File
No. 812-
U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Application
for an Order to Amend a Prior Order UNDER SECTIONS 17(d)
AND 57(i) OF THE INVESTMENT COMPANY ACT OF 1940 AND RULE 17d-1 UNDER THE INVESTMENT COMPANY ACT OF 1940 TO PERMIT CERTAIN JOINT TRANSACTIONS
OTHERWISE PROHIBITED BY
SECTIONS 17(d) AND 57(a)(4) OF THE INVESTMENT COMPANY ACT OF 1940 AND RULE 17d-1 UNDER THE INVESTMENT COMPANY ACT OF 1940
In
the Matter of the Application of:
PROSPECT
CAPITAL CORPORATION, PRIORITY INCOME FUND, INC., PROSPECT SUSTAINABLE INCOME FUND, INC., PROSPECT CAPITAL FUNDING LLC, NATIONAL PROPERTY
REIT CORP., PROSPECT CAPITAL MANAGEMENT L.P., PRIORITY SENIOR SECURED INCOME MANAGEMENT, LLC, PROSPECT YIELD CORPORATION, LLC
10
East 40th Street, 42nd Floor
New York, NY 10016
All
Communications, Notices and Orders to:
Prospect
Capital Corporation
10 East 40th Street, 42nd Floor
New York, NY 10016
Attention: Russell Wininger
(646) 536-3992
Copies
to:
Steven
B. Boehm, Esq.
Anne
G. Oberndorf, Esq.
Eversheds
Sutherland (US) LLP
700
Sixth Street, NW, Suite 700
Washington,
DC 20001-3980
(202)
383-0100
April
29, 2022
I. INTRODUCTION
A.
Summary of Requested Relief
In
this application (the “Application”), the Applicants (as defined below) request an
order (“Order”) from the U.S. Securities and Exchange Commission (the “Commission”)
to amend the prior order issued to Prospect Capital Corporation, et. al (the “Prior Applicants”) under Sections
17(d) and 57(i) of the Investment Company Act of 1940, as amended (the “1940 Act”),1 and Rule
17d-1 thereunder, permitting certain joint transactions otherwise prohibited by Sections 17(d) and 57(a)(4) of the 1940 Act and Rule
17d-1 thereunder (the “Prior Order”).2 In particular, the Prior Order permits Regulated
Funds and Affiliated Funds to participate in the same investment opportunities where such participation would otherwise be prohibited
under Section 17(d) or 57(a)(4) and the rules under the 1940 Act.
B.
Applicants Seeking Relief
| ○ | Prospect
Capital Corporation (“PSEC”), a Maryland corporation that has elected to be regulated as a BDC under
the 1940 Act. The investment adviser to PSEC is PCM (as defined below). |
| ○ | Priority
Income Fund, Inc. (“PRIS”), a Maryland corporation that has registered as an investment company under the 1940 Act. The investment adviser
to PRIS is PRISM (as defined below). |
| ○ | Prospect
Sustainable Income Fund, Inc. (“PSIF”), a Maryland corporation that has elected to be regulated
as a BDC under the 1940 Act. The investment adviser to PSIF is PCM (as defined below). |
| ○ | Prospect
Yield Corporation, LLC (“PYLD” and together with PSEC, PRIS and
PSIF, the “Existing Regulated Funds”), a Maryland corporation that has registered as an investment company under the 1940 Act. The investment
adviser to PYLD is PCM. |
1 | Unless otherwise indicated, all section and rule references
herein are to the 1940 Act and rules promulgated thereunder. |
2 | Certain of the Applicants
previously submitted an application with the Commission (File No. 812-14977), as amended
and restated and filed with the Commission on November 16, 2018, May 31, 2019, August 26, 2019, and December 2, 2019 (the “Prior
Application”), requesting such relief. The Prior Application was noticed in Investment Company Act Release No. 33716 dated
December 16, 2019 (the “Prior Notice”) and the Prior Order granting the relief requested was contained in Investment Company
Act Release No. 33745 dated January 13, 2020. Except as specifically noted herein, all representations
and conditions contained in the Prior Application remain applicable and will apply to any Applicants relying on the Order. All capitalized
terms not otherwise defined in this Application have the meanings ascribed to them in the Prior Application. |
| ○ | Prospect
Capital Management L.P. (“PCM”), a Delaware limited partnership
that serves as the investment adviser for PSEC, PSIF and PYLD, on behalf of itself and its
successors.3 PCM is an investment adviser registered under the Investment Advisers
Act of 1940, as amended (the “Advisers Act”). |
| ○ | Priority
Senior Secured Income Management, LLC (“PRISM” and together with
PCM, the “Existing Advisers”), a Delaware limited liability company
that serves as the investment adviser for PRIS, on behalf of itself and its successors. PRISM
is an investment adviser registered under the Advisers Act. All of the Existing Advisers
are under common control. |
| ● | Prospect
Capital Funding LLC and National Property REIT Corp., (the “Existing Wholly-Owned
Subsidiaries” and collectively with the Existing Regulated Funds and the Existing
Advisers, the “Applicants”), each of which is a separate and distinct
legal entity and each of which is a Wholly-Owned Investment Sub (as defined in the Prior
Order) of the Existing Regulated Funds. The Existing Wholly-Owned Subsidiaries are subsidiaries of PSEC. |
All
Applicants are eligible to rely on the Prior Order.
II.
Applicants’ Proposal
Under
the Prior Order, Affiliated Funds and Regulated Funds can only participate in Follow-On Investments if they are invested in the issuer.
The Order, if granted, would revise the definition of Follow-On Investment to permit Affiliated
Funds to participate in Follow-On Investments in issuers in which at least one Regulated Fund is invested, but such Affiliated Funds
are not invested. This relief would not permit Follow-On Investments by Regulated Funds that are not invested in the issuer.
Affiliated
Funds often do not have infinite lives like many Regulated Funds. As a result, an Affiliated Fund that is invested in a portfolio company
may begin the process of winding down, during which it makes no further investments. If the portfolio company makes a capital call or
requests further funding once the Affiliated Fund is in wind down, the Affiliated Fund will not be able to participate and in some cases,
only one Regulated Fund is left to fulfill the portfolio company’s request. In that case, either the Regulated Fund will be forced
to make the investment by itself, which may not be the appropriate investment amount for the Regulated Fund or the Regulated Fund will
not be able to fulfill its commitment to the portfolio company. If the Regulated Fund does not have the available capital to fulfill
the portfolio company’s request, the portfolio company may be negatively affected, which could negatively affect the Regulated
Fund shareholders. In addition, if the Regulated Fund invested more than the appropriate amount that could also negatively affect the
Regulated Fund shareholders.
Allowing
Affiliated Funds that do not have an investment in the portfolio company to participate in Follow-On Investments can protect Regulated
Fund shareholders from harm as another Affiliated Fund is winding down. Because the relief does not apply to Regulated Funds, there is
no risk of a Regulated Fund being used to prop up an affiliate’s investment.
| 3 | The term successor, as
applied to each Adviser, means an entity which results from a reorganization into another jurisdiction or change in the type of business
organization. |
Applicants
submit that the requested Order is consistent with the
temporary relief granted by the Commission on April 8, 2020.4
III. STATEMENT
IN SUPPORT OF RELIEF REQUESTED
Applicants
note that the Commission may grant the requested relief for the same reasons set forth in Section IV, “Statement in Support of
Relief Requested,” of the Prior Application.
IV. REPRESENTATIONS
AND CONDITIONS
Applicants
agree that any Order of the Commission granting the requested relief will be subject to all of the representations and conditions in
the Prior Order. The only change is that the definition of “Follow-On Investment” in the Prior Application will be deleted
in its entirety and replaced with the following definition:
“Follow-On
Investment” means (i) with respect to a Regulated Fund, an additional investment in the same issuer in which the Regulated
Fund is currently invested; or (ii) with respect to an Affiliated Fund, (X) an additional investment in the same issuer in which the
Affiliated Fund and at least one Regulated Fund are currently invested; or (Y) an investment in an issuer in which at least one Regulated
Fund is currently invested but in which the Affiliated Fund does not currently have an investment. An investment in an issuer includes,
but is not limited to, the exercise of warrants, conversion privileges or other rights to purchase securities of the issuer.5
V. PROCEDURAL
MATTERS
A.
Communications
Please
address all communications concerning this Application and the Notice and Order to:
Russell
Wininger
Prospect Capital Corporation
10 East 40th Street, 42nd Floor
New York, NY 10016
Telphone: (646) 536-3992
rwininger@prospectcap.com
| 4 | BDC Temporary Exemptive Order, Investment Company Act
Rel. Nos. 33837 (April 8, 2020) (order) (extension granted January 5, 2021 and further extension granted April 22, 2021) (the “Temporary
Relief”). |
| 5 | Any and all references in the Prior Application to an Affiliated
Fund needing to be invested in an issuer as a required precedent for a Follow-On Investment would be struck as a result of the Order. |
Please
address any questions, and a copy of any communications, concerning this Application, the Notice and Order to:
Steven
B. Boehm, Esq.
Anne
G. Oberndorf, Esq.
Eversheds
Sutherland (US) LLP
700
Sixth Street, NW, Suite 700
Washington,
DC 20001-3980
(202)
383-0100
anneoberndorf@eversheds-sutherland.us
Applicants
desire that the Commission issue an Order pursuant to Rule 0-5 without conducting a hearing.
Pursuant
to Rule 0-2, each person executing the Application on behalf of an Applicant says that he or she has duly executed the
Application for and on behalf of such Applicant; that he or she is authorized to execute the Application pursuant to the terms of an
operating agreement, management agreement or otherwise; and that all actions by members, directors or other bodies necessary to authorize
each deponent to execute and file the Application have been taken.
The
verifications required by Rule 0-2(d) and the authorizations required by Rule 0-2(c) are attached
hereto as Exhibit A and Exhibit B.1-B.4.
B.
Authorization
All
requirements for the execution and filing of this Application in the name and on behalf of each Applicant by the undersigned have been
complied with and the undersigned is fully authorized to do so and has duly executed this Application as of this 29th day of April, 2022.
|
Prospect Capital Corporation |
|
|
|
By: |
/s/ M. Grier Eliasek |
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
President & Chief Executive Officer |
|
Priority Income Fund, Inc. |
|
|
|
By: |
/s/ M. Grier Eliasek |
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
President & Chief Executive Officer |
|
Prospect Sustainable Income Fund, Inc. |
|
|
|
By: |
/s/ M. Grier Eliasek |
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
President & Chief Executive Officer |
|
Prospect Yield Corporation, LLC |
|
|
|
By: |
/s/ M. Grier Eliasek |
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
Chief Operating Officer |
|
Prospect Capital Management, L.P. |
|
|
|
|
|
By: |
/s/ M. Grier Eliasek |
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
Authorized Person |
|
Priority Senior Secured Income Management, LLC |
|
|
|
By: |
/s/ M. Grier Eliasek |
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
President & Chief Executive Officer |
|
Existing Wholly-Owned Subsidiaries of Prospect Capital Corporation: |
|
|
|
Propsect Capital Funding LLC |
|
National Property REIT Corp. |
|
By: |
/s/ M. Grier Eliasek
|
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
Authorized Signatory |
Exhibit
A
VERIFICATION
Each
of the undersigned states that he or she has duly executed the attached application dated as of April 29, 2022 for and on behalf of the
entities listed below; that he or she holds office with such entity as indicated below and that all action by directors, officers, stockholders,
general partners, trustees or members of each entity and any other body necessary to authorize the undersigned to execute and file such
instrument has been taken. Each of the undersigned further states that he or she is familiar with such instrument, and the contents thereof,
and that the facts therein set forth are true to the best of his or her knowledge, information and belief.
|
Prospect Capital Corporation |
|
|
|
|
|
By: |
/s/ M. Grier Eliasek |
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
President & Chief Executive Officer |
|
Priority Income Fund, Inc. |
|
|
|
|
|
By: |
/s/ M. Grier Eliasek |
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
President & Chief Executive Officer |
|
Prospect Sustainable Income Fund, Inc. |
|
|
|
|
|
By: |
/s/ M. Grier Eliasek |
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
President & Chief Executive Officer |
|
Prospect Yield Corporation, LLC |
|
|
|
|
|
By: |
/s/ M. Grier Eliasek |
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
Chief Operating Officer |
|
Prospect Capital Management, L.P. |
|
|
|
|
|
By: |
/s/ M. Grier Eliasek |
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
Authorized Person |
|
Priority Senior Secured Income Management, LLC |
|
|
|
|
|
By: |
/s/ M. Grier Eliasek |
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
President & Chief Executive Officer |
|
Existing Wholly-Owned Subsidiaries of Prospect Capital Corporation: |
|
|
|
Propsect Capital Funding LLC |
|
National Property REIT Corp. |
|
By: |
/s/ M. Grier Eliasek |
|
|
Name: |
M. Grier Eliasek |
|
|
Title: |
Authorized Signatory |
Exhibit
B.1
RESOLUTIONS
OF THE BOARD OF DIRECTORS
PROSPECT
CAPITAL CORPORATION
WHEREAS,
the Board of Directors (the “Board”) believes it is in the best interests of Prospect Capital Corporation (the
“Company”) to file an application for an order to amend a prior order under Sections 17(d) and 57(i) of the
Investment Company Act of 1940 and Rule 17d-1 under the Investment Company Act of 1940 to permit certain joint transactions otherwise
prohibited by Section 17(d) and 57(a)(4) of the Investment Company Act of 1940 and Rule 17d-1 under the Investment Company Act of 1940
(the “Application”).
NOW,
THEREFORE, BE IT RESOLVED, that the officers of the Company (the “Officers”) be, and they hereby are, authorized,
empowered and directed, in the name and on behalf of the Company, to cause to be prepared, executed, delivered and filed with the SEC
the Application, and to do such other acts or things and execute such other documents, including amendments to the Application, as they
deem necessary or desirable to cause the Application to conform to comments received from the Staff of the SEC and otherwise to comply
with the Investment Company Act of 1940 and the rules and regulations promulgated thereunder, in such form and accompanied by such exhibits
and other documents, as the Officers preparing the same shall approve, such approval to be conclusively evidenced by the filing of the
Application; and it is further
RESOLVED,
that the Officers be, and each of them hereby is, authorized, empowered and directed, in the name and on behalf of Company, to perform
all of the agreements and obligations of the Company in connection with the foregoing resolutions, to take or cause to be taken any and
all further actions, to execute and deliver, or cause to be executed and delivered, all other documents, instruments, agreements, undertakings,
and certificates of any kind and nature whatsoever, to incur and pay all fees and expenses and to engage such persons as the Officers
may determine to be necessary, advisable or appropriate to effectuate or carry out the purposes and intent of the foregoing resolutions,
and the execution by the Officers of any such documents, instruments, agreements, undertakings and certificates, the payment of any fees
and expenses or the engagement of such persons or the taking by them of any action in connection with the foregoing matters shall conclusively
establish the Officers’ authority therefore and the authorization, acceptance, adoption, ratification, approval and confirmation
by the Company thereof.
Exhibit
B.2
RESOLUTIONS
OF THE BOARD OF DIRECTORS
PRIORITY
INCOME FUND, INC.
WHEREAS,
the Board of Directors (the “Board”) believes it is in the best interests of Priority Income Fund, Inc. (the
“Company”) to file an application for an order to amend a prior order under Sections 17(d) and 57(i) of the
Investment Company Act of 1940 and Rule 17d-1 under the Investment Company Act of 1940 to permit certain joint transactions otherwise
prohibited by Section 17(d) and 57(a)(4) of the Investment Company Act of 1940 and Rule 17d-1 under the Investment Company Act of 1940
(the “Application”).
NOW,
THEREFORE, BE IT RESOLVED, that the officers of the Company (the “Officers”) be, and they hereby are, authorized,
empowered and directed, in the name and on behalf of the Company, to cause to be prepared, executed, delivered and filed with the SEC
the Application, and to do such other acts or things and execute such other documents, including amendments to the Application, as they
deem necessary or desirable to cause the Application to conform to comments received from the Staff of the SEC and otherwise to comply
with the Investment Company Act of 1940 and the rules and regulations promulgated thereunder, in such form and accompanied by such exhibits
and other documents, as the Officers preparing the same shall approve, such approval to be conclusively evidenced by the filing of the
Application; and it is further
RESOLVED,
that the Officers be, and each of them hereby is, authorized, empowered and directed, in the name and on behalf of Company, to perform
all of the agreements and obligations of the Company in connection with the foregoing resolutions, to take or cause to be taken any and
all further actions, to execute and deliver, or cause to be executed and delivered, all other documents, instruments, agreements, undertakings,
and certificates of any kind and nature whatsoever, to incur and pay all fees and expenses and to engage such persons as the Officers
may determine to be necessary, advisable or appropriate to effectuate or carry out the purposes and intent of the foregoing resolutions,
and the execution by the Officers of any such documents, instruments, agreements, undertakings and certificates, the payment of any fees
and expenses or the engagement of such persons or the taking by them of any action in connection with the foregoing matters shall conclusively
establish the Officers’ authority therefore and the authorization, acceptance, adoption, ratification, approval and confirmation
by the Company thereof.
Exhibit
B.3
RESOLUTIONS
OF THE BOARD OF DIRECTORS
PROSPECT
SUISTAINABLE INCOME FUND, INC.
WHEREAS,
the Board of Directors (the “Board”) believes it is in the best interests of Prospect Sustainable Income Fund,
Inc. (the “Company”) to file an application for an order to amend a prior order under Sections 17(d) and 57(i)
of the Investment Company Act of 1940 and Rule 17d-1 under the Investment Company Act of 1940 to permit certain joint transactions otherwise
prohibited by Section 17(d) and 57(a)(4) of the Investment Company Act of 1940 and Rule 17d-1 under the Investment Company Act of 1940
(the “Application”).
NOW,
THEREFORE, BE IT RESOLVED, that the officers of the Company (the “Officers”) be, and they hereby are, authorized,
empowered and directed, in the name and on behalf of the Company, to cause to be prepared, executed, delivered and filed with the SEC
the Application, and to do such other acts or things and execute such other documents, including amendments to the Application, as they
deem necessary or desirable to cause the Application to conform to comments received from the Staff of the SEC and otherwise to comply
with the Investment Company Act of 1940 and the rules and regulations promulgated thereunder, in such form and accompanied by such exhibits
and other documents, as the Officers preparing the same shall approve, such approval to be conclusively evidenced by the filing of the
Application; and it is further
RESOLVED,
that the Officers be, and each of them hereby is, authorized, empowered and directed, in the name and on behalf of Company, to perform
all of the agreements and obligations of the Company in connection with the foregoing resolutions, to take or cause to be taken any and
all further actions, to execute and deliver, or cause to be executed and delivered, all other documents, instruments, agreements, undertakings,
and certificates of any kind and nature whatsoever, to incur and pay all fees and expenses and to engage such persons as the Officers
may determine to be necessary, advisable or appropriate to effectuate or carry out the purposes and intent of the foregoing resolutions,
and the execution by the Officers of any such documents, instruments, agreements, undertakings and certificates, the payment of any fees
and expenses or the engagement of such persons or the taking by them of any action in connection with the foregoing matters shall conclusively
establish the Officers’ authority therefore and the authorization, acceptance, adoption, ratification, approval and confirmation
by the Company thereof.
Exhibit
B.4
RESOLUTIONS
OF THE BOARD OF DIRECTORS
PROSPECT
YIELD CORPORATION, LLC
WHEREAS,
the Board of Directors (the “Board”) believes it is in the best interests of Prospect Yield Corporation, LLC
(the “Company”) to file an application for an order to amend a prior order under Sections 17(d) and 57(i) of
the Investment Company Act of 1940 and Rule 17d-1 under the Investment Company Act of 1940 to permit certain joint transactions otherwise
prohibited by Section 17(d) and 57(a)(4) of the Investment Company Act of 1940 and Rule 17d-1 under the Investment Company Act of 1940
(the “Application”).
NOW,
THEREFORE, BE IT RESOLVED, that the officers of the Company (the “Officers”) be, and they hereby are, authorized,
empowered and directed, in the name and on behalf of the Company, to cause to be prepared, executed, delivered and filed with the SEC
the Application, and to do such other acts or things and execute such other documents, including amendments to the Application, as they
deem necessary or desirable to cause the Application to conform to comments received from the Staff of the SEC and otherwise to comply
with the Investment Company Act of 1940 and the rules and regulations promulgated thereunder, in such form and accompanied by such exhibits
and other documents, as the Officers preparing the same shall approve, such approval to be conclusively evidenced by the filing of the
Application; and it is further
RESOLVED,
that the Officers be, and each of them hereby is, authorized, empowered and directed, in the name and on behalf of Company, to perform
all of the agreements and obligations of the Company in connection with the foregoing resolutions, to take or cause to be taken any and
all further actions, to execute and deliver, or cause to be executed and delivered, all other documents, instruments, agreements, undertakings,
and certificates of any kind and nature whatsoever, to incur and pay all fees and expenses and to engage such persons as the Officers
may determine to be necessary, advisable or appropriate to effectuate or carry out the purposes and intent of the foregoing resolutions,
and the execution by the Officers of any such documents, instruments, agreements, undertakings and certificates, the payment of any fees
and expenses or the engagement of such persons or the taking by them of any action in connection with the foregoing matters shall conclusively
establish the Officers’ authority therefore and the authorization, acceptance, adoption, ratification, approval and confirmation
by the Company thereof.
11
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