SEC Company Response from Eagle Point Credit Co Inc. (ECC, ECCC, ECCF, ECCU, ECCV, ECCW, ECCX, ECC-PD) (CIK 0001604174) (ECC) — Sep 6, 2016
Eagle Point Credit Co Inc. (ECC, ECCC, ECCF, ECCU, ECCV, ECCW, ECCX, ECC-PD) (CIK 0001604174)
Date: Sept. 6, 2016 · CIK: 0001604174 · Accession: 0001144204-16-122952
AI Filing Summary & Sentiment
File numbers found in text: 333-205540, 811-22974
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CORRESP
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filename1.htm
1900 K Street, NW
Washington, DC 20006-1110
+1 202 261 3300 Main
+1 202 261 3333 Fax
www.dechert.com
Philip T. Hinkle
philip.hinkle@dechert.com
+1 202 261 3460 Direct
+1 202 261 3050 Fax
September 6, 2016
VIA EDGAR
U.S. Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, D.C. 20549
Attn: Asen Parachkevov and Megan Miller
Re: Eagle Point Credit Company Inc.
Registration Statement on Form N-2
File Numbers: 333-205540; 811-22974
Ladies and Gentlemen:
On behalf of Eagle Point Credit Company
Inc., a Delaware corporation (the “Fund”), we hereby respond to the comments raised by the staff (the “Staff”)
of the U.S. Securities and Exchange Commission (the “Commission”) in telephone calls between Megan Miller of
the Staff and Thomas J. Friedmann of Dechert LLP, outside counsel to the Fund, on July 28, 2016 and between Asen Parachkevov of
the Staff and Philip T. Hinkle and Erin M. Lett of Dechert LLP on August 5, 2016.
For your convenience, the Staff’s
comments are summarized in this letter, and each comment is followed by the applicable response. Concurrently, the Fund is filing
post-effective amendment no. 6 (“Amendment No. 6”) to its registration statement on Form N-2 (the “Registration
Statement”) via EDGAR. We will also provide under separate cover courtesy copies of Amendment No. 6, as submitted and
marked to show the changes from post-effective amendment no. 4 to the Registration Statement.
Capitalized terms used in this letter and
not otherwise defined herein shall have the meanings specified in the Registration Statement.
Asen Parachkevov and Megan Miller
September 6, 2016
Page 2
Post-Effective Amendment No. 4 to
the Registration Statement
1. Please consider whether it is necessary to continue including disclosure on the front cover
relating to the aggregate market value of the Fund’s common stock held by selling stockholders.
Response:
The Fund believes that it is common practice
in the industry to include on the front cover the aggregate market value of securities being registered pursuant to a registration
statement that are held by the selling stockholders. The Fund believes that potential investors may view the information as material
and will expect to see the information disclosed in such a manner.
2. Please confirm whether any of the collateralized loan obligation (“CLO”)
collateral managers referenced in the prospectus are affiliated persons of Stone Point Capital LLC or the Trident V Funds.
Response:
The Fund confirms that none of the CLO
collateral managers referenced in the prospectus are affiliated persons (as defined in Section 2(a)(3) of the Investment Company
Act of 1940, as amended (“1940 Act”)) of either Stone Point Capital LLC or the Trident V Funds.
3. In the table presenting a description of the Fund’s portfolio investments, please clarify
that the aggregate exposure to senior secured loans is obtained indirectly through investments in CLOs.
Response:
The Fund has revised the table and added
a footnote clarifying that the Fund obtains exposure to underlying senior secured loans through its investments in CLOs.
4. In the section entitled “Our Competitive Advantage,” the bullet with the
heading “Alignment of Interests” describes the application of the “hurdle rate.” Please add disclosure
explaining how the Fund’s obligation to pay monthly dividends on its preferred stock is not dependent upon meeting the hurdle
rate.
Asen Parachkevov and Megan Miller
September 6, 2016
Page 3
Response:
The Fund has added disclosure to the section
entitled “The Adviser and the Administrator – Investment Advisory Agreement – Management Fee and Incentive
Fee” that clarifies that the payment of monthly dividends on its preferred stock (including any preferred stock that
may be held by officers or other affiliates of the Adviser) is not subject to meeting the hurdle rate.
5. Please explain in your response to the Staff why the assumption of the Fund’s adjusted
total assets in the Fees and Expenses Table decreased from $427.0 million in pre-effective amendment no. 5 to the Registration
Statement, which was filed on November 25, 2015, to $341.8 million in post-effective amendment no. 4 to the Registration Statement.
Response:
The Fund notes that the change in the assumption
regarding adjusted total assets is principally driven by (1) a decrease in the Fund’s net asset value, from $257.2 million
as of June 30, 2015 to $180.0 million as of March 31, 2016, and (2) an increase in the assumed rate at which the Fund incurs leverage,
from approximately 31% of total assets to 35% of total assets. The Fund notes that it has revised such assumption in Amendment
No. 6 in connection with the publication of the Fund’s unaudited consolidated financial statements as of and for the period
ended June 30, 2016, with the assumption being based on the Fund’s total assets as of June 30, 2016.
6. If the assumptions used by the Fund in preparing the Fees and Expenses Table change while the
Registration Statement, or any amendment thereto, is still effective, please undertake to file a prospectus supplement with the
Commission reflecting such updated assumptions.
Response:
The Fund hereby undertakes to file a prospectus
supplement with the Commission that reflects any updates in the assumptions used in preparing the Fees and Expenses Table prior
to using the Registration Statement to offer common stock.
Asen Parachkevov and Megan Miller
September 6, 2016
Page 4
7. Please provide the calculations supporting the amount listed in the Fees and Expenses Table
for the line “Interest payments on borrowed funds.” The Staff was unable to duplicate this result based upon the information
provided in the footnotes to the table.
Response:
As requested, attached as Annex A
to this letter are the calculations supporting the amount listed for the line “Interest payments on borrowed funds”
in the Fees and Expenses Table. The Fund notes that such amounts have been updated to reflect the updated figure included in Amendment
No. 6 for this line item.
8. With respect to Footnote 3 to the Fees and Expenses Table, please explain to the Staff why expenses
related to the Fund’s dividend reinvestment plan are included in the calculation of “Other expenses.” See
General Instruction 4 in Item 3 of the Form N-2.
Response:
The Fund respectfully notes that the instructions
to the “Fees and Expenses” table require that fees that are charged to participating shareholder accounts be disclosed
as a separate line item under “Stockholder Transaction Expenses”. However, stockholders will bear the expenses incurred
by the Fund in connection with administering the Fund’s dividend reinvestment plan regardless of whether they actually participate
in that plan. The Fund, therefore, believes that it is more appropriate to treat such expenses as ongoing annual expenses of the
Fund for purposes of the presentation set forth in the “Fees and Expenses” table rather than as stockholder transaction
expenses specific to an offering pursuant to the Registration Statement.
9. With respect to the Fund’s wholly-owned Cayman subsidiary (the “Cayman Subsidiary”):
(i) Please confirm that the financial statements of the Cayman Subsidiary are consolidated with
those of the Fund.
Response:
The Fund confirms that the financial statements
of the Cayman Subsidiary are consolidated with those of the Fund.
Asen Parachkevov and Megan Miller
September 6, 2016
Page 5
(ii) Please disclose that the Fund complies with the provisions of the 1940 Act governing investment
policies (Section 8) and capital structure and leverage (Section 18) on an aggregate basis with the Cayman Subsidiary.
Response:
The Fund confirms that the Fund aggregates
its direct investments with the Cayman Subsidiary’s investments when testing for compliance with Section 8 and Section 18.
(iii) Please disclose that the Cayman Subsidiary complies with provisions relating to affiliated transactions
and custody (Section 17) and identify the custodian of the Cayman Subsidiary.
Response:
The Fund confirms that the Cayman Subsidiary complies with,
and will continue to comply with, the provisions relating to affiliated transactions under Section 17 of the 1940 Act and the rules
thereunder, and complies with, and will continue to comply with, the custody provisions of Section 17(f). Additionally, each of
the Fund and the Cayman Subsidiary utilizes the same custodian (Wells Fargo Bank, National Association).
(iv) Disclose any of the Cayman Subsidiary’s principal investment strategies or principal risks
that constitute principal investment strategies or risks of the Fund.
Response:
The Fund confirms that, to the extent any
principal investment strategies and principal risks of the Cayman Subsidiary are deemed principal investment strategies and principal
risks of the Fund on an aggregate basis, such principal investment strategies and principal risks are disclosed as such in the
Fund’s prospectus.
(v) Confirm that the Cayman Subsidiary is not subject
to a management fee.
Response:
The Fund confirms that the Cayman Subsidiary
is not subject to a management fee.
Asen Parachkevov and Megan Miller
September 6, 2016
Page 6
(vi) Confirm that, in connection with its review of the Fund’s investment advisory agreement
under Section 15(c) of the 1940 Act, the Fund’s board of directors reviews the Fund and the Cayman Subsidiary on a consolidated
basis.
Response:
The Fund confirms that, in connection with
its review of the Fund’s investment advisory agreement under Section 15(c) of the 1940 Act, the Fund’s board of directors
considers the performance and expense data of the Fund and its subsidiaries (including the Cayman Subsidiary) on a consolidated
basis and may also consider the activities of the Cayman Subsidiary and the related nature and quality of the services provided
with respect to the Cayman Subsidiary together with its consideration of such factors in respect of the Fund. However, the Fund
respectfully notes that the Cayman Subsidiary is not a registered investment company under the 1940 Act and therefore is not subject
to the requirements of Section 15.
(vii) Confirm that (1) the Cayman Subsidiary and its board of directors have designated an agent for
service of process in the United States; and (2) the Cayman Subsidiary and its board of directors will agree to inspection by the
Staff of the Cayman Subsidiary’s books and records, which will be maintained in accordance with Section 31 of the 1940 Act
and the rules thereunder.
Response:
The Fund hereby confirms that the Cayman
Subsidiary and its board of directors will designate a domestic (U.S.) agent for service of process, although
not required by applicable law. In addition, the Fund hereby confirms that the Cayman Subsidiary and its board of directors will
agree to examination of the Cayman Subsidiary’s books and records by the SEC. The books and records of the Cayman Subsidiary
are maintained in accordance with Section 31 of the 1940 Act and the rules thereunder together with the books and records of the
Fund.
10. The section entitled “Prospectus Summary – Financing and Hedging Strategy –
Leverage by the Company” states that the Fund generally expects to operate with leverage within a range of 25% to 35%
of total assets. Please explain in your correspondence to the Staff how the Fund is permitted to incur leverage of over 33% of
total assets (less current liabilities).
Asen Parachkevov and Megan Miller
September 6, 2016
Page 7
Response:
The leverage range disclosed in the Registration
Statement and noted by the Staff is for a combined leverage ratio that includes both securities representing indebtedness and preferred
stock. The Fund respectfully notes that the asset coverage restrictions under Section 18 of the 1940 Act for registered
closed-end companies such as the Fund apply separately to classes of senior securities that represent indebtedness and those that
represent stock. As Section 18(a)(2) only requires asset coverage of at least 200% with respect to preferred stock, to the extent
the Fund has preferred stock outstanding, its leverage ratio may exceed 33% of total assets (which would be the maximum leverage
permitted if such leverage represented only indebtedness).
11. Please review the principal strategy and principal risk
disclosures related to derivatives and tailor the disclosures to the actual operations of the fund and related risks.
Response:
In drafting the disclosure relating to
derivatives, the Fund took into consideration the guidance set forth in the July 30, 2010 letter from Barry Miller to the Investment
Company Institute. The disclosure concerning derivatives reflects how such investments were expected to be utilized by the Fund
when it commenced operations. In response to the Staff’s request, and based on the Fund’s experience since it commenced
operations, the Fund has reviewed and further tailored the disclosures to reflect the Fund’s current expectations relating
to the Fund’s potential use of derivatives.
12. Please disclose in the section entitled “Use of Proceeds” whether proceeds
could be used to make a return of capital.
Response:
The Fund has added disclosure to the section
entitled “Use of Proceeds” stating that proceeds of offerings may be used to pay distributions to stockholders
which may include a return of capital. The Fund supplementally notes that it has disclosed in each applicable prospectus supplement
if proceeds of an offering could be used to pay a distribution to the Fund’s stockholders.
Asen Parachkevov and Megan Miller
September 6, 2016
Page 8
13. The Staff notes that the section entitled “Determination of Net Asset Value”
refers to a review of “information compiled by the Adviser.” Please disclose in more detail the information the Adviser
uses to estimate fair value and whether such information includes a discounted cash flow analysis (or explain in correspondence
where such disclosure is presented). The Staff requests that the Fund provide as much detail on the Adviser’s valuation process
as possible.
Response:
The Fund notes that Notes 2 and 3 to the
Fund’s consolidated financial statements as of and for the period ended March 31, 2016, and Notes 2 and 3 to the Fund’s
consolidated financial statements as of and for the period ended June 30, 2016, each describe the valuation techniques and inputs
used in the Adviser’s fair valuation process for the Fund’s investments. The Fund also notes that both the narrative
disclosure and the table summarizing the quantitative inputs and assumptions used for investments categorized in Level III of the
fair value hierarchy in Note 3 describe the use of discounted cash flow techniques. The Fund has added additional detail consistent
with such notes to the prospectus in response to the Staff comment.
Periodic Review of the Fund’s
Public Filings Pursuant to the Sarbanes-Oxley Act of 2002
14. Please explain why the Fund filed an amended Form NSAR-B on March 2, 2015. Going forward, please
also undertake to provide a cover letter to the Staff in connection with any future amended filings explaining the reason for such
filing.
Response:
Due to administrative oversight, the initial
filing of the Fund’s NSAR-B for the fiscal year ended December 31, 2014 did not include the required exhibits. Less than
three hours later, upon discovering the error, the Fund filed an amended NSAR-B to include such exhibits. The Fund hereby undertakes
to provide a cover letter to the Staff in connection with any future amended filings explaining the reason for such filing.
15. The Staff notes that neither the Fund’s audited Consolidated Statement of Assets and Liabilities
as of December 31, 2015, as included in the Form N-CSR filed with the