Notice2021-15545
Capital Southwest Corporation, et al.; Notice of Application
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 22, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 138 (Thursday, July 22, 2021)</title>
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[Federal Register Volume 86, Number 138 (Thursday, July 22, 2021)]
[Notices]
[Pages 38770-38772]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-15545]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 34333; 812-15219]
Capital Southwest Corporation, et al.; Notice of Application
July 16, 2021.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
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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.
Applicants: Capital Southwest Corporation (the ``Company''), Capital
Southwest SBIC I, LP (the ``Capital Southwest SBIC''), and Capital
Southwest SBIC I GP, LLC (the ``SBIC GP'').
Summary of the Application: The Company requests an order to permit it
to adhere to a modified asset coverage requirement.
Filing Dates: The application was filed on April 21, 2021, and amended
on July 14, 2021.
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 emailing the Commission's
Secretary at <a href="/cdn-cgi/l/email-protection#faa99f99889f8e9b888389d7b59c9c93999fba899f99d49d958c"><span class="__cf_email__" data-cfemail="40132523322534213239336d0f2626292325003325236e272f36">[email protected]</span></a> and serving applicants with a
copy of the request by email. Hearing requests should be received by
the Commission by 5:30 p.m. on August 10, 2021, 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-
[[Page 38771]]
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 emailing the Commission's Secretary at <a href="/cdn-cgi/l/email-protection#5201373120372633202b217f1d34343b3137122137317c353d24"><span class="__cf_email__" data-cfemail="a5f6c0c6d7c0d1c4d7dcd688eac3c3ccc6c0e5d6c0c68bc2cad3">[email protected]</span></a>.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission,
<a href="/cdn-cgi/l/email-protection#5b083e38293e2f3a29222876143d3d32383e1b283e38753c342d"><span class="__cf_email__" data-cfemail="4310262031263722313a306e0c25252a2026033026206d242c35">[email protected]</span></a>. Applicants: Mr. Bowen S. Diehl, Chief
Executive Officer and President, Capital Southwest Corporation, at
<a href="/cdn-cgi/l/email-protection#5634323f333e3a163537263f22373a253923223e213325227835393b"><span class="__cf_email__" data-cfemail="3052545955585c705351405944515c435f454458475543441e535f5d">[email protected]</span></a> and Mr. Michael S. Sarner, Chief Financial
Officer, Secretary and Treasurer, Capital Southwest Corporation at
<a href="/cdn-cgi/l/email-protection#d6bba5b7a4b8b3a496b5b7a6bfa2b7baa5b9a3a2bea1b3a5a2f8b5b9bb"><span class="__cf_email__" data-cfemail="c2afb1a3b0aca7b082a1a3b2abb6a3aeb1adb7b6aab5a7b1b6eca1adaf">[email protected]</span></a>.
FOR FURTHER INFORMATION CONTACT: Jean E. Minarick, Senior Counsel, at
(202) 551-6811, or Kaitlin C. Bottock, Branch Chief, at (202) 551-6825
(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 website by searching for the file number, or for an
applicant using the Company name box, at <a href="http://www.sec.gov/search/search.htm">http://www.sec.gov/search/search.htm</a> or by calling (202) 551-8090.
Applicants' Representations
1. The Company, a Texas corporation, is an internally 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 produce attractive
risk-adjusted returns by generating current income from its debt
investments and capital appreciation from its equity and equity related
investments.
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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. Capital Southwest 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''). Capital Southwest
SBIC relies on the exclusion from the definition of investment company
contained in section 3(c)(7) of the Act. The SBIC GP is the sole
general partner of Capital Southwest SBIC and the Company is the sole
member of the SBIC GP. The Company is the sole limited partner of
Capital Southwest SBIC. The Company, directly through the SBIC GP,
wholly owns Capital Southwest 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 an
SBIC and relies on section 3(c)(7) for an exclusion 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 Capital Southwest SBIC, are 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 Capital Southwest 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 Capital Southwest 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 Capital Southwest SBIC 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 Capital Southwest SBIC or any
other SBIC Subsidiary to issue or sell any senior security of which the
Company, Capital Southwest 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, Capital
Southwest 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, Capital Southwest 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 Capital Southwest 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.
[[Page 38772]]
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15545 Filed 7-21-21; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on July 22, 2021.
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