December 18, 2019
Via Email
John J. Mahon
Schulte Roth & Zabel LLP
901 Fifteenth Street, NW
Suite 800
Washington, DC 20005
john.mahon@srz.com
Re: NMF Senior Loan Fund I, Inc.
Registration Statement on Form 10
File No. 000-56123
Dear Mr. Mahon:
On November 22, 2019, you filed a registration statement on Form 10 on
behalf of NMF
Senior Loan Fund I, Inc. (the "Company"). We have reviewed the registration
statement and
have provided our comments below. Where a comment is made in one location, it
is applicable
to all similar disclosure appearing elsewhere in the registration statement.
All capitalized terms
not otherwise defined herein have the meaning given to them in the registration
statement.
Please respond to this letter within ten (10) business days by either
amending the filing,
providing the requested information, or advising us when you will provide the
requested
information. We may have additional comments after reviewing your responses to
the following
comments, or any amendment to the filing.
We note that the Company is voluntarily registering shares of its
common stock under
Section 12(g) of the Securities Exchange Act of 1934 ("Exchange Act"). Please
note that a filing
on Form 10 goes effective automatically by lapse of time 60 days after the
original filing date,
pursuant to Exchange Act Section 12(g)(1). If our comments are not
satisfactorily addressed
within this 60-day time period, you should consider withdrawing the Company's
Form 10 prior
to its effectiveness, and re-filing a revised Form 10 that includes changes
responsive to our
comments. If the Company chooses not to withdraw its Form 10 registration
statement, it will be
subject to the reporting requirements of Exchange Act Section 13(a).
Additionally, we will
continue to review the filing until all of our comments have been
satisfactorily addressed.
LEGAL COMMENTS
Page 1 Explanatory Note
1. Please add the following:
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a. The Company is an "emerging growth company," as defined in the Jumpstart
Our
Business Startups Act of 2012. As a result, the Company is eligible to
take advantage of
certain reduced disclosure and other requirements that are otherwise
applicable to public
companies including, but not limited to, not being subject to the
auditor attestation
requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. See
"Item 1.
Business Emerging Growth Company."
b. The Commission maintains an Internet Website (http://www.sec.gov) that
contains the
reports mentioned in this section.
Page 3 Item 1. Business
2. You state that the Company may make investments through wholly-owned
subsidiaries.
Please disclose:
a. That the Company complies with the provisions of the Investment
Company Act of 1940
governing investment policies (Section 8) and capital structure and
leverage (Section 61)
on an aggregate basis with the subsidiaries.
b. That each investment adviser to the subsidiaries complies with
provisions of the
Investment Company Act relating to investment advisory contracts
(Section 15) as an
investment adviser to the Company under Section 2(a)(20) of the
Investment Company
Act. The investment advisory agreement between the subsidiary and its
investment
adviser is a material contract that should be included as an exhibit
to the registration
statement. If the same person is the adviser to both the Company and
the subsidiary,
then, for purposes of complying with Section 15(c), the reviews of the
Company's and
the subsidiary's investment advisory agreements may be combined.
c. That each subsidiary complies with provisions relating to affiliated
transactions and
custody (Section 57). Also, please identify the custodian of the
subsidiary.
d. The basis for determining that undistributed income derived from the
subsidiary is
qualifying income, such as an opinion of counsel.
e. Any of the subsidiary's principal investment strategies or principal
risks that constitute
principal investment strategies or risks of the Company. The principal
investment
strategies and principal risk disclosures of a fund that invests in a
subsidiary should
reflect aggregate operations of the fund and the subsidiary.
Please confirm in correspondence that the financial statements of the
subsidiary will be
consolidated with those of the Company. Please also confirm that: (1) the
subsidiary's
management fee (including any performance fee) will be included in "Management
Fees" and
the subsidiary's expenses will be included in "Other Expenses" in the Company's
fee table; (2)
the subsidiary, if organized and operating outside the United States, and its
board of directors
will agree to designate an agent for service of process in the United States;
and (3) the subsidiary
and its board of directors will agree to inspection by the staff of the
subsidiary's books and
records, which will be maintained in accordance with Section 31 of the
Investment Company Act
and the rules thereunder.
3. You state that the proceeds of preferred shares issued by the Company
to make
investments would have its own specific set of benefits and risks, and all of
the costs of issuing
preferred shares would be borne by the holders of the shares. Please confirm
that the Company
does not intend to issue debt securities or preferred stock within a year of
the effective date of the
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registration statement, or add appropriate disclosure describing the effects of
such issuance on
shareholders.
Page 3 The Investment Adviser
4. You state that the Company's investment adviser is a "wholly-owned
subsidiary of New
Mountain Capital Group, L.P. (together with New Mountain Capital, L.L.C. and
its affiliates,
"New Mountain Capital") whose ultimate owners include Steven B. Klinsky and
related and
other vehicles." Please specify what those "related and other vehicles" are.
5. The Company's name includes the term "senior loan," which is a type of
investment and
therefore is subject to Rule 35d-1 Investment Company Act. Please disclose a
policy to invest,
under normal circumstances, at least 80% of the Company's net assets, plus
borrowings for
investment purposes, in "senior loans." Please also state that the Company will
provide
shareholders with at least 60 days' notice before changing the Company's 80%
policy.
Page 6 Investment Criteria
6. In the bullet point titled, "Established companies," you state that the
Company "will seek
to invest in established companies with sound historical financial
performance." But elsewhere,
you state that the Company's investments will be almost entirely rated below
investment grade
and that the issuers are considered more likely than investment grade issuers
to default on their
payments. Please address the inconsistency.
Page 7 Investment Structure
7. You state that the Company "may also enter into revolving credit
facilities, bridge
financing commitments, delayed draw commitments or other commitments which can
result in
providing future financing to a portfolio company intend to enter into certain
contracts under
which we have material future commitments." Please explain to us whether the
Company will
make capital commitments that may be unfunded for some period of time. If so,
please explain
to us whether the Company will treat its unfunded commitments as senior
securities under
section 61 of the Investment Company Act. If the Company will have unfunded
commitments
that it will not treat as senior securities, please provide us with a
representation that the Company
reasonably believes that its assets will provide adequate cover to allow it to
satisfy its future
unfunded investment commitments, and include an explanation as to why the
Company believes
it will be able to cover its future unfunded investment commitments.
Page 7 Portfolio Company Monitoring
8. This section states that the Company will monitor the performance of
Portfolio
Companies. As part of its monitoring, the Company will use a four-level rating
scale, which
characterizes how each investment is performing. Please explain how this rating
scale will be
used. For example, will it be used to determine whether to exit an investment?
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Page 10 Operating and Regulatory Environment
9. You state that the Company intends to "elect to be subject to the lower
coverage ratio of
150% available thereunder in order to maintain maximum flexibility, reflecting
approximately a
2:1 debt to equity ratio." Please provide more details about how and when the
Company will
make such election.
Page 26 Management Fee
10. You state that the Management Fee will be calculated at a blended rate
with respect to
capital commitments received at the initial closing, which includes a 0.70%
management fee, and
at a subsequent closing, which includes a 0.60% management fee. It is unclear
whether all
shareholders will pay the same management fee at the time such fee is charged.
For example,
would a person buying shares in the subsequent closing only pay a management
fee of 0.60%,
rather than the blended rate? The disclosure about how and management fees are
calculated and
charged is confusing. It is therefore unclear whether the management fee
structure raises issues
under Section 61 of the Investment Company Act. Please address. Also, it is not
clear when
reviewing the tables that the numbers contained in them reference a reduction
in the fee rate;
rather, it suggests the opposite (see the language in the footnotes to the
tables). Please clarify.
Page 28 Expenses
11. Please add to this section a fee table that conforms to requirements of
Item 3 of Form N-
2. Such disclosure will be helpful to investors.
12. Please add an example that conforms to the requirements of Instruction
11 to Item 3.1 of
Form N-2. We further request that you include, in the explanatory paragraph
following the
example, a second example where the five percent return results entirely from
net realized capital
gains and which uses language substantially the same as the following: "You
would pay the
following expenses on a $1,000 investment, assuming a 5.0% annual return
resulting entirely
from net realized capital gains (all of which is subject to our incentive fee
on capital gains): $
___ $ ___ $ ___ $ ___." Such disclosure will be helpful to investors.
Page 32 Senior Securities
13. Please clarify that the Company's borrowings, whether for "emergency
purposes" or
otherwise, are subject to the asset coverage requirements of section 61(a)(1)
of the Investment
Company Act.
14. It appears that the Company may hold a significant amount of
covenant-lite loans. If the
Company will hold a significant amount of covenant-lite loans, please revise
your principal risks
disclosure to include the heightened risks associated with covenant-lite loans.
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15. Please disclose that, to the extent original issue discount instruments,
such as zero coupon
bonds and PIK loans, constitute a significant portion of the Company's income,
investors will be
exposed to typical risks associated with such income being required to be
included in taxable and
accounting income prior to receipt of cash, including the following:
a. The higher interest rates of PIK loans reflect the payment deferral and
increased credit
risk associated with these instruments, and PIK instruments generally
represent a
significantly higher credit risk than coupon loans;
b. PIK loans may have unreliable valuations because their continuing
accruals require
continuing judgments about the collectability of the deferred payments
and the value of
any associated collateral;
c. Market prices of zero-coupon or PIK securities are affected to a greater
extent by interest
rate changes and may be more volatile than securities that pay interest
periodically and in
cash. PIKs are usually less volatile than zero-coupon bonds, but more
volatile than cash
pay securities;
d. Because original issue discount income is accrued without any cash being
received by the
Company, required cash distributions may have to be paid from offering
proceeds or the
sale of Company assets without investors being given any notice of this
fact;
e. The deferral of PIK interest increases the loan-to-value ratio, which is
a measure of the
riskiness of a loan;
f. Even if the accounting conditions for income accrual are met, the
borrower could still
default when the Company's actual payment is due at the maturity of the
loan; and
g. Original issue discount creates risk of non-refundable cash payments to
the adviser based
on non-cash accruals that may never be realized.
Page 80 Potential Conflicts of Interest
16. Please disclose whether the Company has any policies and procedures for
managing
conflicts of interest, and if so, what those policies and procedures are.
ACCOUNTING COMMENTS
17. Please confirm in correspondence that all wholly owned and all
substantially wholly
owned subsidiaries will be consolidated with the financial statements of the
Company.
18. In future financial statements, please include disclosure in the Notes
related to the
reduction of the management fee payable by the Withheld Amounts (factoring in
Cumulative
Losses) and the possibility that the Withheld Amounts may be payable to the
Adviser in a
subsequent quarter.
19. Please confirm that the recoupment period is limited to three years from
the date of any
reductions. Please update the disclosure throughout the Prospectus to reflect
this.
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* * * * * *
We remind you that the Company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff. Should you have any questions regarding this letter,
please contact me at
(202) 551-5166.
Sincerely,
/s/ Lisa N. Larkin
Lisa N. Larkin
Senior Counsel
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