Document ID: SEC-2011-1580-0001
Agency: sec
Document Type: Notice
Title: Applications: NGP Capital Resources Co., et al.
Posted Date: 2011-10-14T04:00Z

[Federal Register Volume 76, Number 199 (Friday, October 14, 2011)]
[Notices]
[Pages 63960-63964]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-26525]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-29831; 812-13695]

NGP Capital Resources Company, et al.; Notice of Application

October 7, 2011.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an order under section 57(a)(4) and 
57(i) of

[[Page 63961]]

the Investment Company Act of 1940 (the ``Act'') and rule 17d-1 under 
the Act to permit certain joint transactions otherwise prohibited by 
section 57(a)(4) of the Act.

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SUMMARY: Summary of Application: Applicants request an order to permit 
a business development company (``BDC'') to co-invest with certain 
affiliates in portfolio companies.
    Applicants: NGP Capital Resources Company (the ``Company''), NGP 
Co-Investment Opportunity Fund, LP (``NGPC'') and NGP Investment 
Advisor, L.P. (the ``Adviser'').

DATES: Filing Dates: The application was filed on September 8, 2009, 
and amended on December 17, 2009, January 5, 2011, August 25, 2011, and 
October 6, 2011.
    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 November 1, 2011, 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 
St., NE., Washington, DC 20549-1090. Applicants: c/o Stephen K. 
Gardner, NGP Capital Resources Company, 1221 McKinney Street, Suite 
2975, Houston, TX 77010.

FOR FURTHER INFORMATION CONTACT: Bruce R. MacNeil, Senior Counsel, at 
(202) 551-6817, or Janet M. Grossnickle, Assistant Director, at (202) 
551-6821 (Office of Investment Company Regulation, Division of 
Investment Management).

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 BDC under the Act.\1\ The Company's 
investment objective is to generate both current income and capital 
appreciation primarily through debt investments with certain equity 
components. The Company's operations are conducted by the Adviser. The 
Company has a five-member board of directors (``Board'') of which three 
members are not interested persons of the Company within the meaning of 
section 2(a)(19) of the Act (``Independent Directors'').
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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 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.
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    2. NGPC is organized as a limited partnership and, in reliance on 
the exclusion from the definition of investment company contained in 
section 3(c)(1), it is anticipated that NGPC will not register under 
the Act. NGP Energy Capital Management, LLC (the ``Affiliated 
Adviser'') owns 99.9% of the ownership interest in NGPC, with the 
Company's administrator, NGP Administration, LLC (the 
``Administrator''), owning the remaining 0.1%. The Affiliated Adviser's 
99.9% ownership interest will be diluted as NGPC offers its interests 
to outside investors. NGPC has not commenced operations and does not 
anticipate doing so unless and until the relief sought by this 
application is obtained. NGPC and any Future Co-Investment Affiliate 
(as defined below) will operate pursuant to an investment objective and 
investment strategies that are identical to those of the Company. The 
Adviser will manage the investment activities of NGPC.
    3. Applicants state that as of August 15, 2011, the Company's 
capital available for investment was $145 million. The Company does not 
have any specific plans to raise additional capital but may do so in 
the future to the extent there are opportunities. Applicants also state 
that NGPC anticipates raising $250 to $500 million in a private 
offering.
    The Adviser is registered as an investment adviser under the 
Investment Advisers Act of 1940. The Affiliated Adviser owns 99.9% of 
the ownership interest in the Adviser, with the Administrator owning 
the remaining 0.1%. The Adviser may in the future advise other entities 
that are affiliated persons of the Company, as defined in section 
2(a)(3)(C) of the Act (the ``Future Co-Investment Affiliates,'' and 
together with NGPC, the ``Co-Investment Affiliates'').\2\ Applicants 
request relief permitting the Company and the Co-Investment Affiliates 
to co-invest in portfolio companies (the ``Co-Investment Program'' and 
each investment, a ``Co-Investment Transaction'').\3\ In selecting 
investments for the Company the Adviser will consider only the 
investment objective, investment strategies, investment position, 
capital available for investment, and other pertinent factors 
applicable to the Company. Likewise, when selecting investments for the 
Co-Investment Affiliates, the Advisor will consider only the investment 
objective, investment strategies, investment position, capital 
available for investment, and other pertinent factors applicable to the 
Co-Investment Affiliates. However, as the Company and the Co-Investment 
Affiliates have the same investment objectives and investment 
strategies, the Adviser anticipates that any investment that is an 
appropriate investment for one entity will be an appropriate investment 
for the other. Applicants state that under the Co-Investment Program, 
co-investments between the Company and the Co-Investment Affiliates 
would be the norm, rather than the exception. The Company, NGPC and any 
Future Co-Investment Affiliate will disclose in offering documents and 
periodic financial reports that they will routinely co-invest with each 
other pursuant to the Co-Investment Program and will disclose how Co-
Investment Transactions will be allocated.
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    \2\ Section 2(a)(3)(C) defines an ``affiliated person'' of 
another person as any person directly or indirectly controlling, 
controlled by, or under common control with, such other person.
    \3\ All existing entities that currently intend to rely on the 
order have been named as applicants and any future entities that may 
rely on the order in the future will comply with its terms and 
conditions.
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    4. Under the Co-Investment Program, each Co-Investment Transaction 
would be allocated among the Company and the Co-Investment Affiliates 
based upon on the relative capital of each entity available for 
investment (``Available Capital'').\4\ These relative allocation 
percentages (``Relative Allocation Percentages'') would be approved 
each quarter or, as necessary or appropriate, between quarters by both 
the full Board and the required majority (within the meaning of Section 
57(o)) (the ``Eligible

[[Page 63962]]

Directors'').\5\ The Company will not deviate from its co-investment 
policies except as may be required by applicable law.\6\ The Co-
Investment Program as a whole has been approved by both the full Board 
and the Eligible Directors. The Relative Allocation Percentages will be 
approved by both the full Board and the Eligible Directors prior to the 
implementation of the Co-Investment Program, and any deviations from 
the Relative Allocation Percentages for any investment, by the Company 
or the Co-Investment Affiliates, would require prior approval by both 
the full Board and the Eligible Directors.
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    \4\ ``Available Capital'' consists solely of liquid assets not 
held for permanent investment, including cash, amounts that can 
currently be drawn down from lines of credit, and marketable 
securities held for short-term purposes. In addition, for the Co-
Investment Affiliates, Available Capital would include bona fide 
uncalled capital commitments that can be called by the settlement 
date of the Co-Investment Transaction.
    \5\ The term ``Eligible Directors,'' when used with respect to 
the approval of a proposed transaction, plan, or arrangement, means 
both a majority of a BDC's directors or general partners who have no 
financial interest in such transaction, plan, or arrangement and a 
majority of such directors or general partners who are not 
interested persons of such company.
    \6\ Applicants are not aware of any such requirement at this 
time.
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Applicants' Legal Analysis

    1. Section 57(a)(4) of the Act prohibits certain affiliated persons 
of a BDC from participating in a joint transaction with the BDC in 
contravention of rules as prescribed by the Commission. In addition, 
under section 57(b)(2) of the Act, any person who is directly or 
indirectly controlling, controlled by or under common control with a 
BDC is subject to section 57(a)(4). Applicants state that the Co-
Investment Affiliates could be deemed to be a person related to the 
Company in a manner described by section 57(b) by virtue of their being 
under common control with the Company. Section 57(i) of the Act 
provides that, until the Commission prescribes rules under section 
57(a)(4), the Commission's rules under section 17(d) of the Act 
applicable to registered closed-end investment companies will be deemed 
to apply. Because the Commission has not adopted any rules under 
section 57(a)(4), rule 17d-1 applies.
    2. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
affiliated persons of a registered investment company from 
participating in joint transactions with the company unless the 
Commission has granted an order permitting such transactions. Rule 17d-
1, as made applicable to BDCs by section 57(i), prohibits any person 
who is related to a BDC in a manner described in section 57(b), acting 
as principal, from participating in, or effecting any transaction in 
connection with, any joint enterprise or other joint arrangement or 
profit-sharing plan in which the BDC is a participant, absent an order 
from the Commission. In passing upon applications under rule 17d-1, the 
Commission considers whether the company's participation 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.
    3. Applicants state that allowing co-investment in portfolio 
companies by the Company and the Co-Investment Affiliates will increase 
favorable investment opportunities for the Company. The Co-Investment 
Program has been approved by the Board and the Eligible Directors on 
the basis that it would be mutually advantageous for the Company to 
have the additional capital from the Co-Investment Affiliates available 
to meet the funding requirements of attractive investments in portfolio 
companies.
    4. Applicants state that the formulae for the allocation of co-
investment opportunities among the Company and Co-Investment 
Affiliates, and the protective conditions set forth below will ensure 
that the Company will be treated fairly. Applicants state that the 
Company's participation in the Co-Investment Transactions will be 
consistent with the provisions, policies, and purposes of the 1940 Act 
and on a basis that is not different from or less advantageous than 
that of other participants.

Applicants' Conditions

    Applicants agree that any order granting the requested relief will 
be subject to the following conditions:
    1. Each time the Adviser considers an investment for the Co-
Investment Affiliates, the Adviser will make an independent 
determination of the appropriateness of the investment for the Company.
    2. (a) If the Adviser deems that the Company's participation in the 
investment is appropriate, then such investment will be made pursuant 
to the Relative Allocation Percentages, unless the Adviser determines 
that investment pursuant to the Relative Allocation Percentages is not 
appropriate for that investment. The Relative Allocation Percentages 
will be determined by both the full Board and the Eligible Directors in 
advance and will be based upon the Available Capital of the Company, on 
the one hand, and the Co-Investment Affiliates, on the other hand. The 
Relative Allocation Percentages will be approved each quarter, or as 
necessary or appropriate, between quarters, by both the full Board and 
the Eligible Directors, and may be adjusted, for subsequent 
transactions, in their sole discretion for any reason, including, among 
other things, changes in the Available Capital of the Company vis-
[agrave]-vis the Available Capital of the Co-Investment Affiliates.
    (b) If the Adviser deems that the Company's participation in the 
Co-Investment Transaction is appropriate, but that investment pursuant 
to the Relative Allocation Percentages is not appropriate, then the 
Adviser will recommend an appropriate level of investment for the 
Company and the Co-Investment Affiliates. If the aggregate amount 
recommended by the Adviser to be invested by the Company in such Co-
Investment Transaction, together with the amount proposed to be 
invested by the Co-Investment Affiliates, exceeds the amount of the 
investment opportunity, the amount proposed to be invested by the 
Company will be based on a ratio of the Company's Available Capital to 
the aggregate Available Capital of the Company and the Co-Investment 
Affiliates, up to the maximum amount proposed to be invested by each. 
The Adviser will provide the Eligible Directors with information 
concerning the Company's and the Co-Investment Affiliates' Available 
Capital to assist the Eligible Directors with their review of the 
Company's investments for compliance with these allocation procedures. 
After making the determinations required in this paragraph (b), the 
Adviser will distribute written information concerning the Co-
Investment Transaction, including the amount proposed to be invested by 
the Co-Investment Affiliates, to the Independent Directors for their 
consideration. Outside of the Relative Allocation Percentages, the 
Company will co-invest with the Co-Investment Affiliates only if, prior 
to the Company's and the Co-Investment Affiliates' participation in the 
Co-Investment Transaction, the Eligible Directors conclude that:
    (i) The terms of the transaction, including the consideration to be 
paid, are reasonable and fair and do not involve overreaching of the 
Company or its stockholders on the part of any person concerned;
    (ii) the transaction is consistent with
    (A) the interests of the stockholders of the Company; and
    (B) the Company's investment objectives and policies (as described 
in the Company's registration statements on Form N-2 and other filings 
made with the Commission by the Company under the Securities Act of 
1933, as amended (``Securities Act''), any reports filed by the Company 
with the Commission under the Securities

[[Page 63963]]

Exchange Act of 1934, as amended, and the Company's reports to 
stockholders);
    (iii) the investment by the Co-Investment Affiliates would not 
disadvantage the Company, and participation by the Company is not on a 
basis different from or less advantageous than that of the Co-
Investment Affiliates; provided, that if the Co-Investment Affiliates, 
but not the Company, gains the right to nominate a director for 
election to a portfolio company's board of directors or the right to 
have a board observer or any similar right to participate in the 
governance or management of the portfolio company, such event shall not 
be interpreted to prohibit the Eligible Directors from reaching the 
conclusions required by this condition (2)(b)(iii), if
    (A) the Eligible Directors shall have the right to ratify the 
selection of such director or board observer, if any, and
    (B) the Adviser agrees to, and does, provide, periodic reports to 
the Company's Board with respect to the actions of such director or the 
information received by such board observer or obtained through the 
exercise of any similar right to participate in the governance or 
management of the portfolio company; and
    (iv) the proposed investment by the Company will not benefit any 
affiliated person of the Company, other than the Co-Investment 
Affiliates, except (A) to the extent permitted by condition 12; (B) to 
the extent permitted by section 57(k); or (C) indirectly, as a result 
of an interest in securities issued by the Co-Investment Affiliates or 
the Company.\7\
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    \7\ Co-Investment Affiliates or an affiliate of the Co-
Investment Affiliates will not receive any fees or other 
compensation in connection with the Co-Investment Affiliates' right 
to nominate a director or board observer to otherwise participate in 
the governance or management of the portfolio company.
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    3. The Company has the right to decline to participate in any Co-
Investment Transaction or to invest less than the amount proposed.
    4. Except for follow-on investments made pursuant to condition 7, 
the Company will not invest in reliance on this order in any portfolio 
company in which the Adviser, or any Co-Investment Affiliates or any 
person controlling, controlled by, or under common control with the 
Investment Adviser or the Co-Investment Affiliates is an existing 
investor.
    5. The Company will not participate in any Co-Investment 
Transaction unless the terms, conditions, price, class of securities to 
be purchased, settlement date, and registration rights will be the same 
for the Company as for the Co-Investment Affiliates. The grant to the 
Co-Investment Affiliates, but not the Company, of the right to nominate 
a director for election to a portfolio company's board of directors, 
the right to have an observer on the board of directors or similar 
rights to participate in the governance or management of the portfolio 
company will not be interpreted so as to violate this condition 5, if 
conditions 2(b)(iii)(A) and (B) are met.\8\
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    \8\ Id.
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    6. Any sale, exchange, or other disposition by the Company or the 
Co-Investment Affiliates of an interest in a security that was acquired 
in a Co-Investment Transaction will be accomplished pro rata based on 
the original investment of each participant unless the Adviser 
formulates a recommendation for participation in a disposition on a 
non-pro rata basis and such recommendation is approved by the Eligible 
Directors on the basis that such non-pro rata disposition is in the 
best interest of the Company. The Company and the Co-Investment 
Affiliates will each bear its own expenses in connection with any 
disposition, and the terms and conditions of any disposition will apply 
equally to all participants.
    7. Any ``follow-on investment'' (i.e., an additional investment in 
the same entity) by the Company or the Co-Investment Affiliates, or any 
exercising of warrants or other rights to purchase securities of the 
issuer in a portfolio company whose securities were acquired in a Co-
Investment Transaction will be accomplished pro rata based on the 
original investment of each participant, unless the Adviser formulates 
a recommendation for participation in the proposed transaction on a 
non-pro rata basis and such recommendation is approved by the Eligible 
Directors on the basis that such non-pro rata participation is in the 
best interest of the Company. The acquisition of follow-on investments 
as permitted by this condition will be subject to the other conditions 
set forth in the application.
    8. The Independent Directors will be provided quarterly for review 
all information concerning (a) all investments made by the Co-
Investment Affiliate during the preceding quarter and (b) Co-Investment 
Transactions during the preceding quarter, including investments made 
by the Co-Investment Affiliates which the Company considered but 
declined to participate in, so that the Independent Directors may 
determine whether the conditions of the order have been met.
    9. The Company will maintain the records required by section 
57(f)(3) of the Act as if each of the investments permitted under these 
conditions were approved by the Independent Directors under section 
57(f).
    10. No Independent Directors will also be a director, general 
partner or principal, or otherwise an ``affiliated person'' (as defined 
in the Act) of, the Co-Investment Affiliates.
    11. The expenses, if any, associated with acquiring, holding or 
disposing of any securities acquired in a Co-Investment Transaction 
(including, without limitation, the expenses of the distribution of any 
such securities registered for sale under the Securities Act) shall, to 
the extent not payable by the Adviser under its investment advisory 
agreements with the Co-Investment Affiliates, be shared by the Company 
and the Co-Investment Affiliates in proportion to the relative amounts 
of their securities to be acquired or disposed of, as the case may be.
    12. Any transaction fee (including break-up or commitment fees but 
excluding broker's fees contemplated by section 57(k)(2) of the Act) 
received in connection with a Co-Investment Transaction will be 
distributed to the Company and the Co-Investment Affiliates on a pro 
rata basis based on the amount they invested or committed, as the case 
may be, in such Co-Investment Transaction. If any transaction fee is to 
be held by the Adviser pending consummation of the transaction, the fee 
will be deposited into an account maintained by the Adviser at a bank 
or banks having the qualifications prescribed in section 26(a)(1) of 
the Act, and the account will earn a competitive rate of interest that 
will also be divided pro rata between the Company and the Co-Investment 
Affiliates based on the amount they invest in such Co-Investment 
Transaction. The Co-Investment Affiliates or any affiliated person of 
the Company will not receive additional compensation or remuneration of 
any kind (other than (a) the pro rata transaction fees described above 
and (b) investment advisory fees paid in accordance with investment 
advisory agreements with the Company and the Co-Investment Affiliates) 
as a result of or in connection with a Co-Investment Transaction.

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    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26525 Filed 10-13-11; 8:45 am]
BILLING CODE 8011-01-P