Question
From:
(Redacted)
Sent:
Tuesday, October 20, 2009 3:32 PM
To:
Verne, B. Michael
Subject: Ordinary Courseof Business Exemption
Mike,
Buyer is enteringinto an agreement to acquire LLC interests in an investment fund (the"Fund") that focuses on making first lien loans. Investments made bythe Fund must be approved by the investment committee of the Fund, whichincludes a representative of the ultimate parent entity of the Fund (the"Seller"), and a representative from the Fund's co-manager. The Fundhas no employees and is currently co-managed by affiliates of its interestholders. Both the Seller and the Fund's minority interest holder (the"Minority Holder"), provide origination services to the Fund. TheFund's two co-managers provide underwriting and portfolio management services tothe Fund and its affiliates. The Fund conducts no business other than makingloans and servicing the loans in its portfolio, and has entered into sourcingagreements with each of Seller and the Minority Holder, through which the fundsources investment opportunities. The Fund is one of many investment vehiclesmanaged by and/or majority owned by the Seller and its co-manager.
Buyer intends topurchase, directly and through one or more of its affiliates, the interests inthe Fund held by the Seller, its Ultimate Parent Entity. As a result, Buyerwill become the Ultimate Parent Entity of the Fund, which will effectivelyresult in Buyer's ownership of a percentage interest in the current loanportfolio of the Fund. After the acquisition, Buyer and its affiliates will assumeall management and sourcing obligations held by the Seller and its affiliates.After the sale of its interests in the Fund to Buyer, we understand that theSeller intends to continue making loans to middle market companies and willalso continue to manage and own other funds.
The applicabledollar thresholds under the HSR Act are met by this transaction.
We have analyzedthe transaction as an exempt acquisition made in the ordinary course ofbusiness under Section (c)(1) of the Act and Rule 802.1 as the Buyer ispresently in the business of making loans such as those being acquired in thetransaction and the Seller is not exiting the business of making such loans.See Informal Interpretation No. 0512015 (December 16, 2005). Also relevant toour analysis is the fact that Buyer is not acquiring any employees or otherbusiness operations of the Fund.
We also believethat the transaction is exempt under Section (c)(2) of the Act and Rule 802.4,as the underlying assets of the Fund are obligations that do not carry thepresent right to vote for directors and the Fund does not have non-exemptassets valued above the size-of-transaction threshold.
Please let me knowat your earliest convenience if you agree with our analysis of theapplicability of the exemption, or whether you require additional facts orwould like to discuss.