[Federal Register Volume 63, Number 211 (Monday, November 2, 1998)]
[Notices]
[Pages 58797-58801]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29200]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-26932]


Filings Under the Public Utility Holding Company Act of 1935, as 
Amended (``Act'')

October 23, 1998.
    Notice is hereby giving that the following filing(s) has/have been 
made with the Commission pursuant to provisions of the Act and rules 
promulgated under the Act. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) and any amendment 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 summit their views in 
writing by November 17, 1998, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549, and serve a copy on the relevant 
applicant(s) and/or declarants(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 
should 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 issued in the matter. 
After November 17, 1998, the application(s) and/or declaration(s), as 
filed or as amended may be granted and/or permitted to become 
effective.

IES Utilities, Inc. (70-9375)

    IES Utilities, Inc. (``IES''), doing business as Alliant Utilities, 
Alliant Tower, Cedar Rapids, Iowa 52401, an electric utility subsidiary 
company of Interstate Energy Corporation, a registered holding company, 
has filed an application-declaration under sections 6(a), 7, 9(a), 10, 
and 12(c) of the Act and rules 42 and 54 under the Act.
    IES proposed, from time to time through December 31, 2000, to: (1) 
issue and sell one or more series of one or a combination of the 
following securities--(a) trust bonds (``Trust Bonds''), (b) senior 
unsecured debentures (``Senior Debentures''), and (c) unsecured 
subordinated debt securities (``Subordinated Debentures''); and (2) 
enter into an agreement or agreements (``Agreement'') for the issuance 
and sale of one or more series of tax-exempt bonds (``Tax-Exempt 
Bonds'') for the financing or refinancing of certain air and water 
pollution control facilities and sewage and solid waste disposal 
facilities (``Facilities''). As security for IPC's obligations under 
the Agreement or security or credit enhancement for the Tax-Exempt 
Bonds, IES also proposes, through December 30, 2000, one or a 
combination of the following transactions: (1) issuance of a non-
negotiable promissory note (``Note'') to evidence a loan to IES of the 
proceeds of the Tax-Exempt Bonds from the issuer of the Tax-Exempt 
Bonds; (2) conveyance of a subordinated security interest in the 
Facilities or other property of IES as security for IES's obligations 
under the Agreement and

[[Page 58798]]

the Note; (3) issuance and pledge of one or more new series of Trust 
Bonds as collateral for the Tax-Exempt Bonds (``Tax-Exempt Collateral 
Bonds''); (4) acquisition of a letter of credit and execution of a 
reimbursement agreement to secure this letter of credit guaranteeing 
payment of the Tax-Exempt Bonds; (5) acquisition of an insurance policy 
guaranteeing the payment of the Tax-Exempt Bonds; and (6) guarantee of 
the payment of principal, premium, if any, and interest on the Tax-
Exempt Bonds.
    The aggregate principal amount of the Trust Bonds, Senior 
Debentures, Subordinated Debentures, and Tax-Exempt Bonds shall not 
exceed $200 million. This amount excludes the principal amount of the 
Tax-Exempt Collateral Bonds and any other forms of security or credit 
enhancement related to the Tax-Exempt Bonds. The aggregate principal 
amount of the Tax-Exempt Collateral Bonds shall not exceed an amount 
equal to the sum of the principal amount, plus interest, of the Tax-
Exempt Bonds.
    The Trust Bonds will be issued under EIS's Indenture of Mortgage 
and Deed of Thrust, dated September 1, 1993, to the First National Bank 
of Chicago, as trustee (``Trustee'') as amended and supplemented and as 
proposed to be further supplemented for one or more new series of Trust 
Bonds (``1993 Indenture''). The Senior Debentures will be issued under 
IES's Indenture (For Senior Unsecured Debt Securities), dated August 1, 
1997, to the Trustee, as amended and supplemented and as proposed to be 
further supplemented for one or more new series of Senior Debentures. 
The Subordinated Debentures will be issued under IES's Indenture (For 
Unsecured Subordinated Debit Securities), dated as of December 1, 1995, 
to the Trustee, as amended and supplemented and as proposed to be 
further supplemented for one or more new series of Subordinated 
Debentures (``1995 Indenture'').
    The Trust Bonds will be secured primarily by: (1) first mortgage 
bonds issued under IES's Indenture of Mortgage and Deed of Trust, dated 
August 1, 1940, as amended and supplemented (``1940 Indenture''), to 
The First National Bank of Chicago, as trustee, and delivered to the 
trustee under the 1993 Indenture; (2) first mortgage bonds issued under 
IES's Indenture or Deed of Trust, dated February 1, 1923, as amended 
and supplemented (``1923 Indenture''), to The Northern Trust Company 
(The First National Bank of Chicago, successor) and Harold H. Rockwell 
(Richard D. Manella, successor), as trustees, and delivered to the 
trustee under the 1993 Indenture; and (3) the lien of the 1993 
Indenture on IES's properties used in the generation, purchase, 
transmission, distribution or sale of electric energy by IES, or in the 
manufacture of manufactured gas, or in the purchase, transportation, 
distribution or sale of steam and hot water, which lien is junior to 
the liens of the 1940 Indenture and the 1923 Indenture. The Senior 
Debentures will be unsecured obligations of IES and will rank on a 
parity with all other unsecured and unsubordinated debt of IES. The 
Subordinated Debentures will be unsecured, subordinated obligations of 
IES. The 1995 Indenture provides that payment of the principal of, 
premium, if any, and interest on Subordinated Debentures is 
subordinated and subject in right of payment to the prior payment in 
full of all senior indebtedness of IES.
    Each new series of Trust Bonds and each series of Senior Debentures 
and Subordinated Debentures will be sold at the price, bear interest at 
the rate or rates, and mature on the date or dates determined at the 
time of sale or when the agreement to sell is entered into, as the case 
may be. No series of Trust Bonds will be issued at rates in excess of 
the lower of 15% per annum or those rates generally obtainable at the 
time of pricing for sales of mortgage bonds having the same reasonably 
similar maturities, issued by companies of the same or reasonably 
comparable credit quality and having reasonably similar terms, 
conditions and features (``Ceiling Rate''). None of any series of 
Senior Debentures or Subordinated Debentures will be sold if their 
fixed interest rate or initial adjustable interest rate exceeds the 
Ceiling Rate.
    As to each series of Trust Bonds, Senior Debentures, and 
Subordinated Debentures having an adjustable interest rate, the initial 
interest rate will be negotiated among IES and the purchasers and will 
be based upon the current market rate for comparable securities. 
Thereafter, the interest rate on these Trust Bonds, Senior Debentures, 
and Subordinated Debentures will be adjusted according to a pre-
established formula or method of determination (in each case, 
``Floating Rate Trust Bonds,'' ``Floating Rate Senior Debentures,'' and 
``Floating Rate Subordinated Debentures,'' respectively), or will be 
that rate which, when set, would be sufficient to remarket the Trust 
Bonds, Senior Debentures, and Subordinated Debentures at their 
principal amount (in each case, ``Remarketed Trust Bonds,'' 
``Remarketed Senior Debentures,'' and ``Remarketed Subordinated 
Debentures,'' respectively). After the initial interest rate period, 
none of the Floating Rate Trust Bonds, Floating Rate Senior Debentures, 
Floating Rate Subordinated Debentures, Remarketed Trust Bonds, 
Remarketed Senior Debentures, or Remarketed Subordinated Debentures 
will bear an interest rate exceeding 15% per annum.
    The price, exclusive of accrued interest, to be paid to IES for 
each new series of Trust Bonds, Senior Debentures, and Subordinated 
Debentures to be sold at competitive bidding will be within a range (to 
be specified by IES to prospective purchasers) of 95% to 105% of the 
principal amount of each series of Trust Bonds, Senior Debentures, and 
Subordinated Debentures. Each series of Trust Bonds, Senior Debentures, 
and Subordinated Debentures will mature not later than 30 years from 
the day of issuance.
    IES anticipates that the issuance and sale of each series of Trust 
Bonds, Senior Debentures, and Subordinated Debentures will be by means 
of competitive bidding or negotiated public offering or private 
placement with institutional investors in order to secure the 
advantages of an advance marketing effort and/or the best available 
terms. Each sale of Trust Bonds, Senior Debentures, and Subordinated 
Debentures is a separate transaction not contingent upon another sale 
of securities.
    IES proposes to use the net proceeds derived from the issuance and 
sale of Trust Bonds, Senior Debentures, and Subordinated Debentures for 
general corporate purposes, including the conduct of its business as a 
utility, the repayment of outstanding securities when due, or the 
possible redemption, acquisition, or refunding of certain outstanding 
securities prior to their stated maturity or due date.
    IES also proposes to enter into one or more Agreements, which may 
be loan or installment sales agreements, relating to the issuance and 
sale of Tax-Exempt Bonds for the financing or refinancing of certain 
Facilities. Under the Agreement, IES may be loaned the proceeds of the 
sale of the Tax-Exempt Bonds, and IES may issue a Note, or the issuer 
of the Tax-Exempt Bonds will undertake to purchase and sell the 
Facilities to IES. While the actual amount of Tax-Exempt Bonds to be 
issued has not yet been determined, this amount will be based upon the 
cost of refunding outstanding bonds or the cost of the Facilities. The 
Tax-Exempt Bonds will mature not more than 30 years from the first day 
of the month in which they are initially issued.

[[Page 58799]]

    In order to obtain the benefit of ratings for the Tax-Exempt Bonds 
equivalent to the rating of the Trust Bonds outstanding under the 1993 
Indenture, which ratings IES has been advised may be attained, IES may 
determine to secure its obligations under the Note and the Agreement by 
delivering to the trustee, a series of Tax-Exempt Collateral Bonds in 
principal amount either (1) equal to the principal amount of the Tax-
Exempt Bonds or (2) equal to the sum of the principal amount of the 
Tax-Exempt Bonds plus interest payments thereon for a specified period. 
The series Tax-Exempt Collateral Bonds will be issued under an 
indenture supplemental to the 1993 Indenture (``Supplemental 
Indenture''), will mature on the maturity date of the Tax-Exempt Bonds 
and will be non-transferable by the trustee. The Tax-Exempt Collateral 
Bonds, in the case of clause (1) above, will bear interest at a rate or 
rates equal to the interest rate or rates to be borne by the related 
Tax-Exempt Bonds and, in the case of clause (2) above, would be non-
interest bearing.
    The Supplemental Indenture will provide, however, that the 
obligation of IES to make payments with respect to the Tax-Exempt 
Collateral Bonds will be satisfied to the extent that payments are made 
under the Note or the Agreement sufficient to meet payments when due in 
respect of the related Tax-Exempt Bonds. The Supplemental Indenture 
will provide that, upon acceleration by the trustee of the principal 
amount of all related outstanding Tax-Exempt Bonds under the trust 
indenture, the trustee may demand the mandatory redemption of the 
related Tax-Exempt Collateral Bonds then held by it as collateral at a 
redemption price equal to the principal amount thereof plus accrued 
interest, if any, to the date fixed for redemption. The Supplemental 
Indenture may also provide that, upon the optional redemption of the 
Tax-Exempt Bonds, in whole or in part, a related principal amount of 
the Tax-Exempt Collateral Bonds will be redeemed at the redemption 
price of the Tax-Exempt Bonds.
    In the case of interest bearing Tax-Exempt Collateral Bonds, 
because interest accrues in respect of the Tax-Exempt Collateral Bonds 
until satisfied by payments under the Note or the Agreement, ``annual 
interest charges'' in respect of the Tax-Exempt Collateral Bonds will 
be included in computing the ``interest earnings requirement'' of the 
1993 Indenture which restricts the amount of Trust Bonds which may be 
issued and sold to the public in relation to IES's net earnings. In the 
case of non-interest bearing Tax-Exempt Collateral Bonds, since no 
interest would accrue in respect of the Tax-Exempt Collateral Bonds, 
the ``interest earnings requirement'' would be unaffected.
    As an alternative to or in conjunction with IES's securing its 
obligations through the issuance of the Tax-Exempt Collateral Bonds, 
IES may acquire an irrevocable letter of credit or other credit 
facility (``Letter of Credit'') of a bank or other financial 
institution (``Bank'') and enter into a reimbursement agreement 
(``Reimbursement Agreement'') for any payments under the Letter of 
Credit. Any borrowing by IES under the Reimbursement Agreement will 
have a term of up to ten years and bear interest at a rate not 
exceeding: (1) the London Interbank Offered Rate plus up to 2%, (2) the 
Bank's certificate of deposit rate plus up to 1\3/4\%, or (3) a rate 
not to exceed the prime rate plus 1%.
    As a further alternative to, or in conjunction with, securing its 
obligations under the Agreement and Notes, IES may acquire a policy of 
insurance guaranteeing the payment when due of the principal of and 
interest on the series of the Tax-Exempt Bonds. This insurance policy 
would extend for the term of the related Tax-Exempt Bonds and would be 
non-cancelable by the insurance company for any reason.
    In the event that a Letter of Credit or an insurance policy is 
issued as an alternative to the issuance of the Tax-Exempt Collateral 
Bonds, IES may convey a subordinated security interest in the 
Facilities or other property of IES as further security for IES's 
obligations under the Agreement and the Note. This subordinated 
security interest would be assigned to the trustee. IES also proposes 
to guarantee the payment of the principal of, premium, if any, and 
interest on the Tax-Exempt Bonds.
    Unless otherwise specifically stated in IES's proposal, any Tax-
Exempt Collateral Bonds, Letter of Credit or any related subordinated 
security interest, coverage under any insurance policy, or guarantee 
acquired by or issued by IES as a security or credit enhancement for 
the Tax-Exempt Bonds shall be in an aggregate amount no greater than 
the principal amount of the Tax-Exempt Bonds plus interest and will be 
designed to reflect the payment terms and conditions of the Tax-Exempt 
Bonds.
    It is contemplated that the Tax-Exempt Bonds will be sold under 
arrangements with one or more purchasers, placement agents or 
underwriters. In accordance with applicable state laws, the interest 
rate to be borne by the Tax-Exempt Bonds will be approved by the issuer 
and will be either a fixed rate, which fixed rate may be convertible to 
a rate which will fluctuate in accordance with a specified prime or 
base rate or rates or may be determined by certain remarketing or 
auction procedures, or a fluctuating rate, which fluctuating rate may 
be convertible to a fixed rate.
    IES also proposes that it may enter into arrangements providing for 
the delayed or future delivery of Tax-Exempt Bonds to one or more 
purchasers or underwriters. The obligations of the purchasers or 
underwriters to purchase Tax-Exempt Bonds under any of these 
arrangements may be secured by U.S. Treasury securities, letters of 
credit, or other collateral. The effective cost to IES of any series of 
the Tax-Exempt Bonds will not exceed the yield on U.S. Treasury 
securities having a maturity comparable to that of the series of Tax-
Exempt Bonds. This effective costs will reflect the applicable interest 
rate or rates and any underwriters' discount or commission.
    The premium (if any) payable upon the redemption of any Tax-Exempt 
Bonds at the option of IES will not exceed the greater (1) 5% of the 
principal amount of the Tax-Exempt Bonds so to be redeemed, or (2) a 
percentage of the principal amount equal to the rate of interest per 
annum borne by the Tax-Exempt Bonds.
    The purchase price payable by or on behalf of IES is respect of 
Tax-Exempt Bonds tendered for purchase at the option of the holders 
will not exceed 100% of the principal amount, plus accrued interest to 
the purchase date.

Interstate Power Company (70-9377)

    Interstate Power Company (``IPC''), 1000 Main Street, P.O. Box 769, 
Dubuque, Iowa 52004-7691, an electric utility subsidiary company of 
Interstate Energy Corporation, a registered holding company, has filed 
an application-declaration under sections 6(a), 7, 9(a), 10, and 12(c) 
of the Act and rules 42 and 54 under the Act.
    IPC proposes, from time to time through December 31, 2000, to: (1) 
issue and sell one or more series of one or a combination of the 
following securities--(a) first mortgage bonds (``First Mortgage 
Bonds''), (b) senior unsecured debentures (``Senior Debentures''), and 
(c) unsecured subordinated debt securities (``Subordinated 
Debentures''); and (2) enter into an agreement or agreements 
(``Agreement'') for the issuance and sale of one or more series of tax-
exempt bonds (``Tax-Exempt Bonds'') for the

[[Page 58800]]

financing or refinancing of certain air and water pollution control 
facilities and sewage and solid waste disposal facilities 
(``Facilities''). As security for IPC's obligations under the Agreement 
or security or credit enhancement for the payment of the Tax-Exempt 
Bonds, IPC also proposes, through December 30, 2000, one or a 
combination of the following transactions: (1) issuance of a non-
negotiable promissory note (``Note'') to evidence a loan of the 
proceeds of the Tax-Exempt Bonds from the issuer of the Tax-Exempt 
Bonds to IPC; (2) conveyance of a subordinated security interest in the 
Facilities or other property of IPC as security for IPC's obligations 
under the Agreement and the Note; (3) issuance and pledge of one or 
more new series of First Mortgage Bonds (``Tax-Exempt Collateral 
Bonds'') as collateral for the Tax-Exempt Bonds; (4) acquisition of a 
letter of credit and executive of a reimbursement agreement to secure 
this letter of credit to guarantee payment of the Tax-Exempt Bonds; (5) 
acquisition of an insurance policy to guarantee payment of the Tax-
Exempt Bonds; and/or (6) guarantee the payment of principal, premium, 
if any, and interest on the Tax-Exempt Bonds.
    The aggregate principal amount of the First Mortgage Bonds, Senior 
Debentures, Subordinated Debentures, and Tax-Exempt Bonds shall not 
exceed $80 million. This amount excludes the principal amount of the 
Tax-Exempt Collateral Bonds and any other forms of security and credit 
enhancement related to the Tax-Exempt Bonds, including letters of 
credit and any related subordinated security interests, guarantees and 
insurance policies. The aggregate principal amount of the Tax-Exempt 
Collateral Bonds shall not exceed an amount equal to the sum of the 
principal amount of the Tax-Exempt Bonds plus interest.
    The new series of First Mortgage Bonds will be issued under IPC's 
Indenture, dated as of January 1, 1948, to The Chase Manhattan Bank and 
C.J. Heinzelmann, as trustees, as supplemented and as proposed to be 
further supplemented for one or more new series of First Mortgage Bonds 
(``Mortgage''). The First Mortgage Bonds would be issued on the basis 
of unfunded net property additions and/or previously retired bonds, as 
permitted and authorized by the Mortgage. The Senior Debentures will be 
issued under IPC's Indenture (For Senior Unsecured Debt Securities) to 
The First National Bank of Chicago (or to another institution), as 
trustee, as proposed to be supplemented for one or more new series of 
Senior Debentures. The Subordinated Debentures will be issued under 
IPC's Indebenture (For Unsecured Subordinated Debt Securities) to The 
First National Bank of Chicago (or to another institution), as trustee, 
as proposed to be supplemented for one or more new series of 
Subordinated Debentures.
    The First Mortgage Bonds will be issued on the basis of unfunded 
net property additions and/or previously retired bonds, as permitted 
and authorized by the Mortgage. The Senior Debentures will be unsecured 
obligations of IPC and will rank on a parity with all other unsecured 
and unsubordinated debt of IPC. The Subordinated Debentures will be 
unsecured, subordinated obligations of IPC. The indenture for the 
Subordinated Debentures will provide that payment of the principal of, 
premium, if any, and interest on Subordinated Debentures will be 
subordinated and subject in right of payment to the prior payment in 
full of all senior indebtedness of IPC.
    Each new series of First Mortgage Bonds and each series of Senior 
Debentures and Subordinated Debentures will be sold at the price, bear 
interest at the rate or rates, and mature on the date or dates 
determined at the time of sale or when the agreement to sell is entered 
into, as the case may be. No series of First Mortgage Bonds will be 
issued at rates in excess of the lower of 15% per annum or those rates 
generally obtainable at the time of pricing for sales of mortgage bonds 
having the same or reasonably similar maturities, issued by companies 
of the same or reasonably comparable credit quality and having 
reasonably similar terms, conditions and features (``Ceiling Rate''). 
None of any series of Senior Debentures or Subordinated Debentures will 
be sold if their fixed interest rate or initial adjustable interest 
rate exceeds the Ceiling Rate.
    As to each series of First Mortgage Bonds, Senior Debentures, and 
Subordinated Debentures having an adjustable interest rate, the initial 
interest rate will be negotiated among IPC and the purchasers and will 
be based upon the current market rate for comparable securities. 
Thereafter, the interest rate on these First Mortgage Bonds, Senior 
Debentures, and Subordinated Debentures will be adjusted according to a 
pre-established formula or method of determination (in each case, 
``Floating Rate First Mortgage Bonds,'' ``Floating Rate Senior 
Debentures,'' and ``Floating Rate Subordinated Debentures,'' 
respectively) or will be that rate which, when set, would be sufficient 
to remarket the First Mortgage Bonds, Senior Debentures, and 
Subordinated Debentures at their principal amount (in each case, 
``Remarketed First Mortgage Bonds,'' ``Remarketed Senior Debentures,'' 
and ``Remarketed Subordinated Debentures,'' respectively). After the 
initial interest rate period, none of the Floating Rate First Mortgage 
Bonds, Floating Rate Senior Debentures, Floating Rate Subordinated 
Debentures, Remarketed First Mortgage Bonds, Remarketed Senior 
Debentures, or Remarketed Subordinated Debentures will bear an interest 
rate exceeding 15% per annum.
    The price, exclusive of accrued interest, to be paid to IPC for 
each new series of First Mortgage Bonds, Senior Debentures, and 
Subordinated Debentures to be sold at competitive bidding will be 
within a range (to be specified by IPC to prospective purchasers) of 
95% to 105% of the principal amount of each series of First Mortgage 
Bonds, Senior Debentures, and Subordinated Debentures. Each series of 
First Mortgage Bonds will mature not later than 40 years from the day 
of issuance. Each series of Senior Debentures and Subordinated 
Debentures will mature not later than 30 years from the day of 
issuance.
    IPC anticipates that the issuance and sale of each series of First 
Mortgage Bonds, Senior Debentures and Subordinated Debentures will be 
by means of competitive bidding or negotiated public offering or 
private placement with institutional investors in order to secure the 
advantages of an advance marketing effort and/or the best available 
terms. Each sale of First Mortgage Bonds, Senior Debentures and 
Subordinated Debentures is a separate transaction not contingent upon 
another sale of securities.
    IPC proposes to use the net proceeds derived from the issuance and 
sale of First Mortgage Bonds, Senior Debentures and Subordinated 
Debentures for general corporate purposes, including the conduct of its 
business as a utility, the repayment of outstanding securities when 
due, or the possible redemption, acquisition, or refunding of certain 
outstanding securities prior to their stated maturity or due date.
    IPC also proposes to enter into one or more Agreements, which may 
be loan or installment sales agreements, relating to the issuance and 
sale of Tax-Exempt Bonds for the financing or refinancing of certain 
Facilities. Under the Agreement, IPC may be loaned the proceeds of the 
sale of the Tax-Exempt Bonds, the IPC may issue a Note, or the issuer 
of the Tax-Exempt Bonds will undertake to purchase and sell the 
Facilities to IPC. While the actual amount of Tax-Exempt

[[Page 58801]]

Bonds to be issued has not yet been determined, this amount will be 
based upon the cost of refunding outstanding bonds or the cost of the 
Facilities. The Tax-Exempt Bonds will mature not more than 30 years 
from the first day of the month in which they are initially issued.
    In order to obtain the benefit of ratings for the Tax-Exempt Bonds 
equivalent to the rating of the First Mortgage Bonds outstanding under 
the Mortgage, which ratings IPC has been advised may be attained, IPC 
may determine to secure its obligations under the Note and the 
Agreement by delivering to the trustee a series of Tax-Exempt 
Collateral Bonds in principal amount either (1) equal to the principal 
amount of the Tax-Exempt Bonds or (2) equal to the sum of the principal 
amount of the Tax-Exempt Bonds plus interest payments thereon for a 
specified period. This series of the Tax-Exempt Collateral Bonds will 
be issued under an indenture supplemental to the Mortgage 
(``Supplemental Indenture''), will mature on the maturity date of the 
Tax-Exempt Bonds and will be non-transferable by the trustee. The Tax-
Exempt Collateral Bonds, in the case of clause (1) above, will bear 
interest at a rate or rates equal to the interest rate or rates to be 
borne by the related Tax-Exempt Bonds and, in the case of clause (2) 
above, would be non-interest bearing.
    The Supplemental Indenture will provide, however, that the 
obligation of IPC to make payments with respect to the Tax-Exempt 
Collateral Bonds will be satisfied to the extent that payments are made 
under the Note or the Agreement sufficient to meet payments when due in 
respect of the related Tax-Exempt Bonds. The Supplemental Indenture 
will provide that, upon acceleration by the trustee of the principal 
amount of all related outstanding Tax-Exempt Bonds under the trust 
indenture, the trustee may demand the mandatory redemption of the 
related Tax-Exempt Collateral Bonds then held by it as collateral at a 
redemption price equal to the principal amount thereof plus accrued 
interest, if any, to the date fixed for redemption. The Supplemental 
Indenture may also provide that, upon the optional redemption of the 
Tax-Exempt Bonds, in whole or in part, a related principal amount of 
the Tax-Exempt Collateral will be redeemed at the redemption price of 
the Tax-Exempt Bonds.
    In the case of interest bearing Tax-Exempt Collateral Bonds, 
because interest accrues in respect of these Tax-Exempt Collateral 
Bonds until satisfied by payments under the Note or the Agreement, 
``annual interest charges'' in respect of these Tax-Exempt Collateral 
Bonds will be included in computing the ``interest earnings 
requirement'' of the Mortgage which restricts the amount of First 
Mortgage Bonds which may be issued and sold to the public in relation 
to IPC's net earnings. In the case of non-interest bearing Tax-Exempt 
Collateral Bonds, since no interest would accrue in respect of these 
Tax-Exempt Collateral Bonds, the ``interest earnings requirement'' 
would be unaffected.
    As an alternative to on in conjunction with IPC's securing its 
obligation through the issuance of the Tax-Exempt Collateral Bonds, IPC 
may acquire an irrevocable letter of credit or other credit facility 
(``Letter of Credit'') of a bank or other financial institution 
(``Bank'') and enter into a reimbursement agreement (``Reimbursement 
Agreement'') for any payments under the Letter of Credit. Any borrowing 
by IPC under the Reimbursement Agreement will have a term of up to ten 
years and bear interest at a rate not exceeding: (1) the London 
Interbank Offered Rate plus up to 2%, (2) the Bank's certificate of 
deposit rate plus up to 1-\3/4\%, or (3) a rate not to exceed the prime 
rate plus 1%.
    As a further alternative to, or in conjunction with, securing its 
obligation under the Agreement and Note, IPC may acquire a policy of 
insurance guaranteeing the payment when due of the principal of and 
interest on the series of the Tax-Exempt Bonds. This insurance policy 
would extent for the term of the related Tax-Exempt Bonds and would be 
non-cancelable by the insurance company for any reason.
    In the event that a Letter of Credit or an insurance policy is 
issued as an alternative to the issuance of the Tax-Exempt Collateral 
Bonds, IPC may convey a subordinated security interest in the 
Facilities or other property of IPC as further security for IPC's 
obligations under the Agreement and the Note. This subordinated 
security interest would be assigned to the trustee. IPC also proposes 
to guarantee the payment of the principal of, premium, if any, and 
interest on the Tax-Exempt Bonds.
    Unless otherwise specifically stated in IPC's proposal, any Tax-
Exempt Collateral Bonds, Letter of Credit or any related subordinated 
security interest, coverage under any insurance policy, or guarantee 
acquired by or issued by IPC as security or credit enhancement for the 
Tax-Exempt Bonds shall be in an aggregate amount no greater than the 
principal of the Tax-Exempt Bonds plus interest and will be designed to 
reflect the payment terms and conditions of the Tax-Exempt Bonds.
    It is contemplated that the Tax-Exempt Bonds will be sold under 
arrangements with one or more purchasers, placement agents or 
underwriters. In accordance with applicable state laws, the interest 
rate to be borne by the Tax-Exempt Bonds will be approved by the issuer 
and will be either a fixed rate, which fixed rate may be convertible to 
a rate which will fluctuate in accordance with a specified prime or 
base rate or rates or may be determined by certain remarketing or 
auction procedures, or a fluctuating rate, which fluctuating rate may 
be convertible to a fixed rate.
    IPC also proposes that it may enter into arrangements providing for 
the delayed or future delivery of Tax-Exempt Bonds to one or more 
purchasers or underwriters. The obligations of the purchasers or 
underwriters to purchase Tax-Exempt Bonds under any of these 
arrangements may be secured by U.S. Treasury securities, letters of 
credit, or other collateral. The effective cost to IPC of any series of 
the Tax-Exempt Bonds will not exceed the yield on U.S. Treasury 
securities having a maturity comparable to that of the series of Tax-
Exempt Bonds. The effective cost will reflect the applicable interest 
rate or rates and any underwriters' discount or commission.
    The premium (if any) payable upon the redemption of any Tax-Exempt 
Bonds at the option of IPC will not exceed the greater of (1) 5% of the 
principal amount of the Tax-Exempt Bonds so to be redeemed, or (2) a 
percentage of the principal amount equal to the rate of interest per 
annum borne by the Tax-Exempt Bonds.
    The purchase price payable by or on behalf of IPC in respect of 
Tax-Exempt Bonds tendered for purchase at the option of the holders 
thereof will not exceed 100% of the principal amount thereof, plus 
accrued interest to the purchase date.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-29200 Filed 10-30-98; 8:45 am]
BILLING CODE 8010-01-M