[Federal Register Volume 62, Number 236 (Tuesday, December 9, 1997)]
[Notices]
[Pages 64897-64899]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32170]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26788]
Filings Under the Public Utility Holding Company Act of 1935, as
Amended (``Act'')
December 3, 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 December 28, 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.
Conectiv, et al.
[70-9095]
Conectiv, Inc. (``Conectiv''), not currently subject to the Act,\1\
Delmarva Power & Light Company (``Delmarva''), a public utility
company, and its subsidiaries, Delmarva Industries, Inc., Delmarva
Energy Co., and Support Conectiv, Inc. (``Support Conectiv''), all
located at 800 King Street, Wilmington, Delaware 19899-0231; Delmarva
Services Company, Conectiv Services, Inc., Conectiv Communications,
Inc., Delmarva Capital Investments, Inc., DCI I, Inc., DCI II, Inc.,
Delmarva Capital Technology Co., DCTC-Burney, Inc., Pine Grove, Inc.,
Pine Grove Landfill, Inc., Pine Grove Hauling Company, Delmarva Capital
Realty Company, Christiana Capital Management, Inc. Post and Rail
Farms, Inc., Delmarva Operating Services Company, DelStar Operating
Company, DelWest Operating Company, DelCal Operating Company, Conectiv
Solutions, Inc., Conectiv Enterprises, Inc., and Conectiv Energy, Inc.,
all located at 252 Chapman Road, P.O. Box 6066, Newark, Delaware 19714;
Atlantic City Electric Company (``Atlantic Electric''), a public
utility holding company currently claiming an exemption from regulation
under section 3(a)(1) of the Act from all provisions except section
9(a)(2), and its subsidiaries, Deepwater Operating Company, Atlantic
Energy Enterprises, Inc., and Atlantic Energy International, Inc., all
located at 6801 Black Horse Pike, Egg Harbor Township, New Jersey
08234; ATE Investment, Inc., Atlantic Generation, Inc., Pedrick
Limited, Inc., Pedrick General, Inc., Vineland Limited, Inc., Vineland
General, Inc., Atlantic Southern Properties, Inc., Atlantic Thermal
Systems, Inc., Atlantic Jersey Thermal Systems, Inc., ATS Operating
Systems, Inc., CoastalComm, Inc., Atlantic Energy Technology, Inc.,
Binghamton General, Inc., Binghamton Limited, Inc., The Earth Exchange,
Inc., and Atlantic Paxton Cogeneration, Inc., all located at 5100
Harding Highway, Mays Landing, New Jersey 08330 (collectively,
``Applicants'' or ``Conectiv System''), have filed an application-
delcaration under sections 6, 7, 9, 10, 12 and 13 under the Act and
rules 43, 45, 46, and 54 under the Act.
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\1\ Conectiv will register as a holding company under the Act
upon consummation of the transactions contemplated in File No. 9069
(``Merger U-1'').
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Conectiv has previously filed an application-declaration with the
Commission under section 9(a)(2) of the Act seeking approvals relating
to the proposed acquisition by Conectiv of securities of Delmarva, and
merger into Conectiv of Atlantic Energy, Inc. (``Atlantic''), parent of
Atlantic Electric, (collectively, these transactions are referred to as
the ``Merger''), and for other related transactions including the
formation of Support Conectiv as a subsidiary service company in
accordance with the provisions of rule 88 under the Act. A notice of
the Merger U-1 was issued on October 3, 1997 (HCAR No. 26763). Each of
the entities that will be directly and indirectly owned subsidiaries of
Conectiv upon consummation of the transactions described in the Merger
U-1 is referred to individually as a ``Subsidiary'' and collectively as
``Subsidiaries''.\2\ Following the consummation of the Merger, Conectiv
will have two utility subsidiaries, Delmarva and Atlantic Electric (the
``Utility Subsidiaries''). All of Conectiv's direct and indirect
Subsidiaries, other than the Utility
[[Page 64898]]
Subsidiaries shall be referred to as ``Non-Utility Subsidiaries.''
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\2\ Applicants state that for purposes of sections in the
application-declaration related to non-utility financing,
guarantees, changes in capital stock of wholly-owned subsidiaries,
and dividends out of capital or unearned surplus by non-utility
subsidiaries, the terms ``Subsidiary'' and ``Subsidiaries'' shall
also include other direct or indirect subsidiaries that Conectiv may
form after the Merger with either the approval of the Commission,
under the Rule 58 exemption or under Section 34 of the Act. Thus,
future Rule 58 and exempt telecommunication companies (``ETCs'') are
included in the term ``Subsidiaries'' for purposes of these
sections.
Applicants also state that for purposes of sections in the Form
U-1 related to the Money Pool, the terms ``Subsidiary'' and
``Subsidiaries'' will only include those companies specifically
named on the cover and signature pages of the application-
declaration and specifically exclude Conectiv Communications, Inc.
and CoastalComm., Inc, both wholly-owned ETCs. Applicants further
request the Commission to reserve jurisdiction over the
participation in the Conectiv System Money Pool of future companies
formed by Conectiv.
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Applicants propose to enter into numerous types of financing
transactions to meet Conectiv's capital requirements immediately
following the Merger and to plan future financing. Applicants request
authorization to engage in the financing transactions through December
31, 2000 (``Authorization Period'') described below.
Financings by each Applicant will be subject to the following
limitations: (i) the effective cost of money on long-term debt
securities will not exceed 300 basis points over comparable term U.S.
Treasury securities and the effective cost of money on short-term
securities will not exceed 300 basis points over the comparable term
London Interbank Offered Rate; (ii) maturity of indebtedness will not
exceed 50 years; (iii) the underwriting fees, commissions, or similar
remuneration paid in connection with the issue, sale or distribution of
a security will not exceed 5% of the principal amount of the financing;
and (iv) Conectiv represents that at all times during the Authorization
Period its common equity will be at least 30% of its consolidated
capitalization.
The proceeds from the sale of securities in external financing
transactions will be used for general and corporate purposes including:
(i) the financing of capital expenditures of the Conectiv System; (ii)
the financing of working capital requirements of the Conectiv System;
(iii) the acquisition, retirement, or redemption of existing
securities; and (iv) direct or indirect investment in companies
authorized under the Merger U-1 and in other rule 58 companies and
ETCs.
1. Conectiv External Financing
a. Common Stock. Conectiv requests authorization to issue common
stock, par value $0.01 per share, up to an aggregate amount of $500
million. Of this amount, Conectiv proposes that $100 million be issued
as consideration for the acquisition by Conectiv or a Non-Utility
Subsidiary of securities of a business (the acquisition of which is
exempt under rule 58 or section 34 of the Act, or which has been
authorized in the Merger U-1). Conectiv requests authorization to issue
up to 10 million shares of Conectiv common stock (or options to
purchase such shares) pursuant to benefit plans and the dividend
reinvestment plan. The number of shares to be issued under the benefit
plans will not exceed 5 million.
b. Long-term Debt. Conectiv requests authorization to issue long-
term debt securities in an amount, when combined with the issuances of
common stock (other than for benefit plans or the Conectiv Dividend
Reinvestment Plan), not to exceed $500 million. The long-term debt
securities would include notes, debentures and medium-term notes issued
under an indenture (``Conectiv Indenture'') and/or borrowings from
banks and other financial institutions.\3\ Specific terms of any
borrowings will be determined by Conectiv at the time of issuance and
will comply with the parameters of financing authorization stated
earlier.
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\3\ Applicants state that the Conectiv Indenture will permit the
issuance of a wide variety of unsecured debt securities in one or
more series. The Conectiv Indenture will contain numerous variable
terms, such as principal amount, interest rate, redemption terms,
denominations, events of default, etc. The Conectiv Indenture
contains no negative covenants or restrictions.
Borrowings from banks and other financial institutions will be
unsecured debt and will rank pari passu with debt securities issued
under the Conectiv Indenture and the Conectiv short-term Credit
Facility (described in footnote 4 below).
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c. Short-term Debt. Conectiv requests authorization to have
outstanding at any one time, up to $500 million of short-term debt
consisting of borrowings under a revolving credit facility with a group
of banks, the issuance of commercial paper \4\ and the sale of bid
notes under bid-note agreements (``Bid-Note Agreements'').\5\ The
short-term debt will be used to refund pre-Merger short-term debt, to
provide for the reissuance of pre-Merger letters of credit and to
provide financing for general corporate purposes, working capital
requirements and Subsidiary capital expenditures until long-term
financing can be obtained.
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\4\ Conectiv anticipates entering into a revolving credit
facility (the ``Credit Facility'') with a group of banks on or
before the effective date of the Merger in order to repay existing
obligations of certain Subsidiaries. A portion of the Credit
Facility may be used to support letters of credit issued by Conectiv
or the Subsidiaries in the ordinary course of business. Also, if a
Utility Subsidiary issues commercial paper, it may be made a party
to the Credit Facility as a backup for the commercial paper.
The interest rates on the Credit Facility are expected to be
based on a triple option pricing formula as follows: (1) prime rate,
(2) LIBOR plus a margin, or (3) CD plus a margin. Maturities on
loans under the LIBOR rate option are expected to be for 1, 2, 3 or
6 months. Maturities on loans under the CD rate option are expected
to be for 30, 60, 90 or 180 days. All of these loans will be
evidenced by promissory notes. It is expected that the Credit
Facility will contain negative covenants consistent with those
covenants required by bank lenders for comparable bank facilities.
The Credit Facility will be unsecured debt of Conectiv and will rank
pari passu with debt issued under the Conectiv Indenture and any
long-term securities issued directly to banks or other financial
institutions.
It is anticipated that the sale of commercial paper will be in
established domestic or European commercial paper markets. It will
be sold to dealers at the discount rate or coupon rate per annum
prevailing at the date of issuance for commercial paper of
comparable quality and maturities sold to commercial paper dealers
generally. The credit Facility will serve as backup for Conectiv's
commercial paper program.
\5\ Conectiv request authorization to enter into individual Bid-
Note Agreements with one or more commercial banks which may or may
not be lenders under the Credit Facility. The Bid-Note Agreements
would permit Conectiv to negotiate with one or more banks to
purchase promissory notes (``Bid Notes'') directly from Conectiv.
The Bid Notes would bear interest rates comparable to or lower than,
those available through other forms of short-term borrowing with
similar terms requested in the application-declaration. The maturity
of any Bid Note would not exceed 270 days.
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d. Hedging Transactions. Conectiv requests authorization to enter
into, perform, purchase and sell financial instruments intended to
manage the volatility of interest rates, including but not limited to
interest rate swaps, caps, floors, collars and forward agreements or
any other similar agreements. Conectiv would employ interest rate swaps
as a means of prudently managing the risk associated with any of its
outstanding debt issued under this authorization by (i) converting
variable rate debt to fixed rate debt, (ii) converting fixed rate debt
to variable rate debt, (iii) limiting the impact of changes in interest
rates resulting from variable rate debt and (iv) providing an option to
enter into interest rate swap transactions in future periods for
planned issuances of debt securities.
2. Subsidiary Financing
Applicants request authorization for Delmarva to issue up to $275
million of short-term debt consisting of commercial paper, unsecured
bank loans and borrowings under the Conectiv system money pool. These
issuances of securities will comply with the parameters for financing
described above. Any short-term borrowings by Delmarva, when combined
with short-term borrowings by Conectiv, will not exceed $500 million at
any time during the Authorization Period. In addition the Applicants
request authorization for the Utility Subsidiaries to enter into
hedging transactions of the same type and under the same conditions as
those identified above for Conectiv.
3. Other Securities
The Applicants request authorization to issue other types of
securities within the parameters of this Application-Declaration during
the Authorization Period. The Applications request that the Commission
reserve jurisdiction over the issuance of additional types of
securities.
[[Page 64899]]
4. Guarantees
Conectiv requests authorization to enter into guarantees, obtain
letters of credit, enter into expense agreements or otherwise provide
credit support with respect to the obligations of Subsidiaries in an
aggregate amount not to exceed $350 million. In addition, the Non-
Utility Subsidiaries request authority to enter into arrangements with
each other similar to those described with respect to Conectiv in an
aggregate amount not to exceed $100 million. Applicants state that the
debt guaranteed will comply with the parameters for financing.
5. Conectiv System Money Pool
Conectiv and the Subsidiaries request authorization to establish a
Conectiv system money pool (``System Money Pool''). Conectiv may
invest, but not borrow from the System Money Pool. Also, Delmarva and
Atlantic Electric would be authorized to borrow up to $275 million and
$250 million, respectively, from the System Money Pool.\6\ No other
participant in the System Money Pool would be permitted to have
borrowings from the System Money Pool exceeding $25 million at any one
time outstanding during the Authorization Period. Support Conectiv will
administer the System Money Pool on an ``at cost'' basis. Support
Conectiv will act strictly in an agency capacity, and not as principal,
with regard to funds deposited in the System Money Pool by other
participants.
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\6\ As noted in footnote 2 above, the only Subsidiaries to be
included in the System Money Pool are those companies specifically
named on the cover and signature pages of the application-
declaration, but specifically excluding Conectiv Communications,
Inc. and CoastalComm. Inc., both wholly-owned ETCs.
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6. Changes in Capital Stock of Wholly-Owned Subsidiaries and Dividends
Out of Capital or Unearned Surplus by Non-Utility Subsidiaries
Applicants request authority to change the terms of any wholly-
owned Subsidiary's authorized capital stock capitalization by an amount
deemed appropriate by Conectiv or other immediate parent company. A
Subsidiary would be able to change the par value, or change between par
and no-par stock, without additional Commission approval. Any action by
a Utility Subsidiary would be subject to and would only be taken upon
receipt of necessary approvals by the state commission in the state or
states where the Utility Subsidiary is incorporated and doing business.
In addition, Conectiv requests the flexibility to withdraw capital
from a Non-Utility Subsidiary with excess funds through a dividend out
of capital surplus to the full extent permitted by the law of the state
where the Non-Utility Subsidiary is incorporated.
7. Financing Entities
The Subsidiaries seek authorization to organize new corporations,
trusts, partnerships or other entities created for the purpose of
facilitating financings. These entities will issue to third parties
income preferred securities or other securities authorized or issued
under an exemption. In addition, authority is requested for (i) the
issuance of debentures or other evidences of indebtedness by any of the
Subsidiaries to a financing entity in return for the proceeds of the
financing, (ii) the acquisition by any of the Subsidiaries of voting
interests or equity securities issued by the financing entity to
establish any such Subsidiary's ownership of the financing entity and
(iii) the guarantee by the Applicants of such financing entity's
obligations.
Applicants also request that (i) Delmarva be authorized to retain
Delmarva Power Financing I, a wholly-owned trust, that has issued trust
preferred securities and loaned the proceeds to Delmarva and (ii)
Atlantic Electric be authorized to retain Atlantic Capital I, a wholly-
owned trust, that has issued trust preferred securities and loaned the
proceeds to Atlantic Electric.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-32170 Filed 12-8-97; 8:45 am]
BILLING CODE 8010-01-M