[Federal Register Volume 60, Number 42 (Friday, March 3, 1995)]
[Notices]
[Pages 12000-12004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-5200]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26237]
Filings Under the Public Utility Holding Company Act of 1935, as
Amended (``Act'')
February 24, 1995.
Notice is hereby given that the following filing(s) has/have been
made with the Commission pursuant to provisions of the Act and rules
promulgated thereunder. All interested persons are referred to the
application(s) and/or declaration(s) for complete statements of the
proposed transaction(s) summarized below. The application(s) and/or
declaration(s) and any amendments thereto is/are available for public
inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in
writing by March 20, 1995, to the Secretary, Securities and Exchange
Commission, Washington, DC 20549, and serve a copy on the relevant
applicant(s) and/or declarant(s) at the address(es) specified below.
Proof of service (by affidavit or, in case of an attorney at law, by
certificate) should be filed with the request. Any request for hearing
shall identify specifically the issues of fact or law that are
disputed. A person who so requests will be notified of any hearing, if
ordered, and will receive a copy of any notice or order issued in the
matter. After said date, the application(s) and/or declaration(s), as
filed or as amended, may be granted and/or permitted to become
effective.
Entergy Corporation, et al., (70-8105)
Entergy Corporation (``Entergy''), 225 Baronne Street, New Orleans,
Louisiana, a registered holding company, and its wholly owned
nonutility subsidiary company, Entergy Enterprises, Inc.
(``Enterprises''), Three Financial Centre, Little Rock, Arkansas, have
filed an application-declaration under sections 6(a), 7, 9(a), 10,
12(b), 13(b), 32 and 33 of the Act and rules 45, 53, 87, 90 and 91
thereunder.
Entergy proposes through December 31, 1997 to invest up to $350
million in Enterprises for its use in providing preliminary development
activities, consulting services, management and administrative support
services, operations and maintenance services and engaging in certain
related transactions.
Pursuant to Commission orders, dated January 11, 1983 (HCAR 22818),
January 13, 1984 (HCAR No. 23200), January 15, 1985 (HCAR 23569), July
25, 1991 (HCAR No. 25353), July 13, 1992 (HCAR No. 25580), and
September 3, 1992 (HCAR No. 25617), Enterprises was organized and has
been engaged in the analysis and development of various investment
opportunities for the Entergy system, as well as the marketing of
management, operating, technical and training expertise developed by
Entergy system companies to nonaffiliates.\1\ The Commission also
authorized Enterprises to form an energy management service company,
Entergy Systems and Service, Inc. (HCAR No. 25718, December 28, 1992)
and to provide certain consulting services to affiliated utilities in
Argentina (HCAR Nos. 25705 and 25706, December 14, 1992).
\1\The Entergy system consists of Entergy and (1) five retail
electric public-utility subsidiary companies, Arkansas Power & Light
Company, Gulf States Utilities Company, Louisiana Power & Light
Company, Mississippi Power & Light Company and New Orleans Public
Service Inc. (collectively, ``System Operating Companies''), (2) a
wholesale generating company that sells power to the System
Operating Companies, System Energy Resources, Inc. (``System
Entergy''), (3) a wholesale generating company that sells power to
nonaffiliates, Entergy Power, Inc., (4) a service company
subsidiary, Entergy Services, Inc. (``ESI''), (5) a nuclear
management service company, Entergy Operations, Inc. (``EOI''), (6)
Enterprises, (7) a fuel supply company, System Fuels, Inc.
(``SFI''), (8) an energy management services company, Entergy
Systems and Service, Inc., (9) two companies formed to own Entergy's
interests in certain Argentine utility companies, Entergy S.A. and
Entergy Argentina S.A., and (10) various direct and indirect
subsidiary companies of Entergy formed to own Entergy's interests in
``eligible facilities'' within the meaning of Section 33 of the Act.
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As part of a restructuring plan, Entergy entered into a series of
agreements (``Settlement Agreements'') with four of its five retail
rate regulators, the Arkansas Public Service Commission, the Council of
the City of New Orleans, the Louisiana Public Service Commission and
the Mississippi Public Service Commission concerning,\2\ in part,
transfer pricing for the provision of services and other affiliate
transactions between Entergy's regulated utilities\3\ and Entergy's
nonutility businesses. Entergy has filed an Application-Declaration
seeking the Commission's approval under the Act to implement provisions
of the Settlement Agreements (S.E.C. File No. 70-8529).
\2\The System Operating Companies' retail rate regulator in
Texas is precluded from agreeing to the terms of the Settlement
Agreements because Texas has regulations governing affiliate
transactions.
\3\``Regulated utility'' includes the system's five utility
companies, System Energy, EOI, ESI, SFI, and any similar subsidiary
Entergy may create in the future.
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Pursuant to the initial order of the Commission issued in this File
(HCAR No. 25848 (dated July 8, 1993) (the ``Order'')), Enterprises is
currently authorized, and proposes to continue, to conduct preliminary
development activities (``Preliminary Development Activities'') related
to possible investments by Entergy. Enterprises' Preliminary
Development Activities may include: (1) Project due diligence and
design review; (2) marketing studies; (3) investigating sites; (4)
research, preliminary engineering and licensing activities; (5)
applying for required permits and regulatory approval; (6) acquiring
options and rights; (7) drafting, negotiation and execution of
contractual commitments with owners of existing facilities;
governmental authorities, equipment vendors, construction firms, power
purchasers, thermal energy users and other project participants; (8)
negotiation of financing commitments with lenders and equity co-
investors (including the provision of guarantees and other credit
enhancements); (9) legal, accounting and financial analysis;
[[Page 12001]] (10) preparing and submitting bids and proposals; and
(11) any other activities necessary to identify and analyze investment
opportunities.
Enterprises would continue its Preliminary Development Activities
with respect to potential investments by Entergy in the following types
of businesses and activities (hereinafter, ``Permitted Investments''):
(1) exempt wholesale generators (``EWGs'') and foreign utility
companies (``FUCOs'') under the Act; (2) qualifying facilities
(``QFs'') under the Public Utility Regulatory Policies Act of 1978, as
amended (``PURPA''); (3) non-exempt domestic and foreign generation,
transmission and distribution facilities, including but not limited to
``inside the fence'' generating projects and other power production
facilities, provided, however, that any nonexempt domestic facility
would be part of the integrated utility system; (4) technologies
relating to energy efficiency; (5) the development of alternative
energy sources; and (6) other exempt or nonutility business investments
permissible under the Act. Except with respect to investments in EWGs,
FUCOs and any other Permitted Investment for which Commission approval
is not required under the Act or rules thereunder, neither Entergy nor
Enterprises would make any Permitted Investment without obtaining
further Commission approval. In addition, the financing of any such
Permitted Investment would, to the extent jurisdictional, be subject to
further Commission authorization.
The Order also authorizes Enterprises to provide various consulting
services (``Consulting Services'') to nonassociate companies in the
areas of electric power generation, transmission and distribution and
operations ancillary thereto. Enterprises proposes to continue to
provide such Consulting Services to nonassociate companies. The
Consulting Services may include: (1) Management expertise, such as
strategic planning, organization, policy matters and management
services; (2) technical expertise, such as design engineering,
availability engineering, construction management planning and
procedures, and financial, system and operational planning; (3)
operating expertise, particularly with respect to generating,
transmission and distribution facilities; (4) environmental expertise,
such as environmental licensing and compliance, negotiation of permits
and environmental planning; (5) training expertise, particularly in the
areas of operations and management; (6) technical and procedural
resources, such as are embedded in computer systems, programs and
manuals; (7) fuel procurement, delivery and storage expertise; (8)
expertise related to marketing and brokering of power resources; and
(9) expertise relating to demand side management or other energy
management services. Enterprises also would continue to market
expertise in the bulk power business of its associate company, Entergy
Power Inc., including: (1) Management services related to generating
projects, transmission facilities and thermal energy facilities,
particularly in the areas of strategic planning, feasibility studies,
and policy and organizational matters; (2) technical services related
to such projects and facilities, particularly in the areas of design,
engineering, procurement and construction; and (3) training services
related to such projects and facilities, particularly in areas of
operations and maintenance. Enterprises also proposes to provide
Consulting Services to associate companies, including associate EWGs,
FUCOs and QFs. Enterprises will not, without further authorization from
the Commission, provide Consulting Services to Retail Electric
Companies.
The Order also authorizes Enterprises to provide, and Enterprises
proposes to continue to provide, certain management and administrative
support services to associate companies which are not Retail Electric
Companies. Administrative services consist of corporate and project
development and planning, portfolio management, and administrative
services, including legal, financial, accounting and internal auditing
(``Administrative Services''). Enterprises would continue to charge its
associate companies for the fully allocated direct and indirect cost of
services provided, determined in accordance with Rules 90 and 91 under
the Act. Enterprises also would continue to utilize a project-based
accounting system to account properly for and allocate the cost of
providing such services to its associate companies.
The Commission reserved jurisdiction in its Order over Enterprises'
provision of Administrative Services to associate companies that are
EWGs or FUCOs under Sections 32 and 33, respectively, of the Act. The
Commission adopted final rules in September 1993 concerning investments
in EWGs (HCAR No. 25886) (September 3, 1993), and Entergy and
Enterprises state that they are in compliance with such rules. In
addition, Entergy and Enterprises agree to comply with the terms and
conditions of all applicable rules under the Act relating to the
provision of services to EWGs and FUCOs, including without limitation
Rule 87 as it may be amended. Accordingly, Entergy and Enterprises
request the Commission to release jurisdiction over the provision of
Administrative Services by Enterprises to associate companies that are
EWGs and FUCOs.
Enterprises also proposes to offer directly or indirectly through
one or more special purpose subsidiary companies of Entergy or
Enterprises (``O&M Sub''), various operations and maintenance services
(``O&M Services'') to developers, owners and operators of domestic and
foreign power projects, including power projects that Enterprises may
develop on its own or in collaboration with third parties. O&M Services
would include development, engineering, design, construction and
construction management, pre-operational start-up, testing and
commissioning, long-term operations and maintenance, fuel procurement,
management and supervision, technical and training, administrative
support, and any other managerial or technical services required to
operate and maintain electric power facilities.
Enterprises would provide the O&M Services using its own workforce
and the personnel and resources of the Retail Electric Companies
obtained pursuant to the Service Agreements with such companies, as
they may be amended by order of the Commission. Under the terms of the
Settlement Agreements, the Retail Electric Companies would be
reimbursed for the fully allocated cost of any services provided to
Enterprises or any O&M Sub, plus 5%. O&M Subs would be domestic or
foreign corporations, partnerships or other entities (depending upon
the legal and regulatory requirements of a particular project).
Enterprises will provide information to the Commission concerning the
formation of an O&M Sub that is not an EWG or FUCO, and will represent
that no Retail Electric Company has subsidized the operations of
Enterprises or any O&M Sub and that any transfer of personnel from any
Retail Electric Company to, and the rendering of O&M Services by,
Enterprises or the O&M Sub are in compliance with applicable rules,
regulations and orders of the Commission. Enterprises proposes to
provide Consulting Services and O&M Services to its nonassociate and
associate companies (excluding the Retail Electric Companies) at fair
market prices. In this respect, Enterprises requests an exemption
pursuant to Section 13(b) of the Act from the requirements of Rules 90
and 91 thereunder, provided one or more of the [[Page 12002]] following
conditions are satisfied with respect to associate companies:
(1) An associated power project is an EWG or a FUCO which
derives no part of its income, directly or indirectly, from the
generation, transmission, or distribution of electric energy for
sale within the United States;
(2) An associated power project is an EWG which sells
electricity at market-based rates which have been approved by the
Federal Energy Regulatory Commission (``FERC'') or the appropriate
state public utility commission, provided that the purchaser is not
a Retail Electric Company;
(3) An associated power project is a QF which sells electricity
exclusively at rates negotiated at arm's length to one or more
industrial or commercial customers purchasing such electricity for
their use and not for resale, and/or to an electric utility company,
other than a Retail Electric Company, at the purchaser's ``avoided
cost'' determined in accordance with the regulations under PURPA; or
(4) An associated power project is an EWG or a QF that sells
electricity at rates based upon its cost of service, as approved by
FERC or any state public utility commission having jurisdiction,
provided that the purchaser of such electricity is not a Retail
Electric Company.
Enterprises also proposes to continue to market and license to
nonaffiliated third parties intellectual properties developed by
Entergy system companies. The Settlement Agreements provide that if a
nonutility business markets a product that was developed by a Retail
Electric Company and is actually used by a Retail Electric Company, all
profits on the sale of the product shall be divided evenly between the
Retail Electric Company responsible for developing the product and the
nonutility business responsible for marketing the product after
deducting all incremental costs associated with making the product
available for sale, including all costs of marketing the product.
However, in the event that a product developed by a Retail Electric
Company to be used in its utility business is not actually so used, and
subsequently is marketed by a nonutility business to third parties,
such Retail Electric Company shall be entitled to recover all of its
costs to develop the product before any profits from marketing shall be
divided.
Entergy proposes, through December 31, 1997, to invest up to $350
million in Enterprises (and continuing beyond December 31, 1997 in
accordance with the terms of any debt incurred or guarantee issued
prior to such date) in connection with Enterprises' authorized business
activities. Entergy's investments in Enterprises may take the form of:
(1) Additional purchases of Enterprises' common stock, no par value,
for a purchase price of $1,000 per share; (2) capital contributions;
(3) loans (and the conversion of any such loans to capital
contributions); and (4) guarantees of indebtedness or other obligations
incurred by Enterprises or its associate companies. Any loans to
Enterprises by Entergy would mature no later than December 31, 2004,
and would bear interest at a rate not to exceed the prime rate in
effect on the date of the loan at a bank designated by Entergy.
Entergy and Enterprises also request authority through December 31,
1997, to issue guarantees in an aggregate amount that, when added to
investments in Enterprises and any O&M Sub, will not exceed $350
million. Guarantees may be required for Enterprises' Preliminary
Development Activities, which might include undertaking reimbursement
obligations or acting as surety on bonds, letters of credit, evidences
of indebtedness, equity commitments, performance and other obligations.
Guarantees may also be required for Enterprises other business
activities or to satisfy the requirements of lenders and other project
participants under financing documents and other agreements to which
Enterprises, an O&M Sub or another associate company of Entergy (other
than a Retail Electric Company) becomes a party. The terms and
conditions of guarantees would be established at arm's length based
upon market conditions.
Entergy and Enterprises also request authorization through December
31, 1997 to organize and provide funding to O&M Subs, through any one
or combination of: (1) Purchases of capital stock; (2) capital
contributions; (3) loans; or (4) guarantees of the securities or other
obligations of an O&M Sub. Any investments in an O&M Sub would be
included in the $350 million investment authority requested by Entergy.
Enterprises would use the proceeds from Entergy's investments to:
(1) Provide working capital in connection with Enterprises' Preliminary
Development Activities, Consulting Services, Administrative Services,
O&M Services, and other authorized business activities; (2) to pay its
associate companies for services rendered to Enterprises; and (3) for
other general corporate purposes. Entergy and Enterprises currently
estimate that approximately $100 million of the $350 million of
investment authority would be applied to meeting Enterprises' foregoing
capital needs. Enterprises currently estimates that, of the proposed
additional investments by Entergy, up to $79 million (but in any case
not more than $86 million) would be used for Preliminary Development
Activities, and up to $26 million (but in any case not more than $30
million) would be used for Administrative Services. None of the funds
will be used to acquire securities or an interest in the business of an
EWG, FUCO, or QF.
Columbus Southern Power Company, (70-8573)
Columbus Southern Power Company (``CSPCo''), 215 North Front
Street, Columbus, Ohio 43215, Kentucky Power Company (``KPCo''), 1701
Central Avenue, P.O. Box 1428, Ashland, Kentucky 41101 and Ohio Power
Company (``OPCo''), 301 Cleveland Avenue, S.W., Canton, Ohio 44702
(collectively, the (``Companies''), electric utility subsidiary
companies of American Electric Power Company, Inc., a registered
holding company, have filed an application-declaration under Sections
6(a), 7, 9, 10 and 12(b) of the Act and Rules 45 and 54 thereunder.
The Companies propose to issue and sell Junior Subordinated
Debentures (``Debentures'') through December 31, 1997. Each series of
Debenture will mature in not more than 50 years in aggregate principal
amounts of up to the following: (1) $80 million for CSPCo; (2) $65
million for KPCo; and (3) $90 million for OPCo. The Debentures may be
sold by competitive bidding or through negotiation with underwriters or
agents. The Debentures will be offered for sale at an initial public
offering price resulting in a yield to maturity which shall not exceed
by more than 3.0% the yield to maturity on United States Treasury bonds
of comparable maturity at the time of pricing of the Debentures. The
commission payable to agents or underwriters will not exceed 3.5% of
the principal amount of the Debentures sold.
The Companies may have the right to defer payment of interest on
the Debentures for up to five years. However, the Companies may not
declare and pay dividends on its outstanding stock if payments under
the Debentures are deferred. The payment of principal, premium and
interest on the Debentures will be subordinated in right of payment to
the prior payment in full of its senior indebtedness. The Companies
will agree to specific redemption provisions, if any, at the time of
the pricing of the Debentures.
If the Companies determine that it is not advisable to sell the
Debentures directly to the public, each may organize a separate special
purpose subsidiary as either: (1) a limited liability company under the
Limited [[Page 12003]] Liability Company Act (``LLC Act'') of the State
of Ohio in the case of CSPCo and OPCo, and of the State of Kentucky in
the case of KPCo or of the State of Delaware or other jurisdiction
considered advantageous in the case of any of the Companies; or (2) a
limited partnership under the Revised Uniform Limited Partnership Act
of the State of Ohio in the case of CSPCo and OPCo, and of the State of
Kentucky in the case of KPCo or of the State of Delaware or other
jurisdiction considered advantageous in the case of any of the
Companies (``Special Purpose Subsidiary''). In the event that any
Company organizes its Special Purpose Subsidiary as a limited liability
company, it may also organize a second special purpose wholly owned
subsidiary under the General Corporation Law of the State of Ohio, the
State of Kentucky, or the State of Delaware or other jurisdiction
(``Investment Sub''), for the purpose of acquiring and holding Special
Purpose Subsidiary common stock to comply with the requirement under
the applicable LLC Act that a limited liability company have at least
two members. If any Company organizes its Special Purpose Subsidiary as
a limited partnership, it may also organize an Investment Sub for the
purpose of acting, or may itself act, as the general partner of the
Special Purpose Subsidiary and may acquire, either directly or
indirectly through such Investment Sub, a limited partnership interest
in such Special Purpose Subsidiary to ensure that such Special Purpose
Subsidiary will have a limited partner to the extent required by
applicable law.
The Special Purpose Subsidiaries propose to issue and sell at any
time or from time-to-time, in one or more series through December 31,
1997, preferred securities (``Preferred Securities''), up to: (1) $75
million aggregate par or stated value or liquidation preference of
Preferred Securities, with a par or stated value or liquidation
preference of up to $100 per security in the case of CSPCo; (2) $60
million aggregate par or stated value or liquidation preference of
Preferred Securities, with a par or stated value or liquidation
preference of up to $100 per security in the case of KPCo; (3) $85
million aggregate par or stated value or liquidation preference of
Preferred Securities, with a par or stated value or liquidation
preference of up to $100 per security in the case of OPCo.
Each Company and/or its respective Investment Sub will acquire all
of the common stock or all of the general partnership interests of its
Special Purpose Subsidiary for an amount up to 5% of the total equity
capitalization from time-to-time of such Special Purpose Subsidiary
(``Equity Contribution''). Each Company may issue and sell to its
Special Purpose Subsidiary the Debentures, at any time or from time-to-
time in one or more series and such Special Purpose Subsidiary will
apply both the Equity Contribution made to it and the proceeds and from
the sale of Preferred Securities by it from time-to-time to purchase
the Company's Debentures. The payment rate, terms, redemption and other
similar provisions of the Preferred Securities will correspond to those
of the Debentures purchased from the Company.
Each Company may also guarantee (``Guarantee''): (1) Payment of
dividends or distributions on the Preferred Securities of its Special
Purpose Subsidiary if and to the extent such Special Purpose Subsidiary
has declared dividends or distributions out of funds legally available
therefor; (2) payments to the Preferred Securities holders of amounts
due upon liquidation of such Special Purpose Subsidiary or redemption
of the Preferred Securities of such Special Purpose Subsidiary; and (3)
certain additional amounts that may be payable in respect of such
Preferred Securities.
It is expected that each Company's interest payments on the
Debentures issued by it will be deductible for federal income tax
purposes and that its Special Purpose Subsidiary will be treated as a
partnership for federal income tax purposes. If Preferred Securities
are issued, any series may be redeemable at the option of the Special
Purpose Subsidiary issuing such series, with the consent or at the
direction of the Company, at a price equal to their par or stated value
or liquidation preference, plus any accrued and unpaid dividends or
distributions, upon the occurrence of certain events. The Preferred
Securities of any series may also be subject to mandatory redemption
upon the occurrence of certain events. Each Company may also have the
right in certain cases to exchange the Preferred Securities of its
Special Purpose Subsidiary for the Debentures of the Company.
In the event that any Special Purpose Subsidiary is required to
withhold or deduct certain amounts in connection with dividend,
distribution or other payments, it may also have the obligation to
``gross up'' such payments so that the holders of the Preferred
Securities issued by such Special purpose Subsidiary will receive the
same payment after such withholding or deduction as they would have
received if no such withholding or deduction were required. If any
Special Purpose Subsidiary is required to pay taxes with respect to
income derived from interest payments on the Debentures issued to it,
the Company may be required to pay such additional interest on the
Debentures as shall be necessary in order that net amounts received and
retained by the Special Purpose Subsidiary, after the payment of such
taxes, shall result in its having such funds as it would have had in
the absence of such payment of taxes.
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of any Special Purpose Subsidiary, the
holders of the Preferred Securities will be entitled to receive, out of
the assets available for distribution to its shareholders or partners,
before any distribution of assets to the common shareholders or general
partner of the Special Purpose Subsidiary, an amount equal to the par
or stated value or liquidation preference of such Preferred Securities
plus any accrued and unpaid dividends or distributions.
Each Company expects to apply the net proceeds of the Debentures to
the repayment of outstanding short-term debt, for construction
purposes, and for other general corporate purposes, including the
redemption or other retirement of outstanding preferred stock and
senior securities.
The Columbia Gas System, Inc., (70-8575)
The Columbia Gas System, Inc. (``Columbia''), 20 Montchanin Road,
Wilmington, Delaware 19807, a registered gas utility holding company,
has filed a declaration under section 12(b) of the act and rule 45
thereunder.
Columbia and Columbia Gas Transmission Corporation (``TCO'')
presently are debtors-in-possession under Chapter 11 of the U.S.
Bankruptcy Code in U.S. Bankruptcy Court for the District of Delaware.
Columbia proposes to make a loan of no more than $4.3 million to
the Employees' Thrift Plan of Columbia Gas System (``Thrift Plan'').
Columbia is the plan sponsor of the Thrift Plan, a defined contribution
plan which is qualified under sections 401 (a) and (k) of the Internal
Revenue Code. Columbia's subsidiary companies (``Subsidiaries'') are
Thrift Plan participating employers,\4\ whose [[Page 12004]] employees,
former employees and beneficiaries constitute the participants. The
Thrift Plan is administered by the Thrift Plan Committee, which is
appointed by Columbia's board of directors and which is currently
comprised of members of senior management of major Columbia companies,
including the distribution companies and the transmission companies.
\4\The participating employers are the following Subsidiaries:
Columbia Gas of Pennsylvania, Inc., Columbia Gas of Ohio, Inc.,
Columbia Gas of Maryland, Inc., Columbia Gas of Kentucky, Inc.,
Commonwealth Gas Services, Inc., Columbia Gulf Transmission Company,
Columbia Gas Transmission Corporation, Columbia Gas Development
Corporation, Columbia Natural Resources, Inc., Columbia Coal
Gasification Corporation, Columbia Energy Services Corporation,
Columbia Gas System Service Corporation, Columbia Propane
Corporation, Commonwealth Propane, Inc., TriStar Ventures
Corporation and Columbia LNG Corporation.
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One of the investment options under the Thrift Plan is the Money
Market/Investment Contract Fund (``Fund'') offered by Fidelity
Investments of Boston, Massachusetts (``Fidelity''). The Fund includes
a guaranteed investment contract (``GIC'') issued by Confederation Life
Insurance Company of Canada (``Confederation Life''). The Confederation
Life GIC was acquired by the Thrift Plan of January 2, 1990 in the
amount of $6.5 million.
On August 12, 1994, Canadian governmental authorities seized
Confederation Life. In order to protect Confederation Life's U.S.
assets, the Insurance Commissioner for the State of Michigan moved to
seize all such assets. At the time Confederation Life was seized, a
segregated subaccount was established by the Thrift Plan Committee and
the Thrift Plan's trustee and was frozen within the Fund.
The Thrift Plan Committee, which is the named fiduciary as well as
Plan Administrator of the Thrift Plan, has considered various options
and has recommended to the boards of directors for Columbia and TCO
that loans be made to the Thrift Plan in order to allow Thrift Plan
participants access to their frozen funds as soon as practicable.
Subject to the receipt of necessary regulatory and Bankruptcy Court
approvals, the boards of directors of Columbia and TCO have considered
the Thrift Plan Committee's recommendation and approved loans to the
Thrift Plan.
Columbia proposes to make two loans to the Thrift Plan, one to be
made by Columbia, subject to the approval of the Bankruptcy Court and
the Commission, and one to be made by TCO, subject to the approval of
the Bankruptcy Court.\5\ The total amount of the loans would be $6.8
million, which represents the accumulated value of the frozen
investment in the Confederation Life GIC, including accrued interest,
as of the close of business on August 11, 1994 (the date preceding the
seizure of Confederation Life's assets). TCO's loan would be
approximately $2.5 million, and Columbia's loan would be no more than
$4.3 million. The loans would be made unsecured and without interest,
would be evidenced by notes and would be non-recourse to participants
or assets held in the Thrift Plan. Repayment of the loans would be made
only from the proceeds received from Confederation Life (from
liquidation and rehabilitation proceedings or otherwise), state
guaranty funds, and other sources, including litigation, in connection
with the Confederation Life GIC. Should the ultimate recovery of these
funds from Confederation Life and other sources be less than 100
percent, full repayment would be waived, and this cost would be borne
by Columbia and TCO.
\5\Columbia and TCO assert the TCO's loan is exempted from
Commission approval pursuant to rule 49(c).
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Upon issuance of the loans, the participants' segregated
subaccounts would be immediately closed, and their previously frozen
funds would be transferred to Fidelity's Money Market Fund.
Periodically as amounts are received from Confederation Life, state
guaranty funds and other sources with regard to the Confederation Life
account, the proceeds would be paid to Columbia or TCO, as the case may
be, and the amounts of the loans would be reduced accordingly.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-5200 Filed 3-2-95; 8:45 am]
BILLING CODE 8010-01-M