other Regulated Fund or Affiliated Fund, but not
the Regulated Fund itself, 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 the Required Majority 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;
(B) the applicable Adviser agrees to, and does, provide periodic
reports to the Regulated Fund'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 Fund or any
Regulated Fund or any affiliated person of any Affiliated Fund or any
Regulated Fund receives in connection with the right of an Affiliated
Fund or a Regulated Fund 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 Funds (who each may, in turn, share its
portion with its affiliated persons) and the participating Regulated
Funds in accordance with the amount of each party's investment; and
(iv) the proposed investment by the Regulated Fund will not benefit
the Advisers, the Affiliated Funds or the other Regulated Funds or any
affiliated person of any 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 by Section 17(e) or 57(k) of
the Act, as applicable, (C) indirectly, as a result of an interest in
the securities issued by one of the parties to the Co-Investment
Transaction, or (D) in the case of fees or other compensation described
in condition 2(c)(iii)(C).
3. Each Regulated Fund has the right to decline to participate in
any Potential Co-Investment Transaction or to invest less than the
amount proposed.
4. The applicable Adviser will present to the Board of each
Regulated Fund, on a quarterly basis, a record of all investments in
Potential Co-Investment Transactions made by any of the other Regulated
Funds or Affiliated Funds during the preceding quarter that fell within
the Regulated Fund's then-current Objectives and Strategies that were
not made available to the Regulated Fund, and an explanation of why the
investment opportunities were not offered to the Regulated Fund. All
information presented to the Board pursuant to this condition will be
kept for the life of the Regulated Fund 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,\12\ a Regulated Fund will not invest in reliance on the
Order in any issuer in which another Regulated Fund, Affiliated Fund,
or any affiliated person
[[Page 71899]]
of another Regulated Fund or Affiliated Fund is an existing investor.
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\12\ This exception applies only to Follow-On Investments by a
Regulated Fund in issuers in which that Regulated Fund already holds
investments.
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6. A Regulated Fund 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 each participating Regulated Fund and Affiliated
Fund. The grant to an Affiliated Fund or another Regulated Fund, but
not the Regulated Fund, 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 Fund or any Regulated Fund elects to sell,
exchange or otherwise dispose of an interest in a security that was
acquired in a Co-Investment Transaction, the applicable Advisers will:
(i) Notify each Regulated Fund that participated in the Co-
Investment Transaction of the proposed disposition at the earliest
practical time; and
(ii) formulate a recommendation as to participation by each
Regulated Fund in the disposition.
(b) Each Regulated Fund 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 participating
Affiliated Funds and Regulated Funds.
(c) A Regulated Fund may participate in such disposition without
obtaining prior approval of the Required Majority if: (i) The proposed
participation of each Regulated Fund and each Affiliated Fund in such
disposition is proportionate to its outstanding investments in the
issuer immediately preceding the disposition; (ii) the Board of the
Regulated Fund has approved as being in the best interests of the
Regulated Fund the ability to participate in such dispositions on a pro
rata basis (as described in greater detail in the application); and
(iii) the Board of the Regulated Fund is provided on a quarterly basis
with a list of all dispositions made in accordance with this condition.
In all other cases, the Adviser will provide its written recommendation
as to the Regulated Fund's participation to the Eligible Directors, and
the Regulated Fund will participate in such disposition solely to the
extent that a Required Majority determines that it is in the Regulated
Fund's best interests.
(d) Each Affiliated Fund and each Regulated Fund will bear its own
expenses in connection with any such disposition.
8. (a) If any Affiliated Fund or any Regulated Fund desires to make
a Follow-On Investment in a portfolio company whose securities were
acquired in a Co-Investment Transaction, the applicable Advisers will:
(i) Notify each Regulated Fund that participated in the Co-
Investment Transaction 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 each
Regulated Fund.
(b) A Regulated Fund may participate in such Follow-On Investment
without obtaining prior approval of the Required Majority if: (i) The
proposed participation of each Regulated Fund and each Affiliated Fund
in such investment is proportionate to its outstanding investments in
the issuer immediately preceding the Follow-On Investment; and (ii) the
Board of the Regulated Fund has approved as being in the best interests
of the Regulated Fund the ability to participate in Follow-On
Investments on a pro rata basis (as described in greater detail in the
application). In all other cases, the Adviser will provide its written
recommendation as to the Regulated Fund's participation to the Eligible
Directors, and the Regulated Fund will participate in such Follow-On
Investment solely to the extent that a Required Majority determines
that it is in the Regulated Fund's best interests.
(c) If, with respect to any Follow-On Investment:
(i) The amount of the opportunity is not based on the Regulated
Funds' and the Affiliated Funds' outstanding investments immediately
preceding the Follow-On Investment; and
(ii) the aggregate amount recommended by the applicable Adviser to
be invested by the applicable Regulated Fund in the Follow-On
Investment, together with the amount proposed to be invested by the
other participating Regulated Funds and Affiliated Funds, collectively,
in the same transaction, exceeds the amount of the opportunity, then
the investment opportunity will be allocated among them pro rata based
on each participant's Available Capital, up to the maximum 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 Non-Interested Directors of each Regulated Fund will be
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including
investments made by other Regulated Funds or Affiliated Funds that the
Regulated Fund considered but declined to participate in, so that the
Non-Interested Directors may determine whether all investments made
during the preceding quarter, including those investments that the
Regulated Fund considered but declined to participate in, comply with
the conditions of the Order. In addition, the Non-Interested Directors
will consider at least annually the continued appropriateness for the
Regulated Fund of participating in new and existing Co-Investment
Transactions.
10. Each Regulated Fund will maintain the records required by
Section 57(f)(3) of the Act as if each of the Regulated Funds were a
BDC and each of the investments permitted under these conditions were
approved by the Required Majority under Section 57(f) of the Act.
11. No Non-Interested Director of a Regulated Fund will also be a
director, general partner, managing member or principal, or otherwise
an ``affiliated person'' (as defined in the Act) of an Affiliated Fund.
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 Securities Act) will, to
the extent not payable by the Advisers under their respective
investment advisory agreements with Affiliated Funds and the Regulated
Funds, be shared by the Regulated Funds and the Affiliated Funds in
proportion to the relative amounts of the securities held or 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 participating Regulated Funds
and Affiliated Funds on a pro rata basis based on the amounts 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 such Adviser at a bank or
[[Page 71900]]
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 participating Regulated Funds and
Affiliated Funds based on the amounts they invest in such Co-Investment
Transaction. None of the Affiliated Funds, the Advisers, the other
Regulated Funds or any affiliated person of the Regulated Funds or
Affiliated Funds 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 Regulated Funds and the
Affiliated Funds, 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 an Adviser, investment advisory fees paid in accordance
with the agreement between the Adviser and the Regulated Fund or
Affiliated Fund.
14. If the Holders own in the aggregate more than 25 percent of the
shares of a Regulated Fund, then the Holders will vote such shares as
directed by an independent third party (such as the trustee of a voting
trust or a proxy adviser) when voting on (1) the election of directors;
(2) the removal of one or more directors; or (3) any matters requiring
approval by the vote of a majority of the outstanding voting
securities, as defined in section 2(a)(42) of the Act.
For the Commission, by the Division of Investment Management,
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-29204 Filed 11-16-15; 8:45 am]
BILLING CODE 8011-01-P
