Correspondence 0001829126-23-004775 from BondBloxx ETF Trust (CIK 0001879238)
BondBloxx ETF Trust (CIK 0001879238)
Date: July 18, 2023 · CIK: 0001879238 · Accession: 0001829126-23-004775
AI Filing Summary & Sentiment
File numbers found in text: 333-272788
Letter
VIA EDGAR Securities and Exchange Commission Attn: Anu Dubey Megan Miller Re: BondBloxx ETF Trust (the “Registrant”) File No. 333-272788
Dear Mses. Dubey and Miller:
This letter is being filed to respond to the telephonic comments received from you on June 29, 2023, June 30, 2023 and July 6, 2023 regarding the staff of the Securities and Exchange Commission’s (the “SEC”) review of the Registrant’s proxy and registration statement on Form N-14 (together, the “Registration Statement”) relating to the proposed reorganization of the Highland/iBoxx Senior Loan ETF, a series of NexPoint Funds I (the “Target Fund”), with and into BondBloxx USD High Yield Bond Sector Rotation ETF, a series of BondBloxx ETF Trust (the “Acquiring Fund”), filed with the SEC on June 20, 2023. The staff’s comments are summarized in bold to the best of our understanding, followed by the Registrant’s responses. The Registrant’s responses will be reflected, to the extent applicable, in the definitive form of the Registration Statement filed pursuant to Rule 497, which the Registrant expects to be filed on or about July 20, 2023. Capitalized terms not defined in this letter have the meanings assigned to them in the Registration Statement.
General Comments
1. Please reflect any SEC staff comments made on Post-Effective Amendment No. 14 to the Registrant’s registration statement on Form N-1A filed on April 6, 2023, to the extent applicable to the Registration Statement.
The Registrant confirms that any such applicable comments will be reflected in the Registration Statement.
2. The SEC staff has taken the position that certain factors generally should be considered in determining which fund’s historical performance should be presented following a fund combination. See North American Security Trust, SEC No-Action Letter (pub. avail. Aug. 5, 1994) (the “NAST Letter”). Because it is proposed that the Target Fund will be the accounting survivor, please supplementally provide an analysis in accordance with the above-referenced no-action letter.
As described in the Registration Statement and the shell fund registration statement on Form N-1A for the Acquiring Fund, the Acquiring Fund will succeed to the performance and financial history of the Target Fund. Because the Reorganization involves the merger of an existing fund into a shell fund, the Acquiring Fund effectively has two choices in terms of showing performance information. The Acquiring Fund may either (i) show the historical performance of the Target Fund, or (ii) show no performance at all. The Registrant believes that it would be contrary to the positions of the staff to abandon the Target Fund’s historical performance in connection with the Reorganization, particularly in light of the fact that it is succeeding to the Target Fund’s financial history. The Acquiring Fund, therefore, must effectively adopt the Target Fund’s historical performance so no accounting survivor analysis, of the type described in the NAST Letter, is necessary.
As noted in the NAST Letter, the staff has generally stated that “the survivor of a business combination for accounting purposes, i.e., the fund whose financial statements are carried forward, will be the fund whose historical performance may be used by a new or surviving fund”- as is the case here with the Target Fund and Acquiring Fund. Moreover, while the NAST Letter addressed a shell reorganization, the circumstances differed from those involved here because that shell reorganization involved three existing funds merging into one new shell fund and, consequently, a substantive analysis was necessary to determine which of the three funds the new or surviving fund most closely resembled. In the present circumstances, the Acquiring Fund, as previously noted, effectively has no choice regarding the selection of historical performance and financial information to use following the Reorganization. Additionally, it is inconsistent with the Registrant’s and its counsel’s understanding that the NAST Letter is applicable to shell reorganizations between a single active fund with past performance and financial history and a shell fund. Accordingly, the Registrant respectfully declines to accept this comment.
3. Regarding discussion about the repositioning of the Target Fund prior to the Reorganization, please consider including an estimate of the repositioning cost of the Target Fund in the Registration Statement.
The Registrant has revised the disclosure to note that the estimated repositioning cost to liquidate and settle all positions within the Target Fund prior to the Reorganization is $266. In the event there is a delay in liquidating the Target Fund’s positions prior to the Reorganization, the Target Fund may incur additional fees to expedite the settlement of such positions; however, the expedited settlement fees are expected to be less than 25 basis points of the Target Fund’s assets, or less than $0.01 per share.
4. Please include the national securities exchange on which shares of the Acquiring Fund will be listed consistent with Item 6(b) of Form N-14.
The requested change has been made.
Shareholder Letter
5. With respect to disclosure regarding associated economies of scale, given that economies of scale may or may not be realized, please revise disclosure to reflect economies of scale may not occur.
The requested change has been made.
6. Please revise the following sentence to clarify that “value” is net asset value and not market price: “Upon shareholder approval and effectiveness of the Agreement, you will receive shares of the Acquiring Fund equivalent to the value of your Target Fund shares as of the closing date . . . .”
The requested change has been made.
-2-
Notice of Special Meeting
7. Please include the record date as of which Target Fund shareholders will be entitled to vote on the proposal(s).
The requested change has been made.
Q&A
8. In the second paragraph under the question “How will the Reorganization affect my investment?”, please clarify that the Reorganization will not take place at the market price on the exchange.
The requested change has been made.
9. In the fifth paragraph under the question “How will the Reorganization affect my investment?”, please disclose the estimated brokerage costs expected to be incurred with respect to (i) conversion of substantially all of Target Fund’s holdings to cash and (ii) use of cash to purchase new investments by Acquiring Fund. Please disclose in dollars and as a percentage of assets. In each case, please also disclose which party will bear the brokerage costs.
The following disclosure has been added to the fifth paragraph under the question “How will the Reorganization affect my investment?” in the Registration Statement:
The estimated brokerage costs expected to be incurred with respect to the conversion of substantially all of Target Fund’s portfolio holdings to cash is $0, or 0% of the Target Fund’s assets, as there are no brokerage costs associated with liquidating bank loans. The estimated brokerage costs expected to be incurred with respect to the use of cash to purchase new investments by the Acquiring Fund is $7,143, or 0.03% of the Acquiring Fund’s assets, and will be borne by the Acquiring Fund. Because the Acquiring Fund will invest in affiliated ETFs, the estimated brokerage costs will consist of brokerage commissions on such ETF shares, if any.
10. In the second sentence under “How will the Reorganization affect my fees?”, please disclose the ability of BondBloxx to recoup waived expenses.
The requested change has been made.
11. In footnote 1 to the fee table under “How will the Reorganization affect my fees?”, please include disclosure clarifying that NexPoint may not recoup waived expenses after the Reorganization.
The requested change has been made.
12. In footnote 2 to the fee table under “How will the Reorganization affect my fees?”, please revise the disclosure to clarify that the contractual fee waiver may be terminated only upon written agreement of the board of trustees of the Acquiring Trust and BondBloxx.
The requested change has been made.
-3-
13. The staff notes that BondBloxx proposes to implement an expense limitation agreement for at least one year following the consummation of the reorganization under “How will your expenses change as a result of the Reorganization?”; however, the dates for the duration of the contractual fee waiver/expense limitation agreement are not included in footnote 2 to the fee table under “How will the Reorganization affect my fees?”. Please revise the disclosure in footnote 2 to the fee table to clarify that the contractual fee waiver/expense limitation agreement will be in effect for at least one year.
The requested change has been made.
14. Please revise the disclosure under “How will your expenses change as a result of the Reorganization?” to clarify how long BondBloxx has agreed to limit the Acquiring Fund’s net total annual operating expenses to 55 basis points.
The requested change has been made.
15. Please disclose the ability of BondBloxx to recoup waived expenses under “How will your expenses change as a result of the Reorganization?”.
The requested change has been made.
16. Please revise the disclosure under “What if I do not wish to participate in the Reorganization?” to replace “redeem” with “sell” since the Target Fund is an ETF. Please also clarify that any sale of Target Fund shares will be at market price.
The requested change has been made.
Proxy Statement/Prospectus
17. On the cover page, please disclose the exchange on which Acquiring Fund shares will be listed consistent with Item 2(a) of Form N-14.
The requested change has been made.
18. On page ii, please revise the last sentence of the third paragraph from the bottom of the page so that it reads “Additional information about the Acquiring Fund will be included in the Acquiring Fund’s Prospectus, when available.”
The requested change has been made.
19. On page ii, if the Acquiring Fund’s registration statement on Form N-1A will not be effective before the Registration Statement, please delete references to the SEC file numbers for the Acquiring Fund.
The Registrant confirms that it will delete references to the Acquiring Fund’s SEC file numbers if the Acquiring Fund’s registration statement on Form N-1A is not effective.
20. On page 1, in the second sentence of the second paragraph under “Reasons for the proposed Reorganization” beginning “NexPoint believes that the Reorganization will be beneficial for the continued viability of the Acquiring Fund,” please replace “Acquiring Fund” with “Target Fund.”
The requested change has been made.
-4-
21. On page 1, in the last sentence of the introductory paragraph under “Comparison of Investment Objectives, Policies and Risks,” please delete references to the Acquiring Fund’s prospectus and SAI if the Acquiring Fund’s registration statement on Form N-1A will not be effective before the Registration Statement.
The Registrant confirms that references to the Acquiring Fund’s prospectus and SAI will be deleted if the Acquiring Fund’s registration statement on Form N-1A is not effective.
22. On page 1 under “Investment Objective,” please describe the contents of the Markit iBoxx USD Liquid Leveraged Loan Index.
The requested change has been made.
23. On page 1 under “Investment Policies and Strategies,” please highlight the differences in the principal investment strategies between the Target Fund and the Acquiring Fund in the introductory paragraph consistent with Item 3(b) of Form N-14 (e.g., the Acquiring Fund employs a sector rotation strategy while the Target Fund does not and the Acquiring Fund invests at least 80% in U.S. issuers while the Target Fund invests in U.S. and non-U.S. issuers, including emerging markets issuers).
The requested change has been made.
24. On page 2 in the columns comparing the investment policies and principa
Show Raw Text
CORRESP
1
filename1.htm
ROPES
& GRAY LLP
THREE
EMBARCADERO CENTER
SAN
FRANCISCO, CA 94111-4006
WWW.ROPESGRAY.COM
July 18,
2023
Edward B. Baer
T +1 415 315 6328
edward.baer@ropesgray.com
VIA
EDGAR
Securities
and Exchange Commission
100
F Street, NE
Washington,
DC 20549
Attn: Anu
Dubey
Megan
Miller
Re: BondBloxx
ETF Trust (the “Registrant”)
File
No. 333-272788
Dear
Mses. Dubey and Miller:
This
letter is being filed to respond to the telephonic comments received from you on June 29, 2023, June 30, 2023 and July 6,
2023 regarding the staff of the Securities and Exchange Commission’s (the “SEC”) review of the Registrant’s
proxy and registration statement on Form N-14 (together, the “Registration Statement”) relating to the proposed reorganization
of the Highland/iBoxx Senior Loan ETF, a series of NexPoint Funds I (the “Target Fund”), with and into BondBloxx USD High
Yield Bond Sector Rotation ETF, a series of BondBloxx ETF Trust (the “Acquiring Fund”), filed with the SEC on June 20,
2023. The staff’s comments are summarized in bold to the best of our understanding, followed by the Registrant’s responses.
The Registrant’s responses will be reflected, to the extent applicable, in the definitive form of the Registration Statement filed
pursuant to Rule 497, which the Registrant expects to be filed on or about July 20, 2023. Capitalized terms not defined in
this letter have the meanings assigned to them in the Registration Statement.
General
Comments
1. Please
reflect any SEC staff comments made on Post-Effective Amendment No. 14 to the Registrant’s
registration statement on Form N-1A filed on April 6, 2023, to the extent applicable
to the Registration Statement.
The
Registrant confirms that any such applicable comments will be reflected in the Registration Statement.
2. The
SEC staff has taken the position that certain factors generally should be considered in determining
which fund’s historical performance should be presented following a fund combination.
See North American Security Trust, SEC No-Action Letter (pub. avail. Aug. 5, 1994)
(the “NAST Letter”). Because it is proposed that the Target
Fund will be the accounting survivor, please supplementally provide an analysis in accordance
with the above-referenced no-action letter.
As
described in the Registration Statement and the shell fund registration statement on Form N-1A for the Acquiring Fund, the Acquiring
Fund will succeed to the performance and financial history of the Target Fund. Because the Reorganization involves the merger of an existing
fund into a shell fund, the Acquiring Fund effectively has two choices in terms of showing performance information. The Acquiring Fund
may either (i) show the historical performance of the Target Fund, or (ii) show no performance at all. The Registrant believes that it
would be contrary to the positions of the staff to abandon the Target Fund’s historical performance in connection with the Reorganization,
particularly in light of the fact that it is succeeding to the Target Fund’s financial history. The Acquiring Fund, therefore,
must effectively adopt the Target Fund’s historical performance so no accounting survivor analysis, of the type described in the
NAST Letter, is necessary.
As
noted in the NAST Letter, the staff has generally stated that “the survivor of a business combination for accounting purposes,
i.e., the fund whose financial statements are carried forward, will be the fund whose historical performance may be used by a new or
surviving fund”- as is the case here with the Target Fund and Acquiring Fund. Moreover, while the NAST Letter addressed a shell
reorganization, the circumstances differed from those involved here because that shell reorganization involved three existing funds merging
into one new shell fund and, consequently, a substantive analysis was necessary to determine which of the three funds the new or surviving
fund most closely resembled. In the present circumstances, the Acquiring Fund, as previously noted, effectively has no choice regarding
the selection of historical performance and financial information to use following the Reorganization. Additionally, it is inconsistent
with the Registrant’s and its counsel’s understanding that the NAST Letter is applicable to shell reorganizations between
a single active fund with past performance and financial history and a shell fund. Accordingly, the Registrant respectfully declines
to accept this comment.
3. Regarding
discussion about the repositioning of the Target Fund prior to the Reorganization, please
consider including an estimate of the repositioning cost of the Target Fund in the Registration
Statement.
The
Registrant has revised the disclosure to note that the estimated repositioning cost to liquidate and settle all positions within the
Target Fund prior to the Reorganization is $266. In the event there is a delay in liquidating the Target Fund’s positions prior
to the Reorganization, the Target Fund may incur additional fees to expedite the settlement of such positions; however, the expedited
settlement fees are expected to be less than 25 basis points of the Target Fund’s assets, or less than $0.01 per share.
4. Please
include the national securities exchange on which shares of the Acquiring Fund will be listed
consistent with Item 6(b) of Form N-14.
The
requested change has been made.
Shareholder
Letter
5. With
respect to disclosure regarding associated economies of scale, given that economies of scale
may or may not be realized, please revise disclosure to reflect economies of scale may not
occur.
The
requested change has been made.
6. Please
revise the following sentence to clarify that “value” is net asset value and
not market price: “Upon shareholder approval and effectiveness of the Agreement, you
will receive shares of the Acquiring Fund equivalent to the value of your Target Fund shares
as of the closing date . . . .”
The
requested change has been made.
-2-
Notice
of Special Meeting
7. Please
include the record date as of which Target Fund shareholders will be entitled to vote on
the proposal(s).
The
requested change has been made.
Q&A
8. In
the second paragraph under the question “How will the Reorganization affect my investment?”,
please clarify that the Reorganization will not take place at the market price on the exchange.
The
requested change has been made.
9. In
the fifth paragraph under the question “How will the Reorganization affect my investment?”,
please disclose the estimated brokerage costs expected to be incurred with respect to (i)
conversion of substantially all of Target Fund’s holdings to cash and (ii) use of cash
to purchase new investments by Acquiring Fund. Please disclose in dollars and as a percentage
of assets. In each case, please also disclose which party will bear the brokerage costs.
The
following disclosure has been added to the fifth paragraph under the question “How will the Reorganization affect my investment?”
in the Registration Statement:
The estimated brokerage costs expected
to be incurred with respect to the conversion of substantially all of Target Fund’s portfolio holdings to cash is $0, or 0% of the
Target Fund’s assets, as there are no brokerage costs associated with liquidating bank loans. The estimated brokerage costs expected
to be incurred with respect to the use of cash to purchase new investments by the Acquiring Fund is $7,143, or 0.03% of the Acquiring
Fund’s assets, and will be borne by the Acquiring Fund. Because the Acquiring Fund will invest in affiliated ETFs, the estimated
brokerage costs will consist of brokerage commissions on such ETF shares, if any.
10. In
the second sentence under “How will the Reorganization affect my fees?”, please
disclose the ability of BondBloxx to recoup waived expenses.
The
requested change has been made.
11. In
footnote 1 to the fee table under “How will the Reorganization affect my fees?”,
please include disclosure clarifying that NexPoint may not recoup waived expenses after the
Reorganization.
The
requested change has been made.
12. In
footnote 2 to the fee table under “How will the Reorganization affect my fees?”,
please revise the disclosure to clarify that the contractual fee waiver may be terminated
only upon written agreement of the board of trustees of the Acquiring Trust and BondBloxx.
The
requested change has been made.
-3-
13. The
staff notes that BondBloxx proposes to implement an expense limitation agreement for at least
one year following the consummation of the reorganization under “How will your expenses
change as a result of the Reorganization?”; however, the dates for the duration of
the contractual fee waiver/expense limitation agreement are not included in footnote 2 to
the fee table under “How will the Reorganization affect my fees?”. Please revise
the disclosure in footnote 2 to the fee table to clarify that the contractual fee waiver/expense
limitation agreement will be in effect for at least one year.
The
requested change has been made.
14. Please
revise the disclosure under “How will your expenses change as a result of the Reorganization?”
to clarify how long BondBloxx has agreed to limit the Acquiring Fund’s net total annual
operating expenses to 55 basis points.
The
requested change has been made.
15. Please
disclose the ability of BondBloxx to recoup waived expenses under “How will your expenses
change as a result of the Reorganization?”.
The
requested change has been made.
16.
Please revise the disclosure under “What if I do not wish to participate in the Reorganization?” to replace “redeem” with “sell” since the Target Fund is an ETF. Please also clarify that any sale of Target Fund shares will be at market price.
The
requested change has been made.
Proxy
Statement/Prospectus
17. On
the cover page, please disclose the exchange on which Acquiring Fund shares will be listed
consistent with Item 2(a) of Form N-14.
The
requested change has been made.
18. On
page ii, please revise the last sentence of the third paragraph from the bottom of the page
so that it reads “Additional information about the Acquiring Fund will be included
in the Acquiring Fund’s Prospectus, when available.”
The
requested change has been made.
19. On
page ii, if the Acquiring Fund’s registration statement on Form N-1A will not be effective
before the Registration Statement, please delete references to the SEC file numbers for the
Acquiring Fund.
The
Registrant confirms that it will delete references to the Acquiring Fund’s SEC file numbers if the Acquiring Fund’s registration
statement on Form N-1A is not effective.
20. On
page 1, in the second sentence of the second paragraph under “Reasons for the proposed
Reorganization” beginning “NexPoint believes that the Reorganization will be
beneficial for the continued viability of the Acquiring Fund,” please replace “Acquiring
Fund” with “Target Fund.”
The
requested change has been made.
-4-
21. On
page 1, in the last sentence of the introductory paragraph under “Comparison of Investment
Objectives, Policies and Risks,” please delete references to the Acquiring Fund’s
prospectus and SAI if the Acquiring Fund’s registration statement on Form N-1A will
not be effective before the Registration Statement.
The
Registrant confirms that references to the Acquiring Fund’s prospectus and SAI will be deleted if the Acquiring Fund’s registration
statement on Form N-1A is not effective.
22. On
page 1 under “Investment Objective,” please describe the contents of the Markit
iBoxx USD Liquid Leveraged Loan Index.
The
requested change has been made.
23. On
page 1 under “Investment Policies and Strategies,” please highlight the differences
in the principal investment strategies between the Target Fund and the Acquiring Fund in
the introductory paragraph consistent with Item 3(b) of Form N-14 (e.g., the Acquiring
Fund employs a sector rotation strategy while the Target Fund does not and the Acquiring
Fund invests at least 80% in U.S. issuers while the Target Fund invests in U.S. and non-U.S.
issuers, including emerging markets issuers).
The
requested change has been made.
24. On
page 2 in the columns comparing the investment policies and principa