Alcentra Capital Corporation, et al.; Notice of Application, 76719-76723 [2015-31070]
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Notices
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
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the Commission does not edit personal
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information that you wish to make
available publicly. All submissions
should refer to File Number SR–MIAX–
2015–65 and should be submitted on or
before December 31, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–31065 Filed 12–9–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–31927; File No. 812–14374]
Alcentra Capital Corporation, et al.;
Notice of Application
December 4, 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:
Applicants request an order to
permit business development
companies (‘‘BDCs’’) and certain closedend management investment companies
to co-invest in portfolio companies with
each other and with affiliated
investment funds.
Applicants: Alcentra Capital
Corporation (the ‘‘Company’’); BNY
Mellon Alcentra Multi-Strategy Credit
Fund, Inc. (‘‘BAMSCF,’’ and together
with the Company, the ‘‘Existing
Regulated Funds’’); Alcentra BDC
Equity Holdings, LLC (the
‘‘Subsidiary’’); Alcentra Middle Market
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SUMMARY:
17 17
CFR 200.30–3(a)(12).
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Fund IV, L.P. (the ‘‘Existing CoInvestment Affiliate’’); Alcentra NY,
LLC (‘‘Alcentra NY’’); Alcentra Limited
(together with Alcentra NY, the
‘‘Alcentra Advisers’’), and The Dreyfus
Corporation (‘‘Dreyfus’’).
DATES: Filing Dates: The application was
filed on October 16, 2014 and amended
on April 2, 2015 and August 6, 2015.
Hearing or Notification of Hearing: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on December 29, 2015, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F St.
NE., Washington, DC 20549–1090.
Applicants: Alcentra Capital
Corporation, 200 Park Avenue, 7th
Floor, New York, NY 10166.
FOR FURTHER INFORMATION CONTACT:
Vanessa M. Meeks, Senior Counsel, or
Melissa R. Harke, Branch Chief, at (202)
551–6825 (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. The Existing Regulated Funds were
each organized as a corporation under
the General Corporate Laws of the State
of Maryland. The Company operates as
an externally-managed, non-diversified,
closed-end management investment
company that has elected to be
regulated as a business development
company (‘‘BDC’’) under the Act.1
BAMSCF is a non-diversified, closed1 Section 2(a)(48) defines a BDC to be any closedend investment company that operates for the
purpose of making investments in securities
described in sections 55(a)(1) through 55(a)(3) of the
Act and makes available significant managerial
assistance with respect to the issuers of such
securities.
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end management investment company
registered under the Act. The
Company’s investment objective is to
generate both current income and
capital appreciation primarily by
making direct investments in lower
middle-market companies in the form of
subordinated debt and, to a lesser
extent, senior debt and minority equity
investments. BAMSCF’s investment
objective is to seek total return
consisting of capital appreciation and
income. A majority of the board of
directors (‘‘Board’’) 2 of the Company are
persons who are not ‘‘interested
persons,’’ as defined in section 2(a)(19)
of the Act (the ‘‘Independent
Directors’’). It is anticipated that the
BAMSCF Board will be comprised
entirely of Independent Directors.
2. The Subsidiary is a Wholly-Owned
Investment Sub (as defined below), the
sole business purpose of which is to
hold one or more investments on behalf
of the Company. The Subsidiary is a
Delaware entity.
3. The Existing Co-Investment
Affiliate is a Delaware limited
partnership. In reliance on the exclusion
from the definition of ‘‘investment
company’’ provided by section 3(c)(1) or
3(c)(7) of the Act, none of the CoInvestment Affiliates (as defined below)
will be registered under the Act.
4. Alcentra NY is a Delaware limited
liable company that is registered as an
investment adviser under the
Investment Advisers Act of 1940 (the
‘‘Advisers Act’’). Alcentra NY serves as
investment adviser to the Company
pursuant to an investment advisory
agreement and also serves as investment
adviser to the Existing Co-Investment
Affiliate. Alcentra Limited is
incorporated in the United Kingdom
and Wales and is registered as an
investment adviser under the Advisers
Act. Alcentra Limited is proposed to
serve as a sub-adviser to BAMSCF.
Dreyfus is a corporation organized
under the laws of the State of New York
that is registered as an investment
adviser under the Advisers Act. Dreyfus
is proposed to serve as investment
manager to BAMSCF.
5. Applicants seek an order (‘‘Order’’)
to permit a Regulated Fund 3 (or a
2 ‘‘Board’’ refers to the board of directors of any
Regulated Fund (as defined below).
3 ‘‘Regulated Funds’’ means the Existing
Regulated Funds and any future closed-end
investment companies that (a) are registered under
the Act or have elected to be regulated as a BDC
under the Act, (b) will be advised by an Adviser,
and (c) that intend to participate in the CoInvestment Program. ‘‘Adviser’’ means (a) Alcentra
NY, Alcentra Limited, or Dreyfus or (b) any other
existing or future investment adviser that controls,
is controlled by or is under common control with
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Wholly-Owned Investment Sub) (as
defined below) and one or more other
Regulated Funds (or a Wholly-Owned
Investment Sub) and/or one or more CoInvestment Affiliates 4 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 sections
17(d) and 57(a)(4) and rule 17d–1. ‘‘CoInvestment Transaction’’ means any
transaction in which a Regulated Fund
(or a Wholly-Owned Investment Sub)
participated together with one or more
other Regulated Funds (or a WhollyOwned Investment Sub) and/or one or
more Co-Investment Affiliates in
reliance on the requested Order.
‘‘Potential Co-Investment Transaction’’
means any investment opportunity in
which a Regulated Fund (or a WhollyOwned Investment Sub) could not
participate together with one or more
other Regulated Funds (or a WhollyOwned Investment Sub) and/or one or
more Co-Investment Affiliates without
obtaining and relying on the Order.5
6. Applicants state that a Regulated
Fund may, from time to time, form one
or more Wholly-Owned Investment
Subs.6 Such a subsidiary would be
Alcentra NY, Alcentra Limited or Dreyfus, and is
registered as an investment adviser under the
Advisers Act. The Alcentra Advisers and Dreyfus
are direct or indirect wholly-owned subsidiaries of
The Bank of New York Mellon Corporation (‘‘BNY
Mellon’’). All references herein to the term
‘‘Adviser’’ include successors-in-interest to the
Adviser. A successor-in-interest is limited to any
entity resulting from a reorganization of the Adviser
into another jurisdiction or a change in the type of
business organization.
4 ‘‘Co-Investment Affiliates’’ means the Existing
Co-Investment Affiliate and any Future CoInvestment Affiliate. ‘‘Future Co-Investment
Affiliate’’ means any entity (i) whose investment
adviser is an Adviser, (ii) that would be an
investment company but for Section 3(c)(1) or
3(c)(7) of the Act and (iii) that intends to participate
in the Co-Investment Program.
5 All existing entities that currently intend to rely
on the Order have been named as applicants. Any
other existing or future entity that relies on the
Order in the future will comply with the terms and
conditions of the application.
6 ‘‘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 (and, in the case of
any SBIC Subsidiaries (as defined below), to
maintain a license under the SBA Act (as defined
below) and issue debentures guaranteed by the SBA
(as defined below)); (iii) with respect to which the
Board of a Regulated Fund has the sole authority
to make all determinations with respect to the
Wholly-Owned Investment Sub’s participation
under the conditions to the Application; and (iv)
that would be an investment company but for
Section 3(c)(1) or 3(c)(7) of the Act. ‘‘SBIC
Subsidiary’’ means a Wholly-Owned Investment
Sub that is licensed by the Small Business
Administration (the ‘‘SBA’’) to operate under the
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prohibited from investing in a CoInvestment Transaction with any CoInvestment Affiliate or another
Regulated Fund because it would be a
company controlled by the Regulated
Fund for purposes of sections 17(d) and
57(a)(4) and rule 17d–1. Applicants
request that each Wholly-Owned
Investment Sub be permitted to
participate in Co-Investment
Transactions in lieu of the Regulated
Fund that owns it and that the WhollyOwned Investment Sub’s participation
in any such transaction be treated, for
purposes of the requested Order, as
though the 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
Board would make all relevant
determinations under the conditions
with regard to a Wholly-Owned
Investment Sub’s participation in a CoInvestment Transaction, and the 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 a 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.
7. In selecting investments for the
Regulated Funds, an Adviser will
consider only the investment objective,
investment policies, investment
position, capital available for
investment and other factors relevant to
each Regulated Fund. Each of the CoInvestment Affiliates has or will have
investment objectives and strategies that
are similar to or overlap with the
Objectives and Strategies 7 of each
Regulated Fund. To the extent there is
an investment opportunity that falls
within the Objectives and Strategies of
one or more Regulated Funds and the
investment objectives and strategies of
Small Business Investment Act of 1958, as
amended, the (‘‘SBA Act’’) as a small business
investment company (an ‘‘SBIC’’).
7 ‘‘Objectives and Strategies,’’ with respect to each
Regulated Fund, means the Regulated Fund’s
investment objectives and strategies, 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 ‘‘1933 Act’’), or under the
Securities Exchange Act of 1934 and the Regulated
Fund’s report to stockholders.
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one or more of the Co-Investment
Affiliates, the Advisers would expect
such Regulated Funds and CoInvestment Affiliates to co-invest with
each other, with certain exceptions
based on available capital or
diversification.8
8. After making the determinations
required in conditions 1 and 2(a), other
than in the case of pro rata Dispositions
(as defined below) and Follow-On
Investments,9 as provided in conditions
7 and 8, the applicable Adviser(s) will
present each Potential Co-Investment
Transaction and the proposed allocation
to the directors of the Board that are
eligible to vote under section 57(o) of
the Act (the ‘‘Eligible Directors’’). The
‘‘required majority,’’ as defined in
section 57(o) of the Act (‘‘Required
Majority’’),10 of a Regulated Fund will
approve each Co-Investment
Transaction prior to any investment by
the Regulated Fund.
9. All subsequent activity, meaning
either to (a) sell, exchange, or otherwise
dispose of an investment (collectively, a
‘‘Disposition’’) or (b) complete a FollowOn Investment, in respect of an
investment acquired in a Co-Investment
Transaction will also be made in
accordance with the terms and
conditions set forth in the application.
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 CoInvestment Affiliate and Regulated
Fund in such Disposition or Follow-On
Investment 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
8 The Regulated Funds, however, will not be
obligated to invest, or co-invest, when investment
opportunities are referred to them.
9 ‘‘Follow-On Investment’’ means any additional
investment in an existing portfolio company, the
exercise of warrants, conversion privileges or other
similar rights to acquire additional securities of the
portfolio company.
10 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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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.
10. No Independent 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.
11. Under condition 14, if an Adviser,
its principals, or any person controlling,
controlled by, or under common control
with the Adviser or its principals, and
the Co-Investment Affiliates
(collectively, the ‘‘Holders’’) own in the
aggregate more than 25 percent of the
outstanding voting shares of a Regulated
Fund (the ‘‘Shares’’), then the Holders
will vote such Shares as directed by an
independent third party when voting on
matters specified in the condition.
Applicants believe that this condition
will ensure that the Independent
Directors will act independently in
evaluating the Co-Investment Program,
because the ability of the Adviser or its
principals to influence the Independent
Directors by a suggestion, explicit or
implied, that the Independent Directors
can be removed will be limited
significantly. Applicants represent that
the Independent Directors will evaluate
and approve any such voting trust or
proxy adviser, taking into account its
qualifications, reputation for
independence, cost to the Regulated
Fund’s 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 other
Regulated Funds and Co-Investment
Affiliates may be deemed to be a person
related to a 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
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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
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 any Order of the
Commission granting the requested
relief will be subject to the following
conditions:
1. Each time an Adviser considers a
Potential Co-Investment Transaction for
a Co-Investment Affiliate or another
Regulated Fund that falls within a
Regulated Fund’s then-current
Objectives and Strategies, the applicable
Adviser(s) will make an independent
determination of the appropriateness of
the investment for the Regulated Fund
in light of the Regulated Fund’s thencurrent circumstances.
2. (a) If the applicable Adviser(s)
deems a Regulated Fund’s participation
in any Potential Co-Investment
Transaction to be appropriate for the
Regulated Fund, the applicable
Adviser(s) will then determine an
appropriate level of investment for the
Regulated Fund.
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(b) If the aggregate amount
recommended by the applicable
Adviser(s) 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 Co-Investment
Affiliates, collectively, in the same
transaction, exceeds the amount of the
investment opportunity, the amount
proposed to be invested by each such
party will be allocated among them pro
rata based on each participating party’s
capital available for investment in the
asset class being allocated, up to the
amount proposed to be invested by
each. The applicable Adviser(s) 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(s) will distribute
written information concerning the
Potential Co-Investment Transaction,
including the amount proposed to be
invested by each Regulated Fund and
each Co-Investment Affiliate 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 Co-Investment Affiliates
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
stockholders and do not involve
overreaching in respect of the Regulated
Fund or its stockholders on the part of
any person concerned;
(ii) the Potential Co-Investment
Transaction is consistent with:
(A) The interests of the Regulated
Fund’s stockholders; and
(B) the Regulated Fund’s then-current
Objectives and Strategies;
(iii) the investment by the other
Regulated Funds or any Co-Investment
Affiliates 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 any other Regulated Fund
or Co-Investment Affiliate; provided
that, if any other Regulated Fund or CoInvestment Affiliate, but not the
Regulated Fund itself, gains the right to
nominate a director for election to a
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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(s) agree to,
and do, provide periodic reports to the
Board of the Regulated Fund 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 other Regulated Fund, or any
Co-Investment Affiliate, or any affiliated
person of either receives in connection
with the right of any other Regulated
Fund or a Co-Investment Affiliate 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
Co-Investment Affiliates (which 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 Co-Investment Affiliates,
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 sections 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(s) will
present to the Board of each Regulated
Fund, on a quarterly basis, a record of
all investments in Potential CoInvestment Transactions made by any of
the other Regulated Funds and CoInvestment Affiliates 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
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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
below,11 a Regulated Fund will not
invest in reliance on the Order in any
issuer in which another Regulated
Fund, Co-Investment Affiliate, or any
affiliated person of another Regulated
Fund or Co-Investment Affiliate 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 Co-Investment Affiliate. The
grant to a Co-Investment Affiliate 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 Co-Investment Affiliate 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 Adviser(s) 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 any
participating Co-Investment Affiliates
and any other 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
Co-Investment Affiliate and Regulated
Fund in such Disposition is
proportionate to its outstanding
11 This exception applies only to Follow-On
Investments by a Regulated Fund in issuers in
which that Regulated Fund already holds
investments.
PO 00000
Frm 00069
Fmt 4703
Sfmt 4703
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
applicable Adviser(s) will provide its
written recommendation as to the
Regulated Fund’s participation to the
Regulated Fund’s 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 Co-Investment Affiliate and
each Regulated Fund will bear its own
expenses in connection with any such
Disposition.
8. (a) If any Co-Investment Affiliate 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 Adviser(s)
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 Co-Investment
Affiliate and each Regulated Fund in
such investment is proportionate to its
outstanding investments in the issuer
immediately preceding the Follow-On
Investment; (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); and (iii) the Board of
the Regulated Fund is provided on a
quarterly basis with a list of all FollowOn Investments made in accordance
with this condition. In all other cases,
the applicable Adviser(s) 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.
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Federal Register / Vol. 80, No. 237 / Thursday, December 10, 2015 / Notices
(c) If, with respect to any Follow-On
Investment:
(i) The amount of the Follow-On
Investment is not based on the CoInvestment Affiliates’ and the Regulated
Funds’ outstanding investments
immediately preceding the Follow-On
Investment; and
(ii) the aggregate amount
recommended by the applicable
Adviser(s) to be invested by each
Regulated Fund in the Follow-On
Investment, together with the amount
proposed to be invested by the
participating Co-Investment Affiliates in
the same transaction, exceeds the
amount of the opportunity, then the
amount to be invested by each such
party will be allocated among them pro
rata based on each participating party’s
capital available for investment in the
asset class being allocated, up to the
amount proposed to be invested by
each.
(d) The acquisition of Follow-On
Investments as permitted by this
condition will be considered a CoInvestment Transaction for all purposes
and subject to the other conditions set
forth in the application.
9. The Independent Directors 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 the Co-Investment Affiliates
and the other Regulated Funds that the
Regulated Fund considered but declined
to participate in, so that the
Independent 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 Independent
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 Independent 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 any
Co-Investment Affiliate.
12. The expenses, if any, associated
with acquiring, holding or disposing of
any securities acquired in a Co-
VerDate Sep<11>2014
19:33 Dec 09, 2015
Jkt 238001
Investment Transaction (including,
without limitation, the expenses of the
distribution of any such securities
registered for sale under the 1933 Act)
will, to the extent not payable by the
Advisers under their respective advisory
agreements with the Co-Investment
Affiliates and the Regulated Funds, be
shared by the participating CoInvestment Affiliates and the
participating Regulated Funds in
proportion to the relative amounts of the
securities held or being acquired or
disposed of, as the case may be.
13. Any transaction fee 12 (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 CoInvestment Affiliates and Regulated
Funds on a pro rata basis based on the
amount they each invested or
committed, as the case may be, in such
Co-Investment Transaction. If any
transaction fee is to be held by an
Adviser pending consummation of the
transaction, the fee will be deposited
into an account maintained by the
Adviser at a bank or banks having the
qualifications prescribed in section
26(a)(1) of the Act, and the account will
earn a competitive rate of interest that
will also be divided pro rata among the
participating Co-Investment Affiliates
and Regulated Funds based on the
amount each invests in such CoInvestment Transaction. None of the CoInvestment Affiliates, the Regulated
Funds, the Advisers nor any affiliated
person of the Regulated Funds or CoInvestment Affiliates 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 Co-Investment Affiliates and the
Regulated 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 the Advisers, investment advisory
fees paid in accordance with their
respective investment advisory
agreements with the Regulated Funds
and Co-Investment Affiliates).
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
12 Applicants are not requesting and the staff is
not providing any relief for transaction fees
received in connection with any Co-Investment
Transaction.
PO 00000
Frm 00070
Fmt 4703
Sfmt 4703
76723
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. 2015–31070 Filed 12–9–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–54, OMB Control No.
3235–0056]
Submission for OMB Review;
Comment Request
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE., Washington, DC
20549–2736.
Extension:
Form 8–A.
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget this
request for extension of the previously
approved collection of information
discussed below.
Form 8–A (17 CFR 249.208a) is a
registration statement used to register a
class of securities under Section 12(b) or
Section 12(g) of the Securities Exchange
Act of 1934 (15 U.S.C. 78l(b) and 78l(g))
(‘‘Exchange Act’’). Section 12(a) (15
U.S.C. 78l(a)) of the Exchange Act
makes it unlawful for any member,
broker, or dealer to effect any
transaction in any security (other than
an exempted security) on a national
securities exchange unless such security
has been registered under the Exchange
Act (15 U.S.C. 78a et seq.). Exchange
Act Section 12(b) establishes the
registration procedures. Exchange Act
Section 12(g) requires an issuer that is
not a bank or bank holding company to
register a class of equity securities (other
than exempted securities) within 120
days after its fiscal year end if, on the
last day of its fiscal year, the issuer has
total assets of more than $10 million
and the class of equity securities is
‘‘held of record’’ by either (i) 2,000
persons, or (ii) 500 persons who are not
accredited investors. An issuer that is a
bank or a bank holding company, must
register a class of equity securities (other
E:\FR\FM\10DEN1.SGM
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]]>Agencies
[Federal Register Volume 80, Number 237 (Thursday, December 10, 2015)]
[Notices]
[Pages 76719-76723]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31070]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. IC-31927; File No. 812-14374]
Alcentra Capital Corporation, et al.; Notice of Application
December 4, 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: Applicants request an order to permit business development
companies (``BDCs'') and certain closed-end management investment
companies to co-invest in portfolio companies with each other and with
affiliated investment funds.
Applicants: Alcentra Capital Corporation (the ``Company''); BNY
Mellon Alcentra Multi-Strategy Credit Fund, Inc. (``BAMSCF,'' and
together with the Company, the ``Existing Regulated Funds''); Alcentra
BDC Equity Holdings, LLC (the ``Subsidiary''); Alcentra Middle Market
Fund IV, L.P. (the ``Existing Co-Investment Affiliate''); Alcentra NY,
LLC (``Alcentra NY''); Alcentra Limited (together with Alcentra NY, the
``Alcentra Advisers''), and The Dreyfus Corporation (``Dreyfus'').
DATES: Filing Dates: The application was filed on October 16, 2014 and
amended on April 2, 2015 and August 6, 2015.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on December 29, 2015, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
St. NE., Washington, DC 20549-1090. Applicants: Alcentra Capital
Corporation, 200 Park Avenue, 7th Floor, New York, NY 10166.
FOR FURTHER INFORMATION CONTACT: Vanessa M. Meeks, Senior Counsel, or
Melissa R. Harke, Branch Chief, at (202) 551-6825 (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. The Existing Regulated Funds were each organized as a
corporation under the General Corporate Laws of the State of Maryland.
The Company operates as an externally-managed, non-diversified, closed-
end management investment company that has elected to be regulated as a
business development company (``BDC'') under the Act.\1\ BAMSCF is a
non-diversified, closed-end management investment company registered
under the Act. The Company's investment objective is to generate both
current income and capital appreciation primarily by making direct
investments in lower middle-market companies in the form of
subordinated debt and, to a lesser extent, senior debt and minority
equity investments. BAMSCF's investment objective is to seek total
return consisting of capital appreciation and income. A majority of the
board of directors (``Board'') \2\ of the Company are persons who are
not ``interested persons,'' as defined in section 2(a)(19) of the Act
(the ``Independent Directors''). It is anticipated that the BAMSCF
Board will be comprised entirely of Independent Directors.
---------------------------------------------------------------------------
\1\ Section 2(a)(48) defines a BDC to be any closed-end
investment company that operates for the purpose of making
investments in securities described in sections 55(a)(1) through
55(a)(3) of the Act and makes available significant managerial
assistance with respect to the issuers of such securities.
\2\ ``Board'' refers to the board of directors of any Regulated
Fund (as defined below).
---------------------------------------------------------------------------
2. The Subsidiary is a Wholly-Owned Investment Sub (as defined
below), the sole business purpose of which is to hold one or more
investments on behalf of the Company. The Subsidiary is a Delaware
entity.
3. The Existing Co-Investment Affiliate is a Delaware limited
partnership. In reliance on the exclusion from the definition of
``investment company'' provided by section 3(c)(1) or 3(c)(7) of the
Act, none of the Co-Investment Affiliates (as defined below) will be
registered under the Act.
4. Alcentra NY is a Delaware limited liable company that is
registered as an investment adviser under the Investment Advisers Act
of 1940 (the ``Advisers Act''). Alcentra NY serves as investment
adviser to the Company pursuant to an investment advisory agreement and
also serves as investment adviser to the Existing Co-Investment
Affiliate. Alcentra Limited is incorporated in the United Kingdom and
Wales and is registered as an investment adviser under the Advisers
Act. Alcentra Limited is proposed to serve as a sub-adviser to BAMSCF.
Dreyfus is a corporation organized under the laws of the State of New
York that is registered as an investment adviser under the Advisers
Act. Dreyfus is proposed to serve as investment manager to BAMSCF.
5. Applicants seek an order (``Order'') to permit a Regulated Fund
\3\ (or a
[[Page 76720]]
Wholly-Owned Investment Sub) (as defined below) and one or more other
Regulated Funds (or a Wholly-Owned Investment Sub) and/or one or more
Co-Investment Affiliates \4\ 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 sections 17(d) and 57(a)(4) and rule 17d-1. ``Co-
Investment Transaction'' means any transaction in which a Regulated
Fund (or a Wholly-Owned Investment Sub) participated together with one
or more other Regulated Funds (or a Wholly-Owned Investment Sub) and/or
one or more Co-Investment Affiliates in reliance on the requested
Order. ``Potential Co-Investment Transaction'' means any investment
opportunity in which a Regulated Fund (or a Wholly-Owned Investment
Sub) could not participate together with one or more other Regulated
Funds (or a Wholly-Owned Investment Sub) and/or one or more Co-
Investment Affiliates without obtaining and relying on the Order.\5\
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\3\ ``Regulated Funds'' means the Existing Regulated Funds and
any future closed-end investment companies that (a) are registered
under the Act or have elected to be regulated as a BDC under the
Act, (b) will be advised by an Adviser, and (c) that intend to
participate in the Co-Investment Program. ``Adviser'' means (a)
Alcentra NY, Alcentra Limited, or Dreyfus or (b) any other existing
or future investment adviser that controls, is controlled by or is
under common control with Alcentra NY, Alcentra Limited or Dreyfus,
and is registered as an investment adviser under the Advisers Act.
The Alcentra Advisers and Dreyfus are direct or indirect wholly-
owned subsidiaries of The Bank of New York Mellon Corporation (``BNY
Mellon''). All references herein to the term ``Adviser'' include
successors-in-interest to the Adviser. A successor-in-interest is
limited to any entity resulting from a reorganization of the Adviser
into another jurisdiction or a change in the type of business
organization.
\4\ ``Co-Investment Affiliates'' means the Existing Co-
Investment Affiliate and any Future Co-Investment Affiliate.
``Future Co-Investment Affiliate'' means any entity (i) whose
investment adviser is an Adviser, (ii) that would be an investment
company but for Section 3(c)(1) or 3(c)(7) of the Act and (iii) that
intends to participate in the Co-Investment Program.
\5\ All existing entities that currently intend to rely on the
Order have been named as applicants. Any other existing or future
entity that relies on the Order in the future will comply with the
terms and conditions of the application.
---------------------------------------------------------------------------
6. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment Subs.\6\ Such a subsidiary
would be prohibited from investing in a Co-Investment Transaction with
any Co-Investment Affiliate or another Regulated Fund because it would
be a company controlled by the Regulated Fund for purposes of sections
17(d) and 57(a)(4) and rule 17d-1. Applicants request that each Wholly-
Owned Investment Sub be permitted to participate in Co-Investment
Transactions in lieu of the Regulated Fund that owns it and that the
Wholly-Owned Investment Sub's participation in any such transaction be
treated, for purposes of the requested Order, as though the 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
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 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 a 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.
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\6\ ``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 (and, in the
case of any SBIC Subsidiaries (as defined below), to maintain a
license under the SBA Act (as defined below) and issue debentures
guaranteed by the SBA (as defined below)); (iii) with respect to
which the Board of a Regulated Fund has the sole authority to make
all determinations with respect to the Wholly-Owned Investment Sub's
participation under the conditions to the Application; and (iv) that
would be an investment company but for Section 3(c)(1) or 3(c)(7) of
the Act. ``SBIC Subsidiary'' means a Wholly-Owned Investment Sub
that is licensed by the Small Business Administration (the ``SBA'')
to operate under the Small Business Investment Act of 1958, as
amended, the (``SBA Act'') as a small business investment company
(an ``SBIC'').
---------------------------------------------------------------------------
7. In selecting investments for the Regulated Funds, an Adviser
will consider only the investment objective, investment policies,
investment position, capital available for investment and other factors
relevant to each Regulated Fund. Each of the Co-Investment Affiliates
has or will have investment objectives and strategies that are similar
to or overlap with the Objectives and Strategies \7\ of each Regulated
Fund. To the extent there is an investment opportunity that falls
within the Objectives and Strategies of one or more Regulated Funds and
the investment objectives and strategies of one or more of the Co-
Investment Affiliates, the Advisers would expect such Regulated Funds
and Co-Investment Affiliates to co-invest with each other, with certain
exceptions based on available capital or diversification.\8\
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\7\ ``Objectives and Strategies,'' with respect to each
Regulated Fund, means the Regulated Fund's investment objectives and
strategies, 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 ``1933
Act''), or under the Securities Exchange Act of 1934 and the
Regulated Fund's report to stockholders.
\8\ The Regulated Funds, however, will not be obligated to
invest, or co-invest, when investment opportunities are referred to
them.
---------------------------------------------------------------------------
8. After making the determinations required in conditions 1 and
2(a), other than in the case of pro rata Dispositions (as defined
below) and Follow-On Investments,\9\ as provided in conditions 7 and 8,
the applicable Adviser(s) will present each Potential Co-Investment
Transaction and the proposed allocation to the directors of the Board
that are eligible to vote under section 57(o) of the Act (the
``Eligible Directors''). The ``required majority,'' as defined in
section 57(o) of the Act (``Required Majority''),\10\ of a Regulated
Fund will approve each Co-Investment Transaction prior to any
investment by the Regulated Fund.
---------------------------------------------------------------------------
\9\ ``Follow-On Investment'' means any additional investment in
an existing portfolio company, the exercise of warrants, conversion
privileges or other similar rights to acquire additional securities
of the portfolio company.
\10\ 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).
---------------------------------------------------------------------------
9. All subsequent activity, meaning either to (a) sell, exchange,
or otherwise dispose of an investment (collectively, a ``Disposition'')
or (b) complete a Follow-On Investment, in respect of an investment
acquired in a Co-Investment Transaction will also be made in accordance
with the terms and conditions set forth in the application. 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 Co-Investment Affiliate and Regulated Fund in
such Disposition or Follow-On Investment 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
[[Page 76721]]
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.
10. No Independent 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.
11. Under condition 14, if an Adviser, its principals, or any
person controlling, controlled by, or under common control with the
Adviser or its principals, and the Co-Investment Affiliates
(collectively, the ``Holders'') own in the aggregate more than 25
percent of the outstanding voting shares of a Regulated Fund (the
``Shares''), then the Holders will vote such Shares as directed by an
independent third party when voting on matters specified in the
condition. Applicants believe that this condition will ensure that the
Independent Directors will act independently in evaluating the Co-
Investment Program, because the ability of the Adviser or its
principals to influence the Independent Directors by a suggestion,
explicit or implied, that the Independent Directors can be removed will
be limited significantly. Applicants represent that the Independent
Directors will evaluate and approve any such voting trust or proxy
adviser, taking into account its qualifications, reputation for
independence, cost to the Regulated Fund's 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 other Regulated Funds and Co-Investment Affiliates may
be deemed to be a person related to a 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 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 any Order of the Commission granting the
requested relief will be subject to the following conditions:
1. Each time an Adviser considers a Potential Co-Investment
Transaction for a Co-Investment Affiliate or another Regulated Fund
that falls within a Regulated Fund's then-current Objectives and
Strategies, the applicable Adviser(s) will make an independent
determination of the appropriateness of the investment for the
Regulated Fund in light of the Regulated Fund's then-current
circumstances.
2. (a) If the applicable Adviser(s) deems a Regulated Fund's
participation in any Potential Co-Investment Transaction to be
appropriate for the Regulated Fund, the applicable Adviser(s) will then
determine an appropriate level of investment for the Regulated Fund.
(b) If the aggregate amount recommended by the applicable
Adviser(s) 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 Co-
Investment Affiliates, collectively, in the same transaction, exceeds
the amount of the investment opportunity, the amount proposed to be
invested by each such party will be allocated among them pro rata based
on each participating party's capital available for investment in the
asset class being allocated, up to the amount proposed to be invested
by each. The applicable Adviser(s) 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(s) will distribute written information
concerning the Potential Co-Investment Transaction, including the
amount proposed to be invested by each Regulated Fund and each Co-
Investment Affiliate 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 Co-Investment
Affiliates 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 stockholders and do not involve overreaching in respect of
the Regulated Fund or its stockholders on the part of any person
concerned;
(ii) the Potential Co-Investment Transaction is consistent with:
(A) The interests of the Regulated Fund's stockholders; and
(B) the Regulated Fund's then-current Objectives and Strategies;
(iii) the investment by the other Regulated Funds or any Co-
Investment Affiliates 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 any other Regulated Fund or Co-
Investment Affiliate; provided that, if any other Regulated Fund or Co-
Investment Affiliate, but not the Regulated Fund itself, gains the
right to nominate a director for election to a
[[Page 76722]]
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(s) agree to, and do, provide periodic
reports to the Board of the Regulated Fund 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 other Regulated Fund,
or any Co-Investment Affiliate, or any affiliated person of either
receives in connection with the right of any other Regulated Fund or a
Co-Investment Affiliate 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 Co-Investment Affiliates (which 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 Co-Investment Affiliates, 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 sections 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(s) 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 and Co-Investment Affiliates 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 below,\11\ a Regulated Fund will not invest in reliance on
the Order in any issuer in which another Regulated Fund, Co-Investment
Affiliate, or any affiliated person of another Regulated Fund or Co-
Investment Affiliate is an existing investor.
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\11\ 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 Co-
Investment Affiliate. The grant to a Co-Investment Affiliate 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 Co-Investment Affiliate 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
Adviser(s) 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 any participating Co-
Investment Affiliates and any other 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 Co-Investment Affiliate and Regulated 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 applicable Adviser(s) will provide its written
recommendation as to the Regulated Fund's participation to the
Regulated Fund's 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 Co-Investment Affiliate and each Regulated Fund will bear
its own expenses in connection with any such Disposition.
8. (a) If any Co-Investment Affiliate 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 Adviser(s)
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 Co-Investment Affiliate and each
Regulated Fund in such investment is proportionate to its outstanding
investments in the issuer immediately preceding the Follow-On
Investment; (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); and (iii) the Board of the Regulated Fund
is provided on a quarterly basis with a list of all Follow-On
Investments made in accordance with this condition. In all other cases,
the applicable Adviser(s) 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.
[[Page 76723]]
(c) If, with respect to any Follow-On Investment:
(i) The amount of the Follow-On Investment is not based on the Co-
Investment Affiliates' and the Regulated Funds' outstanding investments
immediately preceding the Follow-On Investment; and
(ii) the aggregate amount recommended by the applicable Adviser(s)
to be invested by each Regulated Fund in the Follow-On Investment,
together with the amount proposed to be invested by the participating
Co-Investment Affiliates in the same transaction, exceeds the amount of
the opportunity, then the amount to be invested by each such party will
be allocated among them pro rata based on each participating party's
capital available for investment in the asset class being allocated, up
to the amount proposed to be invested by each.
(d) The acquisition of Follow-On Investments as permitted by this
condition will be considered a Co-Investment Transaction for all
purposes and subject to the other conditions set forth in the
application.
9. The Independent Directors 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 the Co-Investment Affiliates and the other
Regulated Funds that the Regulated Fund considered but declined to
participate in, so that the Independent 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 Independent 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 Independent 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 any Co-Investment
Affiliate.
12. The expenses, if any, associated with acquiring, holding or
disposing of any securities acquired in a Co-Investment Transaction
(including, without limitation, the expenses of the distribution of any
such securities registered for sale under the 1933 Act) will, to the
extent not payable by the Advisers under their respective advisory
agreements with the Co-Investment Affiliates and the Regulated Funds,
be shared by the participating Co-Investment Affiliates and the
participating Regulated Funds in proportion to the relative amounts of
the securities held or being acquired or disposed of, as the case may
be.
13. Any transaction fee \12\ (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 Co-Investment
Affiliates and Regulated Funds on a pro rata basis based on the amount
they each invested or committed, as the case may be, in such Co-
Investment Transaction. If any transaction fee is to be held by an
Adviser pending consummation of the transaction, the fee will be
deposited into an account maintained by the Adviser at a bank or banks
having the qualifications prescribed in section 26(a)(1) of the Act,
and the account will earn a competitive rate of interest that will also
be divided pro rata among the participating Co-Investment Affiliates
and Regulated Funds based on the amount each invests in such Co-
Investment Transaction. None of the Co-Investment Affiliates, the
Regulated Funds, the Advisers nor any affiliated person of the
Regulated Funds or Co-Investment Affiliates 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 Co-Investment Affiliates and the Regulated 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 the
Advisers, investment advisory fees paid in accordance with their
respective investment advisory agreements with the Regulated Funds and
Co-Investment Affiliates).
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\12\ Applicants are not requesting and the staff is not
providing any relief for transaction fees received in connection
with any Co-Investment Transaction.
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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. 2015-31070 Filed 12-9-15; 8:45 am]
BILLING CODE 8011-01-P
