August 17, 2016
VIA EDGAR AND EXPRESS MAIL
Mr. William H. Thompson
Accounting Branch Chief
Office of Consumer Products
Division of Corporate Finance
United States Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
| Re: | Greenbacker Renewable Energy Company LLC (the “Company”) |
| Amendment No. 1 to Form 10-K for Fiscal Year Ended December 31, 2015 (the “Form 10-K/A”) | |
| Filed June 22, 2016 | |
| Response Dated July 22, 2016 | |
| File No. 000-55610 |
Dear Mr. Thompson:
We are responding to the comments provided by the staff of the Division of Corporate Finance (the “Staff”) of the Securities and Exchange Commission (the “SEC”) in its letter dated August 5, 2016 (the “Letter”), with regard to the above-referenced filing. The Staff’s comments are set forth below and are followed by the Company’s responses.
Form 10-K/A
Item 8. Consolidated Financial Statements and SupplementaryData
Consolidated Notes to Consolidated FinancialStatements
Note 7. Distributions, page60
Comment:
1. We reviewed your response to comment 4. Reference is made to your disclosurethat: “All distributions paid in the years ended December 31, 2015 and 2014 havebeen reported as return of capital to shareholders.” In light of your response andpresentation of the distributions as an increase in accumulated deficit, please tell us yourconsideration of disclosing that all distributions paid have been reported as a returnoncapitalas opposed to a returnofcapital.
Response:
In determining the appropriate presentation of return of capital distributions, the Company principally took into account three significant considerations: 1) whether or not the distribution was legally declared out of additional paid in capital (“APIC”); 2) whether or not there is clear guidance in U.S. GAAP in regard to distributions that exceed retained earnings, and 3) what is generally accepted as the standard for return of capital distributions by companies, like the Company, that utilize investment company accounting standards.
In regard to 1), the distributions were not legally declared out of APIC nor did the Company’s board of directors authorize the distributions to be paid out of APIC as opposed to retained earnings / deficit.
In regard to 2), the Company believes that U.S. GAAP does not specifically address the accounting for dividends that exceed retained earnings and, because of this lack of specific guidance, there is diversity of practice. In standard U.S. GAAP-prepared financial statements, dividends / distributions are netted against retained earnings / accumulated deficit to clearly exhibit net accumulated earning / deficit after dividends / distributions to shareholders since commencement of operations. In the Company’s view under ASC 946, retained earnings / accumulated deficit is comprised of three separate accounts shown on the Statement of Net Assets – Accumulated deficit, Accumulated net realized gains on investments, and Accumulated unrealized appreciation / (depreciation) on investments and foreign currency translation, net of deferred taxes. The combination of these amounts fairly reflects the retained earnings / accumulated deficit since commencement of operations and would be consistent with amounts shown on financial statements not prepared using ASC 946. As of December 31, 2015, the total of these accounts for the Company equals a deficit of $(318,828), while as of June 30, 2016, the total equaled accumulated earnings of $1,521,006. After the Company’s initial startup phase is completed, the Company is of the opinion that it possesses accumulated earnings after distributions and, thus, its distributions are properly reflected as an increase of the accumulated deficit account as opposed to a reduction in APIC.
In regard to 3), under the provisions of the Internal Revenue Code of 1986, as amended, the portion of the cash dividend, if any, that exceeds earnings and profits is considered a return of capital. In the Company’s situation, 100% of the distributions have been classified as a return of capital due to a variety of factors, including the deduction of non-cash expenses, primarily depreciation, in the determination of earnings and profits. The expectation for the foreseeable future is that all distributions will be considered return of capital (or a reduction in the shareholder’s basis of their investment). Thus, the Company is of the opinion that classifying distributions as a return of capital is appropriate and consistent with the limited guidance provided by U.S. GAAP.
Note 8. Income Taxes, page60
Comment:
2. We reviewed your response to comment 9. The reconciliation provided in the responseis very similar to the disclosure in Note 8 and appears to satisfy the disclosurerequirements at ASC 740-10-50-12. Please provide disclosure in a similar manner in future filingsor advise why you believe such presentation is not most appropriate. In addition,reference is made to the “Plus: SMLLC income taxable” and “Other timing differences” lineitems in the reconciliation. Please tell us the underlying nature of these line items and whythey are reconciling items. In this regard, timing differences that create deferred taxes donot result in reconcilingitems.
Response:
Greenbacker Renewable Energy Corporation (“GREC Corp.”), wholly owned by the Company, is the sole member of several limited liability companies. Single-member limited liability companies (“SMLLC”) are disregarded for tax purposes. A disregarded entity’s taxable income is included in the Federal and State taxable income calculation of its owner, in this case GREC Corp. The “Plus: SMLLC income taxable” line item in the reconciliation refers to the book income from the SMLLCs, at the Federal tax rate of 35%, being included in GREC Corp.’s current taxable income calculation. The “Other timing differences” line item refers to tax cost (basis) adjustments for GREC Corp.’s investment in SMLLCs and Partnerships at the effective Federal and State (net of Federal benefit) tax rate. These adjustments to basis result in a corresponding increase or decrease to GREC Corp.’s tax adjusted change in unrealized gain/loss used in calculating the tax benefit or expense for the current year. Based upon the components included in the reconciliation of tax rates in future filings, the Company will consider including additional disclosure in regard to items such as these noted in our response.
Note 10. Financial Highlights, page62
Comment:
3. We reviewed your response to comment 10. The $8.54 per common share “Netasset value for common shares at end of period” does not include the SpecialUnitholder’s equity balance of $286,259 as of December 31, 2015. Further, the reconciliation onpage 61 of net asset value per common share as of December 31, 2014 totaling $8.50 tonet asset value per common share as of December 31, 2015 totaling $8.54 does not foot.The reconciliation foots to $8.58.Infuture filings, please add a line item to thereconciliation that subtracts the per common share impact of the Special Unitholder’s capitalgains incentive distribution or explain why doing so will not be appropriate. Adding thisline item to the reconciliation noted above would result in a $0.04 subtraction and a tablethat foots to $8.54.
Response:
In thePer share data attributed to common shares, the $0.04 that you reference is the subtotal ofNet increase (decrease) in net asset resulting from operations -$0.67- plusShareholder distributions - ($0.60)- andOther – ($0.03) to arrive atNet increase (decrease) in members’ equity attributed to common sharesof $0.04. This $0.04 amount per share added to the December 31, 2104 net asset value per share of $8.50 totals the $8.54 net asset value per share as of December 31, 2015. See table below with subtotal lines as appropriate:
| For the year ended December 31, 2015 | For the period from Commencement of Operations (April 25, 2014) through December 31, 2014 | ||||||
| Per share data attributed to common shares (1): | ||||||||
| Net proceeds before offering costs (2) | $ | — | $ | 9.17 | ||||
| Offering costs | — | (0.59 | ) | |||||
| Net proceeds after offering costs | — | 8.58 | ||||||
| Net Asset Value at beginning of period | 8.50 | — | ||||||
| Net investment income (loss) and realized loss on foreign currency translation (7) | 0.22 | (0.38 | ) | |||||
| Net unrealized appreciation / (depreciation) on investments | 0.47 | 0.16 | ||||||
| Change in translation of assets and liabilities denominated in foreign currencies | (0.06 | ) | (0.06 | ) | ||||
| Change in benefit from deferred taxes on unrealized appreciation on investments | 0.04 | — | ||||||
| Net increase (decrease) in net assets resulting from operations | 0.67 | (0.28 | ) | |||||
| Shareholder distributions | (0.60 | ) | (0.28 | ) | ||||
| Capital contribution from advisor | — | 0.38 | ||||||
| Other (6) | (0.03 | ) | 0.10 | |||||
| Net increase (decrease) in members’ equity attributed to common shares | 0.04 | (0.08 | ) | |||||
| Net asset value for common shares at end of period (3) | $ | 8.54 | $ | 8.50 | ||||
In future fillings will add appropriate underlines to ensure the subtotals are clear to the reader of the financial statements. The net assets attributed to Special Unitholder is not included in the categoryTotal common stockholder’s equity on the Consolidated Statements of Assets and Liabilities and in the Company’s opinion should not be included in the net asset value reconciliation related to common shareholders.
* * * * *
The Company acknowledges the following:
| · | The Company is responsible for the adequacy and accuracy of the disclosure in its filings with the SEC; |
| · | Staff comments or changes to disclosure in response to Staff comments do not foreclose the SEC from taking any action with respect to any filing; and |
| · | The Company may not assert Staff comments as a defense in any proceeding initiated by the SEC or any person under the federal securities laws of the United States. |
Should you have any questions regarding this letter, please contact Blake Estes at Alston & Bird LLP at (212) 210-9415.
Sincerely,
/s/ Richard C. Butt
Richard C. Butt
Chief Financial Officer
| cc: | Mr. Charles Wheeler |
| Timothy P. Selby, Esq. | |
| Blake E. Estes, Esq. | |