
[Federal Register Volume 76, Number 92 (Thursday, May 12, 2011)]
[Notices]
[Pages 27674-27675]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-11622]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29665; 812-13772]


PennantPark Investment Corporation, et al.; Notice of Application

May 6, 2011.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: 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.

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Applicants: PennantPark Investment Corporation (the ``Company''), 
PennantPark SBIC GP, LLC (the ``General Partner''), PennantPark SBIC LP 
(``PennantPark SBIC'') and PennantPark Investment Advisers, LLC (the 
``Investment Adviser'')

Summary of the Application: The Company requests an order to permit it 
to adhere to a modified asset coverage requirement.

DATES: Filing Dates: The application was filed on May 12, 2010 and 
amended on September 7, 2010, February 18, 2011, and May 2, 2011.

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 May 31, 2011 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.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090. Applicants, 590 Madison Avenue, 
15th Floor, New York, New York 10022.

FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at 
(202) 551-6873, or Dalia Osman Blass, Branch Chief, at (202) 551-6874 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: 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 an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Company, a Maryland 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.\1\ The Company's investment objectives are to generate 
both current income and capital appreciation in the form of mezzanine 
debt, senior secured loans and equity investments through debt and 
equity investments primarily in U.S. middle market private companies. 
The Investment Adviser, a Delaware limited liability company, is the 
external investment adviser to the Company. The Investment Adviser is 
registered under the Investment Advisers Act of 1940.
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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. PennantPark SBIC, a Delaware limited liability company, is a 
small business investment company (``SBIC'') licensed by the Small 
Business Administration (``SBA'') to operate under the Small Investment 
Act of 1958 (``SBIA''). PennantPark SBIC is excluded from the 
definition of investment company by section 3(c)(7) of the Act. The 
Company directly owns 99% of PennantPark SBIC in the form of limited 
partnership interests. The General Partner, which is a wholly-owned 
subsidiary of the Company, owns 1% of PennantPark SBIC in the form of a 
general partnership interest. The Company is the sole member of 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'').\2\ 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 its 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 PennantPark 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 
PennantPark 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

[[Page 27675]]

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' Condition

    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 PennantPark SBIC or any other SBIC 
Subsidiary to issue or sell any senior security of which the Company, 
PennantPark 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, PennantPark 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 PennantPark SBIC or another 
SBIC Subsidiary 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.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11622 Filed 5-11-11; 8:45 am]
BILLING CODE 8011-01-P


