[Federal Register Volume 76, Number 92 (Thursday, May 12, 2011)]
[Notices]
[Pages 27674-27675]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-11622]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29665; 812-13772]
PennantPark Investment Corporation, et al.; Notice of Application
May 6, 2011.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') for an exemption from
sections 18(a) and 61(a) of the Act.
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Applicants: PennantPark Investment Corporation (the ``Company''),
PennantPark SBIC GP, LLC (the ``General Partner''), PennantPark SBIC LP
(``PennantPark SBIC'') and PennantPark Investment Advisers, LLC (the
``Investment Adviser'')
Summary of the Application: The Company requests an order to permit it
to adhere to a modified asset coverage requirement.
DATES: Filing Dates: The application was filed on May 12, 2010 and
amended on September 7, 2010, February 18, 2011, and May 2, 2011.
Hearing or Notification of Hearing: An order granting the application
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 May 31, 2011 and should be accompanied by proof of service on
the Applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons 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
Street, NE., Washington, DC 20549-1090. Applicants, 590 Madison Avenue,
15th Floor, New York, New York 10022.
FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202) 551-6873, or Dalia Osman Blass, Branch Chief, at (202) 551-6874
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or 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, a Maryland corporation, is an externally managed,
non-diversified, closed-end management investment company that has
elected to be regulated as a business development company (``BDC'')
under the Act.\1\ The Company's investment objectives are to generate
both current income and capital appreciation in the form of mezzanine
debt, senior secured loans and equity investments through debt and
equity investments primarily in U.S. middle market private companies.
The Investment Adviser, a Delaware limited liability company, is the
external investment adviser to the Company. The Investment Adviser is
registered under the Investment Advisers Act of 1940.
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\1\ 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 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.
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2. PennantPark SBIC, a Delaware limited liability company, is a
small business investment company (``SBIC'') licensed by the Small
Business Administration (``SBA'') to operate under the Small Investment
Act of 1958 (``SBIA''). PennantPark SBIC is excluded from the
definition of investment company by section 3(c)(7) of the Act. The
Company directly owns 99% of PennantPark SBIC in the form of limited
partnership interests. The General Partner, which is a wholly-owned
subsidiary of the Company, owns 1% of PennantPark SBIC in the form of a
general partnership interest. The Company is the sole member of the
General Partner.
Applicants' Legal Analysis
1. The Company requests an exemption pursuant to section 6(c) of
the Act from the provisions of sections 18(a) and 61(a) of the Act to
permit it to adhere to a modified asset coverage requirement with
respect to any direct or indirect wholly owned subsidiary of the
Company that is licensed by the SBA to operate under the SBIA as a SBIC
and relies on Section 3(c)(7) for an exemption from the definition of
``investment company'' under the 1940 Act (each, a ``SBIC
Subsidiary'').\2\ Applicants state that companies operating under the
SBIA, such as the SBIC Subsidiary, will be subject to the SBA's
substantial regulation of permissible leverage in its capital
structure.
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\2\ All existing entities that currently intend to rely on the
order are named as applicants. Any other existing or future entity
that may rely on the order in the future will comply with the terms
and condition of the order.
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2. Section 18(a) of the Act prohibits a registered closed-end
investment company from issuing any class of senior security or selling
any such security of which it is the issuer unless the company complies
with the asset coverage requirements set forth in that section. Section
61(a) of the Act makes section 18 applicable to BDCs, with certain
modifications. Section 18(k) exempts an investment company operating as
an SBIC from the asset coverage requirements for senior securities
representing indebtedness that are contained in section 18(a)(1)(A) and
(B).
3. Applicants state that the Company may be required to comply with
the asset coverage requirements of section 18(a) (as modified by
section 61(a)) on a consolidated basis because the Company may be
deemed to be an indirect issuer of any class of senior security issued
by PennantPark SBIC or another SBIC Subsidiary. Applicants state that
applying section 18(a) (as modified by section 61(a)) on a consolidated
basis generally would require that the Company treat as its own all
assets and any liabilities held directly either by itself, by
PennantPark SBIC, or by another SBIC Subsidiary. Accordingly, the
Company requests an order under section 6(c) of the Act exempting the
Company from the provisions of section 18(a) (as modified by section
61(a)), such that senior securities issued by each SBIC Subsidiary that
would be excluded from the SBIC Subsidiary's asset coverage ratio by
section 18(k) if it were itself a BDC would also be excluded from the
Company's consolidated asset coverage ratio.
4. Section 6(c) of the Act, in relevant part, permits the
Commission to exempt any transaction or class of transactions from any
provision of the Act if and to the extent that such exemption is
necessary or appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy
and provisions of the Act. Applicants state
[[Page 27675]]
that the requested relief satisfies the section 6(c) standard.
Applicants contend that, because the SBIC Subsidiary would be entitled
to rely on section 18(k) if it were a BDC itself, there is no policy
reason to deny the benefit of that exemption to the Company.
Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
The Company shall not issue or sell any senior security, and the
Company shall not cause or permit PennantPark SBIC or any other SBIC
Subsidiary to issue or sell any senior security of which the Company,
PennantPark SBIC or any other SBIC Subsidiary is the issuer except to
the extent permitted by section 18 (as modified for BDCs by section 61)
of the Act; provided that, immediately after the issuance or sale by
any of the Company, PennantPark SBIC or any other SBIC Subsidiary of
any such senior security, the Company, individually and on a
consolidated basis, shall have the asset coverage required by section
18(a) of the Act (as modified by section 61(a)). In determining whether
the Company has the asset coverage on a consolidated basis required by
section 18(a) of the Act (as modified by section 61(a)), any senior
securities representing indebtedness of PennantPark SBIC or another
SBIC Subsidiary shall not be considered senior securities and, for
purposes of the definition of ``asset coverage'' in section 18(h),
shall be treated as indebtedness not represented by senior securities.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11622 Filed 5-11-11; 8:45 am]
BILLING CODE 8011-01-P