Correspondence 0001213900-24-044814 from Axxes Opportunistic Credit Fund (CIK 0002003867)
Axxes Opportunistic Credit Fund (CIK 0002003867)
Date: May 17, 2024 · CIK: 0002003867 · Accession: 0001213900-24-044814
AI Filing Summary & Sentiment
File numbers found in text: 333-278000, 811-23949
Letter
100 F Street, NE Washington, D.C. 20549 Attention: Ms. Quarles, Senior Counsel, Division of Investment Management Re: Axxes Opportunistic Credit Fund (File Nos. 333-278000 and 811-23949)
Dear Ms. Quarles:
On behalf of our client, Axxes Opportunistic Credit Fund (the “Fund”), set forth below are the responses of the Applicant to the comments received from the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC” or “Commission”) on April 15, 2024 in connection with the Registration Statement on Form N-2 (the “Registration Statement”) under the Securities Act of 1933, as amended (the “1933 Act”), and the Investment Company Act of 1940, as amended (the “1940 Act”) filed with the SEC on March 15, 2024. Below, we provide your comments and the Fund's responses. To the extent edits to the Registration Statement are necessary to respond to the comments, they will be reflected in a pre-effective amendment to the Registration Statement. (the "Pre-Effective Amendment No. 1"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Registration Statement, unless otherwise indicated. References to item and instruction numbers in this letter, unless otherwise specified, are to items and instructions in Form N-2.
GENERAL
Comment 1. We note that the Registration Statement is missing information and exhibits and contains bracketed disclosures. We may have comments on such portions when you complete them in any pre-effective amendment, on disclosures made in response to this letter, on information supplied supplementally, or on exhibits filed in any pre-effective amendment. Please plan accordingly.
Response 1. The Fund acknowledges the Staff's comment and will provide information as needed.
Ellie Quarles
May 17, 2024
Page 2
Comment 2. Where a comment is made concerning disclosure in one location, it is applicable to all similar disclosure appearing elsewhere in the Registration Statement. Please make all conforming changes.
Response 2. The Fund acknowledges the Staff's comment and will make conforming changes as needed.
Comment 3. We note that the Registration Statement discloses requests for exemptive relief (e.g., co-investment relief). Please advise us as to the status of the application disclosed in the Registration Statement and whether you have submitted or expect to submit any other exemptive applications or no-action requests in connection with the Registration Statement.
Response 3. The Fund intends to apply for co-investment exemptive relief but has not yet submitted its application. The Fund is not contemplating any other exemptive applications or no-action requests in connection with the Registration Statement at this time.
Comment 4. Please tell us if you have presented or will present any “test the waters” materials to potential investors in connection with this offering. If so, please provide us with copies of such materials.
Response 4. The Fund has not presented any such materials to potential investors, nor is such a presentation contemplated at this time.
Comment 5. Please confirm that the Fund does not intend to issue debt securities within 12 months from the effective date of the Registration Statement.
Response 5. The Fund does not currently intend to issue debt securities within 12 months from the effective date of the Registration Statement.
PROSPECTUS
Cover Page
Comment 6. In the discussion of the Fund’s 80% policy here and elsewhere throughout the prospectus, please delete “intends to” from before “invest at least 80%.”
Response 6. The Pre-Effective Amendment No. 1 will reflect the Staff's comment.
Comment 7. In the discussion of the investment strategy, please clarify the meaning of “related positions taken to support such credit-related agreements.”
Response 7. In the Pre-Effective Amendment No. 1, the reference to “related positions taken to support such credit-related agreements” will be deleted.
- 2 -
Ellie Quarles
May 17, 2024
Page 3
Comment 8. In the first location that you refer to high yield bonds, please also characterize them as “junk bonds.”
Response 8. The Pre-Effective Amendment No. 1 will reflect the Staff's comment.
Comment 9. In the first discussion of fallen angels, please define the term. To the extent that investments in fallen angels will be a principal investment, please include a discussion in the Investment Objectives and Strategies section and disclose the related risks.
Response 9. The Pre-Effective Amendment No. 1 will reflect the following definition: A “fallen angel” typically refers to a corporate bond that was originally rated investment grade, but was subsequently downgraded to high yield status. The Fund does not presently expect fallen angels to be a principal investment for the Fund. The Fund believes that the risks related to investments in fallen angels are not materially different than the risks related to investments in other high yield bonds.
Comment 10. On page ii, please clarify which of the “[v]arious Credit Instruments and other investments” are considered speculative. Please revise similar discussions throughout the prospectus.
Response 10. The language in question has been deleted and the Pre-Effective Amendment no. 1 will reflect the deletions in all applicable places in the prospectus.
Comment 11. Please advise us supplementally whether, and if so, the extent to which, the Fund may invest in private funds that rely on section 3(c)(1) or 3(c)(7) of the 1940 Act. We may have additional comments after reviewing your response.
Response 11. The Fund does not currently intend to invest in private funds that rely on Section 3(c)(1) or 3(c)(7).
Comment 12. In the discussion of “Securities Offered,” the Fund discloses that monies received will be invested “promptly.” The statement that monies will be invested promptly differs from the disclosure in the Use of Proceeds indicating that the Fund will invest the funds “as soon as practicable (but not in excess of the six months).” Please reconcile those statements.
Response 12. The "Securities Offered" section of the Pre-Effective Amendment No. 1 will reflect that monies received will be invested “as soon as practicable (but not in excess of the months after receipt, except to the extent proceeds are held in cash to pay dividends or expenses, satisfy repurchase offers or for temporary defensive purposes).”
- 3 -
Ellie Quarles
May 17, 2024
Page 4
Comment 13. Please include a footnote to the table for Class C shares indicating that such shares are subject to a contingent deferred sales charge if repurchased within one year. See Item 1.g. of Form N-2, Instruction 3.
Response 13. The Pre-Effective Amendment No. 1 will reflect the Staff's comment.
Comment 14. In the discussion of “Interval Fund,” include a cross-reference to the prospectus sections that discuss the risks related to the Fund’s repurchase policies. See Guide 10 to Form N-2.
Response 14. The Pre-Effective Amendment No. 1 will reflect the Staff's comment.
PROSPECTUS SUMMARY
Investment Program
Comment 15. The Fund discloses that it will invest in credit-related instruments involving shipping and other transportation assets. Please disclose any related risks associated with these investments in the Fund’s later discussion of risks. Please also clarify whether there are any other credit-related instruments besides leases through which the Fund will invest in these assets and describe “other transportation assets.”
Response 15. The Pre-Effective Amendment No. 1 will reflect the Staff’s comment. The Pre-Effective Amendment No. 1 will define "other transportation assets" to include assets such as aircraft and railroad boxcars. The Fund does not expect to invest in credit instruments related to transportation assets other than leases and functionally similar agreements, such as shipping charter contracts, as currently disclosed in the Registration Statement.
Risk Factors
Comment 16. In the fifth bullet on page 2, please clarify that the Fund’s investments may be in Credit Instruments or equity securities of operating companies whose capital structures are highly leveraged. Please also indicate that the debt of these companies may be considered high yield debt (or junk bonds) and that these issuers may be subject to reorganization, restructuring, or bankruptcy proceedings.
Response 16. The Pre-Effective Amendment No. 1 will reflect the Staff's comment.
- 4 -
Ellie Quarles
May 17, 2024
Page 5
Comment 17. In the bullet at the top of page 3, please explain why the Fund may not be able to vote on matters that require approval of investors in its underlying investments.
Response 17. The Pre-Effective Amendment No. 1 will reflect the Staff's comment as drafted below:
The Fund may not be able to vote on matters that require the approval of investors in its underlying investments (e.g., by purchasing non-voting securities in its underlying investments), including matters that could adversely affect the Fund.
Comment 18. In the third bullet on page 3, please clarify whether the reference to “market exchange” should be to “market or exchange.”
Response 18. The Pre-Effective Amendment No. 1 will reflect "market or exchange."
Comment 19. In the seventh bullet on page 3, please clarify whether the Fund intends to focus its investments in any specific industry or group of industries of those identified. If so, please provide disclosure in the discussion of the Fund’s principal strategies about the Fund’s concentration in such industry or group of industries.
Response 19. The Fund does not presently intend to focus its investments in any of the industries or sectors listed on the Registration Statement.
Leverage
Comment 20. Please advise us of the status of entering into a credit facility and include risks specific to that credit facility. Please also file any related material credit agreements.
Response 20. The Fund has not entered into any credit facilities nor is such an entrance intended upon commencement of Fund operations.
- 5 -
Ellie Quarles
May 17, 2024
Page 6
Distributions
Comment 21. Please use consistent terminology when you refer to the dividend reinvestment plan throughout the prospectus. We note disclosure that refers to it as the “distribution reinvestment plan” in other locations.
Response 21. The Pre-Effective Amendment No. 1 will reflect the Staff's comment.
SUMMARY OF FUNDS FEES AND EXPENSES
Comment 22. Please revise clause (1) in footnote 8 regarding reimbursement to refer to the Expense Cap in place at the time such amounts were “waived” rather than “paid or borne.”
Response 22. The Pre-Effective Amendment No. 1 will reflect the Staff's comment.
USE OF PROCEEDS
Comment 23. Please revise the disclosure to clarify the reason for the delay of up to six months for investing proceeds from the sale of Shares. See Guidelines for Form N-2, Guide 1.
Response 23. The Fund submits that it will partially invest the net proceeds from the offering in accordance with its investment objective as soon as practicable and not later than six months after receipt. Unlike with a traditional closed-end fund, the Fund will not conduct an initial public offering that will result in a one-time receipt of substantial proceeds following a single offering. Instead, similar to an open-end fund, the Fund will conduct a continuous offering and will therefore continuously receive proceeds that will be invested on an ongoing basis as investment opportunities arise and are subsequently evaluated.
The Fund has amended its disclosure to reflect that it will invest proceeds not later than six months after receipt, except to the extent proceeds are held in cash to pay dividends or expenses, satisfy repurchase offers or for temporary defensive purposes.
- 6 -
Ellie Quarles
May 17, 2024
Page 7
INVESTMENT PROGRAM
Investment Objective and Principal Strategies
Comment 24. Please include a full description of the Fund’s investment objectives and strategies in this section, including a description of the Credit Instruments described on the cover page. Please discuss the expected maturity and duration of these investments.
Response 24. The Fund expects the maturity of most Credit Instruments in which it will invest to range from 3 to 12 years. While the Fund may hold some Credit Instruments to their maturity, the Fund expects most of its investments in Credit Instruments to be held for 3-5 years or less.
Comment 25. We note cover page and risk disclosure regarding high-yield debt. Please clarify whether the Fund’s principal strategy will include investments in below investment grade securities. If so, please include corresponding strategy disclosure in the summary and in this section, and a corresponding risk bullet point on the cover page regarding investments in “junk” bonds.
Response 25. The Fund submits that investing in below investment grade instruments is part of the Fund's principal investment strategy and Pre-Effective Amendment No. 1 will include corresponding strategy and risk bullet disclosure in the applicable sections.
Comment 26. We note the “Covenant-Lite Loans” risk. Please provide corresponding strategy disclosure about “covenant-lite” loans if they will be part of the Fund’s principal investments.
Response 26. The Fund submits that covenant-lite loans are expected to constitute a principal investment for the Fund, since a large percentage of the leveraged loan market consists of covenant-lite loans. Pre-Effective Amendment No. 1 will include additional disclosure in the applicabl
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CLIFFORD CHANCE US LLP
Two Manhattan West
375 9th Avenue
New York, NY
10001-1696
Tel +1 212 878 8000
Fax +1 212 878 8375
www.cliffordchance.com
May 17, 2024
U.S. Securities and Exchange Commission
Judiciary Plaza
100 F Street, NE
Washington, D.C. 20549
Attention: Ms. Quarles, Senior Counsel, Division
of Investment Management
Re: Axxes Opportunistic Credit Fund (File Nos. 333-278000 and 811-23949)
Dear Ms. Quarles:
On behalf of our client, Axxes Opportunistic Credit
Fund (the “Fund”), set forth below are the responses of the Applicant to the comments received from the staff (the
“Staff”) of the Securities and Exchange Commission (the “SEC” or “Commission”)
on April 15, 2024 in connection with the Registration Statement on Form N-2 (the “Registration Statement”) under the
Securities Act of 1933, as amended (the “1933 Act”), and the Investment Company Act of 1940, as amended (the “1940
Act”) filed with the SEC on March 15, 2024. Below, we provide your comments and the Fund's responses. To the extent edits to
the Registration Statement are necessary to respond to the comments, they will be reflected in a pre-effective amendment to the Registration
Statement. (the "Pre-Effective Amendment No. 1"). Capitalized terms used but not defined herein have the meanings ascribed to
them in the Registration Statement, unless otherwise indicated. References to item and instruction numbers in this letter, unless otherwise
specified, are to items and instructions in Form N-2.
GENERAL
Comment 1. We note that the Registration
Statement is missing information and exhibits and contains bracketed disclosures. We may
have comments on such portions when you complete them in any pre-effective amendment, on
disclosures made in response to this letter, on information supplied supplementally, or on
exhibits filed in any pre-effective amendment. Please plan accordingly.
Response 1. The Fund acknowledges
the Staff's comment and will provide information as needed.
Ellie Quarles
May 17, 2024
Page 2
Comment 2. Where a comment is made concerning
disclosure in one location, it is applicable to all similar disclosure appearing elsewhere
in the Registration Statement. Please make all conforming changes.
Response 2. The Fund acknowledges
the Staff's comment and will make conforming changes as needed.
Comment 3. We note that the Registration
Statement discloses requests for exemptive relief (e.g., co-investment relief). Please advise us as to the status of the application
disclosed in the Registration Statement and whether you have submitted or expect to submit any other exemptive applications or no-action
requests in connection with the Registration Statement.
Response 3. The Fund intends to
apply for co-investment exemptive relief but has not yet submitted its application. The Fund is not contemplating any other exemptive
applications or no-action requests in connection with the Registration Statement at this time.
Comment 4. Please tell us if you have presented or will present any “test the waters”
materials to potential investors in connection with this offering. If so, please provide us with copies of such materials.
Response 4. The Fund has not presented
any such materials to potential investors, nor is such a presentation contemplated at this time.
Comment 5. Please confirm that the Fund does not intend to issue debt securities within 12 months
from the effective date of the Registration Statement.
Response 5. The Fund does not
currently intend to issue debt securities within 12 months from the effective date of the Registration Statement.
PROSPECTUS
Cover Page
Comment 6. In the discussion of the Fund’s 80% policy here and elsewhere throughout the prospectus,
please delete “intends to” from before “invest at least 80%.”
Response 6. The Pre-Effective
Amendment No. 1 will reflect the Staff's comment.
Comment 7. In the discussion of the investment strategy, please clarify the meaning of “related
positions taken to support such credit-related agreements.”
Response 7. In the Pre-Effective
Amendment No. 1, the reference to “related positions taken to support such credit-related agreements” will be deleted.
- 2 -
Ellie Quarles
May 17, 2024
Page 3
Comment 8. In the first location that you refer to high yield bonds, please also characterize them
as “junk bonds.”
Response 8. The Pre-Effective
Amendment No. 1 will reflect the Staff's comment.
Comment 9. In the first discussion of fallen angels, please define the term. To the extent that investments
in fallen angels will be a principal investment, please include a discussion in the Investment Objectives and Strategies
section and disclose the related risks.
Response 9. The Pre-Effective
Amendment No. 1 will reflect the following definition: A “fallen angel” typically refers to a corporate bond that was originally
rated investment grade, but was subsequently downgraded to high yield status. The Fund does not presently expect fallen angels to be a
principal investment for the Fund. The Fund believes that the risks related to investments in fallen angels are not materially different
than the risks related to investments in other high yield bonds.
Comment 10. On page ii, please clarify
which of the “[v]arious Credit Instruments and other investments” are considered
speculative. Please revise similar discussions throughout the prospectus.
Response 10. The language in question
has been deleted and the Pre-Effective Amendment no. 1 will reflect the deletions in all applicable places in the prospectus.
Comment 11. Please advise us supplementally whether, and if so, the extent to which, the Fund may
invest in private funds that rely on section 3(c)(1) or 3(c)(7) of the 1940 Act. We may have additional comments after reviewing
your response.
Response 11. The Fund does not
currently intend to invest in private funds that rely on Section 3(c)(1) or 3(c)(7).
Comment 12. In the discussion of “Securities Offered,” the Fund discloses that monies
received will be invested “promptly.” The statement that monies will be invested promptly differs from the disclosure
in the Use of Proceeds indicating that the Fund will invest the funds “as soon as practicable (but not in excess of
the six months).” Please reconcile those statements.
Response 12. The "Securities
Offered" section of the Pre-Effective Amendment No. 1 will reflect that monies received will be invested “as soon as practicable
(but not in excess of the months after receipt, except to the extent proceeds are held in cash to pay dividends or expenses, satisfy
repurchase offers or for temporary defensive purposes).”
- 3 -
Ellie Quarles
May 17, 2024
Page 4
Comment 13. Please include a footnote to the table for Class C shares indicating that such shares
are subject to a contingent deferred sales charge if repurchased within one year. See Item 1.g. of Form N-2, Instruction
3.
Response 13. The Pre-Effective
Amendment No. 1 will reflect the Staff's comment.
Comment 14. In the discussion of “Interval Fund,” include a cross-reference to the prospectus
sections that discuss the risks related to the Fund’s repurchase policies. See Guide 10 to Form N-2.
Response 14. The Pre-Effective
Amendment No. 1 will reflect the Staff's comment.
PROSPECTUS SUMMARY
Investment Program
Comment 15. The Fund discloses that
it will invest in credit-related instruments involving shipping and other transportation
assets. Please disclose any related risks associated with these investments in the Fund’s
later discussion of risks. Please also clarify whether there are any other credit-related
instruments besides leases through which the Fund will invest in these assets and describe
“other transportation assets.”
Response 15. The Pre-Effective
Amendment No. 1 will reflect the Staff’s comment. The Pre-Effective Amendment No. 1 will define "other transportation assets"
to include assets such as aircraft and railroad boxcars. The Fund does not expect to invest in credit instruments related to transportation
assets other than leases and functionally similar agreements, such as shipping charter contracts, as currently disclosed in the Registration
Statement.
Risk Factors
Comment 16. In the fifth bullet on
page 2, please clarify that the Fund’s investments may be in Credit Instruments or
equity securities of operating companies whose capital structures are highly leveraged. Please
also indicate that the debt of these companies may be considered high yield debt (or junk
bonds) and that these issuers may be subject to reorganization, restructuring, or bankruptcy
proceedings.
Response 16. The Pre-Effective Amendment No. 1 will reflect
the Staff's comment.
- 4 -
Ellie Quarles
May 17, 2024
Page 5
Comment 17. In the bullet at the top
of page 3, please explain why the Fund may not be able to vote on matters that require approval
of investors in its underlying investments.
Response 17. The Pre-Effective
Amendment No. 1 will reflect the Staff's comment as drafted below:
The Fund may not be able to vote on
matters that require the approval of investors in its underlying investments (e.g., by purchasing
non-voting securities in its underlying investments), including matters that could adversely affect the Fund.
Comment 18. In the third bullet on page
3, please clarify whether the reference to “market exchange” should be to “market
or exchange.”
Response 18. The Pre-Effective
Amendment No. 1 will reflect "market or exchange."
Comment 19. In the seventh bullet on
page 3, please clarify whether the Fund intends to focus its investments in any specific
industry or group of industries of those identified. If so, please provide disclosure in
the discussion of the Fund’s principal strategies about the Fund’s concentration
in such industry or group of industries.
Response 19. The Fund does not
presently intend to focus its investments in any of the industries or sectors listed on the Registration Statement.
Leverage
Comment 20. Please advise us of the status
of entering into a credit facility and include risks specific to that credit facility. Please
also file any related material credit agreements.
Response 20. The Fund has not
entered into any credit facilities nor is such an entrance intended upon commencement of Fund operations.
- 5 -
Ellie Quarles
May 17, 2024
Page 6
Distributions
Comment 21. Please use consistent terminology
when you refer to the dividend reinvestment plan throughout the prospectus. We note disclosure
that refers to it as the “distribution reinvestment plan” in other locations.
Response 21. The Pre-Effective
Amendment No. 1 will reflect the Staff's comment.
SUMMARY OF FUNDS
FEES AND EXPENSES
Comment 22. Please revise clause (1)
in footnote 8 regarding reimbursement to refer to the Expense Cap in place at the time such
amounts were “waived” rather than “paid or borne.”
Response 22. The Pre-Effective
Amendment No. 1 will reflect the Staff's comment.
USE OF PROCEEDS
Comment 23. Please revise the disclosure
to clarify the reason for the delay of up to six months for investing proceeds from the sale
of Shares. See Guidelines for Form N-2, Guide 1.
Response 23. The Fund submits
that it will partially invest the net proceeds from the offering in accordance with its investment objective as soon as practicable and
not later than six months after receipt. Unlike with a traditional closed-end fund, the Fund will not conduct an initial public offering
that will result in a one-time receipt of substantial proceeds following a single offering. Instead, similar to an open-end fund, the
Fund will conduct a continuous offering and will therefore continuously receive proceeds that will be invested on an ongoing basis as
investment opportunities arise and are subsequently evaluated.
The Fund has amended its disclosure to
reflect that it will invest proceeds not later than six months after receipt, except to the extent proceeds are held in cash to pay dividends
or expenses, satisfy repurchase offers or for temporary defensive purposes.
- 6 -
Ellie Quarles
May 17, 2024
Page 7
INVESTMENT PROGRAM
Investment Objective and Principal Strategies
Comment 24. Please include a full description
of the Fund’s investment objectives and strategies in this section, including a description
of the Credit Instruments described on the cover page. Please discuss the expected maturity
and duration of these investments.
Response 24. The Fund expects
the maturity of most Credit Instruments in which it will invest to range from 3 to 12 years. While the Fund may hold some Credit Instruments
to their maturity, the Fund expects most of its investments in Credit Instruments to be held for 3-5 years or less.
Comment 25. We note cover page and risk
disclosure regarding high-yield debt. Please clarify whether the Fund’s principal strategy
will include investments in below investment grade securities. If so, please include corresponding
strategy disclosure in the summary and in this section, and a corresponding risk bullet point
on the cover page regarding investments in “junk” bonds.
Response 25. The Fund submits
that investing in below investment grade instruments is part of the Fund's principal investment strategy and Pre-Effective Amendment No.
1 will include corresponding strategy and risk bullet disclosure in the applicable sections.
Comment 26. We note the “Covenant-Lite
Loans” risk. Please provide corresponding strategy disclosure about “covenant-lite”
loans if they will be part of the Fund’s principal investments.
Response 26. The Fund submits
that covenant-lite loans are expected to constitute a principal investment for the Fund, since a large percentage of the leveraged loan
market consists of covenant-lite loans. Pre-Effective Amendment No. 1 will include additional disclosure in the applicabl