[Federal Register Volume 59, Number 130 (Friday, July 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16495]


[[Page Unknown]]

[Federal Register: July 8, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 20381; 812-8998]

 

Massachusetts Mutual Life Insurance Company, et al.; Notice of 
Application

June 30, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for exemption under the Investment 
Company Act of 1940 (``Act'').

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APPLICANTS: Massachusetts Mutual Life Insurance Company (the 
``Insurance Company''), MassMutual Corporate Investors (``Fund I''), 
and MassMutual Participation Investors (``Fund II'') (Fund I and Fund 
II collectively, the ``Funds'').

RELEVANT ACT SECTIONS: Order requested under sections 6(c) and 17(d) 
and rule 17d-1.

SUMMARY OF APPLICATION: Applicants seek an order amending previous 
orders that allow them to co-invest in securities acquired in private 
placements (``Private Placement Securities''). The amended order would 
let applicants co-invest with an additional entity, MassMutual 
Corporate Value Partners Limited (``Newco''), in Private Placement 
Securities. The order also would modify the previous orders to let 
applicants and Newco sell, exchange, or otherwise dispose of the 
Private Placement Securities and exercise warrants, conversion 
privileges and other rights, and make follow-on investments at 
different times and in differing amounts, subject to the approval of a 
committee comprised of all of the trustees of each participating Fund 
who are not ``interested persons'' (as defined in section 2(a)(19)) of 
the Fund or the Insurance Company (a ``Joint Transaction Committee'').

FILING DATE: The application was filed on May 18, 1994, and amended on 
June 16, 1994.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicants with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on July 25, 1994, 
and should be accompanied by proof of service on applicants, in the 
from 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 such notification by writing to 
the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, DC 
20549. Applicants, Springfield, Massachusetts 01111.

FOR FURTHER INFORMATION CONTACT:James E. Anderson, Staff Attorney, at 
(202) 942-0573, or C. David Messman, Branch Chief, at (202) 942-0564 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the SEC's Public Reference Branch.

Applicants' Representations

    1. The Insurance Company is a mutual life insurance company 
organized under the laws of the Commonwealth of Massachusetts. The 
Insurance Company acts as investment adviser to Fund I and Fund II and 
will act as investment adviser to Newco.
    2. Fund I is a registered, non-diversified, closed-end management 
investment company. Fund I invests primarily in Private Placement 
Securities with equity features.
    3. Fund II is a registered, diversified, closed-end management 
investment company. Fund II invests in Private Placement Securities, 
both with and without equity features.
    4. The Insurance Company and Fund I received exemptive relief from 
Section 17(d) of the Act in 1971, as subsequently amended, to allow the 
Insurance Company to invest concurrently in each issue of Private 
Placement Securities purchased by Fund I.\1\ Fund II was permitted to 
participate in transactions in Private Placement Securities with Fund I 
and the Insurance Company by an exemptive order granted in 1988 (the 
``1988 Order'').\2\
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    \1\Massachusetts Mutual Life Insurance Company, Investment 
Company Act Release Nos. 6634 (Jul. 22, 1971) (notice) and 6690 
(Aug. 19, 1971) (order); amended by Investment Company Act Release 
Nos. 10688 (May 10, 1979) (notice) and 10718 (June 4, 1979) (order) 
and Investment Company Act Release Nos. 14494 (Apr. 30, 1985) 
(notice) and 14532 (May 21, 1985) (order).
    \2\Massachusetts Mutual Life Insurance Company, Investment 
Company Act Release Nos. 16578 (Sept. 28, 1988) (notice) and 16601 
(Oct. 19, 1988) (order).
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    5. The Insurance Company anticipates having its wholly-owned 
subsidiary, MassMutual Holding Company, join with a limited number of 
other United States investors to acquire all the equity securities of 
MassMutual Corporate Value Limited (``MCV''), an entity that is 
presently contemplated to be a special purpose Cayman Islands 
corporation. MCV in turn would join with one or more non-United States 
investors to acquire and hold all the equity securities of Newco, 
another special purpose Cayman Islands corporation. Substantially all 
of the assets of MCV would be invested in Newco. As an alternative to 
the foregoing organization of Newco, may be organized as a United 
States entity (such as a Delaware business trust) in which United 
States investors invest directly, with the Insurance Company holding an 
indirect voting equity stake of approximately 30 to 50 percent.
    6. Both MCV and Newco will be investment funds that are not 
required to be registered under the Act. MCV and Newco: (a) will be 
excepted from the definition of investment company pursuant to section 
3(c)(1) because their outstanding securities (other than short-term 
paper) will be beneficially owned by no more than 100 persons; or (b) 
will not be subject to registration pursuant to section 7(d) because 
they will not be organized or otherwise created under the laws of the 
United States or any state, will not make use of the mails or any means 
or instrumentality of interstate commerce in connection with any public 
offering of their securities, and their outstanding securities (other 
than short-term paper) will be beneficially owned by no more than 100 
persons resident in the United States.
    7. Newco will invest its assets primarily in high yield bank debt 
and public and private high yield debt; mezzanine securities consisting 
of private debt securities with equity features, convertible debt and 
convertible preferred stock; and special situations consisting of 
public or private equity, restructured loans and non-performing debt. 
Many of the Private Placement Securities that are suitable for co-
investment by the Funds also will be suitable investments for Newco.
    8. Applicants seek an order pursuant to sections 6(c) and 17(d) and 
rule 17d-1 to permit them to co-invest with Newco. Applicants also 
propose to modify two conditions of the 1988 Order to allow applicants 
and Newco to sell, exchange, or otherwise dispose of the Private 
Placement Securities and exercise warrants, conversion privileges and 
other rights, and make follow-on investments at different times and in 
differing amounts, subject to the approval of each Fund's Joint 
Transaction Committee. If exemptive relief is granted, the minimum 
amount of Private Placement Securities of any issuance that the 
Insurance Company and Newco collectively will be required or permitted 
to purchase if either or both of the Funds participate will be 
calculated by aggregating the amount purchased for the Insurance 
Company with any amount purchased by Newco that is attributed to the 
Insurance Company based on its direct or indirect percentage ownership 
interest in Newco.
    9. Newco may from time to time incur indebtedness secured by a 
pledge of its assets. For purposes of this application, Newco's pledge 
of Private Placement Securities and a transfer of Private Placement 
Securities by Newco to the Insurance Company will not be deemed to be a 
sale, exchange, or other disposition.

Applicants' Legal Analysis

    1. Section 17(d) and rule 17d-1, in the absence of an exemption 
granted by the SEC, preclude an affiliated persons of a registered 
investment company, or an affiliated person of such person, acting as 
principal, from participating in, or effecting any transaction in 
connection with, any joint enterprise or other joint arrangement in 
which the registered investment company, or a company controlled by 
such registered investment company, is a participant. The determination 
of whether to grant relief under section 17(d) and rule 17d-1 turns on 
whether the participation of the investment company in the joint 
arrangements is consistent with the provisions, policies and purposes 
of the Act and not on a basis different from or less advantageous than 
that of the other participants in such arrangements.
    2. Applicants believe that the conditions in the 1988 Order, as 
modified in this application, ensure that the participation of the 
Funds in Private Placement Securities will be on a basis no less 
advantageous than that of the Insurance Company and Newco and 
consistent with the policies and purposes of the Act.

Applicants' Conditions

    Applicants agree that any order granting the requested relief shall 
be subject to the following conditions:
    1. Each time the Insurance Company proposes to acquire Private 
Placement Securities having equity features, the acquisition of which 
would be consistent with the investment objectives and policies of both 
Fund I and Fund II, the Insurance Company will offer both Fund I and 
Fund II the opportunity to acquire an amount of each class of such 
Private Placement Securities equal to the amount proposed to be 
acquired by the Insurance Company. Each time the Insurance Company 
proposes to acquire Private Placement Securities without equity 
features, the acquisition of which would be consistent with the 
investment objective and policies of Fund II, the Insurance Company 
will offer Fund II the opportunity to acquire an amount of each class 
of such Private Placement equal to the amount of such Private Placement 
Securities proposed to be acquired by the Insurance Company. Each of 
Fund I and Fund II may choose to acquire none of such securities or any 
amount of such securities up to the entire amount of securities offered 
to it by the Insurance Company. If either Fund shall have declined such 
offer or accepted a portion of Private Placement Securities offered to 
it, the Insurance Company shall offer the other Fund up to 50% of the 
aggregate amount of such Private Placement Securities then available 
for acquisition; provided that the amount of any individual issuance of 
Private Placement Securities acquired by either Fund shall not exceed 
the amount of such issuance of Private Placement Securities acquired by 
the Insurance Company. For purposes of this condition, the amount of 
any Private Placement Securities acquired or proposed to be acquired by 
the Insurance Company shall be deemed to equal (a) the amount (if any) 
acquired or proposed to be acquired by the Insurance Company plus (b) 
the amount (if any) acquired or proposed to be acquired by Newco that 
is attributable to the Insurance Company's direct or indirect 
percentage ownership interest in Newco.
    2. If Fund I and Fund II choose, or either of them chooses, to 
acquire Private Placement Securities concurrently with the Insurance 
Company or Newco, then the Insurance Company, Newco, Fund I and Fund II 
or either of the Funds together with the Insurance Company or Newco may 
acquire such Private Placement Securities at the same time and at the 
same unit price without further order of the SEC. If Fund I or Fund II 
chooses to acquire Private Placement Securities, but to acquire less 
than the entire amount of such securities offered to it by the 
Insurance Company, such Fund's decision must be approved by a majority 
vote of the members of the Joint Transaction Committee who have no 
financial interest in the transaction (``Required Majority''). The 
determination of Fund I or Fund II to acquire less than all of such 
securities and the reasons therefor will be recorded and become a part 
of the permanent records of such Fund.
    3. If Fund I or Fund II chooses not to acquire any Private 
Placement Securities offered to it by the Insurance Company, such 
Fund's decision must be approved by the Required Majority of the Joint 
Transactions Committee. The determination of Fund I or Fund II not to 
acquire such Private Placement Securities and the reasons therefore 
will be recorded and become a part of the permanent records of such 
Fund.
    4. None of the Insurance Company, Newco, Fund I or Fund II shall 
``make available significant managerial assistance'' (within the 
meaning of Section 2(a)(47) of the Act) to any issuer (a ``Portfolio 
Company'') of a Private Placement Security that is acquired in a joint 
transaction by the Insurance Company, Newco and the Funds or either of 
them. However, the Insurance Company, Newco and the Funds may take 
steps to protect their rights as creditors.
    5. None of the Insurance Company, Newco, Fund I or Fund II shall be 
involved in the sponsorship of any Portfolio Company.
    6. None of the Insurance Company, Newco, Fund I or Fund II shall be 
materially involved in the structuring of any Portfolio Company or of 
any Private Placement Security issued by a Portfolio Company; provided 
that the Insurance Company may take part in the negotiation of the 
terms (such as coupon, final maturity, average life, sinking funds, 
conversion price, registration, put rights and call protection) and 
appropriate restrictive covenants governing Private Placement 
Securities.
    7. Neither the Insurance Company nor Newco shall receive any 
transaction fees in connection with any investment in any security of a 
Portfolio Company (such fees include monitoring, ``topping,'' breakup, 
and termination fees).
    8. None of the Insurance Company, Fund I, Fund II, or Newco will 
make follow-on investments (``Follow-on Investments'') or will exercise 
warrants, conversion privileges, or other rights with respect to 
Private Placement Securities of a class held by the Funds or either of 
them and the Insurance Company and/or Newco, unless each Fund and the 
Insurance Company and/or Newco holding such Private Placement 
Securities shall make such Follow-on Investments or exercise such 
rights and such investments or exercises are made at the same time and 
in amounts proportionate to their respective holdings of such Private 
Placement Securities, subject, however, to the determinations made by a 
Fund's Joint Transaction Committee, as set forth below.
    If (a) the Insurance Company and/or Newco determines to make a 
Follow-on Investment or exercise warrants, conversion privileges, or 
other rights with respect to Private Placement Securities of a class 
held by the Funds or either of them and the Insurance Company and/or 
Newco, and the Insurance Company determines not to make such Follow-on 
Investments or exercise such rights with respect to such Private 
Placement Securities on behalf of the Funds or either of them in 
accordance with the first paragraph of this condition, or (b) the 
Insurance Company determines to cause the Funds or either of them to 
make Follow-on Investments or to exercise warrants, conversion 
privileges, or other rights with respect to a class of Private 
Placement Securities of a class held by the Funds or either of them, 
and the Insurance Company, Newco, or the other Fund, as the case may 
be, shall not also so elect to make such Follow-On Investments or 
exercise such rights in accordance with the first paragraph of this 
condition, then the Insurance Company shall notify in writing the 
chairman of the Joint Transactions Committee of the Fund or Funds 
holding such Private Placement Securities by sending the relevant 
material to the chairman by messenger, overnight delivery or, to the 
extent feasible, by telecopy. Such notification shall include a written 
presentation regarding the proposed transaction, including the reasons 
for the Insurance Company's recommendations to the Fund in light of the 
contrary decision made with respect to the Insurance Company, Newco, or 
the other Fund. The chairman shall convene a meeting of the Joint 
Transactions Committee no later than five business days after receipt 
of the above-referenced notification, at which meeting the Joint 
Transactions Committee will consider the Insurance Company's 
recommendation and, based upon its review, shall determine to make such 
Follow-On Investments or exercise the rights with respect to such 
Private Placement Securities if it determines (pursuant to the vote of 
the Required Majority) such action is in the best interests of the 
Fund, is fair and reasonable to the Fund and its shareholders, and does 
not involve overreaching of the Fund and its shareholders on the part 
of any person concerned. The Joint Transactions Committee's 
determination, and the reasons therefor, shall be recorded and made a 
part of the records of the Fund. None of the Insurance Company, Newco, 
or the Funds of either of them shall effect such Follow-On Investments 
or exercise such rights until the Joint Transactions Committee of each 
Fund considering such transaction has determined, pursuant to the vote 
of the Required Majority, the action to be taken by the Fund.
    9. None of the Insurance Company, Fund I, Fund II, or Newco will 
sell, exchange, or otherwise dispose of any interest in any Private 
Placement Securities of a class held by the Funds or either of them and 
the Insurance Company and/or Newco, unless each Fund holding such 
Private Placement Securities and the Insurance Company and/or Newco, if 
it or they hold such securities, shall dispose of such interest in such 
Private Placement Securities and such dispositions shall be made at the 
same time, for the same unit consideration, and in amounts 
proportionate to their respective holdings of such Private Placement 
Securities, subject, however, to the determinations made by a Fund's 
Joint Transactions Committee, as set forth below.
    If (a) the Insurance Company and/or Newco determines to sell, 
exchange, or otherwise dispose of any interest in any Private Placement 
Securities of a class held by the Funds or either of them and the 
Insurance Company and/or Newco, and the Insurance Company determines 
not to so dispose of the Private Placement Securities held by the Funds 
or either of them in accordance with the first paragraph of this 
condition, or (b) the Insurance Company determines to cause the Funds 
or either of them to sell, exchange, or otherwise dispose of any 
interest in Private Placement Securities of a class held by the Funds 
or either of them, and the Insurance Company, Newco, or the other Fund, 
as the case may be, shall not also so dispose of such interest in the 
Private Placement Securities in accordance with the first paragraph of 
this condition, then the Insurance Company shall notify in writing the 
chairman of the Joint Transactions Committee of the Fund or Funds 
holding such Private Placement Securities by sending the relevant 
material to the chairman by messenger, overnight delivery or, to the 
extent feasible, by telecopy. Such notification shall include a written 
presentation regarding the proposed transaction, including the reasons 
for the Insurance Company's recommendations to the Fund in light of the 
contrary decision made with respect to the Insurance Company, Newco, or 
the other Fund. The chairman shall convene a meeting of the Joint 
Transactions Committee no later than five business days after receipt 
of the above-referenced notification, at which meeting the Joint 
Transactions Committee will consider the Insurance Company's 
recommendation and, based upon its review, the Joint Transactions 
Committee shall determine (pursuant to the vote of a Required 
Majority), to sell, exchange, or dispose of such Private Placement 
Securities pursuant to the Insurance Company's recommendation if it 
determines that such action is in the best interests of the Fund, is 
fair and reasonable to the Fund and its shareholders, and does not 
involve overreaching of the Fund and its shareholders on the part of 
any person concerned. The Joint Transactions Committee's determination, 
and the reasons therefor, shall be recorded and made a part of the 
records of the Fund. None of the Insurance Company, Newco, or the Funds 
of either of them shall effect such disposition until the Joint 
Transactions Committee of each Fund considering such transaction has 
determined, pursuant to the vote of the Required Majority, the action 
to be taken by the Fund.
    10. The expenses, if any, associated with acquiring, holding or 
disposing of any Private Placement Securities (including, without 
limitation, the expenses of the distribution of any such securities 
registered for sale under the Securities Act of 1933) shall, to the 
extent not payable solely by the Insurance Company under its investment 
management agreements with each of the Funds and Newco, be shared by 
the Insurance Company, Newco and the Funds in proportion to the 
relative amounts of such securities held or being acquired or disposed 
of, as the case may be, by the Insurance Company, Newco, and each of 
the Funds.
    11. The Joint Transactions Committee of each Fund will be provided 
quarterly for review all information concerning co-investments made by 
the Insurance Company, Newco and the Funds, including investments made 
by the Insurance Company or Newco in which the Fund declined to 
participate, so that the Joint Transactions Committee may determine 
whether all investments made during the preceding quarter, including 
those investments in which the Fund declined to participate, comply 
with the conditions set forth above.
    12. Each of the applicants will maintain and preserve all records 
required by Section 31 of the Act and any other provisions of the Act 
and the rules and regulations thereunder applicable to such applicant.
    13. For purposes of the requested order, any Private Placement 
Securities acquired or held by applicants and Newco that are identical 
in all respects except for the fact that only Private Placement 
Securities acquired and held by both Funds or either of them have 
voting rights shall be considered to be of the same class of 
securities.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-16495 Filed 7-7-94; 8:45 am]
BILLING CODE 8010-01-M