September 18, 2023
VIA E-MAIL
Benjamin C. Wells, Esq.
Ryan P. Brizek, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Re: PGIM Credit Income Fund
Initial Registration Statement on Form N-2
File Nos. 333- 274044 and 811-23894
Dear Messrs. Wells and Brizek:
On August 17, 2023, PGIM Credit Income Fund (the Fund ) filed a
registration statement on
Form N-2 (the Registration Statement ) under the Securities Act of 1933,
as amended (the 1933
Act ) and the Investment Company Act of 1940, as amended (the 1940 Act
). We have reviewed
the filing and have the following comments. All capitalized terms not otherwise
defined herein
have the meaning given to them in the Registration Statement. Unless otherwise
specified,
references to items, instruction numbers and guides in this letter are to items
and instructions in
Form N-2, and the Guidelines for Form N-2, respectively. References to rules
are to the rules
under the 1940 Act.
General
1. We note that the Registration Statement is missing information and
exhibits (e.g., seed
financial statements of the Fund, fee table, information related to the
trustees and officers) and
contains bracketed disclosures. We may have comments on such portions when you
complete
them in any pre-effective amendment, on disclosures made in response to this
letter, on
information supplied supplementally, or on exhibits filed in any pre-effective
amendment. Please
plan accordingly.
2. Where a comment is made regarding disclosure in one location, it is
applicable to all
similar disclosure appearing elsewhere in the Registration Statement. Please
make all
conforming changes.
3. Please advise us if you expect to submit any exemptive application(s)
or no-action
request(s) in connection with the Registration Statement.
4. Please tell us if you have presented or will present any test the
waters materials to
potential investors in connection with this offering. If so, please provide us
with copies of such
materials.
5. Please confirm that the Fund does not intend to issue preferred or debt
securities within a
year from the effective date of the Registration Statement.
Accounting Comments
Summary of Fund Expenses, p.26
6. Please update "Annual Expenses (Percentage of Gross assets Attributable
to common
shares)" to "Annual Expenses (Percentage of Net assets Attributable to
Common
Shares)". See Item 3 of Form N-2.
7. If the fund intends to issue preferred shares within the first year of
operations, please
include a line item in the fee table for dividend expense for preferred
shares.
8. Does the fund intend to incur any acquired fund fees and expenses in the
first year of
operations? If so, please include an estimate for acquired fund fees and
expenses. See
General Instruction 10 to Item 3 of Form N-2.
9. Footnote (5) appears inconsistent with disclosures throughout the
Registration Statement
regarding use of leverage. Please update accordingly. For example, there
is no other
reference to "unconsolidated operating entities" in the Registration
Statement.
Loan Origination, p. 40
10. Confirm that any subsidiaries will be consolidated with the fund for
financial statement
reporting purposes.
Manager, p. 69
11. The disclosure regarding the management fee waiver on this page is
inconsistent with the
disclosure in the fee table. Footnote (3) to the fee table discloses that the
management fee waiver is
voluntary while this disclosure states that the management fee waiver is
contractual. Please
explain.
Legal Comments
Cover page
12. In the section entitled Investment Objective, please delete the
second sentence from the
objective description as this sentence describes a risk, not the objective.
Page 2 of 11
13. In the section entitled Investment Strategies, please briefly
describe the Fund s 80%
policy under rule 35d-1.
14. In the section entitled Interval Fund/Repurchases, please specify
the anticipated
frequency of such offers, the intervals between deadlines for repurchase
requests, pricing and
repayment and, if applicable, the anticipated timing of the fund's initial
repurchase offer. The
Fund should include a cross-reference to those sections of the prospectus that
discuss the Fund's
repurchase policies and the attendant risks. See Guide 10 to Form N-2.
15. Please add the following bullet disclosures, as applicable to the
Fund:
x The Fund may pay distributions in significant part from sources that
may not be available
in the future and that are unrelated to the Fund's performance, such
as from offering
proceeds, borrowings, and amounts from the Fund's affiliates that are
subject to repayment
by investors.
x Such distributions may constitute return of capital and also reduce
an investor s adjusted
tax basis in the Common Shares, thereby increasing the investor s
potential taxable gain or
reducing the potential taxable loss on the sale of Common Shares. Any
capital returned to
holders of Common Shares through distributions will be distributed
after payment of fees
and expenses.
x The Fund intends to invest in floating rate loans of private
companies for which very little
public information exists. Such companies are also generally more
vulnerable to economic
downturns and may experience substantial variations in operating
results.
x Privately-held companies, below-investment-grade instruments ( junk
bonds), securities
which are at risk of default as to the repayment of principal and/or
interest at the time of
acquisition by the fund or are rated in the lower rating categories
or are unrated in which
the Fund will invest may be difficult to value and may be illiquid.
(Please include a cross
reference to sections in the registration statement discussing
applicable risks).
16. We note that the cover page appears to be longer than two pages.
Please revise to limit the
cover page disclosure to information required by Item 1 (e.g., by identifying
the Investment
Manager rather than describing the investment manager and subadvisers in the
same level of detail
as in the Prospectus Summary section). In addition, we note that the three
paragraphs following
the discussion of subadvisers, starting with the bold paragraph, is largely
repetitive of other
disclosure on the cover page. Please review and consolidate.
Prospectus Summary
17. We note that the prospectus summary is 25 pages long. The summary
should provide a
clear and concise description of the key features of the offering and the Fund,
with cross
references to relevant disclosures elsewhere in the prospectus or statement of
additional
information. Please revise accordingly. For example, the first paragraph under
Portfolio
Contents appears to be largely redundant of disclosure that appears
previously under
Investment Strategies and subsequently under Investment Policies
and could therefore be
Page 3 of 11
streamlined. In addition, a number of instruments identified in the principal
strategy section such
as catastrophe bonds, CLOs, CBOs, and CoCos and investments in certain equity
securities, if
principal investments, should have corresponding risks identified as principal
risks. See
instruction to Item 3.2 of Form N-2
Investment Strategies, p.3
18. To increase clarity for investors, please consider moving the disclosure
regarding the
fund s 80% policy per rule 35d-1 from the Portfolio Contents section to this
section.
Portfolio Management Strategies, pp. 3-4
19. In the second to last paragraph of this section, you state that the
Fund may make use of
credit swaps . Please clarify this strategy and confirm that the Fund
will not purchase CDS
for protection against default or other credit events. (i.e., not "write"
CDS/provide protection). If
the Fund intends to write protection, then please explain this strategy and any
implications for
investors in the Fund.
Portfolio Contents, pp. 4-7
20. Please confirm that the extensive list of enumerated sectors and
instruments identified as
potential investments in Investment Strategies and this section are all
principal investments that
the Fund will make or revise to identify only those instruments that constitute
the Fund s
principal portfolio emphasis. Please move disclosure regarding non-principal
investments to the
SAI. See Instruction 1 to Item 8.4. of Form N-2 (stating that discussion of
types of investments
that will be made by registrant other than those that will constitute its
principal portfolio
emphasis should receive less emphasis in the prospectus). See also Instruction
3 to Item 8.4. of
Form N-2.
21. Similarly, we note that risks related to many of the enumerated
investments are not
included below as principal risks (e.g., catastrophe bonds/event-linked notes,
credit-linked notes,
preferred securities, and convertible securities). Please review the disclosure
and revise
accordingly.
22. Please review the summary to ensure all of the investments discussed in
the latter section
Investment Objectives and Strategies are identified as principal
investments in the summary.
We note certain instruments such as PIK and OID instruments are discussed in
the latter section
but not in the summary. Please confirm whether these are principal investments
of the Fund.
23. Please clarify how this section differs from the Investment Strategies
or Portfolio
Management Strategies sections also in the summary or consider combining these
sections and
briefly summarizing information rather than duplicating the disclosure sections
that appear later
in the prospectus.
24. In the first paragraph on page 4, please revise the last sentence to
refer to the number of
days (60) rather than referencing rule 35d-1 under the Investment Company Act.
25. In the first paragraph on page 5, consider breaking up the paragraph
for readability,
particularly the disclosure related to rates of interests and Fund s use of
derivatives.
Page 4 of 11
26. In the first paragraph on page 5, last sentence, please clarify whether
the "synthetic
instruments" referred to are also derivatives (e.g., "similar instruments").
27. Please clarify the disclosure related to derivatives to tie their
inclusion in the 80% policy
to the term "credit" in the Fund's name.
28. Supplementally, please clarify how the Fund calculates the derivative
position for
purposes of meeting the names rule 80%.
29. In the second paragraph on page, 5, you state that the Fund will
originate loans. Please
more clearly explain the extent to which the Fund intends to engage in
origination activities and briefly
describe the loan selection process. Please clarify whether the Fund intends to
originate whole loans to
retain within the Fund or intends to syndicate such loans. In addition, where
appropriate please add
applicable disclosure addressing:
a. Any limits on loan origination by the Fund, including a
description of any limits
imposed by the Fund s fundamental investment restrictions and
related
interpretations, including with respect to making loans;
b. The loan selection process, including maturity and duration of
individual loans,
borrower and loan types and geographic location of the
borrower, and any limits
on the amount of loans the Fund may originate to issuers in the
same industry;
c. The underwriting standards for these loans;
d. Whether the Fund will be involved in servicing the loans and,
if so, a description
of its servicing obligations;
e. Whether the Fund will set up its own online lending platform to
originate these
loans; and
f. If the Fund expects to originate subprime loans, the extent to
which the Fund
expects to do so and any unique risks.
We may have additional comments after reviewing your responses.
30. In the last paragraph on page 5, Please clarify how the Fund defines
"emerging market."
Please also clarify whether the Fund will invest in sovereign debt.
31. In the third paragraph on page 6, please add a section heading related
to leverage.
Page 5 of 11
Investment Management Agreement, p. 8
32. In the second paragraph, please delete the third sentence ( The
longer an investor ) as
the Staff believes the disclosure could be confusing to investors.
Leverage, p. 8-10
33. This section repeats some of disclosure above in section entitled
"Portfolio Contents."
Please review and revise to minimize duplicative disclosure.
Expenses and Reimbursements, p. 10
34. Please revise the second sentence of the third paragraph, to add the
language in bold:
"may only make repayments to the adviser if such repayment does not cause the
Fund s expense
ratio (after the repayment is taken into account) to exceed both: (1) the
expense cap in place at
the time such amounts were waived; and (2) the Fund s then current expense
cap."
Summary of Risks
35. We note that the risks of investing in the Fund are disclosed in this
section, and twice
below - once in the Investment Strategies section which details each investment
type and
attendant risks, and once in the Risks section. Please revise the disclosure to
reduce redundancy.
For example, please consolidate lengthier risk disclosure in the Risks section
and provide a brief
summary identifying risks in the summary rather than repeating the disclosure
from the Risks
section verbatim in the summary.
General and Market Economic Risks, pp. 13-14
36. Please revise to eliminate duplicative disclosure; for example, covid-19
and infectious
diseases are discussed more than once in the first paragraph.
Repurchase Offers Risk, p. 14
37. In the first sentence of this section, please clarify if the
qualification "subject to approval of
the Board" is with respect to the size of the repurchase offer (i.e., between
5% and 25%).
Floating Rate and Other Loans Risk, p.14
38. We note that the risks described in this paragraph relate to loans
generally rather than
floating rate loans. Please revise the heading accordingly or separate out the
risks related solely to
floating rate/leveraged loans like "Fixed Income Instruments Risk" below (e.g.,
extended trade
settlement periods).
Derivatives Risk, pp. 19-20
39. Please tie each risk to the related principal investment strategy
enumerated in the principal
strategy discussion such as in the first bullet point where counterparty risk
is identified as a risk
of swaps. Disclosure for any principal investment related to derivatives should
be tailored
specifically to how a fund expects to be managed and should address those
strategies that the
fund expects to be the most important means of achieving its objectives and
that it anticipates will
Page 6 of 11
have a significant effect on its performance. Disclosure should not be
generic risks associated
with each derivative type. (See Barry Miller letter to ICI, July 30,
2010).
Real Estate Risk, p. 23
40. The first sentence of this section refers to private REITs and
private placements are
discussed in the Investment Objectives and Strategies. Please explain
supplementally the extent to
which the Fund will invest in private funds that rely on section 3(c)(1)
or 3(c)(7) of the Investment
Company Act. We may have additional comments.
Subsidiary Risk, p. 25
41. Disclosure in this section states that the Fund may invest in one
or more subsidiaries.
Please clarify whether the Fund will invest through subsidiaries. Please
note that subsidiary,
when used in the comments below, refers to an entity (regardless of
whether or not the Fund set up
the entity) that (1) is primarily controlled by the Fund (as defined
below); and (2) primarily
engages in investment activities in securities or other assets. With
regard to any subsidiary of the
Fund, please disclose that:
a. Any investment adviser to the subsidiary complies with
provisions of the Act
relating to investment advisory contracts (Section 15) as if it
were an investment adviser to
the Fund under Section 2(a)(20) of the Act. Any 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 Fund
and the subsidiary, then, for purposes of complying with Section
15(c), the reviews of the
Fund s and the subsidiary s investment advisory agreements may
be combined;
b. The subsidiary s principal investment strategies or
principal risks that constitute
principal investment strategies or risks of the Fund. The
principal investment strategies
and principal risk disclosures of an entity that invests in a
subsidiary should reflect
aggregate operations of the entity and the subsidiary;
c. If the Fund will only invest through wholly owned
Subsidiaries, disclose that the
Fund does not, or does not intend to, create or acquire primary
control of any entity which
engages in investment activities in securities or other assets,
other than entities wholly
owned by the Fund. Primarily controlled means (1) the Fund
controls the unregistered
entity within the meaning of Section 2(a)(9) of the Act, and (2)
the Fund s control of the
unregistered entity is greater than that of any other person.
To the extent certain of the information requested appears in the SAI,
please add an appropriate
cross-reference.
Summary of Fund Expenses, p. 26
42. Please delete the last sentence of footnote 3 ( The longer an
investor holds ) as the Staff
believes the disclosure could be confusing to investors.
Page 7 of 11
Investment Objectives and Strategy, pp. 29-54
43. In the section labeled Additional Information (portfolio contents)
which begins on page
33, please clarify whether the disclosure relates to principal or non-principal
investments of the
Fund.
44. We note that a number of instruments described in this section such as
bank capital
securities, inverse floaters, and credit linked trust certificates are not
identified as principal
investments in the prospectus summary. Please clarify whether any instruments
described in this
section are non-principal investments of the Fund and if so, separate these
instruments from
principal investments of the Fund and label them accordingly.
Contingent Convertible Securities, p.42
45. Please fix the formatting for Loss Absorption Risk and
Subordinated Instruments,
since both risks relate to contingent convertible securities and are not
separate risks.
Event-Linked Instruments, p.44
46. To the extent that event-linked instruments are principal investments
of the Fund, please
briefly identify related risks in the summary of risks above and add a separate
risk factor in the
Risks section which addresses risks related to investments in catastrophe and
event-linked
instruments such as limited resources of issuers, regulation, subordination,
and lower or no credit
ratings.
Credit Default Swaps, p. 47
47. In the first paragraph of this section, you state the Fund may be a
buyer or seller of CDS.
Please move this discussion to the summary where CDS are first identified as
potential
investments of the Fund.
Hybrid Instruments, p. 48
48. Please explain how hybrid instruments will be treated for purposes of
the 80% test. We
note the disclosure states that hybrid instruments provide exposure to equity
and/or commodity
markets.
Other Investment Companies, pp. 49-50
49. If ETFs will be principal investments of the Fund, please add
disclosure related to ETFs'
operating structure (e.g., risks related to reliance on APs, the risk that an
active market may not
develop, and the risk that the share price of an ETF may vary from its
underlying NAV,
particularly in times of market stress).
Leverage, p. 52
50. Leverage is discussed here, and in the next section entitled
"Leverage". Please combine
these sections, and review and revise to eliminate any duplicative disclosure.
Page 8 of 11
Leverage, pp. 52-54
51. Please move the last paragraph of this section to the beginning of the
risk factor section.
Risks, pp. 55-68
52. The disclosure in this section seems to repeat the disclosure in the
prospectus summary, as
well as the discussion of risks embedded in the disclosure related to
instruments that may be
principal investments of the Fund which in many cases is more comprehensive
than that
presented in the risks sections. Please consider revising to eliminate
duplicative disclosure.
SOFR Risk, p. 60
53. Please clarify the reference to LIBOR and disclose which principal
investments are
subject to SOFR risk.
Derivative Actions, Direct Actions and Exclusive Jurisdiction, pp. 75-76
54. We note the Declaration of Trust will be filed by amendment.
Supplementally, please
confirm that the provisions described in this section accurately summarize the
provisions of the
Declaration of Trust as filed in Delaware. We may have additional comments.
55. Please confirm that the provisions of the Declaration of Trust related
to joinder and
reimbursement to the Fund do not apply to claims arising under the US federal
securities law and
revise the disclosure accordingly (e.g., delete the clause if one or more
then ).
56. We note the Declaration of Trust that will be filed by amendment
requires claims to be
brought exclusively in a court in Delaware. Please add disclosure that as a
result, shareholders
may have to bring suit in an inconvenient and less favorable forum. Please also
confirm that the
last sentence of the last paragraph Notwithstanding the foregoing does
not apply to claims
arising under the federal securities laws.
Redemption Fee of Shares Repurchased within One Year of Purchase, p. 78
57. In the second paragraph, please discuss the circumstances under which
PGIM may waive
the redemption fee in its sole discretion.
Original Issue Discount, p. 81
58. Within in this subsection, please explain what PIK securities are in
plain English. To the
extent PIK securities constitute a principal investment of the Fund, please
include corresponding
strategy disclosures:
a. Please disclose that the higher yields and interest rates on and PIK
securities reflects the
payment deferral and increased credit risk associated with such
instruments and that
such investments may represent a significantly higher credit risk
than coupon loans.
Page 9 of 11
b. Please disclose that PIK securities 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.
Statement of Additional Information
Investment Restrictions, pp. 1-2
59. Please note that the Fund should look through a private activity
municipal debt security
whose principal and interest payments are derived principally from the assets
and revenues of a
nongovernmental entity in order to determine the industry to which the
investments should be
allocated when determining the Fund s compliance with its concentration
policies.
Investment Policies and Techniques
Alt-Lending ABS, p. 16
60. The last paragraph describes investments in the Fund s Subsidiaries.
Please add an
appropriate heading to separate this paragraph from the other disclosure in
this section.
Part C
61. Please note the signature requirements of Section 6(a) of the 1933 Act
require that the
Registration Statement be signed by the Fund s principal executive officer,
principal financial
officer, and principal accounting officer or comptroller, as well as a majority
of the Board. Please
ensure that, prior to filing the pre-effective amendment, the Registration
Statement has the proper
signatures pursuant to Section 6(a) of the 1933 Act.
* * * * *
We remind you that the Fund 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.
Page 10 of 11
A response to this letter should be in the form of a pre-effective amendment
filed pursuant to
Rule 472 under the 1933 Act. Where no change will be made in the filing in
response to a
comment, please indicate this fact in your response letter and briefly state
the basis for your
position. Should you have any questions regarding this letter prior to filing
the pre-effective
amendment, please contact me at (202) 551-6870 or hahnja@sec.gov.
Sincerely,
/s/ Jaea Hahn
Jaea Hahn
Senior Counsel
cc: Andrea Ottomanelli Magovern, Assistant Director
Asen Parachkevov, Branch Chief
Page 11 of 11