[Federal Register Volume 59, Number 130 (Friday, July 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-16495]
[[Page Unknown]]
[Federal Register: July 8, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Rel. No. 20381; 812-8998]
Massachusetts Mutual Life Insurance Company, et al.; Notice of
Application
June 30, 1994.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under the Investment
Company Act of 1940 (``Act'').
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APPLICANTS: Massachusetts Mutual Life Insurance Company (the
``Insurance Company''), MassMutual Corporate Investors (``Fund I''),
and MassMutual Participation Investors (``Fund II'') (Fund I and Fund
II collectively, the ``Funds'').
RELEVANT ACT SECTIONS: Order requested under sections 6(c) and 17(d)
and rule 17d-1.
SUMMARY OF APPLICATION: Applicants seek an order amending previous
orders that allow them to co-invest in securities acquired in private
placements (``Private Placement Securities''). The amended order would
let applicants co-invest with an additional entity, MassMutual
Corporate Value Partners Limited (``Newco''), in Private Placement
Securities. The order also would modify the previous orders to let
applicants and Newco sell, exchange, or otherwise dispose of the
Private Placement Securities and exercise warrants, conversion
privileges and other rights, and make follow-on investments at
different times and in differing amounts, subject to the approval of a
committee comprised of all of the trustees of each participating Fund
who are not ``interested persons'' (as defined in section 2(a)(19)) of
the Fund or the Insurance Company (a ``Joint Transaction Committee'').
FILING DATE: The application was filed on May 18, 1994, and amended on
June 16, 1994.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicants with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on July 25, 1994,
and should be accompanied by proof of service on applicants, in the
from of an affidavit, or, for lawyers, a certificate of service.
Hearing requests should state the nature of the writer's interest, the
reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request such notification by writing to
the SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, DC
20549. Applicants, Springfield, Massachusetts 01111.
FOR FURTHER INFORMATION CONTACT:James E. Anderson, Staff Attorney, at
(202) 942-0573, or C. David Messman, Branch Chief, at (202) 942-0564
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee from
the SEC's Public Reference Branch.
Applicants' Representations
1. The Insurance Company is a mutual life insurance company
organized under the laws of the Commonwealth of Massachusetts. The
Insurance Company acts as investment adviser to Fund I and Fund II and
will act as investment adviser to Newco.
2. Fund I is a registered, non-diversified, closed-end management
investment company. Fund I invests primarily in Private Placement
Securities with equity features.
3. Fund II is a registered, diversified, closed-end management
investment company. Fund II invests in Private Placement Securities,
both with and without equity features.
4. The Insurance Company and Fund I received exemptive relief from
Section 17(d) of the Act in 1971, as subsequently amended, to allow the
Insurance Company to invest concurrently in each issue of Private
Placement Securities purchased by Fund I.\1\ Fund II was permitted to
participate in transactions in Private Placement Securities with Fund I
and the Insurance Company by an exemptive order granted in 1988 (the
``1988 Order'').\2\
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\1\Massachusetts Mutual Life Insurance Company, Investment
Company Act Release Nos. 6634 (Jul. 22, 1971) (notice) and 6690
(Aug. 19, 1971) (order); amended by Investment Company Act Release
Nos. 10688 (May 10, 1979) (notice) and 10718 (June 4, 1979) (order)
and Investment Company Act Release Nos. 14494 (Apr. 30, 1985)
(notice) and 14532 (May 21, 1985) (order).
\2\Massachusetts Mutual Life Insurance Company, Investment
Company Act Release Nos. 16578 (Sept. 28, 1988) (notice) and 16601
(Oct. 19, 1988) (order).
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5. The Insurance Company anticipates having its wholly-owned
subsidiary, MassMutual Holding Company, join with a limited number of
other United States investors to acquire all the equity securities of
MassMutual Corporate Value Limited (``MCV''), an entity that is
presently contemplated to be a special purpose Cayman Islands
corporation. MCV in turn would join with one or more non-United States
investors to acquire and hold all the equity securities of Newco,
another special purpose Cayman Islands corporation. Substantially all
of the assets of MCV would be invested in Newco. As an alternative to
the foregoing organization of Newco, may be organized as a United
States entity (such as a Delaware business trust) in which United
States investors invest directly, with the Insurance Company holding an
indirect voting equity stake of approximately 30 to 50 percent.
6. Both MCV and Newco will be investment funds that are not
required to be registered under the Act. MCV and Newco: (a) will be
excepted from the definition of investment company pursuant to section
3(c)(1) because their outstanding securities (other than short-term
paper) will be beneficially owned by no more than 100 persons; or (b)
will not be subject to registration pursuant to section 7(d) because
they will not be organized or otherwise created under the laws of the
United States or any state, will not make use of the mails or any means
or instrumentality of interstate commerce in connection with any public
offering of their securities, and their outstanding securities (other
than short-term paper) will be beneficially owned by no more than 100
persons resident in the United States.
7. Newco will invest its assets primarily in high yield bank debt
and public and private high yield debt; mezzanine securities consisting
of private debt securities with equity features, convertible debt and
convertible preferred stock; and special situations consisting of
public or private equity, restructured loans and non-performing debt.
Many of the Private Placement Securities that are suitable for co-
investment by the Funds also will be suitable investments for Newco.
8. Applicants seek an order pursuant to sections 6(c) and 17(d) and
rule 17d-1 to permit them to co-invest with Newco. Applicants also
propose to modify two conditions of the 1988 Order to allow applicants
and Newco to sell, exchange, or otherwise dispose of the Private
Placement Securities and exercise warrants, conversion privileges and
other rights, and make follow-on investments at different times and in
differing amounts, subject to the approval of each Fund's Joint
Transaction Committee. If exemptive relief is granted, the minimum
amount of Private Placement Securities of any issuance that the
Insurance Company and Newco collectively will be required or permitted
to purchase if either or both of the Funds participate will be
calculated by aggregating the amount purchased for the Insurance
Company with any amount purchased by Newco that is attributed to the
Insurance Company based on its direct or indirect percentage ownership
interest in Newco.
9. Newco may from time to time incur indebtedness secured by a
pledge of its assets. For purposes of this application, Newco's pledge
of Private Placement Securities and a transfer of Private Placement
Securities by Newco to the Insurance Company will not be deemed to be a
sale, exchange, or other disposition.
Applicants' Legal Analysis
1. Section 17(d) and rule 17d-1, in the absence of an exemption
granted by the SEC, preclude an affiliated persons of a registered
investment company, or an affiliated person of such person, acting as
principal, from participating in, or effecting any transaction in
connection with, any joint enterprise or other joint arrangement in
which the registered investment company, or a company controlled by
such registered investment company, is a participant. The determination
of whether to grant relief under section 17(d) and rule 17d-1 turns on
whether the participation of the investment company in the joint
arrangements is consistent with the provisions, policies and purposes
of the Act and not on a basis different from or less advantageous than
that of the other participants in such arrangements.
2. Applicants believe that the conditions in the 1988 Order, as
modified in this application, ensure that the participation of the
Funds in Private Placement Securities will be on a basis no less
advantageous than that of the Insurance Company and Newco and
consistent with the policies and purposes of the Act.
Applicants' Conditions
Applicants agree that any order granting the requested relief shall
be subject to the following conditions:
1. Each time the Insurance Company proposes to acquire Private
Placement Securities having equity features, the acquisition of which
would be consistent with the investment objectives and policies of both
Fund I and Fund II, the Insurance Company will offer both Fund I and
Fund II the opportunity to acquire an amount of each class of such
Private Placement Securities equal to the amount proposed to be
acquired by the Insurance Company. Each time the Insurance Company
proposes to acquire Private Placement Securities without equity
features, the acquisition of which would be consistent with the
investment objective and policies of Fund II, the Insurance Company
will offer Fund II the opportunity to acquire an amount of each class
of such Private Placement equal to the amount of such Private Placement
Securities proposed to be acquired by the Insurance Company. Each of
Fund I and Fund II may choose to acquire none of such securities or any
amount of such securities up to the entire amount of securities offered
to it by the Insurance Company. If either Fund shall have declined such
offer or accepted a portion of Private Placement Securities offered to
it, the Insurance Company shall offer the other Fund up to 50% of the
aggregate amount of such Private Placement Securities then available
for acquisition; provided that the amount of any individual issuance of
Private Placement Securities acquired by either Fund shall not exceed
the amount of such issuance of Private Placement Securities acquired by
the Insurance Company. For purposes of this condition, the amount of
any Private Placement Securities acquired or proposed to be acquired by
the Insurance Company shall be deemed to equal (a) the amount (if any)
acquired or proposed to be acquired by the Insurance Company plus (b)
the amount (if any) acquired or proposed to be acquired by Newco that
is attributable to the Insurance Company's direct or indirect
percentage ownership interest in Newco.
2. If Fund I and Fund II choose, or either of them chooses, to
acquire Private Placement Securities concurrently with the Insurance
Company or Newco, then the Insurance Company, Newco, Fund I and Fund II
or either of the Funds together with the Insurance Company or Newco may
acquire such Private Placement Securities at the same time and at the
same unit price without further order of the SEC. If Fund I or Fund II
chooses to acquire Private Placement Securities, but to acquire less
than the entire amount of such securities offered to it by the
Insurance Company, such Fund's decision must be approved by a majority
vote of the members of the Joint Transaction Committee who have no
financial interest in the transaction (``Required Majority''). The
determination of Fund I or Fund II to acquire less than all of such
securities and the reasons therefor will be recorded and become a part
of the permanent records of such Fund.
3. If Fund I or Fund II chooses not to acquire any Private
Placement Securities offered to it by the Insurance Company, such
Fund's decision must be approved by the Required Majority of the Joint
Transactions Committee. The determination of Fund I or Fund II not to
acquire such Private Placement Securities and the reasons therefore
will be recorded and become a part of the permanent records of such
Fund.
4. None of the Insurance Company, Newco, Fund I or Fund II shall
``make available significant managerial assistance'' (within the
meaning of Section 2(a)(47) of the Act) to any issuer (a ``Portfolio
Company'') of a Private Placement Security that is acquired in a joint
transaction by the Insurance Company, Newco and the Funds or either of
them. However, the Insurance Company, Newco and the Funds may take
steps to protect their rights as creditors.
5. None of the Insurance Company, Newco, Fund I or Fund II shall be
involved in the sponsorship of any Portfolio Company.
6. None of the Insurance Company, Newco, Fund I or Fund II shall be
materially involved in the structuring of any Portfolio Company or of
any Private Placement Security issued by a Portfolio Company; provided
that the Insurance Company may take part in the negotiation of the
terms (such as coupon, final maturity, average life, sinking funds,
conversion price, registration, put rights and call protection) and
appropriate restrictive covenants governing Private Placement
Securities.
7. Neither the Insurance Company nor Newco shall receive any
transaction fees in connection with any investment in any security of a
Portfolio Company (such fees include monitoring, ``topping,'' breakup,
and termination fees).
8. None of the Insurance Company, Fund I, Fund II, or Newco will
make follow-on investments (``Follow-on Investments'') or will exercise
warrants, conversion privileges, or other rights with respect to
Private Placement Securities of a class held by the Funds or either of
them and the Insurance Company and/or Newco, unless each Fund and the
Insurance Company and/or Newco holding such Private Placement
Securities shall make such Follow-on Investments or exercise such
rights and such investments or exercises are made at the same time and
in amounts proportionate to their respective holdings of such Private
Placement Securities, subject, however, to the determinations made by a
Fund's Joint Transaction Committee, as set forth below.
If (a) the Insurance Company and/or Newco determines to make a
Follow-on Investment or exercise warrants, conversion privileges, or
other rights with respect to Private Placement Securities of a class
held by the Funds or either of them and the Insurance Company and/or
Newco, and the Insurance Company determines not to make such Follow-on
Investments or exercise such rights with respect to such Private
Placement Securities on behalf of the Funds or either of them in
accordance with the first paragraph of this condition, or (b) the
Insurance Company determines to cause the Funds or either of them to
make Follow-on Investments or to exercise warrants, conversion
privileges, or other rights with respect to a class of Private
Placement Securities of a class held by the Funds or either of them,
and the Insurance Company, Newco, or the other Fund, as the case may
be, shall not also so elect to make such Follow-On Investments or
exercise such rights in accordance with the first paragraph of this
condition, then the Insurance Company shall notify in writing the
chairman of the Joint Transactions Committee of the Fund or Funds
holding such Private Placement Securities by sending the relevant
material to the chairman by messenger, overnight delivery or, to the
extent feasible, by telecopy. Such notification shall include a written
presentation regarding the proposed transaction, including the reasons
for the Insurance Company's recommendations to the Fund in light of the
contrary decision made with respect to the Insurance Company, Newco, or
the other Fund. The chairman shall convene a meeting of the Joint
Transactions Committee no later than five business days after receipt
of the above-referenced notification, at which meeting the Joint
Transactions Committee will consider the Insurance Company's
recommendation and, based upon its review, shall determine to make such
Follow-On Investments or exercise the rights with respect to such
Private Placement Securities if it determines (pursuant to the vote of
the Required Majority) such action is in the best interests of the
Fund, is fair and reasonable to the Fund and its shareholders, and does
not involve overreaching of the Fund and its shareholders on the part
of any person concerned. The Joint Transactions Committee's
determination, and the reasons therefor, shall be recorded and made a
part of the records of the Fund. None of the Insurance Company, Newco,
or the Funds of either of them shall effect such Follow-On Investments
or exercise such rights until the Joint Transactions Committee of each
Fund considering such transaction has determined, pursuant to the vote
of the Required Majority, the action to be taken by the Fund.
9. None of the Insurance Company, Fund I, Fund II, or Newco will
sell, exchange, or otherwise dispose of any interest in any Private
Placement Securities of a class held by the Funds or either of them and
the Insurance Company and/or Newco, unless each Fund holding such
Private Placement Securities and the Insurance Company and/or Newco, if
it or they hold such securities, shall dispose of such interest in such
Private Placement Securities and such dispositions shall be made at the
same time, for the same unit consideration, and in amounts
proportionate to their respective holdings of such Private Placement
Securities, subject, however, to the determinations made by a Fund's
Joint Transactions Committee, as set forth below.
If (a) the Insurance Company and/or Newco determines to sell,
exchange, or otherwise dispose of any interest in any Private Placement
Securities of a class held by the Funds or either of them and the
Insurance Company and/or Newco, and the Insurance Company determines
not to so dispose of the Private Placement Securities held by the Funds
or either of them in accordance with the first paragraph of this
condition, or (b) the Insurance Company determines to cause the Funds
or either of them to sell, exchange, or otherwise dispose of any
interest in Private Placement Securities of a class held by the Funds
or either of them, and the Insurance Company, Newco, or the other Fund,
as the case may be, shall not also so dispose of such interest in the
Private Placement Securities in accordance with the first paragraph of
this condition, then the Insurance Company shall notify in writing the
chairman of the Joint Transactions Committee of the Fund or Funds
holding such Private Placement Securities by sending the relevant
material to the chairman by messenger, overnight delivery or, to the
extent feasible, by telecopy. Such notification shall include a written
presentation regarding the proposed transaction, including the reasons
for the Insurance Company's recommendations to the Fund in light of the
contrary decision made with respect to the Insurance Company, Newco, or
the other Fund. The chairman shall convene a meeting of the Joint
Transactions Committee no later than five business days after receipt
of the above-referenced notification, at which meeting the Joint
Transactions Committee will consider the Insurance Company's
recommendation and, based upon its review, the Joint Transactions
Committee shall determine (pursuant to the vote of a Required
Majority), to sell, exchange, or dispose of such Private Placement
Securities pursuant to the Insurance Company's recommendation if it
determines that such action is in the best interests of the Fund, is
fair and reasonable to the Fund and its shareholders, and does not
involve overreaching of the Fund and its shareholders on the part of
any person concerned. The Joint Transactions Committee's determination,
and the reasons therefor, shall be recorded and made a part of the
records of the Fund. None of the Insurance Company, Newco, or the Funds
of either of them shall effect such disposition until the Joint
Transactions Committee of each Fund considering such transaction has
determined, pursuant to the vote of the Required Majority, the action
to be taken by the Fund.
10. The expenses, if any, associated with acquiring, holding or
disposing of any Private Placement Securities (including, without
limitation, the expenses of the distribution of any such securities
registered for sale under the Securities Act of 1933) shall, to the
extent not payable solely by the Insurance Company under its investment
management agreements with each of the Funds and Newco, be shared by
the Insurance Company, Newco and the Funds in proportion to the
relative amounts of such securities held or being acquired or disposed
of, as the case may be, by the Insurance Company, Newco, and each of
the Funds.
11. The Joint Transactions Committee of each Fund will be provided
quarterly for review all information concerning co-investments made by
the Insurance Company, Newco and the Funds, including investments made
by the Insurance Company or Newco in which the Fund declined to
participate, so that the Joint Transactions Committee may determine
whether all investments made during the preceding quarter, including
those investments in which the Fund declined to participate, comply
with the conditions set forth above.
12. Each of the applicants will maintain and preserve all records
required by Section 31 of the Act and any other provisions of the Act
and the rules and regulations thereunder applicable to such applicant.
13. For purposes of the requested order, any Private Placement
Securities acquired or held by applicants and Newco that are identical
in all respects except for the fact that only Private Placement
Securities acquired and held by both Funds or either of them have
voting rights shall be considered to be of the same class of
securities.
For the SEC, by the Division of Investment Management, under
delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 94-16495 Filed 7-7-94; 8:45 am]
BILLING CODE 8010-01-M
