[Federal Register Volume 83, Number 135 (Friday, July 13, 2018)]
[Notices]
[Pages 32699-32704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14963]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33152; File No. 812-14925]
AB Private Credit Investors Corp., et al.
July 9, 2018.
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 business
development companies (``BDCs'') to co-invest in portfolio companies
with each other and with certain affiliated investment funds and
accounts.\1\
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\1\ The requested order (``Order'') would supersede an exemptive
order issued by the Commission on October 11, 2016 (In the Matter of
AB Private Credit Investors Corporation, et al., Investment Company
Act Release Nos. 32261 (Sept. 13, 2016) (notice) and 32310 (Oct. 11,
2016) (order) (the ``Prior Order''), with the result that no person
will continue to rely on the Prior Order if the Order is granted.
APPLICANTS: AB Private Credit Investors Corporation (``AB BDC I''); AB
Private Credit Investors Middle Market Direct Lending Fund, L.P. (``AB
PCI Fund I''); AB Energy Opportunity Fund, L.P. (``AB Energy Fund,''
and together with AB PCI Fund I, the ``Existing Affiliated Funds''); AB
Private Credit Investors, LLC (``AB-PCI'') on behalf of itself and
[[Page 32700]]
its successors; \2\ and AXA Equitable Life Insurance Company (``AXA
Equitable'').
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\2\ The term ``successor,'' as applied to any AB-PCI Adviser
(defined below), means an entity that results from a reorganization
into another jurisdiction or change in the type of business
organization.
FILING DATES: The application was filed on June 28, 2018. Applicants
have agreed to file an amendment during the notice period, the
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substance of which is reflected in this notice.
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 August 3, 2018, and should be accompanied by proof of
service on 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
St. NE, Washington, DC 20549-1090. Applicants: J. Brent Humphries, AB
Private Credit Investors LLC, 1345 Avenue of the Americas, New York, NY
10105.
FOR FURTHER INFORMATION CONTACT: Stephan N. Packs, Senior Counsel, at
(202) 551-6853 or David J. Marcinkus, 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. AB BDC I, a Maryland corporation, is organized as a closed-end
management investment company that has elected to be regulated as a BDC
under section 54(a) of the Act.\3\ AB BDC I's Objectives and Strategies
\4\ are to principally generate current income through direct
investments in private loans and notes and, to a lesser extent, long-
term capital appreciation through private equity investments.
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\3\ Section 2(a)(48) defines a business development company
(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.
\4\ ``Objectives and Strategies'' means a Regulated Fund's
(defined below) investment objectives and strategies, as described
in the Regulated Fund's registration statement on Form N-2 or Form
10-12G, as applicable, other filings the Regulated Fund 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 Fund's reports to shareholders.
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2. The board of directors of AB BDC I is comprised of five
directors. The AB BDC I Board and any board of directors of a Future
Regulated Fund (each a ``Board'') will be comprised of directors, a
majority of whom will not be ``interested persons'' within the meaning
of Section 2(a)(19) of the Act (the ``Non-Interested Directors''), of
AB BDC I or any Future Regulated Fund, as applicable.
3. AB PCI Fund I is a Delaware limited partnership that is exempt
from registration pursuant to section 3(c)(7) of the Act. AB PCI Fund
I's investment objective and strategies are to generate both current
income and long-term capital appreciation through debt and equity
investments.
4. AB Energy Fund is a Delaware limited partnership that is exempt
from registration pursuant to section 3(c)(7) of the Act. AB Energy
Fund's investment objective and strategies are to generate attractive
risk-adjusted returns, through current income and capital gains, by
capitalizing on private and public debt and equity investment
opportunities in North American oil and gas producers.
5. AB-PCI, a Delaware limited liability company, is registered with
the Commission as an investment adviser under the Investment Advisers
Act of 1940 (the ``Advisers Act''). AB-PCI is a wholly-owned subsidiary
of AllianceBernstein L.P., a New York based global asset management
firm. AB-PCI is the investment adviser to each of AB BDC I and the
Existing Affiliated Funds. AB-PCI also advises certain Affiliated
Managed Accounts that may participate in the Co-Investment Program,
including the Existing Affiliated Managed Accounts.\5\
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\5\ ``Existing Affiliated Managed Accounts'' means one or more
investment accounts that have been established by AXA Equitable, and
that are advised by: (i) AB-PCI; and (ii) any future investment
adviser that is controlled by AB-PCI and is registered as an
investment adviser under the Advisers Act (``AB-PCI Adviser'').
``Affiliated Managed Account'' means: (i) The Existing
Affiliated Managed Accounts; and (ii) any Future Affiliated Managed
Account. ``Future Affiliated Managed Account'' means an account: (i)
For which an AB-PCI Adviser is acting as investment adviser or sub-
adviser; (b) of a person who is a Section 57(b) affiliate of a
Regulated Fund and who would not be able to rely on Section 3(c)(1)
or 3(c)(7) of the Act; and (c) that intends to participate in the
Co-Investment Program.
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6. AXA Equitable is a stock life insurance corporation organized
under the laws of New York, and is the indirect parent company of AB-
PCI.\6\ AXA Equitable has established an Existing Affiliated Managed
Account, and may from time to time establish Future Affiliated Managed
Accounts, advised by an AB-PCI Adviser.\7\
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\6\ Although AXA Equitable is an indirect parent company of AB-
PCI, AB-PCI has a separate management team from AXA Equitable and
operates as a separate and distinct business and legal entity.
\7\ AXA Equitable is excluded from the definition of investment
company by Section 3(c)(3) of the Act.
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7. Applicants seek an order (``Order'') to permit a Regulated Fund
\8\ and one or more Regulated Funds and/or one or more Affiliated Funds
\9\ 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 AB-PCI Adviser
negotiates terms in addition to price, 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'').
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\8\ ``Regulated Fund'' means AB BDC I and any Future Regulated
Fund. ``Future Regulated Fund'' means any closed-end management
investment company other than AB BDC I: (i) That is registered under
the Act or has elected to be regulated as a BDC; (ii) whose
investment adviser is an AB-PCI Adviser; and (iii) that intends to
participate in the Co-Investment Program.
\9\ ``Affiliated Fund'' means: (i) The Existing Affiliated
Funds; (ii) any Future Affiliated Fund; and (iii) any Affiliated
Managed Account. ``Future Affiliated Fund'' means any entity: (i)
Whose investment adviser or sub-adviser is an AB-PCI Adviser; (b)
that would be an investment company but for Section 3(c)(1) or
3(c)(7) of the 1940 Act; and (c) that intends to participate in the
Co-Investment Program.
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8. The Order would amend the Prior Order to extend the relief
granted under the Prior Order to certain Existing Affiliated Managed
Accounts and Future Affiliated Managed Accounts whose investment
adviser is an AB-PCI Adviser.
9. For purposes of the requested Order, ``Co-Investment
Transaction'' means any transaction in which a Regulated Fund (or its
Wholly-Owned Investment Sub, as defined below) participated together
with one or more
[[Page 32701]]
other Regulated Funds and/or one or more Affiliated Funds in reliance
on the requested Order. ``Potential Co-Investment Transaction'' means
any investment opportunity in which a Regulated Fund (or its Wholly-
Owned Investment Sub, as defined below) 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.
10. Applicants state that a Regulated Fund may, from time to time,
form one or more Wholly-Owned Investment Subs.\10\ 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 Sub be permitted to participate in Co-Investment
Transactions in lieu of its parent Regulated Fund and that the Wholly-
Owned Investment Sub's participation in any such transaction be
treated, for purposes of the requested Order, as though the parent
Regulated Fund were participating directly. The Regulated Fund'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 Fund's Board would be informed of, and
take into consideration, any proposed use of a Wholly-Owned Investment
Sub 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 Subs, the Board will also be informed of, and
take into consideration, the relative participation of the Regulated
Fund and the Wholly-Owned Investment Sub.
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\10\ The term ``Wholly-Owned Investment Sub'' 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 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 section 3(c)(1) or 3(c)(7) of
the Act.
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11. When considering Potential Co-Investment Transactions for any
Regulated Fund, the AB-PCI Adviser will consider only the Objectives
and Strategies, Board-Established Criteria,\11\ investment policies,
investment positions, capital available for investment, and other
pertinent factors applicable to that Regulated Fund.
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\11\ ``Board-Established Criteria'' means criteria that the
Board of a Regulated Fund may establish from time to time to
describe the characteristics of Potential Co-Investment Transactions
regarding which the AB-PCI Adviser to the Regulated Fund should be
notified under Condition 1.
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12. 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 Advisers 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'') \12\ will approve each
Co-Investment Transaction prior to any investment by the participating
Regulated Fund.
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\12\ 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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13. AXA Equitable may decline the opportunity for its Affiliated
Managed Accounts to participate in whole or in part in a Potential Co-
Investment Transaction pursuant to AXA Equitable's arrangement with AB-
PCI with respect to its Affiliated Managed Accounts. AXA Equitable does
not have the ability to cause AB-PCI to change the allocations of any
Potential Co-Investment Transaction.
14. 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.
15. No Non-Interested Director of a Regulated Fund will have a
financial interest in any Co-Investment Transaction, other than through
share ownership in one of the Regulated Funds.
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 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. In addition, section
57(b) applies to any investment adviser to a Regulated Fund that is a
BDC and to any section 2(a)(3)(C) affiliates of the investment adviser,
including AXA Equitable and the Affiliated Managed Accounts. 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
[[Page 32702]]
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.
4. Applicants also represent that if the AB-PCI Adviser or its
principals, or any person controlling, controlled by, or under common
control with an AB-PCI Adviser or its principals, and the Affiliated
Funds (collectively, the ``Holders'') own in the aggregate more than 25
percent of the outstanding voting securities of a Regulated Fund
(``Shares''), then the Holders will vote such Shares as required under
Condition 14. Applicants believe that this Condition will ensure that
the Non-Interested Directors will act independently in evaluating the
Co-Investment Program, because the ability of an AB-PCI Adviser or its
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
party, taking into account its qualifications, reputation for
independence, cost to the shareholders, and other factors that they
deem relevant.
Applicants' Conditions:
Applicants agree that the Order will be subject to the following
Conditions:
1. Each time an AB-PCI 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 and
Board-Established Criteria, the Regulated Fund's AB-PCI Adviser will
make an independent determination of the appropriateness of the
investment for such Regulated Fund in light of the Regulated Fund's
then-current circumstances.
2. (a) If the AB-PCI Adviser deems the Regulated Fund's
participation in any Potential Co-Investment Transaction to be
appropriate for the Regulated Fund, the AB-PCI Adviser will then
determine an appropriate level of investment for the Regulated Fund.
(b) If the aggregate amount recommended by the applicable AB-PCI
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 the Regulated Funds and Affiliated Funds 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. The applicable AB-PCI Adviser to a Regulated Fund 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 AB-PCI 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 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 Funds' and
Affiliated Funds' 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 shareholders and do not involve overreaching in respect of
the Regulated Fund or its shareholders on the part of any person
concerned;
(ii) the Potential Co-Investment Transaction is consistent with:
(A) The interests of the Regulated Fund's shareholders; and
(B) the Regulated Fund's then-current Objectives and Strategies and
Board-Established Criteria;
(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 Fund or Affiliated Fund;
provided that, if any other Regulated Fund or Affiliated Fund, 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 AB-PCI 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 an Affiliated
Fund or a 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
Funds in accordance with the amount of each party's investment; and
(iv) the proposed investment by the Regulated Fund will not benefit
the AB-PCI Advisers, the Affiliated Funds or the 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 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 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 AB-PCI 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 and Board-
Established Criteria 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
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subject to examination by the Commission and its staff.
5. Except for Follow-On Investments made in accordance with
Condition 8,\13\ a Regulated Fund will not invest in reliance on the
Order in any issuer in which another Regulated Fund, Affiliated Fund,
or any affiliated person of another Regulated Fund or an Affiliated
Fund is an existing investor.
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\13\ This exception applies only to Follow-On Investments by a
Regulated Fund in issuers in which that 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 by one or more Regulated Funds and/or Affiliated Funds in a
Co-Investment Transaction, the applicable AB-PCI 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 the
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 any other Regulated Fund.
(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 AB-PCI 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 any Regulated Fund desires to make
a Follow-On Investment in a portfolio company whose securities were
acquired by the Regulated Fund and the Affiliated Fund in a Co-
Investment Transaction, the applicable AB-PCI Advisers will:
(i) Notify each Regulated Fund 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 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 AB-PCI Adviser will provide its
written recommendation as to such Regulated Fund's participation to the
Eligible Directors, and the Regulated Fund will participate in such
Follow-On Investment solely to the extent that the Required Majority
determines that it is in such 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 AB-PCI Adviser to be
invested by each Regulated Fund in the Follow-On Investment, together
with the amount proposed to be invested by the other participating
Regulated Funds and the 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
participant'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 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 other Regulated Funds or Affiliated Funds that a
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: (i) The continued appropriateness for
such Regulated Fund of participating in new and existing Co-Investment
Transactions; and (ii) the continued appropriateness of any Board-
Established Criteria.
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 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 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 AB-PCI Advisers under their respective
investment advisory agreements with the 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
[[Page 32704]]
acquired or disposed of, as the case may be.
13. Any transaction fee \14\ (including break-up or commitment fees
but excluding broker's fees contemplated 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 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 AB-PCI Adviser
pending consummation of the transaction, the fee will be deposited into
an account maintained by such AB-PCI 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 AB-PCI 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 AB-PCI Adviser, investment
advisory fees paid in accordance with the agreement between the AB-PCI
Adviser and the Regulated Fund or Affiliated Fund).
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\14\ 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 percent 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), will prepare an annual report for its Board each year
that evaluates (and documents the basis of that evaluation) the
Regulated Fund'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.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-14963 Filed 7-12-18; 8:45 am]
BILLING CODE 8011-01-P