SecProbe.io

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.20S49
DIVISION OF
INVESTMENT MANAGEMENT
February 4, 2013
Harry S. Pangas, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, NW
Washington, DC 20004-2415
Re: Fifth Street Finance Corp. (the "Company")
Registration Statement on Form N-2
File Number: 333-186101
Dear Mr. Pangas:
The Company filed a shelf registration statement on January 18, 2013
under which it may offer up to $1,000,000,000 of shares of its common
stock, debt securities or warrants to purchase its common stock or debt
securities (collectively, the "Securities"). The Securities may be offered at
prices and on terms to be disclosed in one or more supplements to this
prospectus. Pursuant to Securities Act Release No. 6510 and in reliance
upon the representations contained in your letter of the same date, we
performed a limited review of the registration statement.
Your letter represented that the registration did not contain any
material changes from the disclosure included in the Company's shelf
registration statement on Form N-2 (File No. 333-180267), initially filed with
the Commission on March 22, 2012 and declared effective, as amended, on
July 27, 2012, except for the inclusion of audited financial statements and
related financial data for the fiscal year ended September 30, 2012.
Whenever a comment is made in one location, you should consider it
applicable to all similar disclosure appearing elsewhere in the registration
statement (including all future prospectus supplements). We have the
following comments.
Prospectus Cover Page
1. Disclose that the debt securities in which the Company invests will
generally be considered below investment grade, which are also known as

"junk securities" and that indebtedness below investment grade quality has
predominantly speculative characteristics with respect to the issuer's
capacity to pay interest and repay principaL. Also disclose, if true, that a
material amount of the Company's debt investments will not fully amortize
during their lifetime, which could result in a substantial loss to the Company
if the portfolio company is unable to refinance or repay the debt at maturity.
Page 11
2. Add disclosure in the leverage section that leverage will make the
Company's net asset value per share ("NAV") more volatile.
Page 12
3. The following comments should be addressed in the fee table and
Example that is included in the current prospectus, as well as in any
prospectus supplement used with any offering from this shelf registration
statement that triggers the need to include a Fee Table and Example. Any
such fee table and Example should also be updated in accordance with
current staff positions regarding an increase in expense.
4. We note the absence of the Acquired Fund Fees & Expenses line item
from the Company's fee table. Please confirm to us in your response letter
that the Company will not in the upcoming year make investments at the
level that triggers the need for the additional line item of Acquired Fund Fees
& Expenses. If no such additional line item is required, please indicate in
your response letter that any Acquired Fund Fees & Expenses is nonetheless
included in "Other Expenses" or that the Company does not intend to invest
in any "Acquired Funds."
5. Total expenses of 9.37% are disclosed in the fee table. The financial
highlights on page F-58 show expenses of 9.95%. In your response please
explain the reason for the difference.
6. The last sentence in footnote (4) should be revised by inserting the
word "all" immediately prior to the word "estimated" in the same sentence.
Please confirm that all associated common stock prospectus supplements
will be adjusted accordingly.
7. On October 12, 2012 the Company filed a Rule 497 takedown to
offering $75,000,000 in aggregate principal amount of 5.875% senior notes
due 2024, ("Notes"). The Notes will mature on October 30, 2024 and the
Company will pay interest on the Notes on January 30, April 30, July 30 and
October 30 of each year, beginning on January 30, 2013. The Notes are

issued in minimum denominations of $25 and integral multiples of $25 in
excess thereof. The disclosure on page S-7 of this filing states that "(wJe
estimate that the net proceeds we receive from the sale of the $75.00
million aggregate principal amount of Notes in this offering will be
approximately $72.45 million, after deducting the underwriting discounts
and commissions of $2.25 million payable by us and estimated offering
expenses of approximately $300,000 payable by us". Please explain where
these expenses are located in the Company's fee tables used to offer its
common stock, both immediately before and immediately after the Note
offering. Revise the content of the common stock fee table for future note
issuance as needed, paying attention to offering cost and underwriting
discounts and commissions.
8. On December 3, 2012 the Company filed a Rule 497 takedown to offer
14,000,000 shares of its common stock. We note that the management fee
disclosed in the fee table was 5.30% and that footnote (4) thereto states
"(oJur base management fee under the investment advisory agreement is
calculated at an annual rate of 2% of our gross assets, which includes
borrowings for investment purposes of $466.3 million and excludes cash and
cash equivalents of $74.4 million". We assume the excluded amount of
$74.4 million relates to the Notes discussed in comment 7 above. In
addition, the Company also filed a Rule 497 takedown to offer of
7,500,000 shares of its common stock on September 12, 2012. We note
that the management fee disclosed in that fee table was 5.75%.
Thus, the management fee as a percentage of net assets attributable
to common stock purportedly decreased from September to December, while
assets under management increased. We do not believe that cash
equivalent positions should be excluded from the management fee
calculation, effectively reducing the management fee presented in the fee
table, unless the Company actually intends (and has associated prospectus
disclosure), to not invest such cash equivalents during the next 12 months
or that such cash equivalents will be used to repay other borrowings while
maintaining that reduced leverage for the next 12 months. Please explain
why the management fee (and any other associated expense disclosure) was
not adjusted upward for any expense increase associated with the Notes.
Please explain how this issue will be handled prospectively.
9. Please explain how the Company will ensure that all future 497
takedown filings contain an expense ratio that reflects all expenses of all
existing actual leverage and all expenses of all leverage contemplated by the
Company during the next 12 months.
Page 17

10. The investments disclosed in the first full paragraph are primarily
derivatives. We note that the prospectus does not appear to accurately and
specifically describe the Fund's use of derivatives in a manner customized to
proposed Fund operations. The Division of Investment Management has
recently made a number of observations about derivative related disclosure
by investment companies in a letter from Barry D. Miller, Associate Director,
Office of Legal and Disclosure, to Karrie McMillan, General Counsel,
Investment Company Institute dated July 30, 2010. i Please review the
observations set forth in that letter and revise your disclosure concerning
the use and risks of derivatives.
Page 19
11. The last paragraph on page 19 does not appear to include the leverage
from the Notes, and it is unclear whether the table on page 20 does also.
Please revise the disclosure and table as needed.
Page 34
12. The Notes are not secured against any Company assets or the assets
of any of its subsidiaries, likely increasing the chances that the Notes will
trade at a discount sometime in the future. Is an incentive fee payable if the
Company repurchases the Notes when they are trading at a discount? If so,
Please expand the disclosure as needed.
13. Disclose whether the proceeds from an offering of this registration
statement may be used to make further repurchases and cancellations of the
Company's outstanding debt at a discount that might generate a gain
thereby increasing the incentive fee payable to the Company's Investment
Adviser.
Page 38
14. Please make clear which LIBOR rates are being referenced in the
descriptions on this page and in other locations in the registration statement
where the reference is a general use of the acronym LIBOR.
Page 39
15. If true, please add a footnote to the table to the effect that while the
Company's distributions are generally characterized as a dividend, most such
1 See http://www .sec.gov /divisions/investment/guidance/ici0730 10. pdf.

dividends are derived from the Company's interest income and that taxable
shareholder accounts will not receive the more favorable rate generally
applicable to dividends, but will generally pay federal income tax at the
higher rate applicable to interest income.
Page 43
16. Please inform the staff whether the Board will review and approve in
advance the valuation methodology of any third-party pricing service it uses
and confirm that the Board will regularly review the historical accuracy of its
fair value methodologies. See Release No. IC-26299; "Compliance Programs
of Investment Companies and Investment Advisers," (December 17, 2003)2.
Page 69
17. FSC, Inc. serves as the Company's administrator. The Company
reimburses the administrator for the allocable portion of overhead and other
expenses incurred by the administrator in performing its obligations under
the administration agreement, including rent and the allocable portion of the
costs of compensation and related expenses of its chief financial officer and
chief compliance officer, and the associated staff. Please confirm to the staff
that the Board exercises appropriate oversight with respect to the equity of
the allocation methodology referenced in the administration agreement.
Confirm to the staff that the description of the allocated expenses describes
fully all expenses allocated under the administration agreement.
Page F-7
18. Several investments (with a negative cost) in the Company's Schedule
of Investments for the year ended September 30, 2012 are referenced by
footnote (11). On page F-14, footnote (11) states "(cJost amounts
represent unearned income related to undrawn commitments". Please
explain these circumstances in your response letter.
Generic Prospectus Supplements
19. The Company should include, to the best of its knowledge, complete
generic prospectus supplements, including risk factors and other available
information for each prospectus supplement (e.g., the risk factors for debt
securities is omitted in its entirety). If such debt securities will be unsecured
2 The Release states that Rule 38a-1 requires Funds to provide a methodology or methodologies by
which the fund determines the current fair value of the portfolio security, and to "regularly review the
appropriateness and accuracy of the method used in valuing securities, and make any necessary
adjustments".

against any of the Company's assets and subordinated to other Company
debt, the cover page of this prospectus supplement should be appropriately
modified. The disclosure in comment 1 should also be included on the cover
page of each prospectus supplement.
20. The cover page of the prospectus supplement does not appear to
include a footnote to the public offering price regarding allocated interest
(e.g., Plus accrued interest, if any, from XXX XX, 201X. Please revise the
disclosure as needed, or explain why pro forma language is not needed.
21. In your response letter, undertake to include in any prospectus
supplement, as applicable, under a section captioned "Additional Underwriter
Compensation" a description of the terms of any agreement that the Fund
will have entered into with the underwriters for services other than share
distribution, and specify the nature of the services that the underwriter has
provided or wil1 provide thereunder that differ from typical underwriting
services. Please undertake to disclose whether any such fee payable
thereunder is a one-time fee or whether it is payable annually, and
undertake to file all such agreements as exhibits in a post-effective
amendment to the registration statement.
Part C
22. Please file as an exhibit the legality opinion regarding all securities
being registered, and related consent of counsel, with your next pre-
effective amendment. In this regard, since the terms of the actual offerings
from this registration statement appear to be uncertain and not yet
authorized by the Company's Board of Directors, the Company may need to
undertake to file an unqualified legality of shares opinion, and related
consent of counsel, in a post-effective amendment with each takedown from
this shelf registration statement.
General
23. Please confirm to the staff in your response letter that the Company
will submit any underwritten offering to FINRA for its prior approval of the
underwriting terms.
24. We may have additional comments on disclosures made in response to
this letter, on information supplied supplementally, or on exhibits added in
any pre-effective amendments.
25. Response to this letter should be in the form of a pre-effective
amendment filed pursuant to Rule 472 under the Securities Act. The pre-

effective amendment filing should be accompanied by a supplemental letter
that 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. You
should review and comply with all applicable requirements of the federal
securities laws in connection with the preparation and distribution of a
preliminary prospectus.
******
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 the fund's disclosure, they are responsible for the accuracy
and adequacy of the disclosures they have made.
Notwithstanding our comments, in the event the Company requests
acceleration of the effective date of the pending registration statement, it
should furnish a letter, at the time of such request, acknowledging that
should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
the action of the Commission or the staff, acting pursuant to delegated
authority, in declaring the filing effective, does not relieve the
Company from its full responsibility for the adequacy and accuracy of
the disclosure in the filing; and
the Company may not assert this action as defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
In addition, please be advised that the Division of Enforcement has
access to all information you provide to the staff of the Division of
Investment Management in connection with our review of your filing or in
response to our comments on your filing.
We will consider a written request for acceleration of the effective date
of the registration statement as a confirmation of the fact that those
requesting acceleration are aware of their respective responsibilities. We will
act on the request and, pursuant to delegated authority, grant acceleration
of the effective date.

******
Should you have any questions regarding this letter, please contact
me at (202) 551-6966.
Sincerely,