July 10, 2020
Via Email
Harry Pangas
Dechert LLP
1900 K Street, NW
Washington, DC 20006
harry.pangas@dechert.com
Re: Barings Capital Investment Corporation
Registration Statement on Form 10
File No. 000-56180
Dear Mr. Pangas:
On June 26, 2020, you filed a registration statement on Form 10 on
behalf of Barings
Capital Investment Corporation (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 JOBS Act.
b. The Commission maintains an Internet Website (http://www.sec.gov) that
contains the
reports mentioned in this section.
2. The fourth bullet point states, We do not intend to list our shares
on any securities
exchange for what may be a significant time and we do not expect a secondary
market in the
shares to develop. In the prospectus, please add disclosure that specifies
the Company s
intentions regarding an exchange listing, a liquidation, and/or any other
liquidity event. Please
include an estimated timeframe for these events.
3. The second sentence of the fifth bullet point states, Any capital
returned to you through
distribution will be disturbed after payment of fees and expenses. Please
add an s after
distribution and change disturbed to distributed.
Page 4 Item 1. Business
4. In the second paragraph of the section titled, The Company,
disclosure states,
We expect to conduct private offerings (the Private Offering ) of
our Common
Stock to investors in reliance on exemptions from the registration
requirements of
the U.S. Securities Act of 1933, as amended (the Securities Act ).
At the closing
of any Private Offering, each investor will make a capital commitment
(a Capital
Commitment ) to purchase shares of our Common Stock pursuant to a
subscription agreement entered into with us (a Subscription
Agreement ).
Investors will be required to fund drawdowns ( Drawdowns ) to
purchase shares
of our Common Stock up to the amount of their respective Capital
Commitments
on an as needed basis with a minimum of 10 calendar days prior
notice to the
investors ( Drawdown Notice ).
a. Please supplementally indicate on which exemptions you will rely and
the basis for your
reliance.
b. Please disclose in the prospectus what happens to investors that fail
to honor their
obligations.
5. In the last sentence of the second paragraph of the section titled,
The Company,
disclosure states, We anticipate commencing our loan origination and
investment activities
contemporaneously with the initial closing of the Private Offering, which is
expected to occur in
the second quarter of 2020 (the Closing ). Given that the second
quarter of 2020 has passed,
please revise the timeline accordingly.
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6. In the first sentence of the first paragraph of the section titled,
Description of Business,
disclosure states, We are a financial services company that will primarily
lend to and invest in
senior secured private debt investments in performing, well-established
middle-market
businesses that operate across a wide range of industries. Please provide a
plain English
definition of performing.
7. In the third sentence of the third paragraph of the section titled,
Description of
Business, disclosure states, Barings will employ fundamental credit
analysis, and target
investments in businesses with low levels of cyclicality and operating risk
relative to other
businesses in this market segment. Please provide a plain English definition
of cyclicality.
8. In the third paragraph of the section titled, Description of
Business, please disclose the
expected credit quality and maturity of the Company s investments. Please
include the term
junk bonds in describing debt instruments that will be rated below
investment grade or which,
if unrated, would be rated below investment grade if they were rated.
Page 5 Item 1. Business
9. In the first paragraph at the top of the page, disclosure states, We
will initially focus on
investing in syndicated senior secured loans, bonds and other fixed income. We
expect to
transition to investing in predominately senior secured private debt
investments in performing,
well-established middle-market businesses that operate across a wide range of
industries.
Please add disclosure after this sentence explaining the difference between the
initial and future
investments.
Page 6 Investment Committee
10. The Investment Team is defined on the previous page while the
Investment
Committee is defined on this page. Please explain what the differences are
between the two
groups.
Page 20 Regulation as a Business Development Company
11. In the last sentence of the second paragraph, disclosure states, We
may also borrow
amounts up to 5.0% of the value of our total assets for temporary or emergency
purposes without
regard to asset coverage (emphasis added). The additional 5% is available
only for temporary
purposes, regardless of whether there are also emergency purposes. Please
revise this section to
indicate that the additional 5% borrowings described in this section are
limited to borrowing for
temporary purposes as that term is defined in section 18(g) of the 1940 Act.
Page 35 Inability to Meet Investment Objective or Investment Strategy
12. 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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Page 35 There are potential conflicts of interest, including the management
of other
investment funds and accounts by Barings, which could impact our investment
returns.
13. Please disclose whether the Company has any policies and procedures for
managing
conflicts of interest, and if so, what those policies and procedures are.
Page 40 PIK Interest Payments
14. 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 41 Senior Securities
15. In the first sentence, disclosure states that the Company may issue
debt securities or
preferred stock. Please confirm that the Company does not intend to issue debt
securities or
preferred stock within a year of the effective date of the registration
statement, or add appropriate
disclosure.
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Page 41 We may invest in revolving credit facilities or make other similar
financial
commitments.
16. In the first sentence of the first paragraph, disclosure states, We
may acquire or originate
revolving credit facilities from time to time. Under a revolving credit
facility, we may be
required to fund amounts due in a shorter timeframe than the time in which we
may be able to
call capital from our investors. As a result, there is a risk that we may not
have sufficient
liquidity to fund all or a portion of the amounts due. 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.
ACCOUNTING COMMENTS
Page 15 Definition of Floating Rate
1. Please describe if the change in the calculation of incentive fees will
require a
shareholder vote for the change in advisory agreement.
2. It appears the initial floating rate will be based upon a 3 month
LIBOR. After a transition
event SOFR will be utilized. As SOFR is an overnight rate, please
supplementally describe how
the Company will adjust to a 3 month tenor and if it is expected that there
will be a material
difference between the rates upon transition.
* * * * * *
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
cc: Vincent Di Stefano, Branch Chief
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