[Federal Register Volume 62, Number 90 (Friday, May 9, 1997)]
[Notices]
[Pages 25680-25682]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-12077]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-26714]


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

May 2, 1997.
    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 May 27, 1997, to the Secretary, Securities and Exchange 
Commission, Washington, D.C. 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.

Cinergy Corp

    Cinergy Corp. (``Cinergy''), a registered holding company, located 
at 139 East Fourth Street, Cincinnati, Ohio 45202, has filed a 
declaration under sections 6(a) and 7 of the Act and rule 54 
thereunder.
    Cinergy proposes to issue and sell from time to time through 
December 31, 2002 in an aggregate principal amount at any time 
outstanding not to exceed $400 million of unsecured debt securities 
(``Debentures'') in one or more series, subject to the aggregate debt 
limitation on outstanding Cinergy indebtedness (``Cinergy Corp. Debt 
Limitation''). The Debentures: (a) Will not be convertible into any 
other securities of Cinergy, (b) will have maturities ranging from one 
to 40 years, (c) may be subject to optional and/or mandatory 
redemption, in whole or in part, at par or at various premiums above 
the principal amount thereof, and (d) may be entitled to mandatory or 
optional sinking fund provisions. In addition, Cinergy may have the 
right from time to time to defer the payment of interest on the 
Debentures of one or more series (which may be fixed or floating or 
``multi-modal'' debentures, i.e., debentures where the interest is 
periodically reset, alternating between fixed and floating interest 
rates for each reset period), with all accrued and unpaid interest 
(together with interest thereon) becoming due and payable at the end of 
each such extension period. The Debentures will be issued under an 
indenture (the ``Indenture'') to be entered into between Cinergy and 
The Fifth Third Bank, an Ohio banking corporation, as trustee (the 
``Trustee,'' including any successor trustee appointed pursuant to the 
Indenture), with a supplemental indenture to be executed in respect of 
each separate offering of one or more series of Debentures (each, a 
``Supplemental Indenture'').
    Cinergy proposes to issue and sell the initial series of Debentures 
directly to one or more purchasers in privately negotiated transactions 
or to one or more investment banking or underwriting firms or other 
entities who would resell the Debentures without registration under the 
Securities Act in reliance upon one or more applicable exemptions from 
registration thereunder. From time to time Cinergy may also issue and 
sell the Debentures of one or more series to the public either: (i) 
Through underwriters selected by negotiation or competitive bidding or 
(ii) through selling agents acting either as agent or as principal for 
resale to the public either directly or through dealers.
    The maturity dates, interest rates, redemption and sinking fund 
provisions, if any, with respect to the Debentures of a particular 
series, as well as any associated placement, underwriting or selling 
agent fees, commissions and discounts, if any, will be established by 
negotiation or competitive bidding and reflected in the applicable 
Supplemental Indenture and Purchase Agreement or underwriting agreement 
setting forth such terms; provided, however, that: (1) Cinergy will not 
issue and sell any Debentures (a) At a price higher than 102% or lower 
than 98% of the applicable principal amount thereof or (b) at interest 
rates in excess of those generally obtainable at the time of pricing or 
repricing of such Debentures for securities having the same or 
reasonably similar maturities and having reasonably similar terms, 
conditions and features issued by utility companies or utility holding 
companies

[[Page 25681]]

of the same or reasonably comparable credit quality; and (2) any 
placement, underwriting and selling agent fees, commissions and 
discounts to be paid by Cinergy in connection with the issue and sale 
of any series of Debentures will not exceed 3.5% of the aggregate 
principal amount thereof.
    Cinergy proposes to use the net proceeds from the issue and sale of 
the Debenture to repay outstanding short-term indebtedness incurred to 
finance Cinergy's investment in Midlands Electricity plc, a foreign 
utility company in which Cinergy acquired an indirect 50% ownership 
interest in 1996 through a joint venture transaction with GPU, Inc. 
Cinergy states that it also may use the proceeds to refinance 
Debentures outstanding from time to time. Cinergy proposes to use 
various interest rate risk management instruments in connection with 
the issuance and sale of the Debentures.
    Cinergy states that: (a) Interest due on the Debentures would be 
paid from internally generated funds, including dividends from 
subsidiaries, and (b) the principal of and premium, if any, on the 
Debentures would be paid from the proceeds of additional series of 
Debentures or shares of Cinergy common stock or, on a bridge basis, 
from the proceeds of short-term debt issued by Cinergy.
    In connection with the issuance and sale of the Debentures, Cinergy 
proposes to mitigate interest rate risk through the use of interest 
rate management instruments commonly used in today's capital markets, 
consisting of interest rate swaps, caps, collars, floors, options, 
forwards, futures and similar products designed to manage and minimize 
interest costs. Cinergy expects to enter into these agreements with 
counterparties that are highly rated financial institutions. The 
transactions will be for fixed periods and stated notional amounts.
    Fees, commissions and annual margins in connection with any 
interest rate management agreements will not exceed 100 basis points in 
respect of the principal or notional amount of the related Debentures 
or interest rate management agreement. In addition, with respect to 
options (such as caps and collars), Cinergy may pay an option fee which 
would not exceed 10% of the principal amount of the Debentures covered 
by the option.

The Connecticut Light & Power Company (70-9045)

    The Connecticut Light & Power Company (``CL&P'' or the 
``Applicant''), a wholly owned electric utility subsidiary of Northeast 
Utilities, a registered holding company, located at 107 Selden Street, 
Berlin, Connecticut 06037-5457, has filed an application-declaration 
under sections 6(a), 7, 9(a), 10 and 12(c) of the Act and rules, 46 and 
54 thereunder.
    CL&P requests that (i) CL&P be allowed to organize a wholly-owned 
special purpose corporation to be called CL&P Receivables Corporation 
(``CRC'') for the sole purpose of acquiring certain of CL&P's eligible 
accounts receivable; (ii) CRC be allowed to issue shares of Common 
Stock; (iii) CL&P be allowed to acquire shares of capital stock of CRC; 
(iv) CL&P be allowed to make, directly and indirectly, general and 
initial equity contributions to CRC; and (v) CRC be allowed to pay 
dividends to CL&P.
    CL&P has entered into a Receivables Purchase and Sale Agreement 
dated as of July 11, 1996, as amended (``Existing Agreement'') under 
which CL&P may sell (from time to time in its discretion and subject to 
the satisfaction of certain conditions precedent) fractional, undivided 
ownership interests expressed as a percentage (``Receivables 
Interests'') in: (i) Billed and unbilled indebtedness of customers, as 
booked to Accounts 142.01 and 173 under the Federal Energy Regulatory 
Commission Chart of Accounts (``Receivables'') and (ii) certain related 
assets, including any security or guaranty for any Receivables, all 
collection thereon, and related records and software (``Related 
Assets''). The purchaser[s] is either a bank and its assignees or a 
special purpose Delaware corporation which acquires receivables and 
other assets and issues commercial paper to finance these acquisitions 
(collectively, ``Purchaser''). Citicorp North America, Inc. will act as 
agent (``Agent'') for the Purchaser for transactions under the Existing 
Agreement.
    The Existing Agreement is structured so that any sales made 
thereunder would be accounted for as sales under generally accepted 
accounting principles. In order for such sales made on or after January 
1, 1997 to be so treated, they must comply with the requirements of the 
Statement of Financial Accounting Standards No. 125 (``FAS 125'') 
issued in June 1996. The formation of CRC is intended to satisfy 
certain of the requirements of FAS 125: (i) CRC, as purchaser and 
transferee, will be a ``qualifying special purpose entity'' within the 
meaning of FAS 125, and (ii) once transferred, CL&P will no longer have 
effective control over the assets, so that such transfers should be 
labeled ``true sales'' in the event of CL&P's bankruptcy or 
receivership.
    The restructured accounts receivable purchase and sales program 
will consist of two agreements which will replace the Existing 
Agreement, and is intended to accomplish sales to the Purchaser in a 
manner substantially similar to that under the Existing Agreement. 
Applicant states that the addition of CRC serves merely as a vehicle to 
isolate the Receivables as required by FAS 125, and that the 
restructured purchase and sales arrangements are on essentially the 
same terms to CL&P as the Existing Agreement. Under the first agreement 
(``Company Agreement''), CL&P will sell or transfer as equity 
contributions from time to time all of its receivables and related 
assets to CRC. The purchase price will take into account historical 
loss statistics in CL&P's receivables pool. Under the second agreement 
(``CRC Agreement''), CRC will sell Receivables Interests to the 
Purchaser from time to time. Such Receivables Interests may be funded 
and repaid on a revolving basis. The purchase price for a Receivables 
Interest will be calculated according to a formula. Such formula will 
include reserves based on, among other things, a multiple of historical 
losses, a multiple of historical dilution (such as, e.g., adjustments 
due to billing errors), customer concentrations that exceed specified 
levels and carrying costs and other costs associated with the 
Agreements. The formula will also take into account the cost of 
servicing, which will be returned to CL&P in the form of a servicing 
fee.
    Primarily because of the reserves, the purchase price paid by the 
Purchaser for Receivables Interests will be lower than the purchase 
price paid by CRC to CL&P for Receivables and Related Assets. CL&P 
states that it expects CRC to have sufficient assets to pay CL&P the 
full purchase price for Receivables purchased from CL&P.
    CL&P anticipates that the availability of Receivable and Related 
Assets will vary from time to time in accordance with the energy use of 
its customers. Therefore, since CRC's only source of funds are its 
participation in the program and CL&P's capital contributions, it may 
not have funds available at a particular time to purchase the 
Receivables and Related Assets. CL&P proposes to accommodate this 
situation by: (i) Allowing CRC to make the purchase and owe the balance 
to CL&P on a deferred basis, or (ii) making a capital contribution to 
CRC in the form of the Receivables and Related Assets for which CRC 
lacks the purchase price funds at the time.\1\
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    \1\ CL&P also states that if CRC develops a substantial cash 
balance, it will likely dividend the excess cash to CL&P, so that 
CRC will not itself retain substantial cash balances at any one 
time, and substantially all of the net cash realized from the 
collection of Receivables will be made available to CL&P.

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[[Page 25682]]

    Under the CRC Agreement, purchases may be funded by the Purchaser's 
issuance of commercial paper or drawing under its bank facilities. 
Initially, the aggregate purchase price paid by the Purchaser for 
Receivables Interests is not intended to exceed $200 million.
    The Agent will have the right to appoint a collection agent on 
behalf of the Purchaser and CRC, to administer and collect receivables 
and to notify the obligors of the sale of their receivables, at the 
Agent's option. CL&P will be appointed as the initial collection agent.
    Certain obligations under the Company Agreement create limited 
recourse against CL&P. In order to secure these obligations, CL&P will 
grant to CFR a lien on, and security interest in, any rights which CL&P 
may have in respect of Receivables and Related Assets. The CRC 
Agreement creates comparable recourse obligations against CRC, and CL&P 
states that CRC will grant a security interest to the Purchaser in all 
rights in the Receivables retained by CRC, the Related Assets and 
certain other rights and remedies (including its rights and remedies 
under the Company Agreement) to secure such recourse obligations.\2\
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    \2\ CL&P states that neither CRC's nor the Purchaser's recourse 
to CL&P will include any rights against CL&P should customer 
defaults on the Receivables result in collections attributable to 
the Receivables Interests sold to the Purchaser being insufficient 
to reimburse the Purchaser for he purchase price paid by it for the 
Receivables Interests and its anticipated yield. The Purchaser will 
bear the risk for any credit losses on the Receivables which exceed 
the reserves for such losses included in the Receivables Interests.
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    CL&P and CRC will be obligated to reimburse the Purchaser and the 
Agent for various costs and expenses associated with the Company 
Agreement and the CRC Agreement. CRC will also be required to pay to 
the Agent certain fees for services in connection with such agreements.
    The arrangements under the Company Agreement and the CRC Agreement 
are schedules to terminate on July 11, 2001. CRC may, upon at least 
five business days notice to the Agent, terminate in whole or reduce in 
part the unused portion of its purchase limit in accordance with the 
terms and conditions of the CRC Agreement. The CRC Agreement allows the 
Purchaser to assign all of its rights and obligations under the CRC 
Agreement (including its Receivables Interests and the obligation to 
fund Receivables Interests) to other person, including the providers of 
its bank facilities.
    CL&P intends that the above-described transactions will permit it, 
in effect, through this intermediary device, to accelerate its receipt 
of cash collections from accounts receivable and thereby meet its 
short-term cash needs.

Allegheny Power System, Inc. (70-9041)

    Allegheny Power System, Inc. (``Allegheny''), 10435 Downsville 
Pike, Hagerstown, Maryland 21740, a registered holding company, has 
filed a declaration (``Declaration'') under sections 6(a) and 7 of the 
Act and rule 54 thereunder.
    Allegheny proposes, from time to time through December 31, 2007, to 
issue up to a total of 500,000 shares of its common stock (``Common 
Stock'') to its senior officers and senior officers of its subsidiaries 
as performance awards (``Awards'') under a Performance Share Plan 
(``Plan''). The Board of Directors (``Board'') of Allegheny has 
determined that it would like the flexibility to make payments to the 
Plan participants either in Common Stock or a combination of cash and 
Common Stock.
    The Plan was approved by Allegheny shareholders at the annual 
meeting in May 1994. The Plan consists of cycles which are not less 
than three nor more than five years in length. The Management Review 
Committee (``Committee'') of the Board administraters the Plan and 
establishes each Plan cycle, the conditions of each Award made under 
the Plan, which senior officers will receive Awards, the amount of each 
Award, and guidelines for each Plan cycle.
    Based upon the guidelines set forth in each cycle, an Award payout 
is calculated by multiplying the amount of case awarded by the payout 
ratio. The number of shares of Common Stock to be awarded is then 
derived by converting this payout figure into a number of shares of 
Common Stock at the price specified for that Plan cycle. The dividends 
to be paid on those shares of Common Stock are treated as having been 
reinvested since the beginning of the Plan cycle. The shares of Common 
Stock are then converted back into an amount of cash using the closing 
price at the end of the Plan cycle. A participant receives either 
Common Stock or cash and Common Stock, as determined by the Committee, 
after the end of the Plan cycle. The total number of shares of Common 
Stock eligible for issuance in each Plan cycle is not expected to 
exceed 40,000 shares.
    The Plan will terminate December 31, 2007, unless ended sooner by 
the Board. The Board may terminate or amend the Plan at any time, but 
may not, without stockholder approval, materially increase the benefits 
accruing to participants or increase the total number of shares of 
Common Stock available for Awards.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-12077 Filed 5-8-97; 8:45 am]
BILLING CODE 8010-01-M