September 3, 2014.
Securities and Exchange Commission (“Commission”).
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.
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.
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.
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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.
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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).
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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.
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.
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.
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”).
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.
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 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.
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For the Commission, by the Division of Investment Management, pursuant to delegated authority.
Kevin M. O'Neill,
[FR Doc. 2014-21381 Filed 9-8-14; 8:45 am]
BILLING CODE 8011-01-P