SecProbe.io

June 28, 2024

Via Email

Emily Picard
Clifford Chance LLP
Two Manhattan West
375 9th Avenue
New York, NY 10001-1696
emily.picard@cliffordchance.com

Re:   TCW Spirit Direct Lending LLC
Registration Statement on Form N-2
File No. 811-23967

Dear Ms. Picard:

On May 30, 2024, you filed a registration statement on Form N-2 on behalf of TCW Spirit
Direct Lending LLC (the “Fund”). We have reviewed the registration statement and have provided our comments below. Where a comment is made in one location, it is applicable to all similar disclosure appearing elsewhere in the registration statement. All capitalized terms not otherwise defined herein have the meaning given to them in the registration statement.
Facing Sheet

1. Disclosure states that the Fund’s units will be issued in private placement transactions under
“Section 4(2)” of the Securities Act of 1933. Please revise to state, “Section 4(a)(2).”
Prospectus

Page A-1 – Item 3. Fee Table and Synopsis

2. The Fund has omitted the synopsis (Item 3.2) pursuant to paragraph 3 of Instruction G of the
General Instructions to Form N-2. Please delete “and Synopsis” from the heading in this section.

3. Please align the headings in the fee table with the Form N-2 requirements, e.g., add “attributable
to limited liability company units” after “as a percentage of net assets.” See Item 3.1 of Form N-
2.

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 4. In the line item for “Management Fee”:

x Please add “Base” before “Management Fee.”
x Please confirm that the Fund has disclosed the management fee as a percentage of net assets.
The footnote to this line item may disclose the management as a percentage of gross assets.
Please include in the footnote a cross-reference to a discussion of the Item 9.1.b. discussion of the management fee. The Item 9.1.b. discussion should disclose the management fee as a percentage of average net assets as well as gross assets. See Item 3, Instr. 7 and Item
9.1.b.3., Instrs. 1 and 2 of Form N-2.
x The term “Members” and “Unitholders” appear variously throughout the registration
statement. The Fund’s Amended and Restated Limited Liability Company Agreement appears to define members as “Common Unitholders.” Please ensure that references to investors are accurate and consistent throughout the registration statement.

5. Please delete “Fees and” from the line item for “Fees and Interest Payments on Borrowed
Funds,” or explain why inclusion is necessary.

6. In the line item for “Other Expenses,” please confirm that the fees included in the parenthetical
are the only fees included. Otherwise, please delete the parenthetical.

7. In the line item for “Incentive Fee”:
x Please relocate the line item to appear directly after “Base Management Fee.”
x Please delete the fee listed for “Incentive Fee” and replace with a dash as the present
inclusion assumes a certain level of positive performance.
x Please consider revising footnote 4 to state, as applicable,
o Performance targets are not assumed, and therefore, no incentive fee is included;
o Incentive fees are expected to increase as income increases and include any appropriate
examples.

Page A-2 – Item 3. Fee Table and Synopsis
8. In footnote 5:
x Please supplementally explain what “AU$” means.
x Please clarify that the Fee Waiver Agreement shall become effective at the time the Fund
commences operations and shall continue for a period of one year.
x Please supplementally explain whether the Adviser may be reimbursed for fees waived
under the Fee Waiver Agreement.
x Please confirm that the incentive fee does not have a capital gains component.
9. In the Expense Example, please round all dollar figures to the nearest dollar. See Item 3, Instr. 3
of Form N-2.

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 Page A-2 – Item 8.1 General Description of the Registrant
10. Please revise the second bullet point, as follows:
x The Fund’s units will not be listed on an exchange, and it is not anticipated that a secondary
market will develop. Thus, an investment in the Fund may not be suitable for investors who
may need the money they invest in a specified timeframe.
11. Please add the following bullet points:
x The amount of distributions that the Fund may pay, if any, is uncertain.
x The Fund may pay distributions in significant part from sources that may not be available in
the future and that are unrelated to the Fund’s performance, such as from offering proceeds,
borrowings, and amounts from the Fund’s affiliates that are subject to repayment by
investors.
Page A-3 – Item 8.2 Investment Objectives and Policies
12. In the third paragraph, disclosure refers to unsecured senior loans, subordinated loans, and
mezzanine loans. If the Fund holds a significant amount of covenant-lite loans, please revise
your principal risks disclosure to include the heightened risks associated with covenant-lite
loans.
Page A-4 – Item 8.2 Investment Objectives and Policies
13. In the top paragraph, disclosure states, “The Fund will consider financings for many different
purposes, including corporate acquisitions, growth opportunities, liquidity needs, rescue
situations, recapitalizations, debtor-in-possession (‘DIP’) loans, bridge loans and Chapter 11
exits.” Please revise this sentence using clear, concise, and understandable language.

Page A-4 – Fundamental Investment Policies
14. Please revise the definition of “majority of the outstanding voting Units of the Fund” to align
with the language in section 2(a)(42) of the Investment Company Act of 1940 (“1940 Act”) (e.g., 67 per centum or more, instead of 66-2/3% or more).
Page A-5 -- Fundamental Investment Policies

15. In the second bullet point, disclosure states that the “Fund intends to not invest more than 30%
of its total assets in (a) any blind pool investment fund or similar vehicle established and
managed by a party unrelated to the Adviser and (b) investments outside of the United States
and Canada.”
x Please tell us how much the Fund will invest in hedge funds and/or private equity funds
(including collateralized fund obligations, if relevant) that rely on section 3(c)(1) or 3(c)(7)
of the 1940 Act. If the Fund will invest more than 15% of its net assets in hedge funds and
private equity funds that rely on sections 3(c)(1) or 3(c)(7), please note that registered
closed-end funds that invest more than 15% of their net assets in such hedge funds or private

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 equity funds should impose a minimum initial investment requirement of at least $25,000
and restrict sales to investors that, at a minimum, satisfy the accredited investor standard—
the latter of which the fund satisfies. As the Fund limits investments to accredited investors
but does not appear to impose a minimum investment standard, please explain to us why it
is/would be appropriate to offer units without imposing an investment minimum of at least
$25,000. We may have additional comments after reviewing your response.
x If the Fund will investment in non-U.S. investments as a principal investment strategy,
please add appropriate disclosure to the principal investment strategies and risks sections.
Page A-5 – Item 8.3. Risk Factors

16. The risks on pages A-5 through A-7 do not have a heading that identifies what links the risks
together, although the remaining risks do have such headings. Please consider adding a heading
to this section, or consider integrating the risks into the other sections.
Page A-6 – Lack of Operating History

17. Disclosure refers to past performance of “the prior Direct Lending Funds.” This term is not yet
defined. Please revise.
Page A-7 – Dependence on Key Personnel and Other Management

18. Disclosure refers to the potential loss of services of four individuals who have not previously
been identified. Please add disclosure that explains who these individuals are and what
relevance they have to the Fund.
Page A-8 – Portfolio Concentration

19. Please revise this section to clarify that the Fund has a fundamental policy to not concentrate its
investments in an industry or group of industries.
Page A-9 – Valuation Risk

20. In the fourth sentence, disclosure states, “There is no single standard for determining fair value
in good faith.” Please clarify, as you do on page A-19, that rule 2a-5 of the 1940 Act provides a
framework for fund valuation practices.
Page A-9 – Currency Hedging Risk

21. If currency hedging is a principal investment risk, please add corresponding disclosure about
currency hedging transactions to the principal investment strategies section.

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 Page A-10 – Interest Rate Risk

22. Please consider whether it is necessary to add disclosure regarding the transitions associated
with the use of an interest rate benchmark (e.g., from LIBOR to SOFR, SONIA, etc.).
Page A-10 – Reliance Upon Consultants

23. Disclosure refers to the Adviser’s potential use of consultants to evaluate proposed investments.
Please add disclosure to the principal inves tment strategies section that identifies such
consultants and that explains how they were selected, what role they will have, whether they
will be paid out of Fund assets, and how such payment will be determined, consistent with the
requirements of section 15 of the 1940 Act.
Page A-10 – Use of Investment Vehicles
24. Disclosure refers to risks associated with joint ventures, partnerships, or other special purpose
vehicles. Please add disclosure to the principal investment strategies section regarding the use of
such vehicles, including how they are structured (e.g. are they wholly-owned and controlled or
minority interests in unaffiliated vehicles), and whether they will involve affiliates of the Fund
or Adviser.

Page A-11 – Lender Liability

25. Please consider adding disclosure about the potential costs associated with any lawsuit
regardless of the outcome.
Page A-12 – Special Risks of Highly Leveraged or other Risky Portfolio Companies

26. Disclosure refers to the Fund’s investments in zero-coupon or pay-in-kind securities. Please
disclose the risks presented by investments in PIK and OID securities, including:
x The interest payments deferred on a PIK loan are subject to the risk that the borrower may
default when the deferred payments are due in cash at the maturity of the loan;
x The interest rates on PIK loans are higher to reflect the time-value of money on deferred
interest payments and the higher credit risk of borrowers who may need to defer interest
payments;
x Market prices of OID instruments are more volatile because they are affected to a greater
extent by interest rate changes than instruments that pay interest periodically in cash;
x PIK instruments may have unreliable valuations because the accruals require judgments
about ultimate collectability of the deferred payments and the value of the associated
collateral;
x Use of PIK and OID securities may provide certain benefits to the Fund’s Adviser including
increasing management fees and incentive compensation.

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 Page A-12 – Risks of Using Derivative Instruments
27. If derivatives are a principal investment risk, please add corresponding disclosure to the Fund’s
discussion of principal investment strategies.
Page A-13 – Effect of Varying Terms of Classes of Units
28. Disclosure refers to the possibility that the Fund may issue preferred units. Please confirm that
the Fund will not issue preferred units within one year of the effectiveness of the registration statement. Otherwise, please add appropriate strategy, risk, and dividend expenses disclosure.

Page A-14 – Obligations of Unitholders Relating to Credit Facilities
29. Disclosure refers to the Fund’s possible use of subsidiaries. Please disclose:
x That “Subsidiary” includes entities that engage in investment activities in securities or other
assets that are primarily controlled by the Fund.1
x That the Fund complies with the provisions of the 1940 Act governing investment policies
(section 8) on an aggregate basis with the Subsidiary.
x That the Fund complies with the provisions of the 1940 Act governing capital structure and
leverage (section 18) on an aggregate basis with the Subsidiary so that the Fund treats the
Subsidiary’s debt as its own for purposes of section 18.
x That any investment adviser to the subsidiary complies with provisions of the 1940 Act
relating to investment advisory contracts (section 15) as if it were an investment adviser to
the Fund under section 2(a)(20) of the 1940 Act. Any investment advisory agreement
between the subsidiary and its investment adviser is a material contract that should be
included as an exhibit to the registration statement. If the same person is the adviser to both
the Fund and the Subsidiary, then, for purposes of complying with section 15(c), the reviews
of the Fund’s and the Subsidiary’s investment advisory agreements may be combined.
x That the Subsidiary complies with provisions of the 1940 Act relating to affiliated
transactions and custody (section 17). Also, please identify the custodian of the Subsidiary,
if any.
x Any of the Subsidiary’s principal investment strategies or principal risks that constitute
principal investment strategies or risks of the Fund. The principal investment strategies and
principal risk disclosures of a fund that invests in a subsidiary should reflect aggregate
operations of the fund and the Subsidiary.
x Please explain in correspondence whether the financial statements of the Subsidiary will be
consolidated with those of the Fund. If not, please explain why not.
x Please confirm in correspondence that the Subsidiary and its board of directors will agree to
inspection by the staff of the Subsidiary’s books and records, which will be maintained in
accordance with section 31 of the 1940 Act and the rules thereunder.

1 “Primarily controlled” means (1) the Fund controls the unregistered entity within the meaning of section 2(a)(9) of the 1940 Ac t,
and (2) the Fund’s control of the unregistered entity is greater than that of any other person.

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 x If the Subsidiary is a foreign corporation, please confirm in correspondence that the
Subsidiary and its board of directors will agree to designate an agent for service of process
in the United States.
x If the Subsidiary is wholly-owned, please confirm in correspondence that that the
Subsidiary’s management fee (including any performance fee) will be included in
“Management Fees” and the Subsidiary’s expenses will be included in “Other Expenses” in
the Fund’s fee table. Please also confirm that the Fund does not currently intend to create or
acquire primary control of any entity which primarily engages in investment activities in
securities or other assets, other than entities wholly-owned by the Fund.
Page A-15 – Consequences of Failure to Pay Commitment in Full
30. Disclosure states that a defaulting unitholder “may lose all or a portion of its economic interest
in the Fund.” In a section titled, “Default Provisions” on page A-30, disclosure states remedies
for default may include causing a unitholder “to forfeit a significant portion of its Units or to
transfer its Units to a third party for a price that is less than the net asset value of such Units.”
Please supplementally explain the legal basis for these statements, including how they are
consistent with the requirements of the 1940 Act, e.g., section 23, and the circumstances that
determine the amount such unitholder may lose.
Page A-15 – Limited Liability of the Adviser
31. Disclosure states that the Fund will be required to indemnify the Adviser, and other related
and/or affiliated parties, for certain losses arising out of its activities on behalf of the Fund.
Please clarify that such indemnification is subject to the requirements of the 1940 Act.

Page A-15 – Conflicts of Interest
32. Please add more fulsome disclosure about the conflicts of interest to which the Fund and
unitholders are subject. For example, disclose conflicts of interest that may arise regarding the
allocation of investment opportunities by the Adviser between the Fund and its other clients,
including joint ventures.