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November 2, 2017
Cynthia M. Krus, Esq.
Eversheds Sutherland (US) LLP
700 Sixth Street, NW, Suite 700
Washington, DC 20001
Re: OFS Credit Company, Inc.
File Nos. 333-220794 and 811-23299
Dear Ms. Krus:
On October 4, 2017, you filed a registration statement on Form N-2 on
behalf of OFS
Credit Company, Inc. (the "Company") in connection with the registration of its
common stock.
We have reviewed the registration statement, and have provided our comments
below. For
convenience, we generally organized our comments using headings, defined terms,
and page
numbers from the registration statement. Where a comment is made in one
location, it is
applicable to all similar disclosure appearing elsewhere in the registration
statement. Finally, the
registration statement has a number of disclosure omissions. We may have
additional comments
when the disclosure is completed.
PROSPECTUS
Prospectus Summary -- Overview (Page 1)
1. The name of the Company is "OFS Credit Company, Inc." The term "credit"
suggests a type
of investment and is subject to a policy to invest 80% of the Company's
assets in credit
investments pursuant to Rule 35d-1 of the Investment Company Act of 1940.
Please include
an 80% policy to invest in credit securities and include a specific
definition of credit
securities. Also, if the Company intends to include the equity tranches of
CLOs towards the
80% credit test, please explain to us why this is appropriate.
2. The disclosure in this section states that investment objectives are not
fundamental policies
and may be changed by the board of directors without prior stockholder
approval. Please
disclose how much notice stockholders will receive if investment objectives
are changed by
the board of directors.
Cynthia M. Krus, Esq.
November 2, 2017
Page 2
Prospectus Summary -- CLO Overview (Page 3)
3. Please revise this section to disclose the significant risks of CLO equity
investments in a
manner that is as prominent as their "attractive fundamental attributes" to
ensure a balanced
and accurate portrayal of investing in CLO equity securities.
4. The second bullet states that "historically, (returns are) often in excess
of 20% per annum of
face value." Please delete this statement or submit to us the supporting
data for it.
Prospectus Summary -- Principal Risks of Investing in the Company (Page 4-6)
5. In the risk titled, "First Loss Risk of CLO Equity and Subordinated
Securities," please
explain, in plain English, what it means for the CLO to be in a "first loss
or subordinated
position" with respect to realized losses on the assets of the CLOs,
including the equity
tranche.
6. In the risk titled, "Liquidity Risk," please expand the disclosure and
provide more
information about the illiquidity of CLOs, especially the equity tranche.
Summary of Offering (Page 9)
7. Under the section titled, "Use of Proceeds," the disclosure states that the
Company expects to
fully invest the net proceeds of the offering "within six months after the
completion of the
offering." Since the Company expects that the investment period may exceed
three months,
please disclose the reasons for this expected delay. See Guidelines for Form
N-2, Guide 1.
8. Under the section titled, "Distributions," please disclose that the Company
may distribute
returns of capital. In addition, please disclose how the Company plans to
treat payments
received from equity tranches. For example, please explain if a portion of
the equity tranche
payments will distributed to investors as a return of capital, or whether
they will be used to
purchase additional interests in equity tranches.
Fees and Expenses (page 13)
9. Given the extent to which the Company will invest in CLOs, please disclose
in a footnote
what "Total Annual Expenses" would be if the fees associated with the
Company's CLO
investments were included in the fee table.
10. Please submit to us a description of the accounting policy for organization
and offering costs.
11. Footnote 4 includes in the following disclosure, "(T)he figure shown in the
table above
reflects our assumption that we incur leverage in an amount up to [ ]% of
our total assets (as
determined immediately before the leverage is incurred)." Please be more
specific as to the
type of leverage referred to in Footnote 4. Also, explain to us why total
assets are determined
before, rather than after, leverage is incurred.
Cynthia M. Krus, Esq.
November 2, 2017
Page 3
12. Please revise the parenthetical following the heading "Estimated Annual
Expenses" as
follows: "(as a percentage of net assets attributable to Common Shares)."
See Item 3 of Form
N-2.
13. In footnote (3), please explain to us whether the "expenses of
administering the DRIP Plan,"
include expenses other than brokerage expenses. If so, we may have
additional comments.
Risk Factors (Page 16-35)
14. On page 16, the disclosure states that "the Advisor has never previously
managed a registered
closed-end investment company." Please confirm this is an accurate
statement as there
appears to be filings with the Commission indicating that the Advisor is
managing at least one
other registered closed-end investment company.
15. On page 20, under the risk factor explaining that distributions may be a
return of capital,
please confirm to us that return of capital is not treated as interest
income.
16. As discussed in comment 5 above, please include a more extensive
presentation of risks in the
Prospectus Summary earlier in the registration statement. For example, but
not limited to,
please include:
a. That the incentive fee may create an incentive for the Advisor to
pursue
investments that are riskier or more speculative than would be the
case in the
absence of such compensation arrangement.
b. That securities issued by CLOs are less liquid and therefore
harder to sell, thus it is
harder to mitigate losses on these investments. (page 33)
c. CLO equity tranches are the most likely tranche to suffer a loss
of all their value in
the event of default. (page 33)
17. On page 35, under the heading "OTC trading," the disclosure states that the
Company may
purchase and sell derivatives not traded on an organized market. Please
disclose in this
section if the Company's derivative investments will be included in the
Company's policy to
invest at least 80% of its assets in credit/debt securities. If so,
disclose how the derivative
investments will be valued. Finally, disclose that the notional value of
the Company's
derivative investments will not be used for this purpose.
STATEMENT OF ADDITIONAL INFORMATION
Directors and Officers (Page 61)
18. We note that much of the information for this section will be provided in a
subsequent
amendment to the registration statement. Please ensure that the amendment
includes all
information required by Item 18 of Form N-2 regarding the Company's
directors including,
for each individual director, a discussion of the specific experience,
qualifications, attributes,
Cynthia M. Krus, Esq.
November 2, 2017
Page 4
or skills that led to the conclusion that the person should serve as a
director for the Company.
See Item 18.17 of Form N-2.
Investment Restrictions -- Fundamental Policies (Page 87)
19. In Fundamental Policy number (5), the disclosure states that "the purchase
of debt obligations
(including acquisitions of loans, loan participations or other forms of
debt instruments) shall
not constitute loans by us." Please explain the legal basis for excluding
acquisitions of loans
and loan participations from the Company's lending policy.
PART C
20. Please include as an exhibit, the Staffing and Corporate Services Agreement
with Orchard
First Source Capital, Inc. as referenced on page 2 of the Company's
registration statement.
GENERAL COMMENTS
21. Please advise us whether FINRA has approved the underwriting terms of the
Company's
offering.
22. We note that many portions of your filing are incomplete or will be updated
by amendment.
We may have additional comments on such portions when you complete them in
pre-effective
amendments, on disclosures made in response to this letter, on information
supplied
supplementally, or on exhibits added in any pre-effective amendment.
23. If you intend to omit certain information from the form of prospectus
included with the
registration statement that is declared effective in reliance on Rule 430A
under the Securities
Act of 1933 (the "Securities Act"), please identify the omitted information
to us
supplementally, preferably before filing the pre-effective amendment.
24. Please advise us if you have submitted or expect to submit any exemptive
applications or no-
action requests in connection with your registration statement.
25. Response to this letter should be in the form of a pre-effective amendment
filed pursuant to
Rule 472 under the Securities Act. Where no change will be made in the
filing in response to
a comment, please indicate this fact in a supplemental letter and briefly
state the basis for
your position.
*******
In closing, we remind you that the Company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
Cynthia M. Krus, Esq.
November 2, 2017
Page 5
Should you have any questions prior to filing a pre-effective
amendment, please feel free
to contact me at 202-551-6478.
Sincerely,
/s/ Ashley
Vroman-Lee
Ashley
Vroman-Lee
Senior
Counsel