[Federal Register Volume 83, Number 202 (Thursday, October 18, 2018)]
[Notices]
[Pages 52860-52865]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22676]



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SECURITIES AND EXCHANGE COMMISSION



[Investment Company Act Release No. 33270; File No. 812-14862]




Audax Credit BDC Inc., et al.; Notice of Application



October 12, 2018.

AGENCY: Securities and Exchange Commission (``Commission'').



ACTION: Notice.



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    Notice of an 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 permitting certain joint transactions otherwise 

prohibited by sections 17(d) and 57(a)(4) of the Act and rule 17d-1 

under the Act.



Summary of Application: Applicants request an order to permit a 

business development company (``BDC'') and certain closed-end 

investment companies to co-invest in portfolio companies with each 

other and with affiliated investment funds.



Applicants: Audax Credit BDC Inc. (the ``Company''), Audax Credit 

Strategies (SCS), L.P. (``SCS''), Audax Credit Opportunities (SBA), LLC 

(``SBA''), Audax Senior Debt (MP), LLC (``MP''), Audax Senior Debt 

(WCTPT), LLC (``WCTPT''), Audax Senior Debt (AZ), LLC (``AZ''), Audax 

Senior Loan Fund I, L.P. (``SLF I''), Audax Senior Loan Fund I 

(Offshore), L.P. (``SLF I(O)''), Audax Senior Loan Fund, L.P. 

(``SLF''), Audax Senior Loan Fund III, L.P. (``SLF III''), Audax Senior 

Loan Fund III (Offshore), L.P. (``SLF III(O)''), Audax Senior Loan Fund 

(ST), LP (``SLF(ST)''), Audax Direct Lending Solutions Fund-A, L.P. 

(``Direct Lending-A''), Audax Direct Lending Solutions Fund-B, L.P. 

(``Direct Lending-B''), Audax Direct Lending Solutions Fund-C, L.P. 

(``Direct Lending-C''), Audax Direct Lending Solutions Fund-D, L.P. 

(``Direct Lending-D'' and, collectively with SCS, SBA, MP, WCTPT, AZ, 

SLF I, SLF I(O), SLF, SLF III, SLF III(O), SLF(ST), Direct Lending-A, 

Direct Lending-B, and Direct Lending-C, the ``Private Funds''), and 

Audax Management Company (NY), LLC (the ``Company Adviser,'' and 

collectively with the Company and the Private Funds, the 

``Applicants'').



Filing Dates: The application was filed on December 29, 2017 and 

amended on June 14, 2018.



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 November 6, 2018 and should be accompanied by proof of 

service on applicants, in the form of an affidavit or, for lawyers, a 

certificate of service. Pursuant to rule 0-5 under the Act, hearing 

requests should state the nature of the writer's interest, any facts 

bearing upon the desirability of a hearing on the matter, the reason 

for the request, and the issues contested. Persons who wish to be 

notified of a hearing may request notification by writing to the 

Commission's Secretary.



ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 

St. NE, Washington, DC 20549-1090. Applicants: 101 Huntington Avenue, 

Boston, Massachusetts 02199.



FOR FURTHER INFORMATION CONTACT: Jill Ehrlich, Senior Counsel, at (202) 

551-6819, or Andrea Ottomanelli Magovern, Branch Chief, at (202) 551-

6821 (Chief Counsel's Office, Division of Investment Management).



SUPPLEMENTARY INFORMATION: The following is a summary of the 

application. The complete application may be obtained via the 

Commission's 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. The Company was organized as a corporation under the General 

Corporation Law of the State of Delaware on January 29, 2015 and 

elected to be treated as a BDC \1\ through a notification of election 

to be subject to sections 55 through 65 of the Act on Form N-54A. The 

Company's ``Objectives and Strategies'' \2\ are to generate current 

income and, to a lesser extent, long-term capital appreciation by 

investing primarily in senior secured debt of privately owned U.S. 

middle-market companies. The Company has a five-member board of 

directors (the ``Board''), of which three members are not ``interested 

persons'' of the Company within the meaning of section 2(a)(19) of the 

Act (the ``Non-Interested Directors''). No Non-Interested Director will 

have any direct or indirect financial interest in any Co-Investment 

Transaction (defined below) or any interest in any portfolio company, 

other than indirectly through share ownership (if any) in the Company 

or a Future Regulated Fund (defined below).

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    \1\ Section 2(a)(48) of the Act defines a BDC to be any closed-

end investment company that operates for the purpose of making 

investments in securities described in section 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\ ``Objectives and Strategies'' means, with respect to a 

Regulated Fund (defined below), the investment objectives and 

strategies of such Regulated Fund, as described in such Regulated 

Fund's registration statement, other filings the Regulated Fund has 

made with the Commission under the Act, Securities Act of 1933 (the 

``1933 Act''), or under the Securities Exchange Act of 1934, or in 

the Regulated Fund's reports to stockholders.

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    2. SCS was formed as a Delaware limited partnership on March 10, 

2014 and would be an investment company but for the exclusion from the 

definition of investment company provided by section 3(c)(7) of the 

Act. SCS's investment objective is to invest primarily in a portfolio 

of secured and unsecured loans and other debt instruments, seeking low 

volatility, principal protection and current income. SCS has an 

investment strategy that is similar to the Company's investment 

strategy.

    3. SBA was formed as a Delaware limited liability company on March 

10, 2010 and would be an investment company but for the exclusion from 

the definition of investment company provided by section 3(c)(7) of the 

Act. SBA's investment objective is to invest primarily in a portfolio 

of secured and unsecured loans and other debt instruments, seeking low 

volatility, principal protection and current



[[Page 52861]]



income. SBA has an investment strategy that is similar to the Company's 

investment strategy.

    4. MP was formed as a Delaware limited liability company on June 

28, 2017 and would be an investment company but for the exclusion from 

the definition of investment company provided by section 3(c)(7) of the 

Act. MP's investment objective is to invest primarily in a portfolio of 

secured and unsecured loans and other debt instruments, seeking low 

volatility, principal protection and current income. MP has an 

investment strategy that is similar to the Company's investment 

strategy.

    5. WCTPT was formed as a Delaware limited liability company on 

October 25, 2011 and would be an investment company but for the 

exclusion from the definition of investment company provided by section 

3(c)(7) of the Act. WCTPT's investment objective is to invest in a 

portfolio of first lien senior secured loans, seeking low volatility, 

principal protection and current income for WCTPT. WCTPT has an 

investment strategy that is similar to the Company's investment 

strategy.

    6. AZ was formed as a Delaware limited liability company on 

November 20, 2017 and would be an investment company but for the 

exclusion from the definition of investment company provided by section 

3(c)(7) of the Act. AZ's investment objective is to invest primarily in 

a portfolio of secured and unsecured loans and other debt instruments, 

seeking low volatility, principal protection and current income. AZ has 

an investment strategy that is similar to the Company's investment 

strategy.

    7. SLF I was formed as a Delaware limited partnership on July 23, 

2007 and would be an investment company but for the exclusion from the 

definition of investment company provided by section 3(c)(7) of the 

Act. SLF I's investment objective is to invest primarily in a portfolio 

of secured and unsecured loans and other debt instruments, seeking low 

volatility, principal protection and current income. SLF I has an 

investment strategy that is similar to the Company's investment 

strategy.

    8. SLF I(O) was formed as a Cayman Islands exempted limited 

partnership on October 2, 2007 and would be an investment company but 

for the exclusion from the definition of investment company provided by 

section 3(c)(7) of the Act. SLF I(O)'s investment objective is to 

invest primarily in a portfolio of secured and unsecured loans and 

other debt instruments, seeking low volatility, principal protection 

and current income. SLF(IO) has an investment strategy that is similar 

to the Company's investment strategy.

    9. SLF was formed as a Delaware limited partnership on August 10, 

2012 and would be an investment company but for the exclusion from the 

definition of investment company provided by section 3(c)(7) of the 

Act. The investment objective of SLF is to invest primarily in a 

portfolio of first lien senior secured loans to North American middle 

market companies, although a portion of the its portfolio may be 

invested in mezzanine, second lien, distressed and other securities or 

instruments, including securities or instruments of non-North American 

companies. SLF has an investment strategy that is similar to the 

Company's investment strategy.

    10. SLF III was formed as a Delaware limited partnership on January 

19, 2016 and would be an investment company but for the exclusion from 

the definition of investment company provided by section 3(c)(7) of the 

Act. The investment objective of SLF III is to invest primarily in a 

portfolio of first lien senior secured loans to North American middle 

market companies, although a portion of the its portfolio may be 

invested in mezzanine, second lien, distressed and other securities or 

instruments, including securities or instruments of non-North American 

companies. SLF III has an investment strategy that is similar to the 

Company's investment strategy.

    11. SLF III(O) was formed as a Cayman Islands exempted limited 

partnership on May 25, 2016 and would be an investment company but for 

the exclusion from the definition of investment company provided by 

section 3(c)(7) of the Act. The investment objective of SLF III(O) is 

to invest primarily in a portfolio of first lien senior secured loans 

to North American middle market companies, although a portion of the 

its portfolio may be invested in mezzanine, second lien, distressed and 

other securities or instruments, including securities or instruments of 

non-North American companies. SLF III(O) has an investment strategy 

that is similar to the Company's investment strategy.

    12. SLF (ST) was formed as a Delaware limited partnership on May 

16, 2018 and would be an investment company but for the exclusion from 

the definition of investment company provided by section 3(c)(7) of the 

Act. The investment objective of SLF (ST) is to invest primarily in a 

portfolio of secured and unsecured loans and other debt instruments, 

seeking low volatility, principal protection and current income. SLF 

(ST) has an investment strategy that is similar to the Company's 

investment strategy.

    13. Direct Lending-A, Direct Lending-B and Direct Lending-C were 

each formed as a Delaware limited partnership on October 12, 2017, 

October 12, 2017 and April 5, 2017, respectively, and each would be an 

investment company but for the exclusion from the definition of 

investment company provided by section 3(c)(7) of the Act. Direct 

Lending-D was formed as a Cayman Islands exempted limited partnership 

on April 10, 2018 and would be an investment company but for the 

exclusion from the definition of investment company provided by section 

3(c)(7) of the Act. The investment objective of each of Direct Lending-

A, Direct Lending-B, Direct Lending-C, and Direct Lending-D is to 

engage in direct lending to private middle market companies based in 

the United States and Canada through a variety of structures, and 

primarily via unitranche and stretch senior secured loans, with 

selected positions in senior secured first or second lien loans, equity 

and similar investments. The investment strategy of each of Direct 

Lending-A, Direct Lending-B, Direct Lending-C, and Direct Lending-D 

overlaps with the Company's investment strategy.

    14. The Company Adviser, a Delaware limited liability company and 

an investment adviser registered with the Commission under the 

Investment Advisers Act of 1940 (``Advisers Act''), serves as 

investment adviser to both the Company and each of the Private Funds. 

Under the investment advisory agreements of the Company and the Private 

Funds, the Company Adviser manages the portfolio of each entity in 

accordance with the investment objective and policies of each, makes 

investment decisions for each entity, places purchase and sale orders 

for portfolio transactions for each entity, and otherwise manages the 

day-to-day operations of each entity, subject, in the case of the 

Company, to the oversight of its Board.

    15. Applicants seek an order (``Order'') to permit one or more 

Regulated Funds \3\ and/or one or more



[[Page 52862]]



Affiliated Funds \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 section 57(a)(4) and rule 17d-1 by (a) co-investing 

with each other in securities issued by issuers in private placement 

transactions in which an Adviser negotiates terms in addition to price; 

\5\ 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 

Subsidiary) participates together with one or more other Regulated 

Funds and/or one or more Affiliated Funds in reliance on the requested 

Order.\6\ ``Potential Co-Investment Transaction'' means any investment 

opportunity in which a Regulated Fund (or its Wholly-Owned Investment 

Subsidiary) could not participate together with one or more Affiliated 

Funds and/or one or more other Regulated Funds without obtaining and 

relying on the Order.\7\

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    \3\ ``Regulated Fund'' means the Company 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) whose investment 

adviser is an Adviser, and (c) that intends to participate in the 

Co-Investment Program. The term ``Adviser'' means (a) the Company 

Adviser and (b) any future investment adviser that controls, is 

controlled by or is under common control with the Company Adviser or 

its successor and is registered as an investment adviser under the 

Advisers Act. The term ``successor,'' as applied to each Adviser, 

means an entity that results from a reorganization into another 

jurisdiction or change in the type of business organization.

    \4\ ``Affiliated Fund'' means the Private Funds and any Future 

Affiliated Fund. ``Future Affiliated Fund'' means any entity (a) 

whose investment adviser is an Adviser, (b) that would be an 

investment company but for section 3(c)(1) or 3(c)(7) of the Act, 

and (c) that intends to participate in the Co-Investment Program.

    \5\ The term ``private placement transactions'' means 

transactions in which the offer and sale of securities by the issuer 

are exempt from registration under the 1933 Act.

    \6\ The term ``Wholly-Owned Investment Subsidiary'' 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 and incur debt (which is 

or would be consolidated with other indebtedness of such Regulated 

Fund for financial reporting or compliance purposes under the Act) 

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 sections 3(c)(1) or 3(c)(7) of the Act.

    \7\ All existing entities that currently intend to rely upon the 

requested Order have been named as applicants. Any other existing or 

future entity that subsequently relies on the Order will comply with 

the terms and conditions of the application.

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    16. Applicants state that a Regulated Fund may, from time to time, 

form one or more Wholly-Owned Investment Subsidiaries. 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 Subsidiary be permitted to participate in Co-

Investment Transactions in lieu of its parent Regulated Fund and that 

the Wholly-Owned Investment Subsidiary'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 Subsidiary would have no purpose other than serving as a 

holding vehicle for the parent Regulated Fund's investments and, 

therefore, no conflicts of interest could arise between a Regulated 

Fund and its Wholly-Owned Investment Subsidiary. The applicable 

Regulated Fund's Board would make all relevant determinations under the 

conditions with regard to a Wholly-Owned Investment Subsidiary'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 Subsidiary 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 

Subsidiaries, the Board will also be informed of, and take into 

consideration, the relative participation of the Regulated Fund and the 

Wholly-Owned Investment Subsidiary.

    17. 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 (``Available Capital''), and other 

pertinent factors applicable to that Regulated Fund. The Board of each 

Regulated Fund, including the Non-Interested Directors, has (or will 

have prior to relying on the requested Order) determined that it is in 

the best interests of the Regulated Fund to participate in the Co-

Investment Transaction.

    18. Other than pro rata dispositions and Follow-On Investments as 

provided in conditions 7 and 8, and after making the determinations 

required in conditions 1 and 2(a), the Adviser will present each 

Potential Co-Investment Transaction and the proposed allocation to the 

directors of the Board eligible to vote under section 57(o) of the Act 

(``Eligible Directors''), and the ``required majority,'' as defined in 

section 57(o) of the Act (``Required Majority'') \8\ will approve each 

Co-Investment Transaction prior to any investment by the participating 

Regulated Fund.

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    \8\ 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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    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 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. Applicants also represent that if the Advisers, the principals 

of the Advisers (``Principals''), or any person controlling, controlled 

by, or under common control with an Adviser or the Principals, and the 

Affiliated Funds (collectively, the ``Holders'') own in the aggregate 

more than 25% of the outstanding voting shares of a Regulated Fund (the 

``Shares''), then the Holders will vote such Shares as required under 

condition 14. Applicants believe 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 

third party, taking into account its qualifications, reputation for 

independence, cost to the stockholders, and other factors that they 

deem relevant.



[[Page 52863]]



Applicants' Legal Analysis



    1. Section 57(a)(4) of the Act prohibits certain affiliated persons 

of a BDC from participating in joint transactions with the BDC or a 

company controlled by a BDC in contravention of rules as prescribed by 

the Commission. Under section 57(b)(2) of the Act, any person who is 

directly or indirectly controlling, controlled by, or under common 

control with a BDC is subject to section 57(a)(4). Applicants submit 

that each of the Regulated Funds and Affiliated Funds could be deemed 

to be a person related to each Regulated Fund in a manner described by 

section 57(b) by virtue of being under common control. Section 57(i) of 

the Act provides that, until the Commission prescribes rules under 

section 57(a)(4), the Commission's rules under section 17(d) of the Act 

applicable to registered closed-end investment companies will be deemed 

to apply to transactions subject to section 57(a)(4). Because the 

Commission has not adopted any rules under section 57(a)(4), rule 17d-1 

also applies to joint transactions with Regulated Funds that are BDCs. 

Section 17(d) of the Act and rule 17d-1 under the Act are applicable to 

Regulated Funds that are registered closed-end investment companies.

    2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 

affiliated persons of a registered investment company from 

participating in joint transactions with the company unless the 

Commission has granted an order permitting such transactions. In 

passing upon applications under rule 17d-1, the Commission considers 

whether the company's participation in the joint transaction is 

consistent with the provisions, policies, and purposes of the Act and 

the extent to which such participation is on a basis different from or 

less advantageous than that of other participants.

    3. Applicants state that in the absence of the requested relief, 

the Regulated Funds would be, in some circumstances, limited in their 

ability to participate in attractive and appropriate investment 

opportunities. Applicants believe that the proposed terms and 

conditions will ensure that the Co-Investment Transactions are 

consistent with the protection of each Regulated Fund's shareholders 

and with the purposes intended by the policies and provisions of the 

Act. Applicants state that the Regulated Funds' participation in the 

Co-Investment Transactions will be consistent with the provisions, 

policies, and purposes of the Act and on a basis that is not different 

from or less advantageous than that of other participants.



Applicants' Conditions



    Applicants agree that the Order will be subject to the following 

conditions:

    1. Each time an Adviser considers a Potential Co-Investment 

Transaction for an Affiliated Fund or another Regulated Fund that falls 

within a Regulated Fund's then-current Objectives and Strategies, the 

Regulated Fund's Adviser will make an independent determination of the 

appropriateness of the investment for the Regulated Fund in light of 

the Regulated Fund's then-current circumstances.

    2.

    (a) If the Adviser deems a Regulated Fund's participation in any 

Potential Co-Investment Transaction to be appropriate for the Regulated 

Fund, it will then determine an appropriate level of investment for the 

Regulated Fund.

    (b) If the aggregate amount recommended by the applicable Adviser 

to be invested by the applicable Regulated Fund in the Potential Co-

Investment Transaction, together with the amount proposed to be 

invested by the other participating Regulated Funds and Affiliated 

Funds, collectively, in the same transaction, exceeds the amount of the 

investment opportunity, the investment opportunity will be allocated 

among them pro rata based on each participant's Available Capital, up 

to the amount proposed to be invested by each. The applicable Adviser 

will provide the Eligible Directors of each participating Regulated 

Fund with information concerning each participating party's Available 

Capital to assist the Eligible Directors with their review of the 

Regulated Fund's investments for compliance with these allocation 

procedures.

    (c) After making the determinations required in conditions 1 and 

2(a), the applicable Adviser will distribute written information 

concerning the Potential Co-Investment Transaction (including the 

amount proposed to be invested by each participating Regulated Fund and 

Affiliated Fund) to the Eligible Directors of each participating 

Regulated Fund for their consideration. A Regulated Fund will co-invest 

with one or more other Regulated Funds and/or one or more Affiliated 

Funds only if, prior to the Regulated Fund's participation in the 

Potential Co-Investment Transaction, a Required Majority concludes 

that:

    (i) The terms of the Potential Co-Investment Transaction, including 

the consideration to be paid, are reasonable and fair to the Regulated 

Fund and its 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 any other Regulated Funds or Affiliated 

Funds would not disadvantage the Regulated Fund, and participation by 

the Regulated Fund would not be on a basis different from or less 

advantageous than that of any other Regulated Funds or Affiliated 

Funds; provided that if any other Regulated Funds or Affiliated Funds, 

but not the Regulated Fund itself, gains the right to nominate a 

director for election to a portfolio company's board of directors or 

the right to have a board observer or any similar right to participate 

in the governance or management of the portfolio company, such event 

shall not be interpreted to prohibit the Required Majority from 

reaching the conclusions required by this condition (2)(c)(iii), if:

    (A) The Eligible Directors will have the right to ratify the 

selection of such director or board observer, if any;

    (B) the applicable Adviser agrees to, and does, provide periodic 

reports to the Regulated Fund's Board with respect to the actions of 

such director or the information received by such board observer or 

obtained through the exercise of any similar right to participate in 

the governance or management of the portfolio company; and

    (C) any fees or other compensation that any Affiliated Fund or any 

Regulated Fund or any affiliated person of any Affiliated Fund or any 

Regulated Fund receives in connection with the right of the Affiliated 

Fund or 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 

Fund in accordance with the amount of each party's investment; and

    (iv) the proposed investment by the Regulated Fund will not benefit 

the Advisers, any Affiliated Funds or other Regulated Funds or any 

affiliated person of any of them (other than the parties to the Co-

Investment Transaction), except (A) to the extent permitted by 

condition 13, (B) to the extent permitted by section 17(e) or 57(k) of 

the Act, as applicable, (C) indirectly, as a result of



[[Page 52864]]



an interest in the securities issued by one of the parties to the Co-

Investment Transaction, or (D) in the case of fees or other 

compensation described in condition 2(c)(iii)(C).

    3. Each Regulated Fund has the right to decline to participate in 

any Potential Co-Investment Transaction or to invest less than the 

amount proposed.

    4. The applicable Adviser will present to the Board of each 

Regulated Fund, on a quarterly basis, a record of all investments in 

Potential Co-Investment Transactions made by any of the other Regulated 

Funds or Affiliated Funds during the preceding quarter that fell within 

the Regulated Fund's then-current Objectives and Strategies that were 

not made available to the Regulated Fund, and an explanation of why the 

investment opportunities were not offered to the Regulated Fund. All 

information presented to the Board pursuant to this condition will be 

kept for the life of the Regulated Fund and at least two years 

thereafter, and will be subject to examination by the Commission and 

its staff.

    5. Except for Follow-On Investments made in accordance with 

condition 8,\9\ a Regulated Fund will not invest in reliance on the 

Order in any issuer in which another Regulated Fund, an Affiliated Fund 

or any affiliated person of another Regulated Fund or Affiliated Fund 

is an existing investor.

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    \9\ This exception applies only to Follow-On Investments by a 

Regulated Fund in issuers in which the Regulated Fund already holds 

investments.

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    6. A Regulated Fund will not participate in any Potential Co-

Investment Transaction unless the terms, conditions, price, class of 

securities to be purchased, settlement date, and registration rights 

will be the same for each participating Regulated Fund and Affiliated 

Fund. The grant to an Affiliated Fund or another Regulated Fund, but 

not the Regulated Fund, of the right to nominate a director for 

election to a portfolio company's board of directors, the right to have 

an observer on the board of directors or similar rights to participate 

in the governance or management of the portfolio company will not be 

interpreted so as to violate this condition 6, if conditions 

2(c)(iii)(A), (B) and (C) are met.

    7.

    (a) If any Affiliated Fund or any Regulated Fund elects to sell, 

exchange or otherwise dispose of an interest in a security that was 

acquired in a Co-Investment Transaction, the applicable Advisers will:

    (i) Notify each Regulated Fund that participated in the Co-

Investment Transaction of the proposed disposition at the earliest 

practical time; and

    (ii) formulate a recommendation as to participation by each 

Regulated Fund in the disposition.

    (b) Each Regulated Fund will have the right to participate in such 

disposition on a proportionate basis, at the same price and on the same 

terms and conditions as those applicable to the participating 

Affiliated Funds and Regulated Funds.

    (c) A Regulated Fund may participate in such disposition without 

obtaining prior approval of the Required Majority if: (i) The proposed 

participation of each Regulated Fund and each Affiliated Fund in such 

disposition is proportionate to its outstanding investments in the 

issuer immediately preceding the disposition; (ii) the Board of the 

Regulated Fund has approved as being in the best interests of the 

Regulated Fund the ability to participate in such dispositions on a pro 

rata basis (as described in greater detail in the application); and 

(iii) the Board of the Regulated Fund is provided on a quarterly basis 

with a list of all dispositions made in accordance with this condition. 

In all other cases, the Adviser will provide its written recommendation 

as to the Regulated Fund's participation to the Eligible Directors, and 

the Regulated Fund will participate in such disposition solely to the 

extent that a Required Majority determines that it is in the Regulated 

Fund's best interests.

    (d) Each Affiliated Fund and each Regulated Fund will bear its own 

expenses in connection with any such disposition.

    8.

    (a) If any Affiliated Fund or Regulated Fund desires to make a 

Follow-On Investment in a portfolio company whose securities were 

acquired in a Co-Investment Transaction, the applicable Advisers will:

    (i) Notify each Regulated Fund that participated in the co-

investment transaction of the proposed Follow-On Investment at the 

earliest practical time; and

    (ii) formulate a recommendation as to the proposed participation, 

including the amount of the proposed Follow-On Investment, by each 

Regulated Fund.

    (b) A Regulated Fund may participate in such Follow-On Investment 

without obtaining prior approval of the Required Majority if: (i) The 

proposed participation of each Regulated Fund and each Affiliated Fund 

in such investment is proportionate to its outstanding investments in 

the issuer immediately preceding the Follow-On Investment; and (ii) the 

Board of the Regulated Fund has approved as being in the best interests 

of the Regulated Fund the ability to participate in Follow-On 

Investments on a pro rata basis (as described in greater detail in the 

application). In all other cases, the Adviser will provide its written 

recommendation as to the Regulated Fund's participation to the Eligible 

Directors, and the Regulated Fund will participate in such Follow-On 

Investment solely to the extent that a Required Majority determines 

that it is in the Regulated Fund's best interests.

    (c) If, with respect to any Follow-On Investment:

    (i) The amount of the opportunity is not based on the Regulated 

Funds' and the Affiliated Funds' outstanding investments immediately 

preceding the Follow-On Investment; and

    (ii) the aggregate amount recommended by the applicable Adviser to 

be invested by the applicable Regulated Fund in the Follow-On 

Investment, together with the amount proposed to be invested by other 

participating Regulated Funds and Affiliated Funds, collectively, in 

the same transaction, exceeds the amount of the investment opportunity, 

then the investment opportunity will be allocated among them pro rata 

based on each participant's Available Capital, up to the amount 

proposed to be invested by each.

    (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 any other Regulated Funds or Affiliated Funds that 

the Regulated Fund considered but declined to participate in, so that 

the Non-Interested Directors may determine whether all investments made 

during the preceding quarter, including those investments that the 

Regulated Fund considered but declined to participate in, comply with 

the conditions of the Order. In addition, the Non-Interested Directors 

will consider at least annually the continued appropriateness for the 

Regulated Fund of participating in new and existing Co-Investment 

Transactions.

    10. Each Regulated Fund will maintain the records required by 

section 57(f)(3) of the Act as if each of the Regulated Funds were a 

BDC and each of the investments permitted under these conditions were 

approved by the



[[Page 52865]]



Required Majority under section 57(f) of the Act.

    11. No Non-Interested Director of a Regulated Fund will also be a 

director, general partner, managing member or principal, or otherwise 

an ``affiliated person'' (as defined in the Act) of an Affiliated Fund.

    12. The expenses, if any, associated with acquiring, holding or 

disposing of any securities acquired in a Co-Investment Transaction 

(including, without limitation, the expenses of the distribution of any 

such securities registered for sale under the 1933 Act) will, to the 

extent not payable by the Advisers under their respective investment 

advisory agreements with Affiliated Funds and the Regulated Funds, be 

shared by the Regulated Funds and the Affiliated Funds in proportion to 

the relative amounts of the securities held or to be acquired or 

disposed of, as the case may be.

    13. Any transaction fee \10\ (including break-up or commitment fees 

but excluding broker's fees contemplated 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 Co-Investment Transaction, the fee will be 

deposited into an account maintained by such 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 Advisers, the other 

Regulated Funds, or any affiliated person of the Regulated Funds or 

Affiliated Funds will receive additional compensation or remuneration 

of any kind as a result of or in connection with a Co-Investment 

Transaction (other than (a) in the case of the Regulated Funds and the 

Affiliated Funds, the pro rata transaction fees described above and 

fees or other compensation described in condition 2(c)(iii)(C); and (b) 

in the case of an Adviser, investment advisory fees paid in accordance 

with the investment advisory agreements between such Adviser and the 

Regulated Fund or Affiliated Fund).

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    \10\ The 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% 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) under the Act, will prepare an annual report for the 

Board of such Regulated Fund that evaluates (and documents the basis of 

that evaluation) the Regulated Fund's compliance with the terms and 

conditions of the application and procedures established to achieve 

such compliance.



    For the Commission, by the Division of Investment Management, 

under delegated authority.

Eduardo A. Aleman,

Assistant Secretary.

[FR Doc. 2018-22676 Filed 10-17-18; 8:45 am]

 BILLING CODE 8011-01-P