[Federal Register Volume 65, Number 140 (Thursday, July 20, 2000)]
[Notices]
[Pages 45118-45121]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18347]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 24557; 812-10778]


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

July 13, 2000.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application under sections 6(c) and 17(d) of the 
Investment Company Act of 1940 (the ``Act'') and rule 17d-1 under the 
Act to permit certain joint transactions. The requested order would 
amend an existing order (``Existing Order'').\1\

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    \1\ Massachusetts Mutual Life Insurance Company, et al., 
Investment Company Act Release Nos. 20381 (June 30, 1994) (notice) 
and 20427 (July 26, 1994) (order).

SUMMARY OF APPLICATION: Applicants request an order to permit certain 
registered investment companies to co-invest with certain affiliated 
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entities.

APPLICANTS: Massachusetts Mutual Life Insurance Company and its 
successors \2\ (``MassMutual''); David L. Babson & Company Inc. and its 
successors (``Babson''), and any other person controlling, controlled 
by, or under common control with MassMutual that serves as investment 
adviser to any Registered Fund or any Private Fund (as each is defined 
below) (together with MassMutual, ``MassMutual Adviser''); MassMutual 
Corporate Investors (``CI''); MassMutual Participation Investors 
(``PI'' and with CI, the ``Registered Funds''); MassMutual High Yield 
Partners II LLC, MassMutual Corporate Value Partners Limited (``CVP''); 
MassMutual/Darby CBO LLC, SAAR

[[Page 45119]]

Holdings CDO, Limited, Somers CDO, Limited, Perseus CDO I, Limited, 
MassMutual Global CBO I Limited, Simsbury CLO, Limited, each existing 
or future entity excepted from the definition of investment company 
under section 3(c)(1), 3(c)(5), or 3(c)(7) of the Act, or from 
investment company registration and regulation under section 2(b) of 
the Act, and for which a MassMutual Adviser serves as investment 
adviser (respectively, the ``3(c) Funds'' and the ``2(b) Funds''), and 
any existing or future employees' securities company (as defined in 
section 2(a)(13) of the Act) established by MassMutual (a ``2(a)(13) 
Company'' and, collectively with the 3(c) Funds and 2(b) Funds, the 
``Private Funds'').
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    \2\ For purposes of the requested order, the term ``successors'' 
means an entity that results from a reorganization or a change in 
the type of business organization.

FILING DATES: The application was filed on September 16, 1997, and 
amended on June 23, 2000. Applications have agreed to file an 
amendment, the substance of which is reflected in this notice, during 
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the notice period.

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 August 7, 2000, 
and should be accompanied by proof of service on the 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 may request 
notification of a hearing by writing to the SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, NW., Washington, DC 20549-
0609. Applicants: Massachusetts Mutual Life Insurance Company, 
MassMutual Corporate Investors, MassMutual Participation Investors, and 
MassMutual High Yield Partners II LLC, 1295 State Street, Springfield, 
Massachusetts 01111; David L. Babson & Company Inc., One Memorial 
Drive, Cambridge Massachusetts 02141; MassMutual Corporate Value 
Partners Limited, c/o BankAmerica Trust & Banking (Cayman) Limited, 
Fort Street, George Town, Grand Cayman, Cayman Islands, British West 
Indies; and MassMutual Darby CBO LLC, c/o MassMutual Darby CBO IM Inc., 
c/o Lord Securities Corporation, Two Wall Street, New York, New York, 
10005; SAAR Holdings CDO, Limited, Somers CDO, Limited, and Simsbury 
CLO, Limited, P.O. Box 1984 GT, Elizabeth Square, George Town, Grand 
Cayman, Cayman Island, British West Indies; and Perseus CDO I, Limited 
and MassMutual Global CBO I Limited, c/o Queensgate SPV Service 
Limited, P.O. Box 1093 GT, The Compass Centre, 2nd Floor, Crewe Road, 
Grand Cayman, Cayman Island, British West Indies.

FOR FURTHER INFORMATION CONTACT: Nadya B. Roytblat, Assistant Director, 
(202) 942-0564 (Office of Investment Company Regulation, Division of 
Investment Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee from 
the SEC's Public Reference Branch, 450 Fifth Street, NW, Washington, DC 
20549-0102 (tel. (202) 942-8090).

Applicants' Representations

    1. The Registered Funds, both organized as Massachusetts business 
trusts, are registered under the Act as closed-end management 
investment companies. CI invests primarily in privately placed fixed 
income securities with equity features. PI invests primarily in 
publicly-traded securities and in privately placed fixed income 
securities with or without equity features. CVP is a special purpose 
Cayman Islands corporation and is expected from the definition of 
investment company under section 3(c)(1) of the Act.
    2. MassMutual, organized under the laws of the Commonwealth of 
Massachusetts, is a mutual life insurance company and is registered 
under the Investment Advisers Act of 1940 (``Advisers Act''). Babson is 
an indirect subsidiary of MassMutual and an investment adviser 
registered under the Advisers Act. MassMutal and/or Babson advise the 
Registered Funds and the Private Funds.
    3. Under the Existing Order, MassMutual, the Registered Funds and 
CVP may coinvest in private placement securities. Applicants seek to 
amend the Existing Order to extend the relief to additional Private 
Funds and MassMutual Advisers and modify certain conditions of the 
Existing Order.\3\ For purposes of the requested order, MassMutual or a 
MassMutual Adviser that coinvests with the Registered Funds is referred 
to as a ``MassMutual Investor.''
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    \3\ All existing Private Funds that currently intend to rely on 
the order are named as applicants, and any other existing or future 
Private Fund that subsequently relies on the order will comply with 
the terms and conditions of the application.
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Applicants' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act generally 
prohibit any affiliated person of a registered investment company, or 
affiliated person of an affiliated person, when acting as principal, 
from effecting any joint transaction in which the company participates 
unless the transaction is approved by the SEC. Rule 17d-1 under the Act 
provides that in passing upon applications under section 17(d), the SEC 
will consider whether the participation of a registered investment 
company in a joint enterprise on the basis proposed is consistent with 
the provisions, policies, and purposes of the Act and the extent to 
which the company's participation is on a basis different from or less 
advantageous than that of other participants.
    2. Section 6(c) of the Act provides that an exemptive order may be 
granted where an exemption is necessary or appropriate in the public 
interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Act. 
Applicants request an order under section 6(c) of the Act and rule 17d-
1 under the Act to amend the Prior Order to permit the Registered Funds 
to coinvest in private placement securities with a MassMutual Investor 
and Private Funds.
    3. Applicants state that the Registered Funds were originally 
organized and sold to the public as being able to coinvest in private 
placement securities jointly with MassMutual, and that this strategy 
has been successful over a period of years. Applicants also state that 
the Registered Funds benefit from coinvestments as the increased size 
of the investment creates an advantage in negotiating the price and 
protective covenants and in receiving a larger portion of the 
securities offered in the case of a partial fill (i.e., a situation 
when the amount of securities offered is less than the amount 
originally requested). Applicants also state that, because the assets 
of Private Funds are far greater than the Registered Funds' assets, the 
Registered Funds are able to participate in offerings that otherwise 
might not be available to them. Applicants further contend that the 
conditions of the requested order would assure that the Registered 
Funds participate in the coinvestment transactions on a basis no less 
advantageous than the other participants, and that the transactions are 
consistent with the protection of investors and the provisions, 
policies and purposes of the Act.

Applicants' Conditions

    Applicants agree that the requested order will be subject to the 
following conditions:

[[Page 45120]]

    1. Each time MassMutual (or a MassMutual Adviser to a Registered 
Fund) proposes to acquire private placement securities, the acquisition 
of which would be consistent with the investment objectives and 
policies of a Registered Fund, the Registered Fund's MassMutual Adviser 
will offer the Registered Fund the opportunity to acquire an amount of 
each class of the private placement securities equal to the amount 
proposed to be acquired by MassMutual (or such MassMutual Adviser). 
Each Registered Fund may choose to acquire none of the private 
placement securities or any amount of such securities up to the entire 
amount being offered to it by the MassMutual Adviser. If one Registered 
Fund declines the offer or accepts a portion of the private placement 
securities offered to it, the MassMutual Adviser shall offer the other 
Registered Fund up to 50% of the aggregate amount of the private 
placement securities then available for acquisition; provided that the 
amount of such private placement securities acquired by either 
Registered Fund shall not exceed the amount of private placement 
securities acquired by the MassMutual Investor. For purposes of this 
condition, the amount of any private placement securities acquired or 
proposed to be acquired by a MassMutual Investor shall be deemed also 
to include the amount acquired or proposed to be acquired by a Private 
Fund that is attributable to the MassMutual Investor's direct or 
indirect percentage ownership interest in that Private Fund.
    2. Prior to any co-investment by a Registered Fund, a MassMutual 
Adviser will make an initial determination of whether the acquisition 
of the private placement security is consistent with the investment 
objectives and policies of the Registered Fund and, if so, will submit 
the proposed coinvestment, including the amount proposed to be acquired 
by the Registered Fund, the other Registered Fund, a MassMutual 
Investor and any Private Fund, to the members of the Registered Fund's 
board of trustees who are not interested persons as defined in section 
2(a)(19) of the Act (``Joint Transactions Committee''). A Registered 
Fund may coinvest in a private placement security only if a majority of 
the members of the Joint Transactions Committee who have no direct or 
indirect financial interest in the transaction (``Required Majority'') 
determine that:
    a. The terms of the transaction, including the consideration to be 
paid, are reasonable and fair to the Registered Fund and its 
shareholders and do not involve overreaching of the Registered Fund or 
its shareholders on the part of any person concerned:
    b. The transaction is consistent with the Registered Fund's 
investment objectives and policies as recited in its registration 
statement and its reports to shareholders; and
    c. The coinvestment by another Registered Fund, a MassMutual 
Investor, or a Private Fund would not disadvantage the Registered Fund, 
and participation by the Registered Fund would not be on a basis 
different from or less advantageous than that of other participants.
    3. If a MassMutual Adviser determines that a Registered Fund should 
not acquire any private placement securities offered to it by a 
MassMutual Adviser pursuant to condition 1 above, the MassMutual 
Adviser will submit its determination to the Required majority for 
approval.
    4. The Registered Funds, a MassMutual Investor and any Private Fund 
shall acquire private placement securities in reliance on the order 
only if the terms, conditions, price, class, registration rights, if 
any, and any other rights are the same for each Registered Fund, 
MassMutual Investor and any Private Fund participating in the 
coinvestment (except that a Registered Fund also may have voting 
rights). When more than one Registered Fund proposes to coinvest in the 
same private placement securities, the Required Majority of each 
Registered Fund shall review the transaction, and make the 
determinations set forth in condition 2 above, on or about the same 
time.
    5. Except as described below, no Registered Fund may make a follow-
on investment (i.e., an additional investment in the same entity in 
which the Registered Fund and a MassMutual Investor or a Private Fund 
hold a coinvestment made pursuant to condition 1 above) (``Follow-on 
Investment'') or exercise warrants, conversion privileges, or other 
rights unless the MassMutual Investor or the Private Fund makes such 
Follow-on Investment or exercises such warrants, conversion rights, or 
other rights at the same time and in amounts proportionate to their 
respective holdings of the private placement securities. If a 
MassMutual Investor or a Private Fund anticipates participating in a 
Follow-on Investment or exercising warrants, conversion rights, or 
other rights in an amount disproportionate to its holding, the 
MassMutual Adviser will formulate a recommendation as to the proposed 
Follow-on Investment or exercise of rights by each Registered Fund and 
submit the recommendation to each Registered Fund's Required Majority. 
That recommendation will include an explanation why a MassMutual 
Investor or a Private Fund, as the case may be, is not participating to 
the extent of or exercising its proportionate amount. Prior to any such 
disproportionate Follow-on Investment or exercise, a Registered Fund 
must obtain approval for the transaction as set forth in condition 2 
above. For purposes of this condition 5, the amount of any private 
placement securities acquired or proposed to be acquired by a 
MassMutual Investor shall be deemed also to include the amount acquired 
or proposed to be acquired by a Private Fund that is attributable to 
the MassMutual Investor's direct or indirect percentage ownership 
investment in that Private Fund. Transactions pursuant to this 
condition 5 will be subject to the other conditions set forth in the 
order granted pursuant to this application.
    6. Neither a MassMutual Investor nor a Private Fund will sell, 
exchange, or otherwise dispose of any interests in any private 
placement securities acquired pursuant to the order unless each 
Registered Fund has the opportunity to dispose of the interests at the 
same time, for the same unit consideration, on the same terms and 
conditions and in amounts proportionate to their holdings of the 
private placement securities. With respect to any such transaction, the 
MassMutual Adviser will formulate a recommendation as to the proposed 
participation by a Registered Fund and submit the recommendation to the 
Required Majority. The Registered Fund will dispose of such private 
placement securities to the extent the Required Majority determines 
that the disposition is in the best interests of the Registered Fund, 
is fair and reasonable, and does not involve overreaching of the 
Registered Fund or its shareholders by any person concerned.
    7. 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 a MassMutual Adviser under its investment 
management agreements with the Registered Funds and the Private Funds, 
be shared by the MassMutual Investor, the Private Funds and the 
Registered Funds in proportion to the relative amounts of such private 
placement securities held or being acquired or disposed of, as the case 
may be, by the MassMutual Investor, the

[[Page 45121]]

Private Funds, and the Registered Funds.
    8. The Joint Transactions Committee of each Registered Fund will be 
provided quarterly for review all information concerning co-investments 
made by the MassMutual Investor, the Private Funds, and the Registered 
Funds, including investments made by a MassMutual Investor or the 
Private Funds in which a Registered 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 Registered Fund declined to participate, 
comply with the conditions of the order. In addition, the Joint 
Transactions Committee will consider at least annually the continued 
appropriateness of the standards established for co-investments by a 
Registered Fund, including whether the use of the standards continues 
to be in the best interests of the Registered Fund and its shareholders 
and does not involve overreaching on the part of any person concerned.
    9. Except for a Follow-on Investment made pursuant to condition 5 
above, no coinvestment will be made by a Registered Fund in private 
placement securities of any entity if another Registered Fund, 
MassMutual, a MassMutual Adviser or a Private fund then currently holds 
a security issued by that entity.
    10. Any transaction fee (including break-up or commitment fees but 
excluding broker's fees contemplated by section 17(e)(2) of the Act) 
received by the applicants in connection with a transaction will be 
distributed to the participants on a pro rata basis. If any transaction 
fee is to be held by a MassMutual Adviser pending consummation of the 
transaction, the fee will be deposited into an account maintained by 
the MassMutual 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 participants. No MassMutual Adviser will receive additional 
compensation or remuneration of any kind as a result of or in 
connection with a co-investment, or compensation for its services in 
sponsoring, structuring, or providing managerial assistance to an 
issuer of private placement securities that is not shared pro rata with 
the other coinvestors.
    11. Each applicant 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 the applicant. The 
Registered Funds will maintain records required by section 57(f)(3) of 
the Act as if each of the Registered Funds were a business development 
company and the coinvestments and any follow-on investments (or 
exercise of warrants, conversion rights or other rights) were approved 
under section 57(f).

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-18347 Filed 7-19-00; 8:45 am]
BILLING CODE 8010-01-M