[Federal Register Volume 83, Number 40 (Wednesday, February 28, 2018)]
[Notices]
[Pages 8712-8717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-04086]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33031; File No. 812-14766]


Bain Capital Specialty Finance, Inc., et al.

February 23, 2018.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

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    Notice of application for an order under sections 17(d) and 57(i) 
of the Investment Company Act of 1940 (the ``Act'') and rule 17d-1 
under the Act to permit certain joint transactions otherwise prohibited 
by sections 17(d) and 57(a)(4) of the Act and rule 17d-1 under the Act.
    Summary of Application: Applicants request an order to permit 
business development companies (``BDCs'') to co-invest in portfolio 
companies with each other and with affiliated investment funds.
    Applicants: Bain Capital Specialty Finance, Inc. (``BCSF''), 
Griffin Institutional Access Credit Fund; BCSF Advisors, LP 
(``BCSFA''), on behalf of itself and its successors; \1\ Griffin 
Capital Credit Advisor, LLC (``GIACF''); Bain Capital Credit, LP 
(``Bain''), Bain Capital Credit (Australia), Pty. Ltd, Bain Capital 
Credit (Asia), LLC, Bain Capital Investments (Europe) Ltd, Bain Capital 
Credit, Ltd., Bain Capital Credit CLO Advisors, LP (together with 
BCSFA, the ``Existing Bain Advisers''), on behalf of themselves and 
their successors; Avery Point II CLO, Ltd, Avery Point III CLO, Ltd, 
Avery Point IV CLO, Ltd, Avery Point V CLO, Ltd, Avery Point VI CLO, 
Ltd, Newhaven II CLO, Designated Activity Co, Race Point IX CLO, Ltd, 
Race Point X CLO, Ltd, Race Point V CLO, Ltd, Race Point VI CLO, Ltd, 
Race Point VII CLO, Ltd, Race Point VIII CLO, Ltd, Bain Capital CLO 
Partners, L.P., Sankaty Credit Opportunities (Offshore Master) IV, LP, 
Sankaty Credit Opportunities II, LP, Sankaty Credit Opportunities III, 
LP, Sankaty Credit Opportunities IV, LP, Bain Capital Distressed & 
Special Situations 2013 (AIV I), L.P., Bain Capital Distressed & 
Special Situations 2013 (AIV II Master), L.P., Bain Capital Distressed 
& Special Situations 2013 (A), L.P., Bain Capital Distressed & Special 
Situations 2013 (A2 Master), L.P., Bain Capital Distressed & Special 
Situations 2013 (B), L.P., Bain Capital Direct Lending 2015 (L), L.P., 
SDLF (L-A), LLC, Bain Capital Direct Lending 2015 (U), L.P., Bain 
Capital Distressed & Special Situations 2013 (D), L.P., Bain Capital 
High Income Feeder II, L.P., Bain Capital High Income Feeder, Ltd., 
Bain Capital High Income Partnership, L.P., Bain Capital Credit Managed 
Account (CalPERS), L.P., Bain Capital Credit Managed Account (E), L.P., 
Bain Capital Credit Managed Account (Newport Mobile), L.P., Bain 
Capital Credit Managed Account (NZSF), L.P., Bain Capital Credit 
Managed Account (PSERS), L.P., Bain Capital Credit Managed Account 
(TCCC), L.P., Bain Capital Credit Managed Account (UCAL), L.P., Bain 
Capital Middle Market Credit 2010 (Offshore II Master), L.P., Bain 
Capital Middle Market Credit 2010 (Offshore Master), L.P., Bain Capital 
Middle Market Credit 2014, L.P., Bain Capital Middle Market Credit 2014 
(A Master), L.P., Bain Capital Middle Market Credit 2014 (F), L.P., 
Bain Capital Middle Market Credit 2010, L.P., Bain Capital Credit Rio 
Grande FMC, L.P., Bain Capital Senior Loan Fund (SRI), L.P., Bain 
Capital Senior Loan Fund Public Ltd Co, Bain Capital Senior Loan Fund, 
L.P., Warehouse Funding Avery Point VII, LLC, Queenscliff Trust, Bain 
Capital Credit Managed Account (CLO), L.P., Cape Schanck Direct Lending 
Trust, Bain Capital Distressed & Special Situations 2016 (A), L.P., 
Bain Capital Distressed & Special Situations 2016 (B Master), L.P., 
Bain Capital Distressed & Special Situations 2016 (B), L.P., Bain 
Capital Distressed & Special Situations 2016 (EU), L.P., Bain Capital 
Distressed & Special Situations 2016 (EU Master), L.P., Bain Capital 
Distressed & Special Situations 2016 (F), L.P., Sankaty Credit 
Opportunities (F) Europe, L.P., Bain Capital Credit Managed Account 
(Blanco), L.P., Bain Capital Credit Managed Account (FSS), L.P., Bain 
Capital Structured Credit Fund, L.P., Bain Capital Special Situations 
Asia, L.P., Sankaty CLO Opportunities Coinvestment Fund, L.P., Bain 
Capital Distressed & Special Situations 2016 (G), L.P., Bain Capital 
Credit CLO 2016-2, Ltd, Bain Capital Credit CLO 2017-1, Ltd, Bain 
Capital Credit CLO 2017-2, Ltd, Newhaven CLO, Designated Activity Co, 
Rye Harbour CLO, Designated Activity Co, Cavalry CLO IV, Ltd., Cavalry 
CLO V, LTD., Bain Capital Euro CLO 2017-1, Designated Activity Co, Bain 
Capital Euro CLO 2017-2, Designated Activity Co (collectively, the 
``Existing Affiliated Funds'').
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    \1\ The term ``successor,'' as applied to each Adviser (defined 
below), means an entity that results from a reorganization into 
another jurisdiction or change in the type of business organization.
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    Filing Dates: The application was filed on April 20, 2017 and 
amended on October 4, 2017 and February 20, 2018.
    Hearing or Notification of Hearing: An order granting the requested 
relief will

[[Page 8713]]

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 
March 20, 2018, 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: Mr. Ranesh Ramanathan, 
Esq., General Counsel, Bain Capital Credit, LP, 200 Clarendon Street, 
37th Floor, Boston, MA, 02116; Mr. Howard S. Hirsch, Esq., Vice 
President and Secretary, Griffin Capital Credit Advisor, LLC, Griffin 
Capital Plaza, 1520 E. Grand Avenue, El Segundo, CA 90245.

FOR FURTHER INFORMATION CONTACT: Elizabeth G. Miller, Senior Counsel, 
at (202) 551-8707 or Holly Hunter-Ceci, Assistant Chief Counsel, 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 website by searching for the file number, or for an 
applicant using the Company name box, at http://www.sec.gov/search/search.htm or by calling (202) 551-8090.
    Applicants' Representations:
    1. BCSF is a Delaware corporation organized as a closed-end 
management investment company that has elected to be regulated as a BDC 
under Section 54(a) of the Act.\2\ BCSF's Objectives and Strategies \3\ 
are to provide risk-adjusted returns and current income to investors. 
BCSF invests primarily in middle-market companies with between $10 
million and $150 million in annual earnings before interest, taxes, 
depreciation and amortization. BCSF intends to focus on senior 
investments with a first or second lien on collateral and strong 
structures and documentation intended to protect the lender.
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    \2\ Section 2(a)(48) defines a BDC to be any closed-end 
investment company that operates for the purpose of making 
investments in securities described in sections 55(a)(1) through 
55(a)(3) of the Act and makes available significant managerial 
assistance with respect to the issuers of such securities.
    \3\ ``Objectives and Strategies'' means a Regulated Fund's 
investment objectives and strategies, as described in the Regulated 
Fund's registration statement on Form 10, other filings the 
Regulated Fund has made with the Commission under the Securities Act 
of 1933 (the ``Securities Act''), or under the Securities Exchange 
Act of 1934 and the Regulated Fund's reports to shareholders.
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    2. GIACF is a Delaware statutory trust organized as a closed-end 
investment management company that has elected to operate as an 
interval fund pursuant to Rule 23c-3 under the Act. GIACF's Objectives 
and Strategies are to generate a return comprised of both current 
income and capital appreciation with an emphasis on current income with 
low volatility and low correlation to the broader markets. GIACF 
pursues its investment objective by investing primarily in secured debt 
(including senior secured, unitranche and second lien debt) and 
unsecured debt (including senior unsecured and subordinated debt) 
issued by private or public U.S. companies. GIACF's portfolio will 
consist of a core of syndicated high yield bonds and bank loans.
    3. The board of directors of each of BCSF and GIACF (the ``Board'') 
\4\ is comprised of five directors, three of whom are not ``interested 
persons,'' within the meaning of Section 2(a)(19) of the Act (the 
``Non-Interested Directors'').
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    \4\ The term ``Board'' refers to the board of directors or 
trustees of any Regulated Fund.
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    4. BCSFA is registered as an investment adviser under the 
Investment Advisers Act of 1940 (the ``Advisers Act''). BCSFA serves as 
investment adviser to BCSF and sub-adviser to GIACF. It is a wholly-
owned subsidiary of Bain.
    5. Griffin is registered an investment adviser under the Advisers 
Act. Griffin serves as investment adviser to GIACF. Griffin is an 
indirect majority-owned subsidiary of Griffin Capital Company, LLC.
    6. Bain is registered as an investment adviser under the Advisers 
Act. Bain serves as investment adviser to certain Existing Affiliated 
Funds and either it or another Bain Adviser will serve as the 
investment adviser to any Future Affiliated Funds (defined below).
    7. Bain Capital Credit (Australia), Pty. Ltd., an Australian 
proprietary company formed in 2012, is authorized and regulated by the 
Australian Securities and Investments Commission. It is a wholly-owned 
subsidiary of Bain.
    8. Bain Capital Investments (Europe), Limited, a United Kingdom 
private limited company formed in 2014, and Bain Capital Credit, Ltd., 
a United Kingdom private limited company formed in 2005, are authorized 
and regulated by the U.K. Financial Conduct Authority. Bain Capital 
Investments (Europe) Limited is a subsidiary of Bain Capital, LP. Bain 
Capital Credit, Ltd. is a wholly-owned subsidiary of Bain.
    9. Bain Capital Credit Asia, LLC is a limited liability company 
organized in the State of Delaware in 2014 that has been registered in 
Hong Kong under the Hong Kong Companies Ordinance. It is a wholly-owned 
subsidiary of Bain.
    10. Bain Capital Credit CLO Advisors, LP is a limited partnership 
organized in the State of Delaware and is registered with the 
Commission under the Advisers Act. It is a wholly-owned subsidiary of 
Bain.
    11. Applicants state that the Bain Advisers and the Griffin 
Advisers are not affiliated persons, or affiliated persons of 
affiliated persons (as defined in the Act), except for the affiliation 
that arises as a result of serving as the advisers of any Regulated 
Fund that is advised by a Griffin Adviser and sub-advised by a Bain 
Adviser.
    12. As Bain Capital, LP controls Bain, and will control any other 
Bain Adviser, it may be deemed to control the Regulated Funds and the 
Affiliated Funds. Applicants state that Bain Capital, LP is a holding 
company and does not currently offer investment advisory services to 
any person and is not expected to do so in the future. Applicants state 
that as a result, Bain Capital, LP has not been included as an 
Applicant.
    13. Applicants seek an order (``Order'') to permit a Regulated Fund 
\5\ and one or more Regulated Funds and/or one or more Affiliated Funds 
\6\ to participate in the same investment opportunities through a 
proposed co-investment program (the ``Co-

[[Page 8714]]

Investment Program'') where such participation would otherwise be 
prohibited under section 57(a)(4) and rule 17d-1 by (a) co-investing 
with each other in securities issued by issuers in private placement 
transactions in which an Adviser \7\ negotiates terms in addition to 
price; \8\ and (b) making additional investments in securities of such 
issuers, including through the exercise of warrants, conversion 
privileges, and other rights to purchase securities of the issuers 
(``Follow-On Investments''). ``Co-Investment Transaction'' means any 
transaction in which a Regulated Fund (or its Wholly-Owned Investment 
Sub, as defined below) participated together with one or more other 
Regulated Funds and/or one or more Affiliated Funds in reliance on the 
requested Order. ``Potential Co-Investment Transaction'' means any 
investment opportunity in which a Regulated Fund (or its Wholly-Owned 
Investment Sub, as defined below) could not participate together with 
one or more Affiliated Funds and/or one or more other Regulated Funds 
without obtaining and relying on the Order.\9\
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    \5\ ``Regulated Fund'' means Existing Regulated Funds and any 
Future Regulated Fund. ``Future Regulated Fund'' means any closed-
end management investment company (a) that is registered under the 
Act or has elected to be regulated as a BDC, (b)(i) whose investment 
adviser is a Bain Adviser or (ii) whose investment adviser is a 
Griffin Adviser and whose sub-adviser is a Bain Adviser, and (c) 
that intends to participate in the Co-Investment Program.
    The term ``Adviser'' means any Bain Adviser or Griffin Adviser. 
The term ``Bain Adviser'' means any Existing Bain Adviser and any 
future investment adviser that (i) controls, is controlled by or is 
under common control with Bain Capital, LP, and (ii) is registered 
as an investment adviser under the Advisers Act and (iii) is not a 
Regulated Fund or a subsidiary of a Regulated Fund.
    \6\ ``Affiliated Fund'' means the Existing Affiliated Funds and 
any Future Affiliated Fund. ``Future Affiliated Fund'' means any 
entity (a) whose investment adviser is a Bain Adviser, (b) that 
would be an investment company but for section 3(c)(1) or 3(c)(7) of 
the Act, and (c) that intends to participate in the Co-Investment 
Program.
    \7\ The term ``Adviser'' means any Bain Adviser or Griffin 
Adviser.
    \8\ The term ``private placement transactions'' means 
transactions in which the offer and sale of securities by the issuer 
are exempt from registration under the Securities Act.
    \9\ All existing entities that currently intend to rely upon the 
requested Order have been named as applicants. Any other existing or 
future entity that subsequently relies on the Order will comply with 
the terms and conditions of the application.
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    14. Applicants state that a Regulated Fund may, from time to time, 
form one or more Wholly-Owned Investment Subs.\10\ Such a subsidiary 
would be prohibited from investing in a Co-Investment Transaction with 
any Affiliated Fund or Regulated Fund because it would be a company 
controlled by its parent Regulated Fund for purposes of section 
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 its parent Regulated Fund and that the Wholly-
Owned Investment Sub's participation in any such transaction be 
treated, for purposes of the requested Order, as though the parent 
Regulated Fund were participating directly. Applicants represent that 
this treatment is justified because a Wholly-Owned Investment Sub would 
have no purpose other than serving as a holding vehicle for the 
Regulated Fund's investments and, therefore, no conflicts of interest 
could arise between the Regulated Fund and the Wholly-Owned Investment 
Sub. The Regulated Fund's Board would make all relevant determinations 
under the conditions with regard to a Wholly-Owned Investment Sub's 
participation in a Co-Investment Transaction, and the Regulated Fund's 
Board would be informed of, and take into consideration, any proposed 
use of a Wholly-Owned Investment Sub in the Regulated Fund's place. If 
the Regulated Fund proposes to participate in the same Co-Investment 
Transaction with any of its Wholly-Owned Investment Subs, the Board 
will also be informed of, and take into consideration, the relative 
participation of the Regulated Fund and the Wholly-Owned Investment 
Sub.
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    \10\ The term ``Wholly-Owned Investment Sub'' means an entity 
(i) that is wholly-owned by a Regulated Fund (with the Regulated 
Fund at all times holding, beneficially and of record, 100% of the 
voting and economic interests); (ii) whose sole business purpose is 
to hold one or more investments on behalf of the Regulated Fund; 
(iii) with respect to which the Regulated Fund's Board has the sole 
authority to make all determinations with respect to the entity's 
participation under the conditions of the Application; and (iv) that 
would be an investment company but for section 3(c)(1) or 3(c)(7) of 
the Act.
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    15. Applicants note that Griffin is responsible for the overall 
management of GIACF's activities, and BCSFA is responsible for the day-
to-day management of GIACF's investment portfolio, in each case 
consistent with their fiduciary duties. A Griffin Adviser will serve as 
the investment adviser to any Regulated Fund with a Bain Adviser as its 
sub-adviser. In the case of a Regulated Fund with a Bain Adviser as 
sub-adviser, the Bain Adviser will identify and recommend the Potential 
Co-Investment Transactions for the Regulated Fund, and the applicable 
sub-advisory agreement will require the Bain Adviser to present such 
Potential Co-Investment Transaction to the applicable Griffin Adviser, 
which will have the authority to approve or reject it for the Regulated 
Fund.
    16. When considering Potential Co-Investment Transactions for any 
Regulated Fund, the applicable Adviser will consider only the 
Objectives and Strategies, investment policies, investment positions, 
capital available for investment, and other pertinent factors 
applicable to that Regulated Fund. The Regulated Fund Advisers expect 
that any portfolio company that is an appropriate investment for a 
Regulated Fund should also be an appropriate investment for one or more 
other Regulated Funds and/or one or more Affiliated Funds, with certain 
exceptions based on available capital or diversification.\11\
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    \11\ The Regulated Funds, however, will not be obligated to 
invest, or co-invest, when investment opportunities are referred to 
them.
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    17. Other than pro rata dispositions and Follow-On Investments as 
provided in conditions 7 and 8, and after making the determinations 
required in conditions 1 and 2(a), the Advisers will present each 
Potential Co-Investment Transaction and the proposed allocation to the 
directors of the Board eligible to vote under section 57(o) of the Act 
(``Eligible Directors''), and the ``required majority,'' as defined in 
section 57(o) of the Act (``Required Majority'') \12\ will approve each 
Co-Investment Transaction prior to any investment by the participating 
Regulated Fund.
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    \12\ 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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    18. Applicants state that a Bain Adviser has an investment 
committee through which it will carry out its obligation under 
condition 1 to make a determination as to the appropriateness of the 
Potential Co-Investment Transaction for any Regulated Fund. Applicants 
represent that in the case of a Potential Co-Investment Transaction, 
the Bain Adviser would apply its allocation policies and procedures in 
determining the proposed allocation for the Regulated Fund consistent 
with the requirements of condition 2(a). Applicants further note that 
each Griffin Adviser and Bain Adviser has adopted its own allocation 
policies and procedures that take into account the allocation policies 
and procedures for the Regulated Funds. Applicants believe that while 
each Bain Adviser client may not participate in each investment 
opportunity, over time each Bain Adviser client would participate in 
investment opportunities fairly and equitably.
    19. With respect to the pro rata dispositions and Follow-On 
Investments provided in conditions 7 and 8, a Regulated Fund may 
participate in a pro rata disposition or Follow-On Investment without 
obtaining prior approval of the Required Majority if, among other 
things: (i) The proposed participation of each Regulated Fund and 
Affiliated Fund in such disposition is proportionate to its outstanding 
investments in the issuer immediately preceding the disposition or 
Follow-On Investment, as the case may be; and (ii) the Board of the 
Regulated Fund has approved that Regulated Fund's participation in pro 
rata dispositions and Follow-On Investments as being in the best 
interests of the Regulated Fund. If the Board does not so approve, any 
such disposition or Follow-On Investment will be submitted to the 
Regulated Fund's Eligible Directors. The

[[Page 8715]]

Board of any Regulated Fund may at any time rescind, suspend or qualify 
its approval of pro rata dispositions and Follow-On Investments with 
the result that all dispositions and/or Follow-On Investments must be 
submitted to the Eligible Directors.
    20. No Non-Interested Director of a Regulated Fund will have a 
financial interest in any Co-Investment Transaction, other than through 
share ownership in one of the Regulated Funds.

Applicants' Legal Analysis

    1. Section 57(a)(4) of the Act prohibits certain affiliated persons 
of a BDC from participating in joint transactions with the BDC or a 
company controlled by a BDC in contravention of rules as prescribed by 
the Commission. Under section 57(b)(2) of the Act, any person who is 
directly or indirectly controlling, controlled by, or under common 
control with a BDC is subject to section 57(a)(4). Applicants submit 
that each of the Regulated Funds and Affiliated Funds be deemed to be a 
person related to each Regulated Fund in a manner described by section 
57(b) by virtue of being under common control. In addition, section 
57(b) applies to any investment adviser to a Regulated Fund that is a 
BDC and to any section 2(a)(3)(C) affiliates of the investment adviser, 
including GIACF and the Affiliated Funds. 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.
    4. Applicants also represent that if the Advisers, certain 
employees and principals of Bain and its affiliated advisers 
(collectively, the ``Principals''), any person controlling, controlled 
by, or under common control with the Advisers or the Principals, and 
the Affiliated Funds (collectively, the ``Holders'') own in the 
aggregate more than 25 percent of the outstanding voting securities of 
a Regulated Fund (``Shares''), then the Holders will vote such Shares 
as required under Condition 14. Applicants believe that this condition 
will ensure that the Non-Interested Directors will act independently in 
evaluating the Co-Investment Program, because the ability of the 
Advisers or the Principals to influence the Non-Interested Directors by 
a suggestion, explicit or implied, that the Non-Interested Directors 
can be removed will be limited significantly. Applicants represent that 
the Non-Interested Directors will evaluate and approve any such 
independent party, taking into account its qualifications, reputation 
for independence, cost to the shareholders, and other factors that they 
deem relevant.

Applicants' Conditions

    Applicants agree that the Order will be subject to the following 
conditions:
    1. Each time a Bain Adviser considers a Potential Co-Investment 
Transaction for an Affiliated Fund or another Regulated Fund that falls 
within a Regulated Fund's then-current Objectives and Strategies, each 
Adviser to a Regulated Fund will make an independent determination of 
the appropriateness of the investment for such Regulated Fund in light 
of the Regulated Fund's then-current circumstances.
    2. (a) If each Adviser to a Regulated Fund deems the Regulated 
Fund's participation in any Potential Co-Investment Transaction to be 
appropriate for the Regulated Fund, the Adviser (or Advisers if there 
are more than one) will then determine an appropriate level of 
investment for the Regulated Fund.
    (b) If the aggregate amount recommended by the Adviser (or Advisers 
if there are more than one) to a Regulated Fund to be invested by the 
Regulated Fund in the Potential Co-Investment Transaction, together 
with the amount proposed to be invested by the other participating 
Regulated Funds and Affiliated Funds, collectively, in the same 
transaction, exceeds the amount of the investment opportunity, the 
amount of the investment opportunity will be allocated among the 
Regulated Funds and Affiliated Funds pro rata based on each 
participant's capital available for investment in the asset class being 
allocated, up to the amount proposed to be invested by each. The 
Adviser (or Advisers if there are more than one) to a Regulated Fund 
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)above, the Adviser to the Regulated Fund (or Advisers if there are 
more than one) will distribute written information concerning the 
Potential Co-Investment Transaction (including the amount proposed to 
be invested by each participating Regulated Fund and Affiliated Fund) 
to the Eligible Directors for their consideration. A Regulated Fund 
will co-invest with one or more other Regulated Funds and/or one or 
more Affiliated Funds only if, prior to the Regulated Funds' and 
Affiliated Funds' participation in the Potential Co-Investment 
Transaction, a Required Majority concludes that:
    (i) The terms of the Potential Co-Investment Transaction, including 
the consideration to be paid, are reasonable and fair to the Regulated 
Fund and its shareholders and do not involve overreaching in respect of 
the Regulated Fund or its shareholders on the part of any person 
concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (A) The interests of the Regulated Fund's shareholders; and
    (B) the Regulated Fund's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Funds or Affiliated 
Funds would not disadvantage the Regulated

[[Page 8716]]

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 Affiliated Fund; provided that, if any other Regulated Fund or 
Affiliated Fund, but not the Regulated Fund itself, gains the right to 
nominate a director for election to a portfolio company's board of 
directors or the right to have a board observer or any similar right to 
participate in the governance or management of the portfolio company, 
such event shall not be interpreted to prohibit the Required Majority 
from reaching the conclusions required by this condition 2(c)(iii), if:
    (A) The Eligible Directors will have the right to ratify the 
selection of such director or board observer, if any;
    (B) the Adviser to the Regulated Fund (or Advisers if there are 
more than one) agrees to, and does, provide periodic reports to the 
Regulated Fund's Board with respect to the actions of such director or 
the information received by such board observer or obtained through the 
exercise of any similar right to participate in the governance or 
management of the portfolio company; and
    (C) any fees or other compensation that any Affiliated Fund or any 
Regulated Fund or any affiliated person of any Affiliated Fund or any 
Regulated Fund receives in connection with the right of an Affiliated 
Fund or a Regulated Fund to nominate a director or appoint a board 
observer or otherwise to participate in the governance or management of 
the portfolio company will be shared proportionately among the 
participating Affiliated Funds (who each may, in turn, share its 
portion with its affiliated persons) and the participating Regulated 
Funds in accordance with the amount of each party's investment; and
    (iv) the proposed investment by the Regulated Fund will not benefit 
the Adviser to the Regulated Fund (or Advisers if there are more than 
one), the Affiliated Funds or the other Regulated Funds or any 
affiliated person of any of them (other than the parties to the Co-
Investment Transaction), except (A) to the extent permitted by 
condition 13, (B) to the extent permitted by 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 Adviser to the Regulated Fund (or Advisers if there are more 
than one) will present to the Board of each Regulated Fund, on a 
quarterly basis, a record of all investments in Potential Co-Investment 
Transactions made by any of the other Regulated Funds or Affiliated 
Funds during the preceding quarter that fell within the Regulated 
Fund's then-current Objectives and Strategies that were not made 
available to the Regulated Fund, and an explanation of why the 
investment opportunities were not offered to the Regulated Fund. All 
information presented to the Board pursuant to this condition will be 
kept for the life of the Regulated Fund and at least two years 
thereafter, and will be subject to examination by the Commission and 
its staff.
    5. Except for Follow-On Investments made in accordance with 
condition 8,\13\ a Regulated Fund will not invest in reliance on the 
Order in any issuer in which another Regulated Fund, Affiliated Fund, 
or any affiliated person of another Regulated Fund or an Affiliated 
Fund is an existing investor.
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    \13\ This exception applies only to Follow-On Investments by a 
Regulated Fund in issuers in which that Regulated Fund already holds 
investments.
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    6. A Regulated Fund will not participate in any Potential Co-
Investment Transaction unless the terms, conditions, price, class of 
securities to be purchased, settlement date, and registration rights 
will be the same for each participating Regulated Fund and Affiliated 
Fund. The grant to an Affiliated Fund or another Regulated Fund, but 
not the Regulated Fund, of the right to nominate a director for 
election to a portfolio company's board of directors, the right to have 
an observer on the board of directors or similar rights to participate 
in the governance or management of the portfolio company will not be 
interpreted so as to violate this condition 6, if conditions 
2(c)(iii)(A), (B) and (C) are met.
    7. (a) If any Affiliated Fund or any Regulated Fund elects to sell, 
exchange or otherwise dispose of an interest in a security that was 
acquired by one or more Regulated Funds and/or Affiliated Funds 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 the 
Regulated Fund in the disposition.
    (b) Each Regulated Fund will have the right to participate in such 
disposition on a proportionate basis, at the same price and on the same 
terms and conditions as those applicable to the participating 
Affiliated Funds and any other Regulated Fund.
    (c) A Regulated Fund may participate in such disposition without 
obtaining prior approval of the Required Majority if: (i) The proposed 
participation of each Regulated Fund and each Affiliated Fund in such 
disposition is proportionate to its outstanding investments in the 
issuer immediately preceding the disposition; (ii) the Board of the 
Regulated Fund has approved as being in the best interests of the 
Regulated Fund the ability to participate in such dispositions on a pro 
rata basis (as described in greater detail in the application); and 
(iii) the Board of the Regulated Fund is provided on a quarterly basis 
with a list of all dispositions made in accordance with this condition. 
In all other cases, the Adviser to the Regulated Fund (or Advisers if 
there are more than one) will provide their written recommendation as 
to the Regulated Fund's participation to the Eligible Directors, and 
the Regulated Fund will participate in such disposition solely to the 
extent that a Required Majority determines that it is in the Regulated 
Fund's best interests.
    (d) Each Affiliated Fund and each Regulated Fund will bear its own 
expenses in connection with any such disposition.
    8. (a) If any Affiliated Fund or any Regulated Fund desires to make 
a Follow-On Investment in a portfolio company whose securities were 
acquired by the Regulated Fund and the Affiliated Fund 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 Regulated Fund and each Affiliated Fund 
in such investment is proportionate to its outstanding investments in 
the issuer immediately preceding the Follow-On Investment; and (ii) the 
Board of the Regulated Fund has approved as being in the best interests 
of the Regulated Fund the ability to participate in Follow-On 
Investments on a pro rata basis (as described in greater detail in the 
application). In all other cases, the

[[Page 8717]]

Adviser to the Regulated Fund (or Advisers if there are more than one) 
will provide their written recommendation as to such Regulated Fund's 
participation to the Eligible Directors, and the Regulated Fund will 
participate in such Follow-On Investment solely to the extent that the 
Required Majority determines that it is in such Regulated Fund's best 
interests.
    (c) If, with respect to any Follow-On Investment:
    (i) The amount of the opportunity is not based on the Regulated 
Funds' and the Affiliated Funds' outstanding investments immediately 
preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the Adviser (or Advisers 
if there are more than one) to a Regulated Fund to be invested by the 
Regulated Fund in the Follow-On Investment, together with the amount 
proposed to be invested by the other participating Regulated Funds and 
the Affiliated Funds in the same transaction, exceeds the amount of the 
opportunity; then the amount invested by each such party will be 
allocated among them pro rata based on each participant'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 Non-Interested Directors of each Regulated Fund will be 
provided quarterly for review all information concerning Potential Co-
Investment Transactions and Co-Investment Transactions, including 
investments made by other Regulated Funds or Affiliated Funds that a 
Regulated Fund considered but declined to participate in, so that the 
Non-Interested Directors may determine whether all investments made 
during the preceding quarter, including those investments that the 
Regulated Fund considered but declined to participate in, comply with 
the conditions of the Order. In addition, the Non-Interested Directors 
will consider at least annually the continued appropriateness for such 
Regulated Fund of participating in new and existing Co-Investment 
Transactions.
    10. Each Regulated Fund will maintain the records required by 
section 57(f)(3) of the Act as if each of the Regulated Funds were a 
BDC and each of the investments permitted under these conditions were 
approved by the Required Majority under section 57(f) of the Act.
    11. No Non-Interested Director of a Regulated Fund will also be a 
director, general partner, managing member or principal, or otherwise 
an ``affiliated person'' (as defined in the Act), of any Affiliated 
Fund.
    12. The expenses, if any, associated with acquiring, holding or 
disposing of any securities acquired in a Co-Investment Transaction 
(including, without limitation, the expenses of the distribution of any 
such securities registered for sale under the Securities Act) will, to 
the extent not payable by the applicable Adviser(s) under their 
respective investment advisory agreements with the Affiliated Funds and 
the Regulated Funds, be shared by the Regulated Funds and the 
Affiliated Funds in proportion to the relative amounts of the 
securities held or to be acquired or disposed of, as the case may be.
    13. Any transaction fee \14\ (including break-up or commitment fees 
but excluding broker's fees contemplated by section 17(e) or 57(k) of 
the Act, as applicable) received in connection with a Co-Investment 
Transaction will be distributed to the participating Regulated Funds 
and Affiliated Funds on a pro rata basis based on the amounts they 
invested or committed, as the case may be, in such Co-Investment 
Transaction. If any transaction fee is to be held by an Adviser pending 
consummation of the transaction, the fee will be deposited into an 
account maintained by 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 Regulated Funds and Affiliated 
Funds based on the amounts they invest in such Co-Investment 
Transaction. None of the Affiliated Funds, the applicable Adviser(s), 
the other Regulated Funds or any affiliated person of the Regulated 
Funds or Affiliated Funds will receive additional compensation or 
remuneration of any kind as a result of or in connection with a Co-
Investment Transaction (other than (a) in the case of the Regulated 
Funds and the Affiliated Funds, the pro rata transaction fees described 
above and fees or other compensation described in condition 
2(c)(iii)(C); and (b) in the case of the Advisers, investment advisory 
fees paid in accordance with the Regulated Funds' and the Affiliated 
Funds' investment advisory agreements).
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    \14\ 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 when voting on (1) the election 
of directors; (2) the removal of one or more directors; or (3) any 
other matter under either the Act or applicable State law affecting the 
Board's composition, size or manner of election.
    15. Each Regulated Fund's chief compliance officer, as defined in 
rule 38a-1(a)(4), will prepare an annual report for its Board each year 
that evaluates (and documents the basis of that evaluation) the 
Regulated Fund's compliance with the terms and conditions of the 
application and the procedures established to achieve such compliance.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-04086 Filed 2-27-18; 8:45 am]
 BILLING CODE 8011-01-P