
[Federal Register Volume 81, Number 106 (Thursday, June 2, 2016)]
[Notices]
[Pages 35419-35421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12878]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 32127; 812-14399]


Ares Capital Corporation, et al.; Notice of Application

May 26, 2016.
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: Ares Capital Corporation (the ``Company''), Ares 
Capital

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Management LLC (the ``Adviser''), Ares Venture Finance GP LLC (the 
``General Partner''), and Ares Venture Finance, L.P. (``Ares SBIC'').

SUMMARY: 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 December 12, 2014, 
and amended on May 11, 2015, and May 11, 2016.
    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 June 20, 2016, 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 
Street NE., Washington, DC 20549-1090. Applicants: Kipp deVeer, Chief 
Executive Officer, and Joshua M. Bloomstein, General Counsel, Ares 
Capital Corporation, 245 Park Avenue, 44th Floor, New York, NY 10167.

FOR FURTHER INFORMATION CONTACT: Kieran G. Brown, Senior Counsel, at 
(202) 551-6773, or James M. Curtis, Branch Chief, at (202) 551-6712 
(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 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.

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 objective is to generate 
both current income and capital appreciation through debt and equity 
investments. The Adviser, a Delaware limited liability company, is the 
investment adviser to the Company. The 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. Ares 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''). Ares SBIC is excluded from 
the definition of investment company by section 3(c)(7) of the Act. The 
General Partner is the sole general partner of Ares SBIC and the 
Company is the sole member of the General Partner. The Company is the 
sole limited partner of Ares SBIC. The Company, directly or indirectly 
through the General Partner, wholly owns Ares 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 exemption from the definition 
of ``investment company'' under the Act (each, an ``SBIC 
Subsidiary'').\2\ Applicants state that companies operating under the 
SBIA, such as the SBIC Subsidiary, 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 Ares 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 Ares 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 SBIC Subsidiary 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 Ares SBIC or any other SBIC 
Subsidiary to issue or sell any senior security of which the Company, 
Ares SBIC or any other SBIC Subsidiary is the issuer except to the 
extent permitted by section 18 (as modified for BDCs by section 61(a)); 
provided that, immediately after the issuance or sale of any such 
senior security by any of the Company, Ares SBIC or any other SBIC 
Subsidiary, the Company, individually and on a consolidated basis, 
shall have

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the asset coverage required by section 18(a) (as modified by section 
61(a)). In determining whether the Company, Ares 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 Ares 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.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2016-12878 Filed 6-1-16; 8:45 am]
 BILLING CODE 8011-01-P


