[Federal Register Volume 79, Number 174 (Tuesday, September 9, 2014)]
[Notices]
[Pages 53466-53467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-21381]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31240; 812-14320]
Garrison Capital, Inc., et al.; Notice of Application
September 3, 2014.
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: Garrison Capital Inc. (``Company''), Garrison Capital SBIC
LP (``Garrison SBIC''), Garrison Capital Advisers LLC (``Garrison
Adviser''), Garrison Capital SBIC Holdco Inc. (``Holdco'') and Garrison
Capital SBIC General Partner LLC (``General Partner'').
Summary of the Application: The Company requests an order to permit it
to adhere to a modified asset coverage requirement.
Filing Dates: The application was filed June 6, 2014.
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 September 29, 2014 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.
[[Page 53467]]
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090. Applicants: Julian Weldon,
Garrison Capital, Inc., 1290 Avenue of the Americas, Suite 914, New
York, NY 10104.
FOR FURTHER INFORMATION CONTACT: Emerson Davis, Senior Counsel, at
(202) 551-6868, or Daniele Marchesani, Branch Chief, at (202) 551-6821
(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 Web site 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, a Delaware 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 objective is to provide its
stockholders with both current income and capital appreciation
primarily through debt investments and, to a lesser extent, equity
investments. Garrison Adviser, a Delaware limited liability company, is
the investment adviser to the Company. The Investment Adviser is
registered under the Investment Advisers Act of 1940, as amended.
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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. Garrison SBIC, a Delaware limited partnership, has received a
``green light letter'' from the Small Business Administration (``SBA'')
and intends to submit an application to the SBA for a small business
investment company (``SBIC'') license to operate under the Small
Business Investment Act of 1958 (``SBIA''). Garrison SBIC expects to
rely on the exclusion from the definition of investment company
contained in section 3(c)(7) of the Act. The Company currently owns a
99% limited partnership interest in Garrison SBIC. The General Partner,
a Delaware limited liability company, is the general partner of
Garrison SBIC. The General Partner owns 1% of Garrison SBIC in the form
of a general partner interest. The Company currently holds 100 percent
of the shares of Holdco, which holds a one percent membership interest
in 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 their 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 Garrison 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 Garrison
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 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 Garrison SBIC or any other SBIC
Subsidiary to issue or sell any senior security of which the Company,
Garrison 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, Garrison 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 a SBIC Subsidiary if that SBIC Subsidiary has issued
indebtedness that is held or guaranteed by the SBA 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.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21381 Filed 9-8-14; 8:45 am]
BILLING CODE 8011-01-P