August 21, 2020
Via Email
Owen Pinkerton
Thompson Hine
1919 M Street, N.W.
Suite 700
Washington, D.C. 20036-3537
owen.pinkerton@thompsonhine.com
Re: Flat Rock Capital Credit Fund
Registration Statement on Form N-2
File Nos. 333- 240039, 811-23579
Dear Mr. Pinkerton:
On July 23, 2020, you filed a registration statement on Form N-2 on
behalf of Flat Rock
Capital Credit Fund (the Fund ). 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.
1. On June 19, 2020, the Fund filed a registration statement/proxy
statement on Form N-14
8C, and the staff provided comments for that filing. Please incorporate
responses to those
comments into this filing, as applicable.
2. Please tell us if you have presented any test the waters materials to
potential investors in
connection with this offering. If so, please provide us with copies of such
materials.
PROSPECTUS
Outside Front Cover Page i
3. The first paragraph explains that the Fund is an interval fund and
provides some details
about repurchase offers. Please add disclosure specifying the intervals between
deadlines for
repurchase requests, pricing, and repayment.
4. In the sixth line of the third paragraph, disclosure incorporates by
reference the Fund s
Statement of Additional Information. Please confirm that the Fund will comply
with Fast Act
requirements, including adding hyperlinks to each exhibit identified in the
exhibit index and any
other information incorporated by reference in the registration statement, if
filed on EDGAR.
See FAST Act Modernization and Simplification of Regulation S-K, Rel. No.
33-10618, Mar.
1
20, 2019; Rule 411 under the 1933 Act; Rule 0-4 under the Investment Company
Act of 1940
( 1940 Act ).
5. In the first line of the paragraph titled, Principal Investment
Strategies, disclosure
states, The Fund pursues its investment objective by investing, under normal
circumstances, at
least 80% of its assets (defined as net assets plus the amount of any borrowing
for investment
purposes) in Credit Investments . The Fund defines Credit Investments
as senior secured
loans of U.S. middle-market companies ( Senior Loans ) and investment
vehicles, such as
collateralized loan obligations ( CLOs ), business development companies (
BDCs ) or senior
loan facilities that provide the Fund with exposure to Senior Loans. Risk
disclosure starting on
page 5 indicates that the Fund may invest in below-investment grade securities
(junk bonds). In
the principal investment strategies section, please clarify that the Fund
invests in below-
investment grade securities and specify which investments will be
below-investment grade,
investment grade, or both.
Outside Front cover Page ii
6. In the first line of the paragraph titled, Predecessor Fund,
disclosure states, Flat Rock
Capital Corp. (the Predecessor Fund ), a Maryland corporation that is an
externally managed,
non-diversified, closed-end investment company that has elected to be regulated
as a BDC under
the 1940 Act, is expected to be reorganized into the Fund as of the date the
Fund commences
operations. If the Fund s registration statement is to become effective
before the date on which
the predecessor fund is reorganized into the Fund, please note that the
registration statement may
not contain predecessor fund performance disclosure, unless the Fund commits to
not use the
prospectus to sell to shareholders prior to the reorganization. Please advise
the staff of your
intent and revise the registration statement accordingly.
7. The second bullet point states, There is no secondary market for
the Fund s shares, and
it is not anticipated that a secondary market will develop. Please add the
following disclosure,
Thus, an investment in the Fund may not be suitable for investors who may
need the money
they invest in a specified timeframe.
8. The seventh bullet point states, The Fund s distributions may be
funded from unlimited
amounts of offering proceeds or borrowings, which may constitute a return of
capital and reduce
the amount of capital available to the Fund for investment. Any capital
returned to shareholders
through distributions will be distributed after payment of fees and expenses.
Please add
disclosure explaining that the amount of distributions that the Fund may pay,
if any, is uncertain.
9. In the last line on the page, disclosure states, See Risk Factors
beginning on page 17 of
this Prospectus. Please add disclosure emphasizing that investing in the
common shares of the
Fund may be speculative and involves a high degree of risk, including the risks
associated with
below-investment grade securities and the use of leverage. See Item 1.1.j. of
Form N-2.
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Page 2
10. In the sixth line of the third paragraph, disclosure states, The
Adviser through a
consistent approach to credit evaluation and careful attention to the details
of execution, it seeks
to close deals as fast or faster than competitive financing providers while
maintaining discipline
with respect to credit, pricing and structure to ensure the ultimate success of
the financing. The
Adviser considers observation rights, where appropriate, regular dialogue with
company
management and sponsors and detailed, internally generated monitoring reports
to be critical to
our performance. Please delete the word it or otherwise revise the
sentence to read correctly.
Please also provide a definition of observation rights, using plain
English.
11. The fifth bullet point states, Stable, predicable cash flows with low
technology and
market risks. Please change predicable to predictable.
Page 3
12. The second bullet point states, Defensible niche strategy or other
barriers to entry.
Please revise this phrase using plain English.
13. The Fund discloses that it will invest in Senior Loans. In the
principal investment
strategy sections, please add disclosure that describes the Fund s strategies
related to credit
ratings, duration and/or maturity, and CLO tranches, if applicable.
Page 7 Private Placements Risk
14. The Fund discloses that it may invest in private placements. Please
tell us whether the
Fund will invest in hedge funds and/or private equity funds that rely on
section 3(c)(1) or 3(c)(7)
of the 1940 Act. If so, if the Fund will invest more than 15% of its net assets
in hedge funds and
private equity funds that rely on sections 3(c)(1) or 3(c)(7), please note that
registered closed-end
funds that invest more than 15% of their net assets in such hedge funds or
private equity funds
should impose a minimum initial investment requirement of at least $25,000 and
restrict sales to
investors that, at a minimum, satisfy the accredited investor standard. If the
Fund will invest
more than 15% of its net assets in such investments without imposing these
limitations, please
explain to us why it would be appropriate for the Fund to offer shares. We may
have additional
comments after reviewing your response. See Speech: PLI Investment
Management Institute,
by Dalia Blass, July 28, 2020, at
https://www.sec.gov/news/speech/blass-speech-pli-investment-
management-institute.
Page 8 CLO Risk
15. The Fund discloses that it may invest in CLOs. In the principal
investment strategy
sections, please add disclosure that describes in which tranches the Fund will
invest.
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Page 12 Investment Policies
16. The first paragraph refers to the Fund s 80% investment policy.
Please specify whether
the policy is non-fundamental. If it is non-fundamental, please disclose that
the Fund will
provide shareholders with at least 60 days prior notice of any change to this
policy. See Rule
35d-1(a)(2)(ii) of the 1940 Act.
Page 16
17. In the third paragraph, disclosure states that the Fund may, on a
non-principal basis (i.e.,
generally less than 5% of total assets), invest in publicly-traded BDCs as
determined by the
investment adviser in order to meet its investment objective. However, earlier
disclosure states
that BDCs are a principal investment strategy. Please reconcile the
discrepancy.
Page 20 Collateral Liquidation Risk
18. In the third line of this paragraph, disclosure states, The Fund s
access to collateral may
be limited by bankruptcy or other insolvency laws, and these laws may be less
developed and
more cumbersome with respect to the Fund s non-U.S. investments. Please
revise strategy and
risk disclosure throughout the prospectus to be consistent about whether the
Fund will or will not
invest in foreign securities as a principal investment strategy.
Page 26 - Leveraging Risk
19. Please advise whether the Fund intends to offer preferred shares within
12 months of
effectiveness of the registration statement. If yes, please include disclosure
about the
consequences to common shareholders of the issuance of preferred, e.g.,
subordination,
diminished voting power, increased expense ratio; and provide appropriate fee
table disclosure.
Page 30 Investment Adviser
20. The Fund discloses that the investment adviser is entitled to an
incentive fee. Please
provide a graphical representation of the incentive fee allocation and examples
that illustrate how
the incentive fee would be calculated under several different scenarios using
adjusted capital.
Please also disclose conflicts of interest that may arise in relation to the
investment adviser s
selection of investments or use of techniques (such as leverage) that have the
effect of increasing
the investment adviser s compensation.
STATEMENT OF ADDITIONAL INFORMATION
Pages 23 Involuntary Repurchases
21. In the seventh line of this paragraph, disclosure states that the Fund
may conduct
involuntary repurchases if it would be in the interests of the Fund, as
determined by the Board.
Please revise the disclosure to state that the Fund may repurchase shares
involuntarily from a
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shareholder at net asset value in accordance with the Fund s Declaration of
Trust and section 23
of the 1940 Act and Rule 23c-2 thereunder.
* * * * * *
We note that portions of the filing are incomplete. We may have
additional comments on
such portions when you complete them in a pre-effective amendment, on
disclosures made in
response to this letter, on information provided supplementally, or on exhibits
added in any pre-
effective amendment.
A response to this letter should be in the form of a pre-effective
amendment filed pursuant
to Rule 472 under the Securities Act. The pre-effective amendment filing should
be
accompanied by a supplemental letter that includes your responses to each of
these comments.
Where no change will be made in the filing in response to a comment, please
indicate this fact in
your supplemental letter and briefly state the basis for your position.
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
Senior Counsel
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