Correspondence 0001575872-23-001076 from American Marketplace Capital Corp (CIK 0001962903)
American Marketplace Capital Corp (CIK 0001962903)
Date: June 30, 2023 · CIK: 0001962903 · Accession: 0001575872-23-001076
AI Filing Summary & Sentiment
File numbers found in text: 000-56514
Referenced dates: February 24, 2023
Letter
United States Securities and Exchange Commission Washington, D.C. 20549 Re: American Marketplace Capital Corporation, File No. 000-56514
Dear Ms. Brutlag:
On behalf of American Marketplace Capital Corporation (the “Company”), set forth below is the Company’s response to the comments provided by the staff of the Division of Investment Management (the “Staff”) of the U.S. Securities and Exchange Commission (the “SEC”) in a letter dated February 24, 2023 regarding the Company’s registration statement on Form 10 (File No. 000-56514) (the “Registration Statement”), as filed with the SEC on January 25, 2023. The Staff’s comments are set forth below and are followed by the Company’s responses. Where applicable, revisions to the Registration Statement referenced in the below responses are set forth in a new Registration Statement on Form 10, concurrently filed herewith.
EXPLANATORY NOTE
1. Page 3 includes a summary of risks presented in bullet-point form, which is important information that should be given prominence. Consider making this text bold and/or larger font to draw attention to this disclosure. We also suggest that the bullets appear in bold and in a larger font immediately above the signature line on the subscription agreement.
Response: The Company has made the text bold in the summary of risks section. Further, the Company will include the summary risks in bold type immediately above the signature line in the form of subscription agreement.
ITEM 1. BUSINESS
The Company - American Marketplace Capital Corporation
2. Investment Objective. The disclosure on page 7 states that the Company intends to achieve its investment objective “by investing in a portfolio composed primarily of merchant cash advances (‘MCAs’) to small and middle-market companies” and that “MCAs provide alternative financing to a traditional small-business loan.” It also states that “[t]he Company will gain exposure to MCAs as follows: (i) purchasing individual MCAs, or a pool of MCAs, directly from MCA Providers; (ii) by purchasing a portion of an MCA or pool of MCAs (a “Participation Interest”) from MCA Providers; and (iii) to a lesser extent, by originating MCAs directly.” In addition, the disclosure states that the Company is unaware of other BDCs or closed-end funds that principally invest in MCAs.
a. If true, please clarify in the disclosure that the Company will invest in a portfolio composed primarily of MCAs to small and middle-market companies in the United States and that the MCAs and Senior Loans will be made to private companies only.
Eversheds Sutherland (US) LLP is part of a global legal practice, operating through various separate and distinct legal entities, under Eversheds Sutherland. For a full description of the structure and a list of offices, please visit www.eversheds-sutherland.com.
Samantha A. Brutlag
Page
b. Please briefly explain further in this section what MCAs are and how they work, including how they differ from traditional small-business loans. Since the Company invests principally in MCAs, it is important for investors to understand what MCAs are in order to understand the Company's business.
c. Please explain to the staff (i) why MCAs should be deemed "securities" for purposes of Section 2(a)(48) of the Investment Company Act of 1940, as amended (the “1940 Act”) and (ii) why an MCA, including if bought via participation, would be considered a "qualifying asset" under Section 55(a) of the 1940 Act.
d. Please explain to the staff whether the funding structures for MCAs, including MCA participations, could be found to involve the issuance of unregistered securities, and what, if any, exemptions from registration would apply.
e. Please explain to the staff how the Company and MCA providers chosen by the Company will structure MCA participations and transactions in a manner that complies with securities laws.
Response:
a. The Company has revised the disclosure on page 7 of the Registration Statement to clarify that the Company’s investment portfolio will be comprised primarily of MCAs to small- and middle-market United States companies (“Merchants”) and Senior Loans to privately owned United States companies.
b. The Company has added additional disclosure to page 7 of the Registration Statement, further describing what MCAs are and how they work, including how they differ from traditional small-business loans.
c. The Company believes that, for the purposes of Section 2(a)(48) of the 1940 Act, investments in MCAs are investments in “securities.” The 1940 Act does not specifically address whether an MCA is a security; however, the Company believes that its MCA investments would be structurally comparable to unsecured debt investments made by BDCs and registered closed-end funds, which are treated as securities for purposes of the 1940 Act. In both cases, whether it be the Company investing in an MCA or a BDC that invests in subordinated debt of its portfolio companies, capital is provided to a Merchant or portfolio company, which the Merchant or portfolio company is then obligated to repay based on a certain repayment schedule. While an MCA may technically not be considered a loan, and instead a contract for the purchase of future receivables, the Company does not believe that this difference should result in one such structure being a security, and the other not for purposes of Section 2(a)(48). Further, Section 3(c)(5)(A) exempts from the definition of investment company, companies that are in the business of “[p]urchasing or otherwise acquiring notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services,” subject to certain additional requirements. This exemption covers companies that engage in “factoring” (i.e., purchasing invoices/accounts receivable at a discount) and implies that the SEC believes that factoring contracts are securities for purposes of the 1940 Act. While MCAs are contracts for future receivables as opposed to existing invoices, the structures are analogous in that both involve providing capital in exchange for receivables. Because the Company believes that MCAs are securities for purposes of the 1940 Act, if the Company purchases an MCA (or a Participation Interest of a single MCA) of a Merchant that qualifies as an eligible portfolio company, this investment would be considered a “qualifying asset” under Section 55(a) of the 1940 Act. The Company acknowledges that, generally, an investment in a structured pool of MCAs via a Participation Interest may not be considered a “qualifying asset” and, as such, the Company would only invest in such participations outside of the “70% bucket.”
Samantha A. Brutlag
Page
d. Without taking a position regarding whether the sale of an MCA Participation Interest constitutes the issuance of an unregistered security, the Company intends to invest in Participation Interests that are structured in compliance with Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and/or the private offering rules of Regulation D under the Securities Act. Similarly, without taking a position regarding whether the sale of an individual MCA, in its entirety, constitutes the issuance of an unregistered security, the Company notes that its investments in MCAs will be completed via private transactions that do not involve a public offering or general solicitation (See Section 4(a)(2) of the Securities Act).
e. As stated above, the Company intends to invest in Participation Interests that are structured in compliance with Section 4(a)(2) and/or Regulation D under the Securities Act.
Investment Process Overview
3. Page 17 states "MCA Providers will receive a portion of the cash flow generated from each MCA they originate or service in the form of a technology and servicing fee." Please explain to the staff:
a. whether these fees will be reflected in the fee table and, if excluded, the basis for such determination.
b. whether the Company or Adviser will enter into agreements for such technology and servicing activities, and if so, whether such agreements will be filed as exhibits to the Registration Statement.
Response:
a. The fees received by the MCA Providers will not be reflected in the fee table. When a Merchant makes a payment on an M
Show Raw Text
CORRESP
1
filename1.htm
Eversheds
Sutherland (US) LLP
700
Sixth Street, NW, Suite 700
Washington, DC 20001-3980
D:
+1 202.383.0262
F: +1 202.637.3593
owenpinkerton@eversheds-sutherland.com
June
30, 2023
Samantha
A. Brutlag
Senior
Counsel
United
States
Securities
and Exchange Commission
Washington,
D.C. 20549
Re: American
Marketplace Capital Corporation, File No. 000-56514
Dear
Ms. Brutlag:
On
behalf of American Marketplace Capital Corporation (the “Company”), set forth below is the Company’s response to the
comments provided by the staff of the Division of Investment Management (the “Staff”) of the U.S. Securities and Exchange
Commission (the “SEC”) in a letter dated February 24, 2023 regarding the Company’s registration statement on Form 10
(File No. 000-56514) (the “Registration Statement”), as filed with the SEC on January 25, 2023. The Staff’s comments
are set forth below and are followed by the Company’s responses. Where applicable, revisions to the Registration Statement referenced
in the below responses are set forth in a new Registration Statement on Form 10, concurrently filed herewith.
EXPLANATORY
NOTE
1. Page
3 includes a summary of risks presented in bullet-point form, which is important information
that should be given prominence. Consider making this text bold and/or larger font to draw
attention to this disclosure. We also suggest that the bullets appear in bold and in a larger
font immediately above the signature line on the subscription agreement.
Response:
The Company has made the text bold in the summary of risks section. Further, the Company will include the summary risks in bold type
immediately above the signature line in the form of subscription agreement.
ITEM
1. BUSINESS
The
Company - American Marketplace Capital Corporation
2. Investment
Objective. The disclosure on page 7 states that the Company intends to achieve its investment
objective “by investing in a portfolio composed primarily of merchant cash advances
(‘MCAs’) to small and middle-market companies” and that “MCAs provide
alternative financing to a traditional small-business loan.” It also states that “[t]he
Company will gain exposure to MCAs as follows: (i) purchasing individual MCAs, or a pool
of MCAs, directly from MCA Providers; (ii) by purchasing a portion of an MCA or pool of MCAs
(a “Participation Interest”) from MCA Providers; and (iii) to a lesser extent,
by originating MCAs directly.” In addition, the disclosure states that the Company
is unaware of other BDCs or closed-end funds that principally invest in MCAs.
a. If
true, please clarify in the disclosure that the Company will invest in a portfolio composed
primarily of MCAs to small and middle-market companies in the United States and that the
MCAs and Senior Loans will be made to private companies only.
Eversheds Sutherland
(US) LLP is part of a global legal practice, operating through various separate and distinct legal entities, under Eversheds Sutherland.
For a full description of the structure and a list of offices, please visit www.eversheds-sutherland.com.
Samantha
A. Brutlag
Page
2
b. Please
briefly explain further in this section what MCAs are and how they work, including how they
differ from traditional small-business loans. Since the Company invests principally in MCAs,
it is important for investors to understand what MCAs are in order to understand the Company's
business.
c. Please
explain to the staff (i) why MCAs should be deemed "securities" for purposes of
Section 2(a)(48) of the Investment Company Act of 1940, as amended (the “1940 Act”)
and (ii) why an MCA, including if bought via participation, would be considered a "qualifying
asset" under Section 55(a) of the 1940 Act.
d. Please
explain to the staff whether the funding structures for MCAs, including MCA participations,
could be found to involve the issuance of unregistered securities, and what, if any, exemptions
from registration would apply.
e. Please
explain to the staff how the Company and MCA providers chosen by the Company will structure
MCA participations and transactions in a manner that complies with securities laws.
Response:
a. The
Company has revised the disclosure on page 7 of the Registration Statement to clarify that
the Company’s investment portfolio will be comprised primarily of MCAs to small- and
middle-market United States companies (“Merchants”) and Senior Loans to privately
owned United States companies.
b. The
Company has added additional disclosure to page 7 of the Registration Statement, further
describing what MCAs are and how they work, including how they differ from traditional small-business
loans.
c. The
Company believes that, for the purposes of Section 2(a)(48) of the 1940 Act, investments in MCAs are investments in
“securities.” The 1940 Act does not specifically address whether an MCA is a security; however, the Company believes
that its MCA investments would be structurally comparable to unsecured debt investments made by BDCs and registered closed-end
funds, which are treated as securities for purposes of the 1940 Act. In both cases, whether it be the Company investing in an MCA or
a BDC that invests in subordinated debt of its portfolio companies, capital is provided to a Merchant or portfolio company, which
the Merchant or portfolio company is then obligated to repay based on a certain repayment schedule. While an MCA may technically not
be considered a loan, and instead a contract for the purchase of future receivables, the Company does not believe that this
difference should result in one such structure being a security, and the other not for purposes of Section 2(a)(48). Further,
Section 3(c)(5)(A) exempts from the definition of investment company, companies that are in the business of “[p]urchasing or
otherwise acquiring notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of
the sales price of merchandise, insurance, and services,” subject to certain additional requirements. This exemption covers
companies that engage in “factoring” (i.e., purchasing invoices/accounts receivable at a discount) and implies that the
SEC believes that factoring contracts are securities for purposes of the 1940 Act. While MCAs are contracts for future receivables
as opposed to existing invoices, the structures are analogous in that both involve providing capital in exchange for receivables.
Because the Company believes that MCAs are securities for purposes of the 1940 Act, if the Company purchases an MCA (or a
Participation Interest of a single MCA) of a Merchant that qualifies as an eligible portfolio company, this investment would be
considered a “qualifying asset” under Section 55(a) of the 1940 Act. The Company acknowledges that, generally, an
investment in a structured pool of MCAs via a Participation Interest may not be considered a “qualifying asset” and, as
such, the Company would only invest in such participations outside of the “70% bucket.”
Samantha
A. Brutlag
Page
3
d. Without
taking a position regarding whether the sale of an MCA Participation Interest constitutes
the issuance of an unregistered security, the Company intends to invest in Participation
Interests that are structured in compliance with Section 4(a)(2) of the Securities Act of
1933, as amended (the “Securities Act”) and/or the private offering rules of
Regulation D under the Securities Act. Similarly, without taking a position regarding whether
the sale of an individual MCA, in its entirety, constitutes the issuance of an unregistered
security, the Company notes that its investments in MCAs will be completed via private transactions
that do not involve a public offering or general solicitation (See Section 4(a)(2) of the
Securities Act).
e. As
stated above, the Company intends to invest in Participation Interests that are structured
in compliance with Section 4(a)(2) and/or Regulation D under the Securities Act.
Investment
Process Overview
3. Page
17 states "MCA Providers will receive a portion of the cash flow generated from each
MCA they originate or service in the form of a technology and servicing fee." Please
explain to the staff:
a. whether
these fees will be reflected in the fee table and, if excluded, the basis for such determination.
b. whether
the Company or Adviser will enter into agreements for such technology and servicing activities,
and if so, whether such agreements will be filed as exhibits to the Registration Statement.
Response:
a. The
fees received by the MCA Providers will not be reflected in the fee table. When a Merchant
makes a payment on an M