[Federal Register Volume 87, Number 7 (Tuesday, January 11, 2022)]
[Notices]
[Pages 1446-1451]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-00244]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 34465; File No. 812-15190]


HPS Corporate Lending Fund, et al.

January 5, 2022.
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 certain 
business development companies and closed-end management investment 
companies to co-invest in portfolio companies with each other and with 
affiliated investment funds.

Applicants:  HPS Corporate Lending Fund (``HPS Fund''); HPS Investment 
Partners, LLC (``HPS''); Brickyard Direct Lending Fund, L.P.; Core 
Senior Lending Fund (A-A), L.P.; Core Senior Lending Fund, L.P.; HPS 
DPT Direct Lending Fund, L.P.; Hinode Direct Lending 2017 Fund, L.P.; 
Kitty Hawk Credit Fund, L.P.; HPS Investment Partners (UK) LLP; HPS 
Investment Partners (HK), Limited; HPS Investments Partners (AUS) Pty 
Ltd.; HPS ALSC Management, LLC; HPS Mezzanine Partners, LLC; HPS 
Mezzanine Partners II, LLC; HPS Mezzanine Management III, LLC; HPS 
Mezzanine Management 2019, LLC; HPS Opportunities SL Management, LLC; 
HPS RE Management, LLC; HPS Investment Partners CLO (US), LLC; HPS 
Investment Partners CLO (UK) LLP; HPS EF GP, LLC; HPS EL SLF 2016 GP, 
LLC; CGC, LLC; CGC III Partners LLC; Core Senior Lending Master Fund 
(PB), L.P.; HPS Core Senior Lending Portfolio (PB) II, L.P.; Credit 
Value Master Fund 2016, L.P.; Credit Value Master Fund V, L.P.; Credit 
Value Ontario Fund V, L.P.; Credit Value Master Fund VI, L.P.; European 
Asset Value Fund (USD) II, L.P.; European Asset Value Offshore Fund 
(USD) II, L.P.; European Asset Value Offshore Fund II, L.P.; HPS 
European Liquid Loan Opportunities Master Fund, L.P.; HPS Mezzanine 
Partners 2019, L.P.; HPS Offshore Mezzanine Partners 2019 Co-Invest, 
L.P.; HPS Offshore Mezzanine Partners 2019 Europe, SCSp; HPS Offshore 
Mezzanine Partners 2019, L.P.; HPS Special Situations Opportunity Fund, 
L.P.; HPS Special Situations Opportunity Offshore Fund, L.P.; HPS 
Specialty Loan Europe Fund V, SCSp; HPS Specialty Loan Fund (JPY) V, 
L.P.; HPS Specialty Loan Fund V, L.P.; HPS Specialty Loan Fund V-L, 
L.P.; HPS Specialty Loan International Fund V, SCSp; HPS Specialty Loan 
International Fund V-L, L.P.; Institutional Credit Master Fund, L.P.; 
Liquid Loan Opportunities Master Fund, L.P.; Mayfair Alternative Credit 
Funds ICAV; Mezzanine Partners III, L.P.; Offshore Mezzanine Partners 
III Co-Invest, L.P.; Offshore Mezzanine Partners III, L.P.; Real Estate 
Credit Solutions Fund II, L.P.; Real Estate Credit Solutions Offshore 
Fund II, L.P.; Specialty Loan Fund 2016, L.P.; Specialty Loan Fund 
2016-L, L.P.; Specialty Loan Institutional Fund 2016-L, L.P.; Aspen Co-
Invest, L.P.; Bronco Co-Invest, L.P; Endurance II Co-Invest, L.P.; 
Galaxy III Co-Invest, L.P.; Milano Co-Invest, L.P.; Neptune Co-Invest, 
L.P.; Patriot Co-Invest, L.P.; Aiguilles Rouges Irish Specialty Loan 
Fund plc; Aiguilles Rouges Specialty Loan Fund, L.P.; Cactus Direct 
Lending Fund, L.P.; Cardinal Fund, L.P.; CST Specialty Loan Fund, L.P.; 
Falcon Credit Fund, L.P.; GIM Credit Lux S.A.; GIM Credit Master Lux 
S.[agrave] r.l.; GIM II, L.P.; GIM, L.P.; HC Direct Lending Fund, L.P.; 
HN Co-Investment Fund, L.P.; HPS Core Senior Lending Co-Invest, L.P.; 
HPS Halite 2020 Direct Lending Fund Limited; HPS KP Mezz 2019 Co-
Invest, L.P.; HPS Magnetite Energy & Power Credit Fund, L.P.; HPS 
Magnetite Energy & Power Credit Offshore Fund, L.P.; HPS Ocoee 
Specialty Loan Fund, L.P.; HPS OH Co-Investment Fund, L.P.; HPS PA Co-

[[Page 1447]]

Investment Fund, L.P.; HPS RR Specialty Loan Fund, L.P.; HPS VG Co-
Investment Fund, L.P.; Jade Real Assets Fund, L.P.; Mauna Kea Fund, 
L.P.; Moreno Street Direct Lending Fund, L.P.; NDT Senior Loan Fund, 
L.P.; Presidio Loan Fund, L.P.; Private Loan Opportunities Fund, L.P.; 
Red Cedar Fund 2016, L.P.; Sandlapper Credit Fund, L.P.; SC Strategic 
Investment Fund, L.P.; Specialty Loan Fund--CX-2, L.P.; Specialty Loan 
VG Fund, L.P.; AP Mezzanine Partners III, L.P.; HPS AP Mezzanine 
Partners 2019, L.P.; HPS Hinode Mezzanine Partners 2020, L.P.; 
Specialty Loan Ontario Fund 2016, L.P.; EL Specialty Loan Secondary 
Fund, L.P.; HPS Offshore Strategic Investment Partners V, L.P.; HPS 
Strategic Investment Partners V, L.P.; HPS AP Strategic Investment 
Partners V, L.P.; HPS AD Co-Investment Holdings, L.P.; HPS Strategic 
Investment Management V, LLC; HPS Elbe Unlevered Direct Lending Fund, 
SCSp; HPS Specialty Loan Ontario Fund V, L.P.; Shelby Co-Invest, L.P.; 
Core Senior Lending Fund II, SCSp; Core Senior Lending International 
Fund II, SCSp; HPS Offshore Strategic Investment Partners V Europe, 
SCSp; Segovia Loan Advisors (UK) LLP; HPS Core Senior Lending 
International Fund (EUR) II, SCSp; HPS Specialty Loan Fund (EUR) V, 
L.P.; Proxima Co-Invest, L.P.; Proxima Onshore Co-Invest, L.P.; HPS 
Specialty Loan Fund TX, L.P.; Salus Co-Invest, L.P.; Credit Value Fund 
VII, L.P.; Credit Value Offshore Fund VII, LP.; HPS Mint Co-Invest, 
L.P.; HPS Special Situations Opportunity Fund II, L.P.; HPS Specialty 
Situations Opportunity Offshore Fund II; SCSp; Credit Value Ontario 
Fund VII; L.P; HPS Specialty Situation Opportunity Fund II; HN SIP Co-
Investment Fund, L.P.; Core Senior Lending Fund II Feeder, L.P; and HPS 
KP SIP V Co-Investment Fund, L.P.

Filing Dates:  The application was filed on December 30, 2020, and 
amended on April 21, 2021, August 5, 2021, November 5, 2021, and 
December 23, 2021.

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 emailing the Commission's 
Secretary at [email protected] and serving applicants with a 
copy of the request by email. Hearing requests should be received by 
the Commission by 5:30 p.m. on January 31, 2022, and should be 
accompanied by proof of service on the 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 emailing the Commission's Secretary at [email protected].

ADDRESSES: 
    The Commission: [email protected].
    Applicants: Yoohyun K. Choi at [email protected] and 
Richard Horowitz, Esq. at [email protected].

FOR FURTHER INFORMATION CONTACT:  Laura J. Riegel, Senior Counsel, at 
(202) 551-3038, or Trace W. Rakestraw, Branch Chief, at (202) 551-6825 
(Division of Investment Management, Chief Counsel's Office).

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. HPS Fund is a Delaware statutory trust that is a non-diversified 
closed-end management investment company that has elected to be 
regulated as a business development company (``BDC'') under section 
54(a) of the Act.\1\ HPS Fund's Objectives and Strategies \2\ are to 
generate attractive risk adjusted returns, predominately in the form of 
current income, with select investments exhibiting the ability to 
capture long-term capital appreciation, by investing primarily in newly 
originated senior secured debt and other securities of private U.S. 
companies within the middle market and upper middle market. The board 
of trustees (the ``Board'') \3\ of HPS Fund has five members, three of 
whom are not ``interested persons'' of HPS Fund within the meaning of 
section 2(a)(19) of the Act (``Independent Trustees'').\4\
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    \1\ HPS Fund filed a Form N-54A on January 3, 2022. See https://www.sec.gov/Archives/edgar/data/1838126/000114036122000146/0001140361-22-000146-index.htm. 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 sections 
55(a)(1) through 55(a)(3) of the Act and makes available significant 
managerial assistance with respect to the issuers of such 
securities.
    \2\ ``Objectives and Strategies'' means the investment 
objectives and strategies of a Regulated Entity (as defined below), 
as described in the Regulated Entity's registration statement, other 
filings the Regulated Entity 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 Entity's reports 
to shareholders.
    \3\ ``Board'' means the board of directors or equivalent of any 
Regulated Entity.
    \4\ ``Independent Trustees'' means, with respect to any Board, 
the directors or trustees who are not ``interested persons'' within 
the meaning of section 2(a)(19) of the Act.
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    2. HPS, a Delaware limited liability company, is registered with 
the Commission as an investment adviser under the Investment Advisers 
Act of 1940 (``Advisers Act''). HPS serves as the investment adviser to 
HPS Fund.
    3. The Existing Affiliated Funds are the investment funds 
identified on Schedule A to the application. Each Existing Affiliated 
Fund would be an investment company but for section 3(c)(1) or section 
3(c)(7) of the Act.
    4. The investment advisory subsidiaries and relying advisers of HPS 
identified on Schedule A to the application (each such investment 
adviser and HPS, an ``Existing Adviser'' and collectively, the 
``Existing Advisers''), serve as investment advisers to the respective 
Existing Affiliated Funds. HPS controls the other Existing Advisers.
    5. Applicants seek an order (``Order'') to permit a Regulated 
Entity \5\ and one or more other Regulated Entities and one or more 
Affiliated Funds \6\ to (a) participate in the same investment 
opportunities through a proposed co-investment program where such 
participation would otherwise be prohibited under section 17(d) or 
section 57(a)(4) and the rules under the Act; and (b) make additional 
investments in securities of such issuers (``Follow-On Investments''), 
including through the exercise of warrants, conversion privileges, and 
other rights

[[Page 1448]]

to purchase securities of the issuers. ``Co-Investment Transaction'' 
means any transaction in which a Regulated Entity (or its Wholly-Owned 
Investment Sub, as defined below) participate together with one or more 
other Regulated Entities and/or Affiliated Funds in reliance on the 
requested Order. ``Potential Co-Investment Transaction'' means any 
investment opportunity in which a Regulated Entity (or its Wholly-Owned 
Investment Subs) could not participate together with one or more other 
Regulated Entities and/or one or more Affiliated Funds without 
obtaining and relying on the Order.\7\
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    \5\ ``Regulated Entity'' means HPS Fund and any Future Regulated 
Entity. ``Future Regulated Entity'' means any closed-end management 
investment company formed in the future that is registered under the 
1940 Act or any closed-end management investment company that has 
elected to be regulated as a BDC, whose investment adviser is an 
Adviser, and that intends to participate in the co-investment 
program described in the application. ``Adviser'' means any Existing 
Adviser and any Future Adviser. ``Future Adviser'' means any future 
investment adviser that (i) controls, is controlled by or is under 
common control with HPS, (ii) is registered as an investment adviser 
under the Advisers Act, and (iii) is not a Regulated Entity or a 
subsidiary of a Regulated Entity.
    \6\ ``Affiliated Fund'' means any Existing Affiliated Fund or 
any Future Affiliated Fund. ``Future Affiliated Fund'' means any 
investment fund that would be an ``investment company'' but for 
section 3(c)(1) or 3(c)(7) of the Act, is formed in the future, 
whose investment adviser is an Adviser, and that intends to 
participate in the co-investment program described in the 
application. No Affiliated Fund is or will be a subsidiary of a 
Regulated Entity.
    \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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    6. Applicants state that any of the Regulated Entities, from time 
to time, form one or more Wholly-Owned Investment Subs.\8\ Such a 
subsidiary would be prohibited from investing in a Co-Investment 
Transaction with any other Regulated Entity or Affiliated Fund because 
it would be a company controlled by its parent Regulated Entity 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 Entity and that 
the Wholly-Owned Investment Sub's participation in any such transaction 
be treated, for purposes of the Order, as though the parent Regulated 
Entity 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 
Entity's investments and, therefore, no conflicts of interest could 
arise between the Regulated Entity and the Wholly-Owned Investment Sub. 
The Regulated Entity'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 
Entity's Board would be informed of, and take into consideration, any 
proposed use of a Wholly-Owned Investment Sub in the Regulated Entity's 
place. If the Regulated Entity 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 Entity and the Wholly-Owned 
Investment Sub.
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    \8\ The term ``Wholly-Owned Investment Sub'' means an entity (a) 
whose sole business purpose is to hold one or more investments on 
behalf of a Regulated Entity (and, in the case of an SBIC Subsidiary 
(as defined below), maintain a license under the Small Business 
Investment Act of 1958, as amended (the ``SBA Act'') and issue 
debentures guaranteed by the Small Business Administration (the 
``SBA''); (b) that is wholly-owned by the Regulated Entity (with the 
Regulated Entity at all times holding, beneficially and of record, 
100% of the voting and economic interests); (c) with respect to 
which the Regulated Entity's Board has the sole authority to make 
all determinations with respect to the entity's participation under 
the conditions of the application; and (d) that would be an 
investment company but for section 3(c)(1) or 3(c)(7) of the Act. 
All subsidiaries of the Regulated Entity participating in the Co-
Investment Transactions will be Wholly-Owned Investment Subs. The 
term ``SBIC Subsidiary'' means a Wholly-Owned Investment Sub that is 
licensed by the SBA to operate under the SBA Act as a small business 
investment company (an ``SBIC'').
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    7. The Advisers expects that any portfolio company that is an 
appropriate investment for a Regulated Entity should also be an 
appropriate investment for one or more other Regulated Entities and/or 
one or more Affiliated Funds, with certain exceptions based on 
available capital or diversification.\9\ When considering Potential Co-
Investment Transactions for any Regulated Entity, the applicable 
Adviser will consider only the Objectives and Strategies, Board-
Established Criteria,\10\ investment policies, investment positions, 
capital available for investment, and other pertinent factors 
applicable to that Regulated Entity. Applicants believe that the use of 
Board-Established Criteria for each of the Regulated Entities is 
appropriate based on the potential size and scope of HPS' advisory 
business. Applicants argue that in addition to the other protections 
offered by the conditions, using Board-Established Criteria in the 
allocation of Potential Co-Investment Transactions will further reduce 
the risk of subjectivity in the Adviser's determination of whether an 
investment opportunity is appropriate for a Regulated Entity. In 
connection with the Board's annual review of the continued 
appropriateness of any Board-Established Criteria under condition 9, 
the Regulated Entity's Adviser will provide information regarding any 
Co-Investment Transaction (including, but not limited to, Follow-On 
Investments) effected by the Regulated Entity that did not fit within 
the then-current Board-Established Criteria.
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    \9\ The Regulated Entities, however, will not be obligated to 
invest, or co-invest, when investment opportunities are referred to 
them.
    \10\ ``Board-Established Criteria'' means criteria that the 
Board of the applicable Regulated Entity may establish from time to 
time to describe the characteristics of Potential Co-Investment 
Transactions which would be within the Regulated Entity's then-
current Objectives and Strategies that the applicable Adviser should 
consider as appropriate for the Regulated Entity. If no Board-
Established Criteria are in effect for a Regulated Entity, then such 
Adviser will consider all Potential Co-Investment Transactions that 
fall within the then-current Objectives and Strategies for that 
Regulated Entity. Board-Established Criteria will be objective and 
testable, meaning that they will be based on observable information, 
such as such as industry/sector of the issuer, minimum earnings 
before interest, taxes, depreciation and amortization of the issuer, 
asset class of the investment opportunity or required commitment 
size, and not on characteristics that involve discretionary 
assessment. The Adviser to a Regulated Entity may from time to time 
recommend criteria for the applicable Board's consideration, but 
Board-Established Criteria will only become effective if approved by 
a majority of the Independent Trustees. The Independent Trustees of 
a Regulated Entity may at any time rescind, suspend, or qualify its 
approval of any Board-Established Criteria, though applicants 
anticipate that, under normal circumstances, the Board would not 
modify these criteria more often than quarterly.
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    8. 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), for each Regulated Entity, the 
applicable Adviser will present each Potential Co-Investment 
Transaction and the proposed allocation to the directors or trustees of 
the Board eligible to vote under section 57(o) of the Act (``Eligible 
Trustees''), and the ``required majority,'' as defined in section 57(o) 
of the Act (``Required Majority'') \11\ will approve each Co-Investment 
Transaction prior to any investment by the participating Regulated 
Entity.
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    \11\ In the case of a Regulated Entity that is a registered 
fund, the Board members that make up the Required Majority will be 
determined as if the Regulated Entity were a BDC subject to section 
57(o).
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    9. With respect to the pro rata dispositions and Follow-On 
Investments provided in conditions 7 and 8, a Regulated Entity 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 Entity and 
each 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 Entity has approved that Regulated Entity's 
participation in pro rata dispositions and Follow-On Investments as 
being in the best interests of the Regulated Entity. If the Board does 
not so approve, any such disposition or Follow-On Investment will be 
submitted to the Regulated Entity's Eligible Trustees. The Board of any 
Regulated Entity may at any time rescind, suspend, or qualify its 
approval of pro rata dispositions and Follow-On

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Investments with the result that all dispositions and/or Follow-On 
Investments must be submitted to the Eligible Trustees.
    10. No Independent Trustee of a Regulated Entity will have a direct 
or indirect financial interest in any Co-Investment Transaction (other 
than indirectly through share ownership in one of the Regulated 
Entities), including any interest in any company whose securities would 
be acquired in a Co-Investment Transaction.
    11. Applicants also represent that if the Advisers, the principal 
owners of any of the Advisers (the ``Principals''), or 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% of the outstanding 
voting shares of a Regulated Entity (the ``Shares''), then the Holders 
will vote such Shares as required under condition 14.

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 Entities and Affiliated Funds could be 
deemed to be a person related to each Regulated Entity 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 Entities that are BDCs. Section 17(d) of the Act and rule 
17d-1 under the Act are applicable to Regulated Entities 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 Entities would be, in many 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 Entity's shareholders 
and with the purposes intended by the policies and provisions of the 
Act. Applicants state that the Regulated Entities' 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. (a) Each Adviser will establish, maintain and implement policies 
and procedures reasonably designed to ensure that it identifies for 
each Regulated Entity all Potential Co-Investment Transactions that (i) 
the Adviser considers for any other Regulated Entity or Affiliated Fund 
and (ii) fall within the Regulated Entity's then-current Objectives and 
Strategies and Board-Established Criteria.
    (b) When an Adviser identifies a Potential Co-Investment 
Transaction for a Regulated Entity under condition 1(a), the Adviser 
will make an independent determination of the appropriateness of the 
investment for the Regulated Entity in light of the Regulated Entity's 
then-current circumstances.
    2. (a) If an Adviser deems a Regulated Entity's participation in 
any Potential Co-Investment Transaction to be appropriate for the 
Regulated Entity, the Adviser will then determine an appropriate level 
of investment for the Regulated Entity.
    (b) If the aggregate amount recommended by an Adviser to be 
invested by the applicable Regulated Entity in the Potential Co-
Investment Transaction, together with the amount proposed to be 
invested by the other participating Regulated Entities 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 capital available for 
investment in the asset class being allocated, up to the amount 
proposed to be invested by each. Each Adviser will provide the Eligible 
Trustees of each participating Regulated Entity with information 
concerning each participating party's available capital to assist the 
Eligible Trustees with their review of the applicable Regulated 
Entity's investments for compliance with these allocation procedures.
    (c) After making the determinations required in conditions 1(b) 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 Entity 
and each participating Affiliated Fund) to the Eligible Trustees of its 
participating Regulated Entity for their consideration. A Regulated 
Entity will enter into a Co-Investment Transaction with one or more 
other Regulated Entities or Affiliated Funds only if, prior to the 
Regulated Entity'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 
Entity and its equity holders and do not involve overreaching in 
respect of the Regulated Entity or its equity holders on the part of 
any person concerned;
    (ii) the Potential Co-Investment Transaction is consistent with:
    (A) The interests of the Regulated Entity's equity holders; and
    (B) the Regulated Entity's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Entities or any 
Affiliated Funds would not disadvantage the Regulated Entity, and 
participation by the Regulated Entity would not be on a basis different 
from or less advantageous than that of any other Regulated Entities or 
any Affiliated Funds; provided that, if any other Regulated Entity or 
any Affiliated Fund, but not the Regulated Entity 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 Trustees will have the right to ratify the 
selection of such director or board observer, if any; and
    (B) the Adviser agrees to, and does, provide periodic reports to 
the Board of

[[Page 1450]]

the Regulated Entity 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 Regulated Entity or any 
Affiliated Fund or any affiliated person of any Regulated Entity or any 
Affiliated Fund receives in connection with the right of a Regulated 
Entity or an Affiliated 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 may each, in turn, share its 
portion with its affiliated persons) and the participating Regulated 
Entities in accordance with the amount of each party's investment; and
    (iv) the proposed investment by the Regulated Entity will not 
benefit any Adviser, the other Regulated Entities, the Affiliated 
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 Entity 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 Entity, on a quarterly basis, a record of all investments in 
Potential Co-Investment Transactions made by any other Regulated Entity 
or Affiliated Fund during the preceding quarter that fell within the 
Regulated Entity's then-current Objectives and Strategies and Board-
Established Criteria that were not made available to the Regulated 
Entity, and an explanation of why the investment opportunities were not 
offered to the Regulated Entity. All information presented to the Board 
pursuant to this condition will be kept for the life of the Regulated 
Entity 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,\12\ a Regulated Entity will not invest in reliance on the 
Order in any issuer in which another Regulated Entity, Affiliated Fund, 
or any affiliated person of another Regulated Entity or Affiliated Fund 
is an existing investor. The applicable Adviser will maintain books and 
records that demonstrate compliance with this condition for such 
Regulated Entity.
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    \12\ This exception applies only to Follow-On Investments by a 
Regulated Entity in issuers in which that Regulated Entity already 
holds investments.
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    6. A Regulated Entity 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 Entity and Affiliated 
Fund. The grant to another Regulated Entity or an Affiliated Fund, but 
not the Regulated Entity, 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 Regulated Entity or Affiliated 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 Entity 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 Entity in the disposition.
    (b) Each Regulated Entity 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 
Regulated Entities and Affiliated Funds.
    (c) A Regulated Entity may participate in such disposition without 
obtaining prior approval of the Required Majority if: (i) The proposed 
participation of each Regulated Entity 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 Entity has approved as being in the best interests of the 
Regulated Entity 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 Entity 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 such Regulated Entity's participation to such 
Regulated Entity's Eligible Trustees, and such Regulated Entity will 
participate in such disposition solely to the extent that a Required 
Majority determines that it is in such Regulated Entity's best 
interests.
    (d) Each Regulated Entity and each Affiliated Fund will bear its 
own expenses in connection with any such disposition.
    8. (a) If a Regulated Entity or an Affiliated 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 Entity 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 Entity.
    (b) A Regulated Entity may participate in such Follow-On Investment 
without obtaining prior approval of the Required Majority if: (i) The 
proposed participation of each Regulated Entity 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 Entity has approved as being in the best 
interests of the Regulated Entity 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 Entity's participation to 
the Eligible Trustees, and the Regulated Entity will participate in 
such Follow-On Investment solely to the extent that a Required Majority 
determines that it is in the Regulated Entity's best interests.
    (c) If, with respect to any Follow-On Investment:
    (i) The amount of a Follow-On Investment is not based on the 
Regulated Entities' and the Affiliated Funds' outstanding investments 
immediately preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the applicable Advisers to 
be invested by each

[[Page 1451]]

Regulated Entity in the Follow-On Investment, together with the amount 
proposed to be invested by the participating 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 party's capital available for investment in the 
asset class being allocated, up to the amount proposed to be invested 
by each.
    (d) The acquisition of Follow-On Investments as permitted by this 
condition will be considered a Co-Investment Transaction for all 
purposes and subject to the other conditions set forth in the 
application.
    9. The Independent Trustees of each Regulated Entity will be 
provided quarterly for review all information concerning Potential Co-
Investment Transactions that fell within the Regulated Entity's then-
current Objectives and Strategies and Board-Established Criteria, 
including investments in Potential Co-Investment Transactions made by 
other Regulated Entities and Affiliated Funds, that the Regulated 
Entity considered but declined to participate in, and concerning Co-
Investment Transactions in which the Regulated Entity participated, so 
that the Independent Trustees may determine whether all Potential Co-
Investment Transactions and Co-Investment Transactions during the 
preceding quarter, including those Potential Co-Investment Transactions 
which the Regulated Entity considered but declined to participate in, 
comply with the conditions of the Order. In addition, the Independent 
Trustees will consider at least annually (a) the continued 
appropriateness for the Regulated Entity of participating in new and 
existing Co-Investment Transactions and (b) the continued 
appropriateness of any Board-Established Criteria.
    10. Each Regulated Entity will maintain the records required by 
section 57(f)(3) of the Act as if each of the Regulated Entities were a 
BDC and each of the investments permitted under these conditions were 
approved by the Required Majority under section 57(f).
    11. No Independent Trustee of a Regulated Entity will also be a 
director, general partner, managing member or principal, or otherwise 
be 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 Advisers under their respective 
investment advisory agreements with the Regulated Entities and the 
Affiliated Funds, be shared by the Affiliated Funds and the Regulated 
Entities 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 \13\ (including break-up or commitment fees 
but excluding brokerage or underwriting compensation permitted 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 Entities 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 
Entities and Affiliated Funds based on the amounts they invest in such 
Co-Investment Transaction. None of the Advisers, the Affiliated Funds, 
the other Regulated Entities or any affiliated person of the Regulated 
Entities 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 
Entities and Affiliated Funds, the pro rata transaction fees described 
above and fees or other compensation described in condition 
2(c)(iii)(C), (b) brokerage or underwriting compensation permitted by 
section 17(e) or 57(k) of the Act or (c) in the case of an Adviser, 
investment advisory fees paid in accordance with the investment 
advisory agreement between the Adviser and the Regulated Entity or 
Affiliated Fund).
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    \13\ Applicants are not requesting and the staff of the 
Commission 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 Entity, then the Holders will vote such Shares in 
the same percentages as the Regulated Entity's other shareholders (not 
including the Holders) when voting on (1) the election of directors; 
(2) the removal of one or more directors; or (3) all other matters 
under either the Act or applicable State law affecting the Board's 
composition, size or manner of election.
    15. Each Regulated Entity'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 Entity'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.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-00244 Filed 1-10-22; 8:45 am]
BILLING CODE 8011-01-P