RegAlert2009-06-04
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SEC Division of Investment Management staff letter: American Capital, Ltd
Counsel for American Capital, Ltd. requests assurance that the SEC staff will not recommend enforcement action under Sections 18(a)(1)(B) and 61(a)(1) of the Investment Company Act of 1940 if the company declares a dividend consisting of 10% cash and 90% stock. The request arises because American Capital's asset coverage for senior securities representing indebtedness is below the 200% threshold required by Section 61(a)(1), which would otherwise prohibit the declaration of the cash portion of the distribution. The company seeks this relief to maintain its status as a regulated investment company and avoid significant additional federal income taxes and excise taxes.
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Morgan. Lewis & Beckius llP Morgan Lewis 1111 Pennsylvania Avenue NW Washington, COUNSELORS AT LAW DC 20004 Tel. 202.73nooO Fax: 202.739.3001 www.morganlewis.com Thomas S. Harman Partner 202.739.5662 tharman@MorganLewis.com lCA Section 18(a)(l)(B) lCA Section 61(a)(I) June 4, 2009 Douglas J. Scheidt Associate Director and Chief Counsel Division ofInvestment Management Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Re: American Capital, Ltd. (File No. 814-00149) Dear Mr. Scheidt:
We are counsel to American Capital, Ltd. ("American Capital"), a closed-end investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940, as amended (the "1940 Act"). We are writing on behalf ofAmerican Capital to seek assurance from the staff of the Division of Investment Management that it will not recommend enforcement action against American Capital to the Commission under Sections 18(a)(I)(B) and 6 I(a)(I) ofthe 1940 Act ifAmerican Capital proceeds as described below. Background American Capital invests in private equity, private debt, private real estate investments, early and late stage technology investments, special situation investments, alternative asset funds and structured finance investments. American Capital currently has outstanding common stock listed on NASDAQ, and debt obligations it has issued consisting of both public and private debt. American Capital qualifies for pass-through tax treatment as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986 (the "Code"), as amended. It has historically met the requirements imposed upon RICs under the Code to avoid corporate level federal income taxes on income and gains by distributing such items to its shareholders as dividends. Section 852(a) of the Code requires, in part, that a RIC distribute at least 90 percent of its annual investment company taxable income to shareholders as taxable dividend distributions to DBli63 113074.2
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