83 FR 15648 - Application; Benefit Street Partners BDC, Inc., et al.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 70 (April 11, 2018)

[Federal Register Volume 83, Number 70 (Wednesday, April 11, 2018)]
[Notices]
[Pages 15648-15653]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-07430]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33068; File No. 812-14601]


Application; Benefit Street Partners BDC, Inc., et al.

April 6, 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 certain 
business development companies (``BDC'') and closed-end management 
investment companies to co-invest in portfolio companies with each 
other and with affiliated investment funds.

Applicants: Benefit Street Partners BDC, Inc. (``BSP BDC''), Providence 
Flexible Credit Allocation Fund (``Providence Flexible Credit''), 
Business Development Corporation of America (``BDCA,'' together with 
BSP BDC and Providence Flexible Credit, the ``Existing Regulated 
Funds''), Providence TMT Debt Opportunity Fund II L.P. (``Fund II''), 
PECM Strategic Funding L.P. (``Strategic Funding''), SEI Energy Debt 
Fund, LP (``SEI Fund''), Providence Debt Fund III L.P. (``Fund III''), 
Providence Debt Fund III Master (Non-US) L.P. (``Fund III Offshore''), 
Benefit Street Partners Capital Opportunity Fund L.P. (``BSP Capital 
Fund''), Benefit Street Partners Capital Opportunity Fund II L.P. 
(``BSP Capital Fund II''), Benefit Street Partners SMA LM L.P. 
(``Benefit Street LM''), Benefit Street Partners SMA-C L.P. (``Benefit 
Street SMA-C''), Benefit Street Partners Senior Secured Opportunities 
Fund L.P. (``Benefit Street Senior Secured''), Benefit Street Partners 
Senior Secured Opportunities Master Fund (Non-US) L.P. (``Benefit 
Street Senior Secured Offshore''), Benefit Street Partners Senior 
Secured Opportunities (U) Fund (Non-US) L.P. (``Opportunities (U) 
Fund''), Benefit Street Partners Senior Secured Opportunities (U) 
Master Fund (Non-US) L.P. (``Opportunities (U) Master Fund''), BSP 
Special Situations Master A L.P. (``BSP Master A''), BSP Special 
Situations Master B L.P. (``BSP Master B''), Benefit Street Partners 
Debt Fund IV L.P. (``Fund IV''), Benefit Street Partners Debt Fund IV 
Master (Non-US) L.P. (``Fund IV Offshore''), Benefit Street Partners 
SMA-T L.P. (``SMA-T'' and each of Fund II, Strategic Funding, SEI Fund, 
Fund III, Fund III Offshore, BSP Capital Fund, BSP Capital Fund II, 
Benefit Street LM, Benefit Street SMA-C, Benefit Street Senior Secured, 
Benefit Street Senior Secured Offshore, Opportunities (U) Fund, 
Opportunities (U) Master Fund, BSP Master A, BSP Master B, Fund IV and 
Fund IV Offshore is referred to as an ``Existing Affiliated Fund'' and 
collectively, the ``Existing Affiliated Funds''), Providence Equity 
Capital Markets L.L.C. (``Fund II Affiliated Adviser''), Benefit Street 
Partners L.L.C. (``BSP Adviser''), BDCA Adviser, LLC (``BDCA 
Adviser''), and SEI Investments Management Corporation (``SEI 
Adviser'').

Filing Dates: The application was filed on January 15, 2016, and 
amended on January 9, 2017, June 23, 2017, and December 13, 2017.

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 April 30, 2018, 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 
St. NE, Washington, DC 20549-1090. Applicants: BSP BDC, Providence 
Flexible Credit, BDCA, Fund II, Strategic Funding, Fund III, Fund III 
Offshore, BSP Capital Fund, BSP Capital Fund II, Benefit Street LM, 
Benefit Street SMA-C, Benefit Street Senior Secured, Benefit Street 
Senior Secured Offshore, Opportunities (U) Fund, Opportunities (U) 
Master Fund, BSP Master A, BSP Master B, Fund IV, Fund IV Offshore, 
SMA-T, Fund II Affiliated Adviser, BSP Adviser, and BDCA Adviser, 9 
West 57th Street, 49th Floor, New York, NY 10019; SEI Fund and SEI 
Adviser, One Freedom Valley Drive, Oaks, PA 19456.

FOR FURTHER INFORMATION CONTACT: Christine Y. Greenlees, Senior 
Counsel, at (202) 551-6879 or Robert H. Shapiro, 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. BSP BDC is a Maryland corporation organized as a closed-end 
management investment company that intends to elect to be regulated as 
a BDC under section 54(a) of the Act.\1\ BSP BDC's Objectives and 
Strategies \2\ are to generate both current income and capital 
appreciation by primarily investing in secured debt, unsecured debt, as 
well as related equity securities issued by private U.S. middle market 
companies. The board of directors (``Board'') of BSP BDC will be 
comprised of five directors, three of whom will be persons who are not 
``interested persons'' of BSP BDC as defined in section 2(a)(19) of the 
Act (``Non-Interested Directors'').
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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 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 a Regulated Fund's 
investment objectives and strategies, as described in the Regulated 
Fund's registration statement on Form N-2, 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. Providence Flexible Credit is a Massachusetts business trust 
organized as closed-end investment company registered under the Act. 
Providence Flexible Credit's Objectives and Strategies are to seek 
total return through a combination of current income and capital 
appreciation. Providence Flexible Credit will seek to achieve its 
investment objective by investing primarily in a portfolio of (i) 
secured loans made primarily to companies whose debt is below 
investment grade quality; (ii) corporate

[[Page 15649]]

bonds that are expected to be primarily high yield issues of below 
investment grade quality; and (iii) debt investment opportunities in 
middle market companies in the United States that are of below 
investment grade quality. Providence Flexible Credit will have a Board 
with a majority of trustees that are Non-Interested Directors.
    3. BDCA is a Maryland corporation organized as a closed-end 
management investment company that has elected to be regulated as a BDC 
under the Act. BDCA's Objectives and Strategies are to generate both 
current income and capital appreciation by primarily investing in 
senior secured loans and mezzanine debt issued by middle market 
companies. BDCA's Board consists of seven members, a majority of whom 
are Non-Interested Directors.
    4. Each of the Affiliated Funds (defined below) would be an 
investment company but for section 3(c)(1) or 3(c)(7) of the Act. Each 
Affiliated Fund has, or will have, investment objectives and strategies 
that are similar to or that overlap with the Regulated Funds' 
Objectives and Strategies.
    5. Fund II Affiliated Adviser, BSP Adviser, and BDCA Adviser are 
each Delaware limited liability companies registered as investment 
advisers under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). Applicants state that the Providence Advisers (defined below) 
are controlled by their principal owners (the ``Principals'') and are 
thus affiliated persons of each other as described by section 
2(a)(3)(C) of the Act. Fund II Affiliated Adviser serves as investment 
adviser to Fund II and Strategic Funding. BSP Adviser serves as 
investment adviser to BSP BDC, Providence Flexible Credit, Fund III, 
Fund III Offshore, BSP Capital Fund, BSP Capital Fund II, Benefit 
Street LM, Benefit Street SMA-C, Benefit Street Senior Secured, Benefit 
Street Senior Secured Offshore, Opportunities (U) Fund, Opportunities 
(U) Master Fund, BSP Master A, BSP Master B, Fund IV, Fund IV Offshore, 
and SMA-T. In addition, BSP Adviser serves as sub-adviser to SEI Fund, 
whose investment adviser, SEI Adviser, is not affiliated with BSP 
Adviser. BDCA Adviser serves as investment adviser to BDCA.
    6. SEI Adviser is a Delaware corporation registered as an 
investment adviser under the Advisers Act. SEI Adviser serves as 
investment adviser to SEI Fund. As noted above, BSP Adviser serves as 
Sub-Adviser to SEI Fund. SEI Adviser is not an affiliated person of any 
Providence Adviser.
    7. Applicants seek to supersede the Prior Order \3\ to permit one 
or more Regulated Funds \4\ and/or one or more Affiliated Funds \5\ 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 Adviser 
negotiates terms in addition to price; \6\ 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''). ``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 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) 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.\7\
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    \3\ The requested order (the ``Order'') would supersede an 
exemptive order issued by the Commission on June 23, 2015 (the 
``Prior Order'') that was granted pursuant to sections 57(a)(4) and 
57(i) and rule 17d-1, with the result that no person will continue 
to rely on the Prior Order if the Order is granted. Benefit Street 
Partners BDC, Inc., et al., Investment Company Act Release Nos. 
31651 (May 27, 2015) (notice) and 31686 (Jun. 23, 2015) (order).
    \4\ ``Regulated Fund'' means any of the Existing Regulated Funds 
and any Future Regulated Fund. ``Future Regulated Fund'' means any 
closed-end management investment company (a) that is registered 
under the Act or has elected to be regulated as a BDC, (b) whose 
investment adviser is a Providence Adviser, and (c) that intends to 
participate in the Co-Investment Program. The term ``Providence 
Adviser'' means (a) BSP Adviser, (b) BDCA Adviser, (c) Fund II 
Affiliated Adviser, and (d) any future investment adviser, other 
than Providence Equity Partners L.L.C., that controls, is controlled 
by or is under common control with BSP Adviser, BDCA Adviser and 
Fund II Affiliated Adviser and is registered under the Advisers Act. 
The term ``Adviser'' means any Providence Adviser and SEI Adviser. 
Providence Equity Partners L.L.C. is excluded from the definition of 
Adviser because none of its clients will participate in any Co-
Investment Transaction.
    \5\ ``Affiliated Fund'' means (a) the Existing Affiliated Funds 
and (b) any Future Affiliated Fund. ``Future Affiliated Fund'' means 
any entity (a) whose investment adviser is a Providence Adviser, (b) 
that would be an investment company but for section 3(c)(1) or 
3(c)(7) of the Act, and (c) that intends to participate in the Co-
Investment Program.
    \6\ The term ``private placement transactions'' means 
transactions in which the offer and sale of securities by the issuer 
are exempt from registration under the Securities Act.
    \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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    8. Applicants state that a Regulated Fund may, from time to time, 
form a Wholly-Owned Investment Sub.\8\ 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. 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 Fund's investments and, therefore, no conflicts of interest 
could arise between the Regulated Fund and the Wholly-Owned Investment 
Sub. 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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    \8\ 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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    9. When considering Potential Co-Investment Transactions for any 
Regulated Fund, the Adviser (or Advisers if there are more than one) 
will consider only the Objectives and

[[Page 15650]]

Strategies, investment policies, investment positions, capital 
available for investment (``Available Capital''), and other pertinent 
factors applicable to that Regulated Fund. The Advisers expect that any 
portfolio company that is an appropriate investment for a Regulated 
Fund should also be an appropriate investment for one or more other 
Regulated Funds and/or one or more Affiliated Funds, with certain 
exceptions based on Available Capital or diversification. The Regulated 
Funds, however, will not be obligated to invest, or co-invest, when 
investment opportunities are referred to them.
    10. Applicants state that SEI Adviser serves as investment adviser 
to SEI Fund, while BSP Adviser serves as sub-adviser. Applicants 
represent that SEI Adviser is responsible for the overall management of 
SEI Fund's activities, and BSP Adviser is responsible for the day-to-
day management of SEI Fund's investment portfolio. Applicants represent 
that although BSP Adviser identifies and recommends investments for SEI 
Fund, SEI Adviser has ultimate authority with respect to SEI Fund's 
investments.
    11. Applicants represent that each Providence Adviser has adopted 
allocation policies and procedures which are designed to allocate 
investment opportunities fairly and equitably among their clients over 
time. Applicants state that in the case of a Potential Co-Investment 
Transaction, the applicable Providence Adviser applies its allocation 
policies and procedures in determining the proposed allocation for the 
applicable Regulated Fund consistent with the requirements of condition 
2(a). Applicants state that, as a result, all Potential Co-Investment 
Transactions that are presented to any Providence Adviser would also be 
presented to each Providence Adviser advising or sub-advising a 
Regulated Fund, which, as required by condition 1, would make an 
independent determination of the appropriateness of the investments for 
such Regulated Fund.
    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 applicable Adviser(s) 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'') \9\ will approve each Co-Investment Transaction prior to 
any investment by the participating Regulated Fund.
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    \9\ 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. 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.
    14. No Non-Interested Director of a Regulated Fund will have a 
financial interest in any Co-Investment Transaction, other than 
indirectly through share ownership in one of the Regulated Funds.
    15. Under condition 15, if the Providence Advisers, the Principals, 
or any person controlling, controlled by, or under common control with 
the Providence Advisers or the Principals, and the Affiliated Funds 
(collectively, the ``Holders'') own in the aggregate more than 25% of 
the outstanding voting securities of a Regulated Fund (``Shares''), 
then the Holders will vote such Shares as directed by an independent 
third party when voting on matters specified in the condition. 
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 the Providence Advisers or 
the Principals to influence the Independent 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' Legal Analysis

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
participation by a registered investment company and an affiliated 
person in any ``joint enterprise or other joint arrangement or profit-
sharing plan,'' as defined in the rule, without prior approval by the 
Commission by order upon application. 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. Similarly, with regard to 
BDCs, section 57(a)(4) of the Act generally prohibits certain persons 
specified in section 57(b) from participating in joint transactions 
with the BDC or a company controlled by the BDC in contravention of 
rules as prescribed by the Commission. 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.
    2. 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 submit that each of the other Regulated Funds and the 
Affiliated Funds may be deemed to be affiliated persons of a Regulated 
Fund within the meaning of section 2(a)(3)(C) of the Act by reason of 
common control because (i) a Providence Adviser may be deemed to 
control each of the Existing Regulated Funds and the Existing 
Affiliated Funds, (ii) a Providence Adviser may be deemed to control 
any Future Regulated Funds or Future Affiliated Funds, (iii) the 
Providence Advisers are owned and controlled by the Principals and (iv) 
a Providence Adviser sub-advises SEI Fund and, therefore, SEI Fund may 
be deemed to be under common control with the Existing Regulated Funds. 
As a result, a Regulated Fund and one or more other

[[Page 15651]]

Regulated Funds and/or one or more Affiliated Funds would be prohibited 
from participating in Co-Investment Transactions by sections 17(d) or 
57(a)(4) of the Act, and rule 17d-1 of the Act.
    4. Applicants state that in the absence of the requested relief, in 
some circumstances the Regulated Funds would be limited in their 
ability to participate in attractive and appropriate investment 
opportunities. Applicants believe that the proposed terms and 
conditions of the application will ensure that the Co-Investment 
Transactions are consistent with the protection of each Regulated 
Fund's shareholders and with the 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 would be done in 
a manner 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. Each time a Providence 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, each Adviser to the Regulated Fund 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 each Adviser to a Regulated Fund deems the participation 
in any Potential Co-Investment Transaction to be appropriate for the 
Regulated Fund, the Adviser (or Advisers if there are more than one) 
will then determine an appropriate level of investment for the 
Regulated Fund.
    (b) If the aggregate amount recommended by the Adviser (or Advisers 
if there are more than one) to a Regulated Fund to be invested by the 
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 them pro rata based on 
each participant's Available Capital, up to the amount proposed to be 
invested by each. The Adviser (or Advisers if there are more than one) 
to each participating 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 Adviser to the Regulated Fund (or Advisers if there are more 
than one) 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 of each participating Regulated Fund 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 Fund'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 
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 shareholders of the Regulated Fund; and
    (B) the Regulated Fund's then-current Objectives and Strategies;
    (iii) the investment by any other Regulated Funds or any 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 other Regulated Funds or Affiliated Funds; 
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 Adviser to the Regulated Fund (or Advisers if there are 
more than one) 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 
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 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 section 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 Adviser to the Regulated Fund (or Advisers if there are more 
than one) 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 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 subject to examination by the Commission and 
its staff.
    5. Except for Follow-On Investments made in accordance with 
condition 8,\10\

[[Page 15652]]

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 Affiliated Fund is an existing 
investor.
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    \10\ 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 in a Co-Investment Transaction, the applicable Providence 
Adviser 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 each 
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 Regulated Funds.
    (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 Adviser to the Regulated Fund (or Advisers if 
there are more than one) 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 in a Co-Investment Transaction, the applicable Providence 
Adviser 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 Adviser to the Regulated Fund (or 
Advisers if there are more than one) will provide its written 
recommendation as to the Regulated Fund's participation to the Eligible 
Directors, and the Regulated Fund will participate in such Follow-On 
Investment solely to the extent that a Required Majority determines 
that it is in the 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 Affiliated 
Funds' and the Regulated Funds' outstanding investments immediately 
preceding the Follow-On Investment; and
    (ii) the aggregate amount recommended by the Adviser(s) to be 
invested by each Regulated Fund 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 participant's Available Capital, 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 the 
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 the continued appropriateness for the 
Regulated Fund of participating in new and existing Co-Investment 
Transactions.
    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 an 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 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 acquired or disposed of, as the case may be.
    13. Any transaction fee \11\ (including break-up or commitment fees 
but excluding broker's fees contemplated by section 17(e) or 57(k) of 
the Act, as

[[Page 15653]]

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 Adviser pending consummation of 
the transaction, the fee will be deposited into an account maintained 
by such 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 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 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 Adviser, investment 
advisory fees paid in accordance with the agreement between the Adviser 
and the Regulated Fund or Affiliated Fund).
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    \11\ 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% 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 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.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-07430 Filed 4-10-18; 8:45 am]
 BILLING CODE 8011-01-P