April 29, 2021
Via Email
Steven B. Boehm
Eversheds Sutherland
700 6th St., NW
Washington, DC 20001
stevenboehm@eversheds-sutherland.com
Re: NC SLF Inc.
Registration Statement on Form 10
File No. 000-56265
Dear Mr. Boehm:
On April 1, 2021, you filed a registration statement on Form 10 on
behalf of NC SLF 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.
Page 1 Explanatory Note
1. At the end of the second bullet point, please add, Therefore, the
Company s shares
constitute illiquid investments.
2. Please add bullet points explaining that:
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x If the Company makes additional offerings of its shares in the future,
an investor may be
required to make additional purchases of the Company s shares on one
or more dates to be
determined by the Company.
x Investment in the Company is suitable only for sophisticated investors
and requires the
financial ability and willingness to accept the high risks and lack of
liquidity inherent in an
investment in the Company.
x 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
Company for investment. Any capital returned to you through
distributions will be
distributed after payment of fees and expenses.
x The Fund will invest in securities that are rated below investment
grade by rating agencies
or that would be rated below investment grade if they were rated; below
investment grade
securities, which are often referred to as junk have
predominantly speculative
characteristics with respect to the issuer s capacity to pay interest
and repay principal.
x The privately-held companies and below-investment-grade securities in
which the Fund will
invest will be difficult to value and are illiquid.
Page 4 Item 1. Business
3. In the last line of the first paragraph, disclosure states that the
Company shall commence
the wind up of operations two years following the expiration of the Investment
Period, subject to
additional extensions, each for an additional one year period, upon approval of
the holders of a
majority of the Company s then outstanding Shares. Please tell us
supplementally whether the
Company will establish a liquidating trust as part of the liquidation process.
4. In the first line of the third paragraph, disclosure states 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.
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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.
Page 6 Investment Objective and Portfolio
5. In the fifth line of the first paragraph, disclosure states that the
Company will predominantly
target investments in U.S. middle market businesses. Please disclose whether
the Company may
make investments in foreign securities, including emerging markets, and if so,
disclose the risks of
such investments, as applicable.
6. In the sixth and seventh lines of the first paragraph, disclosure
states, We will also be
permitted to make protective investments Please disclose in plain English
how the Company
defines protective investments.
7. In the ninth line of the first paragraph, disclosure states, The
Company will focus on
privately originated debt to performing U.S. middle market companies. Please
disclose in plain
English what qualifies as a performing middle market company and
privately originated debt.
Please also make clear that the companies issuing this debt will generally be
eligible portfolio
companies as described below in the registration statement.
Page 7 Investment Criteria
8. In the sixth bullet point, disclosure states that Target Portfolio
Companies will typically
exhibit characteristics, such as strong recurring revenue or re-occurring
revenue, with good
visibility of backlog and revenue. Please define good visibility of
backlog and revenue using
plain English.
Page 10 Unitranche Loans
9. In the first line of the second paragraph, disclosure states, In
addition, from time to time we
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. 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
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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 10 Investment Selection and Process
10. The first sentence states that the investment process consists of four
distinct phases.
However, it appears that disclosure describes three phases: Origination, Credit
Evaluation, and
Execution. Please address the inconsistency.
Page 14 Fourth Column Titled Ongoing
11. In connection with the discussion about the monitoring approach
employed by the Senior
Loan Investment Team, disclosure states that the team will monitor ESG
risks, concerns and
opportunities. This is the first time that disclosure refers to ESG, and it
is unclear what role ESG
plays in the Company s investments. Please add appropriate disclosure
throughout the registration
statement that addresses the Company s definition of ESG, as well as the
related strategies and
risks.
Page 16 Valuation of Portfolio Investments
12. Staff notes that valuation related disclosure states For all
valuations, the Audit Committee
of our Board (the Audit Committee ), which consists solely of directors
who are not interested
persons of the Company, as such term is used under the 1940 Act (the
Independent Directors ),
will review these preliminary valuations and our Board, a majority of whom are
Independent
Directors, will discuss the valuations and determine the fair value of each
investment in the
portfolio in good faith; provided, however, that to the extent our assets are
treated as plan assets
for purposes of ERISA, the Sub-Administrator will determine valuations using
only those valuation
methodologies reviewed and approved by the Audit Committee and our Board, and
our Board will
accept such valuations prepared by the Sub-Administrator in accordance
therewith. In
addition, disclosure on page 48 further states that, Under such
circumstances, the valuations of
such third-party and unaffiliated valuations firms must be used without
adjustment. (emphasis
added)
Please modify the disclosures referenced above and any other similar
valuation related
disclosure, as appropriate, to, for the avoidance of doubt, make it clear that
valuations prepared by
the Sub-Administrator will be used without adjustment only to the extent that
the Board (or its
designated Committee) consider the determinations representative of fair value
in good faith.
Page 23 Failure to Qualify as a RIC
13. In the last line of the first paragraph, disclosure states,
Distributions in excess of our current
and accumulated earnings and profits would be treated first as a return of
capital to the extent of the
stockholder s tax basis, and any remaining distributions would be treated as
a capital gain. Please
define return of capital using plain English.
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Page 33 Management Fee
14. Please provide disclosure of the accounting policy for management fees,
related Withheld
Amounts and the measurement of impairments in accordance with ASC Topic
310-10-35.
In relation to disclosure included in the third paragraph discussing
Withheld Amounts,
please confirm that the recoupment period for Withheld Amounts is limited
to three years from
the date of any reductions and include disclosure describing the operation of
the recoupment and its
impact on the rate of management fee rate paid in a period subsequent to the
recoupment. If,
however, a liability for the payment of management fees related to Withheld
Amounts is
recorded, please confirm if there are any additional criteria (e.g. end of the
Investment Period),
other than those disclosed, that trigger the payment or waiver of these
amounts.
15. In the second paragraph, disclosure states that the Management Fee will
be calculated at an
annual blended rate with respect to the Company s Assets Invested (defined
below) at the end of
each quarterly period by reference to (i) 0.75% in case of Assets Invested
equal to or less than $500
million, (ii) 0.65% in case of Assets Invested greater than $500 million and
equal to or less than $1
billion and (iii) 0.60% in case of Assets Invested greater than $1 billion, in
each case, in the manner
set forth in Figure A below. This section discusses the calculations based
on the initial closing and
identifies breakpoints depending on the varying amount of the Company s
Assets Invested.
However, disclosure on page 4 refers to the possibility of subsequent closings,
which suggests that
an investor might pay a different management fee depending on when the investor
invests.
Therefore, it is unclear whether the management fee structure raises issues
under Section 61 of the
Investment Company Act. Please tell us whether all shareholders will bear their
proportionate share
of the same Management Fee each quarter regardless of when they invest.
Page 34 Expenses
16. Please consider expanding upon the management fee calculation example
titled, Figure A
Management Fee Calculation to demonstrate the operation of the management
fee, withheld
amounts and their subsequent reversals. In addition, please confirm the
accuracy of the reference
to ...quarter 12... in footnote 3, of the current example, given that the
footnote is linked to a
reference to quarter 8 and beyond.
17. 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.
18. 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 40 The Private Offering
19. Please disclose in the prospectus what happens to investors who fail to
honor their
obligations.
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Page 48 - There is uncertainty as to the value of our Portfolio Investments
because most of our
investments are, and may continue to be in private companies and recorded at
fair value. In
addition, the fair values of our investments are determined by our Board in
accordance with
our valuation policy.
20. The fourth paragraph includes disclosure stating, Furthermore, under
such circumstances
where our assets are not treated as plan assets for purposes of
ERISA, the types of factors that
the Board may take into account in determining the fair value of our
investments is generally
expanded to include, as appropriate: available market data, including relevant
and applicable market
trading and transaction comparables, applicable market yields and multiples,
security covenants,
call protection provisions, information rights, the nature and realizable value
of any collateral, the
Portfolio Company s ability to make payments, its earnings and discounted
cash flows and the
markets in which it does business, comparisons of financial ratios of peer
companies that are public,
comparable merger and acquisition transactions and the principal market and
enterprise values.
Please modify this disclosure to address any inconsistency in the
reference to the expansion
of the types of factors that might be considered by the Board in determining
fair value, as compared
to the factors that might be considered by the Sub-Administrator when
independently valuing
Portfolio Investments, which are being treated as Plan Assets, in
consultation with the Investment
Adviser. By implication, the Investment Adviser has an obligation to share with
the Sub-
Administrator any salient information impactful to valuation it has in its
possession relevant to
many if not all of the factors delineated in the disclosure.
Page 69 We may be subject to risks associated with our investment in junior
debt securities.
21. Disclosure states, We may invest in junior debt securities (for
example, in connection with
an exchange of Senior Loans for other instruments following a workout or other
resolution of a
troubled investment). Please define workout using plain English.
Page 72 OID and market discount instruments create the risk of
non-refundable incentive
fee payments to the Investment Adviser based on non-cash accruals that we may
not
ultimately realize.
22. Disclosure includes a reference to an incentive fee which is not
previously disclosed. Please
confirm the accuracy of this statement and modify as appropriate.
Page 78 Provisions of the Maryland General Corporation Law and our Charter
and Bylaws
could deter takeover attempts and have an adverse effect on the price of our
Shares.
23. In the sixth line, disclosure states, The SEC staff has rescinded
its position that, under the
1940 Act, an investment company may not avail itself of the Maryland Control
Share Acquisition
Act. As a result, we will amend our Bylaws to be subject to the Maryland
Control Share Acquisition
Act, only if the Board determines that it would be in our best interests to do
so, including in light of
the Board's fiduciary obligations, applicable federal and state laws, and the
particular facts and
circumstances surrounding the Board's decision. If such conditions are met, and
we amend our
Bylaws to repeal the exemption from the Maryland Control Share Acquisition Act,
the Maryland
Control Share Acquisition Act also may make it more difficult for a third party
to obtain control of
us and increase the difficulty of consummating such a transaction. Please
include the bylaws as an
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exhibit in Part C. We may have further comments. Also, please tell us how and
when you will
notify shareholders if the Company amends the bylaws.
Page 103 Capital Stock
24. In the last paragraph, disclosure states, Our charter also provides
that the Board may
classify or reclassify any unissued shares of common stock into one or more
classes or series of
common stock or preferred stock by setting or changing the preferences,
conversion or other rights,
voting powers, restrictions, or limitations as to dividends and other
distributions, qualifications, or
terms or conditions of redemption of the Shares. Please explain
supplementally what steps the
Company would take if the Board determined to undertake such classification or
reclassification
into one or more classes or series.
25. In the fourth column of the table that describes the classes of stock to
be outstanding, it
appears that footnote 3 is at the end of the heading, however there is no
accompanying text to the
footnote. Please explain.
Page 106 Action by Stockholders
26. The last sentence states, These provisions, combined with the
requirements of our bylaws
regarding the calling of a Shareholder-requested special meeting of
Shareholders discussed below,
may have the effect of delaying consideration of a Shareholder proposal until
the next annual
meeting. Please revise the last sentence to state that the written consent
provisions may have the
effect of delaying consideration of a shareholder proposal indefinitely,
instead of merely to the next
annual meeting.
* * * * * *
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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