January 14, 2022
Steven B. Boehm
Eversheds Sutherland (US) LLP
700 Sixth Street, NW
Washington, DC 20001
Re: MSD Investment, LLC
File Nos. 000-56375; 814-01334
Dear Mr. Boehm:
On December 15, 2021, you filed a registration statement on Form 10 on
behalf of MSD
Investment, LLC. (the Company ), in connection with the registration of
the Company s
common stock under Section 12(g) of the Securities Exchange Act of 1934 (the
Exchange
Act ). We have reviewed the registration statement, and have provided our
comments below.
For convenience, we generally organized our comments using headings, defined
terms, and page
numbers from the registration statement. Where a comment is made in one
location, it is
applicable to all similar disclosure appearing elsewhere 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 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 Section 12(g)(1)
of the Exchange Act. 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 Section 13(a) of the Exchange Act. Additionally, we will
continue to review the
filing until all of our comments have been satisfactorily addressed.
Steven B. Boehm, Esq.
January 14, 2022
Page 2
REGISTRATION STATEMENT
Explanatory Note (page 1)
1. Please add the bulleted disclosure below, if applicable, in bold and 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 The Company intends to invest primarily in privately held companies for
which little
public information exists and which are more vulnerable to economic
downturns and
substantial variations in operating results.
x The privately held companies, below investment grade securities ( junk
bonds) and real
estate in which the Company invests are difficult to value and will
generally be illiquid.
x Our 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 us for investment. Any capital returned to you through
distributions will be
distributed after payment of fees and expenses.
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.
2. Given the length of the Risk Factors section, please include in the
forepart of the
registration statement a series of concise, bulleted or numbered statements
that is no more than
two pages summarizing the principal risk factors. See Item 105(b) of Regulation
S-K.
3. Please disclose how the BDC Conversion will be accomplished
mechanically. We may
have additional comments based on your response.
Forward Looking Statements (page 2)
4. In listing the risks, uncertainties and other factors that could cause
actual results to differ
materially from those expressed or forecasted in the forward-looking
statements, please consider
disclosing the discontinuation of LIBOR and transition to a new reference rate.
Item 1. Business General Development of Business (page 3)
5. The first sentence of the second paragraph states that the Company
expects to conduct a
private offering of its common stock to accredited investors. Please revise
this sentence to state
that the Company will conduct a private offering of its common stock to
accredited investors .
Steven B. Boehm, Esq.
January 14, 2022
Page 3
Item 1. Business Description of Business The Company MSD
Investment, LLC
(pages 3 4)
6. Please disclose that the Company is non-diversified and the
implications of being non-
diversified.
7. The first sentence states that the Company will invest in a broadly
diversified portfolio .
Inasmuch as the Company is non-diversified and disclosure on page 38 sets forth
a risk factor
stating that the Company s portfolio could become significantly concentrated
in a limited
number of companies, issuers, types of financial instruments, industries,
sectors, strategies,
countries, or geographic regions, please revise the reference to a broadly
diversified portfolio or
explain to us why such reference is appropriate.
8. The first sentence of the second paragraph states that the portfolio
will be comprised
primarily of loans and notes sourced from both private and liquid markets
.. Please clarify what
liquid markets are and how it is consistent with disclosure on page 23 of
the Company s
registration statement describing the illiquid nature of its portfolio .
9. The second sentence of the second paragraph states that the Company
will focus
primarily on investing in senior secured loans. The first sentence of the first
paragraph states
that the Company will primarily invest in senior secured loans and notes
[emphasis added].
Please reconcile this disclosure.
10. Please disclose the Company s maturity and credit quality policies
with respect to its
investments and the corresponding risks of such policies in the Risk Factors
section.
11. The first sentence of the third paragraph states that the Company will
source
opportunities by leveraging MSD Capital L.P. and the Adviser s broad network
and reputation.
Please identify here who MSD Capital L.P. is. The Company will source
opportunities by
leveraging MSD s broad network and reputation and, as disclosed on pages 11
12, the MSD
investment teams work closely together and consistently share ideas, allowing
the Credit Team
to leverage MSD s network and knowledge base to pursue attractive investment
opportunities
and diligence a wide range of industries and companies. Please explain to us
why MSD Capital
L.P. is not identified as an investment adviser to the Company as defined in
Section 2(a)(20) of
the Investment Company Act of 1940 ( 1940 Act ).
Item 1. Business Description of Business Advisory Agreement (pages 4
7)
12. Please consider disclosing a fee table that conforms to the
requirements of Item 3.1 of
Form N-2 adjacent to this section. Please also consider disclosing an expense
example that
conforms to the requirements of Instruction 11 to Item 3.1 of Form N-2. We
further request that
you include a second example where the five percent return results entirely
from net realized
capital gains, with an introductory sentence of explanation of the second
example. We believe
that such disclosure would be helpful to investors.
Steven B. Boehm, Esq.
January 14, 2022
Page 4
Item 1. Business Description of Business Advisory Agreement
Compensation of
the Adviser (pages 5 6)
13. The disclosure under Management Fee states that the Management
Fee shall be
calculated at a rate of 0.1875% per quarter of the Company s average gross
asset value but
excluding, cash and cash equivalents, as defined and undrawn commitments.
Please clarify the
timing of the calculation of each of these exclusions (e.g., does the
calculation involve averaging
the amount of undrawn commitments at the end of each of the two most recently
completed
calendar quarters?). Please also clarify what undrawn commitments include and
disclose if any
commitments are included in average gross asset value. We may have additional
comments
based on your response.
14. Under Incentive Fee , please disclose a graphical representation
and examples showing
the calculation of the Incentive Fee.
Item 1. Business Description of Business Advisory Agreement
Limitations of
Liability and Indemnification (page 7)
15. The first sentence states that the Advisory Agreement will provide that
the Company will
indemnify the Adviser and its affiliates against any liabilities relating to
certain activities except
to the extent arising out of the Indemnitee s gross negligence, fraud or
knowing and willful
misconduct. Please revise the disclosure of excepted conduct to track the
language of Section
17(i) of the 1940 Act.
Item 1. Business Description of Business Payment of the Company s
Expenses under
the Administration and Advisory Agreements (pages 7 9)
16. Disclosure on page 9 refers to each subsidiary of the Company. Please
respond to the
following comments regarding any primarily controlled entity that engages in
investment
activities in securities or other assets. A primarily controlled entity is an
entity that the Company
controls as defined in Section 2(a)(9) of the 1940 Act and for which the
Company s control of
the entity is greater than that of any other person.
a. Disclose any of the subsidiary s principal investment strategies or
principal risks that
constitute principal investment strategies or principal risks of the
Company.
b. Disclose that the Company complies with the provisions of the 1940 Act
governing
capital structure and leverage (Section 18, as modified by Section 61) on
an aggregate
basis with the subsidiary.
c. Disclose that each investment adviser to the subsidiary complies with the
provisions of
the 1940 Act relating to investment advisory contracts (Section 15 as it
applies through
Section 59) as an investment adviser to the Company under Section
2(a)(20) of the 1940
Act. Also file the investment advisory agreement between the subsidiary
and its
Steven B. Boehm, Esq.
January 14, 2022
Page 5
investment adviser as an exhibit to the registration statement. See Item
25.2.k. of Form
N-2.
d. Disclose that each subsidiary complies with the provisions relating to
affiliated
transactions and custody (Section 17 as modified by Section 57). Identify
the custodian
of the subsidiary.
e. Confirm to us that the financial statements of each subsidiary will be
consolidated, as
applicable, with those of the Company in accordance with U.S. Generally
Accepted
Accounting Principles, Regulation S-X and other applicable accounting
guidance.
f. Confirm to us that (a) if a subsidiary is not organized in the U.S., the
subsidiary and its
board of directors will agree to designate an agent for service of
process in the U.S.; and
(b) a 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,
as modified by Section 64 of the 1940 Act.
17. For any wholly-owned subsidiary of the Company, please confirm to us that a
subsidiary s
management fee (including any performance fee) will be included in the
Management Fee line
item of any fee table the Company discloses and a subsidiary s expenses will
be included in the
Other Expenses line item of any such fee table.
Item 1. Business Description of Business Investment Strategy Types
of
Investments (page 11)
18. If the types of investments identified here are all principal
investments of the Company,
please revise the heading of this section to include the word principal .
If the types of
investments identified here include both principal and non-principal
investments of the
Company, please separately disclose principal and non-principal investments
under separate
headings.
19. If covenant-lite loans will be a principal investment of the Company,
please disclose such
investments here and consider whether the disclosure on page 52 of the risks of
covenant-lite
loans (under Secondary Debt) should instead be set forth as a separate risk
factor.
Item 1. Business Description of Business Closing (page 14)
20. The first sentence states that the Company will hold one or more
closings at which it will
accept Capital Commitments from investors. Please specifically disclose the
consequences to
investors who fail to honor their obligations under a Capital Commitment or a
Catch-up Purchase
(as is currently only generally described in a risk factor on page 72). Please
also supplementally
describe the Company s policies and procedures to implement the consequences
of such failures.
Steven B. Boehm, Esq.
January 14, 2022
Page 6
Item 1. Business Description of Business Liquidity Events (pages 15
16)
21. The fourth paragraph cross references Discretionary Repurchases of
Shares . No such
section exists. Please disclose this section, including disclosing that all
share repurchases will be
made consistent with Section 23(c) of the 1940 Act, as modified by Section 63
of the 1940 Act,
and the rules thereunder.
Item 1A. Risk Factors (pages 31 80)
22. Many of the risk factors in this section describe risks of investments
that are not
identified in the description of the Company s business in Item 1 (e.g.,
Non-U.S. Investments
(page 39); Convertible Securities (page 42); Structured Investments, including
junior and equity
tranches (page 44) General Real Estate Risks (page 47)). Please review the Risk
Factors and
disclose the types of investments referenced therein in the description of the
Company s
business.
Item 1A. Risk Factors Non-U.S. Investments (page 39)
23. If the Company will invest in emerging markets as part of its principal
strategies, please
revise this risk factor, or add a separate risk factor, to disclose the
heightened risks associated
with emerging market investments. See ADI 2020 11 (Registered Funds Risk
Disclosure
Regarding Investments in Emerging Markets).
Item 1A. Risk Factors Risks Related to Investments in Leveraged Loans (page
40)
24. The first sentence of this risk factor states that the Company may
invest in leveraged
loans. Please describe leveraged loans (e.g., loans made to borrowers who
already have high
levels of debt and/or a low credit rating).
Item 1A. Risk Factors Hung Loans (page 41)
25. Please disclose what an LBO is.
Item 1A. Risk Factors Convertible Securities (page 42)
26. If the Company will invest in contingent convertible securities as part
of its principal
strategies, please identify such securities as part of the Company s
principal strategies and
disclose the corresponding risks of such securities here.
Item 1A. Risk Factors Leverage and Borrowing Risks (pages 50 51)
27. Please revise the second paragraph of this risk factor to reflect that
the Company is
required to meet a coverage ratio of total assets to total borrowings and other
senior securities of
at least 150%.
Steven B. Boehm, Esq.
January 14, 2022
Page 7
Item 1A. Risk Factors Co-Investment with Exemptive Relief (page 56)
28. The first sentence states that the Company and the Adviser have applied
for an exemptive
order from the SEC. Please disclose that there is no assurance that the
exemptive relief will be
granted.
Item 1A. Risk Factors Risks Related to Consumer Loans and Consumer Lending
(pages
60 61)
29. The first sentence of the first full paragraph on page 61 states that
certain of the
Company s investments may consist of loans offered through lending platforms.
Please tell us
how much of the Company s assets will be invested in loans offered through
lending platforms
and disclose any upper limit on such investments. We may have more comments
after reviewing
your response.
Item 1A. Risk Factors Feeder Funds (page 66)
30. Please revise the disclosure to clarify the certain purposes for
which the Feeder Fund
investors may be treated as separate Shareholders and the significance of this
treatment.
Item 1A. Risk Factors Warehoused Investments (page 69)
31. The first sentence states that MSD may warehouse one or more
investments for the
Company. Please describe to us in detail how MSD warehouses investments for the
Company,
including the purpose and structure of the warehouse, types of investments to
be warehoused, the
entities involved in warehousing and each entity s role and affiliation with
the Company, any
compensation involved, and whether access, in the form of a backstop or
otherwise, to a
warehouse s portfolio is available to persons/entities other than the
Company. To the extent that
the Company enters into a warehousing transaction prior to the effectiveness of
this registration
statement, please file a supplemental schedule of investments prepared in
accordance with the
requirements of Regulation S-X 12-12 as part of a pre-effective amendment
detailing the
portfolio investments which the Company is conditionally obliged to purchase
pursuant to any
facility agreement. We may have more comments after reviewing your response.
Item 1A. Risk Factors Restricted Ability to Enter into Transactions with
Affiliates
(pages 75 76)
32. The last paragraph on page 76 describes the risks of change of control
provisions
included in the Company s organizational documents. Please disclose this
paragraph under a
separate heading.
Item 6. Executive Compensation (page 91)
33. Please confirm that perquisites and other personal benefits or property
are in each case
less than $10,000 in the aggregate or include a compensation chart as described
in Item 402(k) of
Reg S-K.
Steven B. Boehm, Esq.
January 14, 2022
Page 8
Item 9. Market Price of and Dividends on the Registrant s Common Equity and
Related
Shareholder Matters (pages 94 95)
34. Please disclose the information required by Items 201(a)(2) and
201(b)(1) of Regulation
S-K.
35. Please describe the Company s dividend reinvestment plan.
Item 11. Description of Registrant s Securities To Be Registered
Limitation on Liability
of Directors and Officers; Indemnification and Advance of Expenses (pages 97
98)
36. Please revise the last sentence of the second paragraph to track the
language of Section
17(h) of the 1940 Act.
Item 11. Description of Registrant s Securities To Be Registered Certain
Provisions of
the Maryland General Corporation Law and Our Charter and Bylaws (Pages 98
102)
37. If the Company s Charter or Bylaws contain provisions that require
shareholders to waive
jury trials, please disclose such provision in this section.
38. If the Company s Charter or Bylaws contain provisions that restrict
shareholders ability
to bring direct or derivative claims, please disclose such provisions in this
section.
39. Under Exclusive Forum on page 102, please disclose the associated
risks of the
exclusive forum provision (e.g., shareholders may have to bring suit in an
inconvenient and
unfavorable forum; that the enforceability of exclusive forum provisions is
questionable).
Item 15. Financial Statements and Exhibits (page 103)
40. Please furnish all required financial statements and supplementary data.
Audited financial
statements for one year, supplemented by interim period financial statements,
if required, should
be dated within 135 days of effectiveness. In addition, please confirm whether
or not the
predecessor LLCs had commenced investment operations prior to the conversion by
law to a
Maryland Corporation. Please also file as exhibits the documents associated
with the BDC
Conversion.
GENERAL COMMENTS
41. 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 supplied supplementally, or on exhibits
added in any pre-
effective amendments.
42. Response to this letter should be in the form of a pre-effective
amendment filed under the
Exchange Act. The amendment filing should be accompanied by a supplemental
letter that
Steven B. Boehm, Esq.
January 14, 2022
Page 9
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.
43. Please advise us if you have submitted, or expect to submit, any
exemptive application
or no-action request in connection with the registration statement, other than
the application for
co-investment relief you expect to submit that is described on page 56 of the
registration
statement.
44. We urge all persons who are responsible for the accuracy and adequacy
of the disclosure
in the filings reviewed by the staff to be certain that they have provided all
information investors
require for an informed decision. Since the Company and its management are in
possession of
all facts relating to Company disclosure, they are responsible for the accuracy
and adequacy of
the disclosures they have made.
*******
Should you have any questions regarding this letter, please feel free to
contact me at
(202) 551-6782.
Sincerely,
/s/ Anu
Dubey
Anu
Dubey
Senior
Counsel
cc: Michael Spratt
Michael Shaffer
John Kernan