58274 Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Notices 

Unregistered Funds in proportion to the 

relative amounts of such private 

placement securities held or being 

acquired or disposed of, as the case may 

be, by the Registered Funds and the 

Unregistered Funds. 

8. Each quarter the Adviser will 

provide to each Registered Fund’s Joint 

Transactions Committee information 

concerning all investments in private 

placement securities made by all 

Registered and Unregistered Funds, 

including all investments in which the 

Registered Fund declined to participate, 

so that a Required Majority may 

determine whether all investments 

made during the preceding quarter, 

including those in which the Registered 

Fund declined to participate, comply 

with the conditions of the order. In 

addition, all of the Independent 

Trustees of each Registered Fund will 

consider at least annually the continued 

appropriateness of Co-investment 

Transactions by the Registered Fund 

with the Unregistered Funds and other 

Registered Funds, including whether 

engaging in Co-investment Transactions 

pursuant to the order continues to be in 

the best interests of the Registered Fund 

and its shareholders and does not 

involve overreaching on the part of any 

person concerned. 

9. No investment will be made by a 

Registered Fund in a Co-investment 

Transaction in reliance on the order if 

the Adviser knows or reasonably should 

know that an Unregistered Fund or 

another Registered Fund or any 

affiliated person of such Unregistered 

Fund or another Registered Fund then 

currently holds a security issued by that 

issuer, except for a Follow-On 

Investment made pursuant to condition 

5 of this order. 

10. Any transaction fee (including 

break-up or commitment fees but 

excluding brokerage fees contemplated 

by section 17(e)(2) of the Act) received 

in connection with a transaction entered 

into in reliance on the order will be 

distributed to the participants on a pro 

rata basis based on the amounts they 

invested or committed, as the case may 

be, in such transaction. If any 

transaction fee is to be held by the 

Adviser, Promere General Partner, 

Promere Manager, Ardance General 

Partner or Ardance Manager pending 

consummation of the transaction, the 

fee will be deposited into an account 

maintained by the Adviser, Promere 

General Partner, Promere Manager, 

Ardance General Partner or Ardance 

Manager at a bank or banks having the 

qualifications prescribed in section 

26(a) of the Act, and the account will 

earn a competitive rate of interest that 

also will be divided pro rata among the 

participants based on the amounts they 

invested or committed, as the case may 

be, in such transaction. None of the 

Adviser, Promere General Partner, 

Promere Manager, Ardance General 

Partner, or Ardance Manager will 

receive additional compensation or 

remuneration of any kind as a result of 

or in connection with a co-investment 

or compensation for its services in 

sponsoring, structuring, or providing 

managerial assistance to an issuer of 

private placement securities that is not 

shared pro rata with the coinvesting 

Registered Funds and Unregistered 

Funds. 

11. Each applicant will maintain and 

preserve all records required to be 

preserved under the Act and the rules 

and regulations under the Act 

applicable to such applicant. The 

Registered Funds will maintain the 

records required by section 57(f)(3) of 

the Act as if each of the Registered 

Funds were a business development 

company and the Co-investment 

Transactions were approved under 

section 57(f). 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23491 Filed 10–3–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

28427; 812–13428] 

MCG Capital Corporation, et al.; Notice 

of Application 

September 30, 2008. 

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), 55(a), and 61(a) of the Act. 

SUMMARY OF THE APPLICATION: 

Applicants request an order to permit: 

(1) A business development company to 

look to the assets of its wholly-owned 

subsidiaries, rather than the business 

development company’s interest in the 

subsidiaries themselves, in determining 

whether the business development 

company meets certain requirements for 

business development companies under 

the Act, and (2) the business 

development company to adhere to a 

modified asset coverage requirement. 

APPLICANTS: MCG Capital Corporation 

(‘‘MCG’’), Solutions Capital G.P., LLC, 

Solutions Capital I, L.P., MCG Capital 

Advisory Services, Inc., MCG Equity 

Funding I, LLC, MCG Finance I, LLC, 

MCG Finance V, LLC, MCG Commercial 

Loan Funding Trust, MCG Finance VII, 

LLC, MCG Commercial Loan Trust 

2006–1, MCG Finance VIII, LLC, MCG 

Commercial Loan Trust 2006–2, MCG 

Finance IX, LLC, MCG Commercial 

Loan Trust 2008–1, MCG IH Holdings, 

Inc., IH Helicon, Inc., IH NPS Holdings, 

LLC, MCG Opportunity Investment 

Fund I, LLC, Sleep Investors, LLC, TNR 

Investors, LLC, Crystal Media Network, 

Inc., IH Chesapeake Tower, Inc., IH 

Dayton Parts, Inc., IH GSD, Inc., IH 

Intran Inc., IH MTP, Inc., IH NDS, Inc., 

IH NEPG, Inc., IH NYL, Inc., IH Orbitel 

Holdings, Inc., IH OTM, Inc., IH PBI, 

Inc., IH Premier, Inc. and IH Quantum, 

Inc. 

FILING DATES: The application was filed 

on September 25, 2007, and amended 

on June 17, 2008, and September 17, 

2008. Applicants have agreed to file an 

amendment during the notice period, 

the substance of which is contained in 

this notice. 

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 October 27, 2008, and 

should be accompanied by proof of 

service on the Applicant, 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. Applicant, c/o Steven F. Tunney, 

President and Chief Executive Officer, 

MCG Capital Corporation, 1100 Wilson 

Boulevard, Suite 3000, Arlington, VA 

22209. 

FOR FURTHER INFORMATION CONTACT: 

Christine Y. Greenlees, Senior Counsel, 

at (202) 551–6879, or Marilyn Mann, 

Branch Chief, at (202) 551–6821 

(Division of Investment Management, 

Office of Investment Company 

Regulation). 

SUPPLEMENTARY INFORMATION: The 

following is a summary of the 


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1Applicants represent that these Blocker 

Subsidiaries are a lawful method of tax planning 

under the Internal Revenue Code and are frequently 

used by companies seeking to elect to be treated as 

regulated investment companies. MCG has obtained 

an opinion from tax counsel from the firm of 

Sutherland Asbill & Brennan LLP confirming the 

appropriateness of this structure. 

2For the purposes of Section 2(a)(48)(B), MCG 

will treat securities held by the Subsidiaries as if 

they were held directly by MCG. 

application. The complete application 

may be obtained for a fee at the 

Commission’s Public Reference Room, 

100 F Street, NE., Washington, DC 

20549–1520 (tel. 202–551–5850). 

Applicants’ Representations 

1. MCG, a Delaware corporation, is an 

internally managed, non-diversified, 

closed-end investment company that 

has elected to be regulated as a business 

development company (‘‘BDC’’) under 

the Act. MCG is a commercial finance 

company that provides capital and 

advisory services to middle-market 

companies throughout the United 

States. 

2. MCG conducts, and expects to 

continue to conduct, a portion of its 

business through its current and future 

subsidiaries, all of whose equity 

securities are owned or will be owned 

directly or indirectly by MCG (each, a 

‘‘Subsidiary’’). There are three types of 

Subsidiaries that currently are active or 

are currently being contemplated: (1) 

Operating Subsidiaries, (2) financing 

subsidiaries, and (3) blocker 

subsidiaries. 

3. MCG’s current operating 

subsidiaries are Solutions Capital I, L.P. 

(the ‘‘SBIC Subsidiary’’) and Solutions 

Capital G.P., LLC (the ‘‘SBIC GP’’). The 

SBIC Subsidiary, a Delaware limited 

partnership, is a small business 

investment company (‘‘SBIC’’) licensed 

under the Small Business 

Administration (‘‘SBA’’) to operate 

under the Small Business Investment 

Act of 1958 (‘‘SBIA’’). The SBIC 

Subsidiary relies on section 3(c)(7) of 

the Act. The SBIC GP, a Delaware 

limited liability company, is the sole 

general partner of the SBIC Subsidiary. 

MCG is the SBIC GP’s sole member and 

owner. The SBIC GP is the sole general 

partner of the SBIC Subsidiary, and 

MCG is the sole limited partner of the 

SBIC Subsidiary. 

4. MCG intends to operate the SBIC 

Subsidiary through the SBIC GP for the 

same investment purposes as MCG, and 

the SBIC Subsidiary will invest in the 

same kinds of securities as MCG. The 

operations of both the SBIC Subsidiary 

and the SBIC GP will be consolidated 

with those of MCG for financial 

reporting purposes. The assets of the 

SBIC Subsidiary and the SBIC GP are 

recorded on MCG’s balance sheet, and 

thus are considered assets of MCG for 

U.S. generally accepted accounting 

principles purposes. 

5. From time to time, MCG transfers 

pools of loans and/or other investments 

to special purpose entities (the 

‘‘Financing Subsidiaries’’) for use in 

connection with on-balance sheet 

financing transactions. The current 

Financing Subsidiaries are structured as 

Delaware limited liability companies. 

Each such current Financing Subsidiary, 

in turn, transfers such loans and/or 

other investments to a wholly owned 

trust (each, a ‘‘Financing Trust’’) that 

finances the acquisition of such assets 

through the issuance of debt securities. 

The current Financing Subsidiaries are 

excluded from the definition of 

investment company under section 

3(c)(7) of the Act, and the current 

Financing Trusts are excluded from the 

definition of investment company under 

rule 3a–7 under the Act. 

6. The purpose of the Financing 

Subsidiaries is to provide a legally 

separate entity to hold investments and/ 

or to hold the Financing Trust, which, 

in turn, hold the investments supporting 

MCG’s financings. MCG solely controls 

the operations of each Financing Trust, 

including the acquisition and 

disposition of assets by each Financing 

Trust. 

7. MCG utilizes wholly owned 

subsidiaries to hold MCG’s interests in 

certain of MCG’s portfolio companies 

(the ‘‘Blocker Subsidiaries’’). The 

Blocker Subsidiaries are excluded from 

the definition of investment company 

under section 3(c)(7) of the Act. Certain 

of the Blocker Subsidiaries are 

structured as Delaware corporations and 

hold certain investment assets that are 

structured as pass-through tax entities 

in order to allow MCG to continue to 

qualify as a regulated investment 

company for tax purposes.1 Other 

Blocker Subsidiaries, organized as 

Delaware limited liability companies, 

hold MCG’s interests in MCG’s portfolio 

companies in order to block potential 

investor-related liability to MCG. 

8. The Blocker Subsidiaries are not 

operating companies and do not have 

any employees. The Blocker 

Subsidiaries exist solely for the benefit 

of MCG in order to hold MCG’s interests 

in its portfolio companies and do not 

provide any services to any other 

company. MCG does and will continue 

to make available significant managerial 

assistance to the issuers of securities 

held by the Subsidiaries to the extent 

required by section 2(a)(48)(B).2

Applicants’ Legal Analysis 

A. Relief for MCG To Deem Assets Held 

by its Subsidiaries To Be Owned by 

MCG for Purposes of Determining Its 

Compliance With Section 55(a) of the 

Act 

1. Section 2(a)(48) of the Act generally 

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 (3) of the Act and makes 

available significant managerial 

assistance with respect to the issuers of 

these securities. Section 55(a) of the Act 

requires a BDC to have at least 70 

percent of its assets invested in assets 

described in sections 55(a)(1) through 

(7) (‘‘Qualifying Assets’’). Qualifying 

Assets generally include securities 

issued by eligible portfolio companies 

as defined in section 2(a)(46) of the Act. 

Section 2(a)(46)(B) generally excludes 

from the definition of an eligible 

portfolio company an investment 

company, as defined under section 3 of 

the Act, and a company that would be 

an investment company but for the 

exclusion from the definition of 

investment company in section 3(c) of 

the Act. 

2. 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 

request an order pursuant to section 6(c) 

to allow MCG to deem the assets of its 

current and future Subsidiaries as its 

own assets for purposes of determining 

its compliance with section 55(a). 

3. Applicants state that each 

Subsidiary will be formed as a limited 

liability company (‘‘LLC’’), a 

corporation (‘‘Corporation ‘‘) or a 

partnership (‘‘Partnership’’). MCG and/ 

or one or more other Subsidiaries at all 

times will be the only members of each 

Subsidiary that is an LLC and will 

collectively hold all of the ownership 

interests in the LLC Subsidiary. No LLC 

Subsidiary will admit any person other 

than MCG or another Subsidiary as a 

member, and no LLC Subsidiary will 

issue interests other than to MCG or 

another Subsidiary. MCG and/or one or 

more other Subsidiaries at all times will 

own and hold all of the outstanding 

equity interests in each Subsidiary that 

is formed as a Corporation. MCG and/ 

or one or more other Subsidiaries will 

at all times be the sole limited partner 

of any Subsidiary that is formed as a 


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58276 Federal Register / Vol. 73, No. 194 / Monday, October 6, 2008 / Notices 

Partnership and the sole owner of such 

Subsidiary’s general partner. Applicants 

also state that since MCG, directly or 

indirectly through another Subsidiary, 

owns or would own the entire equity 

interest in any current and future 

Subsidiaries, any activity carried on by 

them will, in all material respects, have 

the same economic effect on MCG’s 

stockholders as if carried on directly by 

MCG. 

B. Relief for the Company To Adhere to 

a Modified Asset Coverage Requirement 

1. Applicants request 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 MCG to 

adhere to a modified asset coverage 

requirement. 

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 a question 

exists as to whether MCG must comply 

with the asset coverage requirements of 

section 18(a) (as modified by section 

61(a)) solely on an individual basis or 

whether MCG must also comply with 

the asset coverage requirements on a 

consolidated basis because MCG may be 

deemed to be an indirect issuer of any 

class of senior security issued by the 

SBIC Subsidiary. Applicants state that 

they wish to treat the SBIC Subsidiary 

as if it were a BDC subject to sections 

18 and 61 of the Act. 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. 

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, since the SBIC Subsidiary 

would be entitled to rely on section 

18(k) if it was a BDC itself, there is no 

policy reason to deny the benefit of that 

exemption to MCG. 

Applicants’ Conditions 

Applicants agree that the order 

granting the requested relief will be 

subject to the following conditions: 

Relief From Section 55(a) 

1. Each Subsidiary will be formed as 

a limited liability company (‘‘LLC’’), a 

corporation (‘‘Corporation ‘‘) or a 

partnership (‘‘Partnership’’). MCG and/ 

or one or more other Subsidiaries at all 

times will be the only members of each 

Subsidiary that is an LLC and will 

collectively hold all of the ownership 

interests in the LLC Subsidiary. No LLC 

Subsidiary will admit any person other 

than MCG or another Subsidiary as a 

member, and no LLC Subsidiary will 

issue interests other than to MCG or 

another Subsidiary. MCG and/or one or 

more other Subsidiaries at all times will 

own and hold all of the outstanding 

equity interests in each Subsidiary that 

is formed as a Corporation. MCG and/ 

or one or more other Subsidiaries will 

at all times be the sole limited partner 

of any Subsidiary that is formed as a 

Partnership and the sole owner of such 

Subsidiary’s general partner. 

2. The Subsidiaries, and any future 

Subsidiaries, may not acquire any asset 

if the acquisition would cause MCG to 

violate section 55(a). 

3. No person shall serve or act as 

investment adviser to a Subsidiary 

unless the Board and stockholders of 

MCG shall have taken the action with 

respect thereto also required to be taken 

by the board of directors of the 

Subsidiary and stockholders of the 

Subsidiary as if the Subsidiary were a 

BDC. 

Relief From Section 18(a) 

4. MCG will not issue or sell any 

senior security and MCG will not cause 

or permit the SBIC Subsidiary to issue 

or sell any senior security of which 

MCG or the SBIC Subsidiary is the 

issuer except to the extent permitted by 

section 18 (as modified for BDCs by 

section 61); provided that immediately 

after issuance or sale by any of MCG or 

the SBIC Subsidiary of any such senior 

security, MCG individually and on a 

consolidated basis, shall have the asset 

coverage required by section 18(a) (as 

modified by section 61(a)), except that, 

in determining whether MCG on a 

consolidated basis has the asset 

coverage required by section 18(a) (as 

modified by section 61(a)), any senior 

securities representing indebtedness of 

the SBIC Subsidiary shall not be 

considered senior securities and, for 

purposes of the definition of ‘‘asset 

coverage’’ in section 18(h), will be 

treated as indebtedness not represented 

by senior securities. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23492 Filed 10–3–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Public Law 94–409, that 

the Securities and Exchange 

Commission will hold a Closed Meeting 

on Wednesday, October 1, 2008, at 2 

p.m. 

Commissioners, Counsels to the 

Commissioners, the Secretary to the 

Commission, and certain staff members 

who have an interest in the matter will 

attend the Closed Meeting. 

The General Counsel of the 

Commission, or his designee, has 

certified that, in his opinion, one or 

more of the exemptions as set forth in 

5 U.S.C. 552b(c)(8) and (9) and 17 CFR 

200.402(a)(8) and (9), permit 

consideration of the scheduled matter at 

the Closed Meeting. 

Commissioner Aguilar, as duty 

officer, voted to consider the item listed 

for the closed meeting in closed session, 

and determined that no earlier notice 

thereof was possible. 

The subject matter of the Closed 

Meeting scheduled for Wednesday, 

October 1, 2008, will be: Matters Related 

to the Financial Markets. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. For further 

information and to ascertain what, if 

any, matters have been added, deleted 

or postponed, please contact: The Office 

of the Secretary at (202) 551–5400. 

Dated: October 1, 2008. 

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. E8–23498 Filed 10–3–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

FEDERAL REGISTER CITATION OF PREVIOUS

ANNOUNCEMENT: [73 FR 55571, 

September 25, 2008]. 


jlentini on PROD1PC65 with NOTICES