[Federal Register Volume 79, Number 201 (Friday, October 17, 2014)]
[Notices]
[Pages 62481-62482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-24685]
[[Page 62481]]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31282; 812-14279]
New Mountain Finance Corporation, et al.; Notice of Application
October 10, 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: New Mountain Finance Corporation (the ``Company''), New
Mountain Finance Adviser BDC, L.L.C. (the ``Investment Adviser''), New
Mountain Finance SBIC G.P., L.L.C. (the ``General Partner''), and New
Mountain Finance SBIC, L.P. (``New Mountain SBIC'').
Summary of the Application: The Company requests an order to permit it
to adhere to a modified asset coverage requirement.
DATES: The application was filed on February 18, 2014, and amended on
June 25, 2014, and September 4, 2014.
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 4, 2014, 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
Street NE., Washington, DC 20549-1090. Applicants: Robert A. Hamwee,
New Mountain Finance Corporation, 787 Seventh Avenue, 48th Floor, New
York, NY 10019.
FOR FURTHER INFORMATION CONTACT: David Joire, Senior Counsel, at (202)
551-6866, or James M. Curtis, Branch Chief, at (202) 551-6712 (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 generate
current income and capital appreciation through the sourcing and
origination of debt securities at all levels of the capital structure,
including first and second lien debt, notes, bonds and mezzanine
securities. The Investment 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.
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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. New Mountain SBIC, a Delaware limited partnership, received
approval for a license from the Small Business Administration (``SBA'')
to operate as a small business investment company (``SBIC'') under the
Small Business Investment Act of 1958 (``SBIA''). New Mountain SBIC is
excluded from the definition of investment company by section 3(c)(7)
of the Act. The General Partner is the sole general partner of New
Mountain SBIC and the Company is the sole member of the General
Partner. The Company is the sole limited partner of New Mountain SBIC.
The Company, directly or indirectly through the General Partner, wholly
owns New Mountain SBIC.
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 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 New Mountain 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 New
Mountain 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 its individual 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
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Subsidiary would be entitled to rely on section 18(k) if it were a BDC,
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 will not itself issue or sell any senior security and
the Company will not cause or permit New Mountain SBIC or any other
SBIC Subsidiary to issue or sell any senior security of which the
Company, New Mountain SBIC or any other SBIC Subsidiary is the issuer
except to the extent permitted by Section 18 (as modified for BDCs by
Section 61); provided that, immediately after the issuance or sale of
any such senior security by any of the Company, New Mountain SBIC or
any other SBIC Subsidiary, the Company, individually and on a
consolidated basis, shall have the asset coverage required by Section
18(a) (as modified by Section 61(a)). In determining whether the
Company, New Mountain SBIC and any other SBIC Subsidiary on a
consolidated basis have the asset coverage required by Section 18(a)
(as modified by Section 61(a)), any senior securities representing
indebtedness of New Mountain SBIC or another 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. 2014-24685 Filed 10-16-14; 8:45 am]
BILLING CODE 8011-01-P