61788 Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Notices 

1Triangle Capital Corporation, et al., Investment 

Company Act Release Nos. 28383 (Sept. 19, 2008) 

(notice) and 28437 (Oct. 14, 2008) (order). 

2Section 2(a)(48) of the Act defines a BDC to be 

any closed-end investment company that operates 

for the purpose of making investments in securities 

described in sections 55(a)(1) through 55(a)(3) of the 

Act and makes available significant managerial 

assistance with respect to the issuers of such 

securities. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

29453; 812–13771] 

Triangle Capital Corporation, et al.; 

Notice of Application 

September 30, 2010. 

AGENCY: Securities and Exchange 

Commission (the ‘‘Commission’’). 

ACTION: Notice of an application to 

amend a prior order under sections 6(c), 

12(d)(1)(J), and 57(c) of the Investment 

Company Act of 1940 (‘‘Act’’) granting 

exemptions from sections 12(d)(1)(A) 

and (C), 18(a), 21(b), 57(a)(1)–(a)(3), and 

61(a) of the Act; under section 57(i) of 

the Act and rule 17d–1 under the Act to 

permit certain joint transactions 

otherwise prohibited by section 57(a)(4) 

of the Act; and under section 12(h) of 

the Securities Exchange Act of 1934 

(‘‘Exchange Act’’) granting an exemption 

from section 13(a) of the Exchange Act. 

APPLICANTS: Triangle Capital 

Corporation (‘‘Triangle’’), Triangle 

Mezzanine Fund, LLLP (‘‘TMF’’), New 

Triangle GP, LLC (‘‘General Partner’’), 

New Triangle GP, LLC (‘‘GP II’’), and 

Triangle Mezzanine Fund II LP (‘‘SBIC 

II’’). 

SUMMARY OF APPLICATION: Applicants 

request an order (‘‘Amended Order’’) to 

amend a prior order permitting a parent 

business development company (‘‘BDC’’) 

and its wholly-owned small business 

investment company (‘‘SBIC’’) 

subsidiary to engage in certain 

transactions that otherwise would be 

permitted if such parent BDC and such 

SBIC subsidiary were one company and 

to file certain reports on a consolidated 

basis, and permitting such parent BDC 

to adhere to a modified asset coverage 

requirement (‘‘Prior Order’’).1 Applicants 

seek to amend the Prior Order in order 

to permit such SBIC subsidiary, which 

is also a BDC, and a newly formed SBIC 

subsidiary or any future SBIC subsidiary 

to engage in certain transactions that 

otherwise would be permitted if such 

parent BDC and the SBIC subsidiaries 

were one company and to permit such 

parent BDC to adhere to a modified 

asset coverage requirement. 

DATES: Filing Dates: The application was 

filed on May 11, 2010 and amended on 

September 28, 2010. Applicants have 

agreed to file an amendment during the 

notice period, the substance of which is 

reflected 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 21, 2010, and 

should be accompanied by proof of 

service on 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, c/o Garland S. Tucker 

III, Triangle Capital Corporation, 3700 

Glenwood Avenue, Suite 530, Raleigh, 

NC 27612. 

FOR FURTHER INFORMATION CONTACT: Jill 

Ehrlich, Attorney Adviser, at (202) 551– 

6819, or Mary Kay Frech, Branch Chief, 

at (202) 551–6821 (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 

website 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. Triangle, a Maryland corporation, is 

an internally managed, non-diversified, 

closed-end investment company that 

has elected to be regulated as a BDC 

under the Act.2 Triangle operates as a 

specialty finance company that provides 

customized financing solutions to lower 

middle market companies that have 

annual revenues between $10 and $100 

million. Triangle’s investment objective 

is to seek attractive returns by 

generating current income from debt 

investments and capital appreciation 

from equity related investments. 

Triangle has an eight member board of 

directors (‘‘Triangle Board’’), five of 

whom are not ‘‘interested persons’’ of 

Triangle within the meaning of section 

2(a)(19) of the Act. Triangle is internally 

managed by its executive officers under 

the supervision of the Triangle Board. 

2. TMF, a North Carolina limited 

liability limited partnership, is an SBIC 

licensed by the Small Business 

Administration (‘‘SBA’’) to operate 

under the Small Business Investment 

Act of 1958 (‘‘SBA Act’’). TMF has 

elected to be regulated as a BDC under 

the Act. TMF has the same investment 

objectives and strategies as Triangle. 

Triangle owns a 99.9% limited 

partnership interest in TMF, and the 

General Partner, a wholly-owned 

subsidiary of Triangle, owns a 0.1% 

general partnership interest in TMF. 

TMF, therefore, is functionally a 100% 

owned subsidiary of Triangle because 

Triangle and the General Partner own 

all of the equity and voting interest in 

TMF. TMF is consolidated with 

Triangle for financial reporting 

purposes. TMF has a board of directors 

(‘‘TMF Board’’) consisting of five persons 

who are not interested persons of TMF 

within the meaning of section 2(a)(19) of 

the Act and three persons who are 

interested persons of TMF. 

3. SBIC II, a Delaware limited 

partnership, is an SBIC licensed by the 

SBA. Unlike TMF, SBIC II will not be 

registered under the Act based on the 

exclusion from the definition of 

investment company contained in 

section 3(c)(7) of the Act. Triangle 

directly owns a 99.9% limited 

partnership interest in SBIC II. GP II, a 

wholly owned subsidiary of Triangle, 

owns a 0.1% general partnership 

interest in SBIC II. Therefore, SBIC II is 

functionally a 100% owned subsidiary 

of Triangle because Triangle and GP II 

own all of the equity and voting interest 

in SBIC II. SBIC II is consolidated with 

Triangle for financial reporting 

purposes. 

4. Each of TMF and SBIC II has 

entered into a management services 

agreement with Triangle, whereby 

Triangle provides management services 

to TMF and SBIC II. The General Partner 

is a limited liability company organized 

under the laws of North Carolina and 

the sole general partner of TMF. GP II 

is a limited liability company organized 

under the laws of Delaware and the sole 

general partner of SBIC II. 

5. The Prior Order permits Triangle 

and TMF to operate effectively as one 

company. At the time of the Prior Order, 

TMF was Triangle’s only wholly-owned 

SBIC subsidiary. Subsequent to the Prior 

Order, Triangle has formed SBIC II and 

may in the future create other direct or 

indirect wholly-owned subsidiaries of 

Triangle (collectively, with TMF and 

SBIC II, the ‘‘Subsidiaries,’’ and each a 

‘‘Subsidiary’’). The Subsidiaries may 

also be licensed by the SBA to operate 

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Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Notices 61789 

3The terms and conditions of the Prior Order will 

continue to apply to Triangle, TMF and the General 

Partner, except as described in the current 

application. Any existing entities that currently 

intend to rely on the Amended Order have been 

named as applicants, and any other existing or 

future entities that may rely on the Amended Order 

in the future would comply with its terms and 

conditions. 

as SBICs (collectively, the ‘‘SBIC 

Subsidiaries,’’ and each an ‘‘SBIC 

Subsidiary’’) or in some cases may not 

be SBICs.3

6. Applicants seek the Amended 

Order to request the same exemptive 

relief for SBIC II and any future 

Subsidiaries that was granted under the 

Prior Order with respect to TMF, except 

to the extent that such relief is not 

necessary due to the fact that SBIC II is 

not (and no future Subsidiary will be) a 

BDC or a registered investment 

company under the Act. 

Applicants’ Legal Analysis 

1. Applicants request the Amended 

Order under sections 6(c), 57(c) and 

57(i) of the Act and rule 17d–1 under 

the Act to permit TMF and another 

Subsidiary to engage in certain 

transactions that otherwise would be 

permitted if Triangle and its 

Subsidiaries were one company and to 

permit Triangle to adhere to a modified 

asset coverage requirement. 

2. Section 18(a) 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 of section 

18(a)(1)(A) and (B) (with respect to 

senior securities representing 

indebtedness). 

3. Applicants state that a question 

exists as to whether Triangle must 

comply with the asset coverage 

requirements of section 18(a) (as 

modified by section 61(a)) solely on an 

individual basis or whether it must also 

comply with the asset coverage 

requirements on a consolidated basis 

because Triangle may be deemed to be 

an indirect issuer of any class of senior 

security issued by any SBIC Subsidiary. 

Applicants state that they wish to treat 

SBIC II (and any future SBIC Subsidiary) 

as if it were a BDC subject to sections 

18 and 61 of the Act. Applicants state 

that companies operating under the SBA 

Act, such as SBIC II (and future SBIC 

Subsidiaries), are subject to the SBA’s 

substantial regulation of permissible 

leverage in their capital structure. 

4. The Prior Order granted relief 

under section 6(c) from sections 18(a) 

and 61(a) to permit Triangle to exclude 

from its consolidated asset coverage 

ratio any senior security representing 

indebtedness issued by TMF (not any 

future SBIC Subsidiary). Accordingly, 

applicants request relief under section 

6(c) of the Act from sections 18(a) and 

61(a) of the Act to permit Triangle to 

exclude from its consolidated asset 

coverage ratio any senior security 

representing indebtedness issued by any 

SBIC Subsidiary. 

5. 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 SBIC II (or any 

future 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 such 

exemption to Triangle. 

6. Sections 57(a)(1) and (2) of the Act 

generally prohibit, with certain 

exceptions, sales or purchases of any 

security or other property between BDCs 

and certain of their affiliates as 

described in section 57(b) of the Act. 

Section 57(b) includes a person, directly 

or indirectly, either controlling, 

controlled by or under common control 

with the BDC. Applicants state that 

Triangle directly owns all of the limited 

partnership interests in TMF and SBIC 

II and indirectly owns all of the general 

partnership interests in TMF and SBIC 

II through its 100% ownership of the 

General Partner and GP II, respectively. 

Accordingly, SBIC II and TMF would 

each be a person related to each other 

in a manner described in section 57(b) 

because each is deemed to be under the 

control of Triangle and thus under 

common control. In addition, each 

future Subsidiary would also each be a 

person related to each other Subsidiary 

in a manner described in section 57(b) 

as long as they remain under the 

common control of Triangle. 

7. Applicants state that there may be 

circumstances when one or more of 

Triangle, TMF, SBIC II or any future 

Subsidiary would purchase all or a 

portion of the portfolio investments 

held by one of the others in order to 

enhance the liquidity of the selling 

company or for other reasons, subject in 

each case to the requirements of the 

SBA and the regulations thereunder, as 

applicable. In addition, there may be 

circumstances when a Subsidiary would 

invest in securities of an issuer that may 

be deemed to be a person related to 

either Triangle or TMF in a manner 

described in section 57(b), or for 

Triangle to invest in securities of an 

issuer that may be deemed to be a 

person related to a Subsidiary in a 

manner described in section 57(b). 

8. The Prior Order only extends relief 

from sections 57(a)(1) and (2) to 

transactions between Triangle and TMF. 

Applicants therefore request an 

exemption from sections 57(a)(1) and 

57(a)(2) of the Act to permit any 

transaction between TMF (as a BDC) 

and any other Subsidiary with respect to 

the purchase or sale of securities or 

other property. Applicants also seek an 

exemption from these provisions to 

allow any transaction between TMF and 

a controlled portfolio affiliate of another 

Subsidiary. Applicants state that the 

requested relief is intended only to 

permit Triangle and its Subsidiaries to 

do that which they otherwise would be 

permitted to do if they were one 

company. 

9. Section 57(c) provides that the 

Commission will exempt a proposed 

transaction from the provisions of 

section 57(a)(1) and (2) of the Act if the 

terms of the proposed transaction, 

including the consideration to be paid 

or received, are reasonable and fair and 

do not involve overreaching of any 

person concerned, and the proposed 

transaction is consistent with the policy 

of the BDC concerned and the general 

purposes of the Act. 

10. Applicants submit that the 

requested relief from section 57(a)(1) 

and (2) meets this standard. Applicants 

represent that the proposed operations 

as one company will enhance efficient 

operations of Triangle and its wholly 

owned subsidiaries, including TMF, and 

allow them to deal with portfolio 

companies as if Triangle and such 

Subsidiaries were one company. 

Applicants contend that the terms of the 

proposed transactions are reasonable 

and fair and do not involve 

overreaching of Triangle or TMF by any 

person, and that the requested order 

would permit Triangle and the 

Subsidiaries to carry out more 

effectively their purposes and objectives 

of investing primarily in small business 

concerns. Finally, applicants note that 

the proposed transactions are consistent 

with the policies of Triangle and TMF 

as specified in filings with the 

Commission and Triangle’s reports to 

stockholders, as well as consistent with 

the policies and provisions of the Act. 

11. Section 17(d) of the Act and rule 

17d–1 under the Act (made applicable 

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61790 Federal Register / Vol. 75, No. 193 / Wednesday, October 6, 2010 / Notices 

to BDCs by section 57(i)) prohibit 

affiliated persons of a registered 

investment company, or an affiliated 

person of such person, acting as 

principal, from participating in any joint 

transaction or arrangement in which the 

registered company or a company it 

controls is a participant, unless the 

Commission has issued an order 

authorizing the arrangement. Section 

57(a)(4) of the Act imposes substantially 

the same prohibitions on joint 

transactions involving any BDC and an 

affiliated person of such BDC, or an 

affiliated person of such affiliated 

person, as specified in section 57(b) of 

the Act. Section 57(i) of the Act 

provides that rules and regulations 

under section 17(d) of the Act will 

apply to transactions subject to section 

57(a)(4) in the absence of rules under 

that section. The Commission has not 

adopted rules under section 57(a)(4) 

with respect to joint transactions and, 

accordingly, the standards set forth in 

rule 17d–1 govern applicants’ request 

for relief. 

12. The Prior Order only extends 

relief from section 57(a)(4) and rule 

17d–1 for joint transactions between 

Triangle and TMF. Accordingly, 

applicants request relief under section 

57(i) and rule 17d–1 to permit any joint 

transaction that would otherwise be 

prohibited by section 57(a)(4), in which 

TMF (as a BDC) and another Subsidiary 

participate, but only to the extent that 

the transaction would not be prohibited 

if Triangle and the Subsidiaries were a 

single company. 

13. In determining whether to grant 

an order under section 57(i) and rule 

17d–1, the Commission considers 

whether the participation of the BDC in 

the joint transaction is consistent with 

the provisions, policies, and purposes of 

the Act, and the extent to which such 

participation is on a basis different from 

or less advantageous than that of other 

participants. Applicants note that the 

proposed transactions are consistent 

with the policy and provisions of the 

Act and will enhance the interests of 

Triangle and TMF while retaining the 

important protections afforded by the 

Act. In addition, because the joint 

participants will conduct their 

operations as though they comprise one 

company, the participation of one will 

not be on a basis different from or less 

advantageous than the others. 

Accordingly, applicants believe that the 

standard for relief under section 57(i) 

and rule 17d–1 is satisfied. 

14. Applicants note that the 

conditions in the Prior Order will be 

replaced by the conditions set forth 

herein. These conditions are the same 

conditions as in the Prior Order, except 

that (a) the defined terms have been 

revised to include all current and future 

Subsidiaries, (b) condition 6 has been 

added in the event that a person serves 

or acts as an investment adviser to SBIC 

II or a future Subsidiary, and (c) the two 

conditions relating to consolidated 

reporting, which applicants no longer 

believe to be necessary, will be deleted 

from the Prior Order. 

Applicants’ Conditions 

Applicants agree that the Amended 

Order will be subject to the following 

conditions: 

1. Triangle will at all times own and 

hold, beneficially and of record, all of 

the outstanding equity interests in any 

Subsidiary, including all of the 

outstanding membership interests in 

any general partner of any Subsidiary, 

or otherwise own and hold beneficially, 

all of the outstanding voting securities 

and other equity interests in such 

Subsidiary. 

2. The SBIC Subsidiaries will have 

investment policies not inconsistent 

with those of Triangle, as set forth in 

Triangle’s registration statement. 

3. No person shall serve as a member 

of any board of directors of any 

Subsidiary unless such person shall also 

be a member of the Triangle Board. The 

board of directors or the managers, as 

applicable, of any Subsidiary will be 

appointed by the equity owners of such 

Subsidiary. 

4. Triangle will not itself issue or sell 

any senior security, and Triangle will 

not cause or permit any SBIC Subsidiary 

to issue or sell any senior security of 

which Triangle or such 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 of any such senior security by 

either Triangle or any SBIC Subsidiary, 

Triangle 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 Triangle and 

any SBIC Subsidiary on a consolidated 

basis have the asset coverage required 

by section 61(a), any borrowings by any 

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. 

5. Triangle will acquire securities of 

any SBIC Subsidiary representing 

indebtedness only if, in each case, the 

prior approval of the SBA has been 

obtained. In addition, Triangle and any 

SBIC Subsidiary will purchase and sell 

portfolio securities between themselves 

only if, in each case, the prior approval 

of the SBA has been obtained. 

6. No person shall serve or act as 

investment adviser to SBIC II or any 

future Subsidiary unless the Triangle 

Board and the stockholders of Triangle 

shall have taken such action with 

respect thereto that is required to be 

taken pursuant to the Act by the 

functional equivalent of the board of 

directors of SBIC II or any future 

Subsidiary and the stockholders of SBIC 

II or any future Subsidiary as if SBIC II 

or such future Subsidiary were a BDC. 

For the Commission, by the Division of 

Investment Management, pursuant to 

delegated authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–25073 Filed 10–5–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

29450; 812–13769] 

Capital Southwest Corporation; Notice 

of Application 

September 29, 2010. 

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 

23(a), 23(b) and 63 of the Act, and under 

sections 57(a)(4) and 57(i) of the Act and 

rule 17d–1 under the Act permitting 

certain joint transactions otherwise 

prohibited by section 57(a)(4) of the Act. 

SUMMARY OF THE APPLICATION: Applicant, 

Capital Southwest Corporation (‘‘Capital 

Southwest’’), requests an order to permit 

it to issue restricted shares of its 

common stock to its officers and 

employees under the terms of its 

employee compensation plan. 

FILING DATES: The application was filed 

on May 5, 2010, and amended on May 

17, 2010 and September 24, 2010. 

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 

applicant 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 25, 2010, and 

should be accompanied by proof of 

service on applicant, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Hearing requests should state 

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