[Federal Register Volume 63, Number 240 (Tuesday, December 15, 1998)]
[Notices]
[Pages 69124-69125]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33134]



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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 23592; International Series Release 
No. 1173; 812-11422]


Cableuropa S.A.; Notice of Application

December 8, 1998.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for exemption under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') from all provisions of the 
Act.

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SUMMARY OF APPLICATION: Applicant requests an order under section 6(c) 
of the Act exempting a special purpose vehicle and any special purpose 
vehicle that applicant establishes in the future in the same manner and 
for the same purpose (each, ``SPV'') from all provisions of the Act. 
The order would permit SPV to sell certain debt securities (``Notes'') 
and use the proceeds to finance the business activities of applicant 
and companies directly or indirectly controlled by applicant 
(``Operating Companies'').

FILING DATE: The application was filed on December 7, 1998.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the Commission orders a hearing. Interested 
persons may request a hearing by writing to the Commission's Secretary 
and serving applicant with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on January 4, 1999, and should be accompanied by proof of service 
on applicant, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, Securities and Exchange Commission, 450 Fifth 
Street, NW, Washington, DC 20549. Applicant, Edificio Europa 2, Calle 
Musgo 2. Urb., La Florida. 28023 Aravaca, Madrid.

FOR FURTHER INFORMATION CONTACT:
Kathleen L. Knisely, Staff Attorney, at (202) 942-0517, or Nadya B. 
Roytblat, Assistant Director, at (202) 942-0564 (Division of Investment 
Management, Office of Investment Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
Commission's Public Reference Branch, 450 Fifth Street, NW, Washington, 
DC 20549 (tel. 202-942-8090).

Applicant's Representations

    1. Applicant, a limited liability corporation organized under the 
laws of the Kingdom of Spain, is a Spanish cable television and 
telecommunications company. Applicant's primary business is to manage 
and provide technical assistance to the Operating Companies. The 
Operating Companies are limited liability companies organized under the 
laws of the Kingdom of Spain and engaged in providing broadband cable 
television and telecommunications services to customers in Spain.
    2. SPV will be a public limited company formed under the laws of 
England and Wales. SPV will be organized specifically to raise funds 
for the operations of applicant and the Operating Companies by issuing 
the Notes and lending the proceeds to applicant and the Operating 
Companies. SPV will be organized, and conduct its activities, in 
accordance with rule 3a-5 under the Act, with certain exceptions 
discussed below. Rule 3a-5 provides an exemption from the definition of 
investment company for certain companies organized primarily to finance 
the business operations of their parent companies or companies 
controlled by their parent companies.
    3. Applicant has determined to raise capital through SPV because 
the direct issuance of the Notes by applicant would not be feasible 
under Spanish tax and corporate law. Under Spanish tax law, significant 
tax disadvantages may be borne by applicant were it to own or control 
SPV. In addition, Spanish corporate law also further restricts the 
direct issuance of the Notes by applicant or a finance subsidiary of 
applicant. For these reasons, at least 95% of equity securities of SPV 
will be held by an English private limited company (``HoldCo SPV'') 
with applicant holding the remaining interest. All of HoldCo SPV's 
equity securities will be held by a professional trust corporation 
(``TrustCo'') under the terms of an English law charitable trust. The 
declaration of trust establishing the charitable trust will give 
TrustCo discretion to apply any residual value held by it for such 
purposes as it may select, provided they constitute ``charitable 
purposes'' under English law. In any case, any charity selected to 
benefit from any residual value in HoldCo SPV's assets (including the 
shares it owns in SPV will not pay any consideration in connection with 
such acquisition.
    4. SPV intends to issue the Notes in reliance on Regulation S and 
Rule 144A under the Securities Act of 1933 (``1933 Act'') and shortly 
thereafter file a registration statement under the 1933 Act to register 
a separate series of high-yield debt securities with identical terms to 
the initial Notes to be offered in exchange for the initial Notes. 
These Notes will be unconditionally guaranteed by applicant on a 
subordinated basis.
    5. Applicant and SPV, in connection with the offering of the Notes, 
will submit to the jurisdiction of any state or federal court in the 
Borough of Manhattan in the City of New York, and will appoint an agent 
to accept any process which may be served, in any suit, action, or 
proceedings brought against applicant or SPV based upon their 
obligation under the Notes as described in the application. The consent 
to jurisdiction and appointment of an authorized agent to accept 
service of process will be irrevocable until all amounts due and to 
become due with respect to the Notes have been paid.
    6. SPV will loan at least 85% of any cash or cash equivalent raised 
by SPV to applicant and the Operating Companies as soon as practicable, 
but in no event later than six months after SPV's receipt of the cash 
or cash equivalents. In the event SPV borrows amounts in excess of the 
amounts to be loaned to applicant and the Operating Companies at any 
given time, SPV will invest the excess in temporary investments pending 
lending the money to applicant and the Operating Companies. Consistent 
with rule 3a-5, all investments by SPV, including all temporary 
investments, will be made in government securities, securities of 
applicant or a company controlled by applicant, or debt securities 
which are exempted from the provisions of the 1933 Act by section 
3(a)(3) of the 1933 Act.
    7. SPV's articles of association and its memorandum of association 
and any trust indenture agreement will: (i) limit its activities to 
issuing the Notes or other debt securities and loaning the proceeds to 
applicant and the Operating Companies; and (ii) prohibit the transfer 
of SPV's shares to any party other than HoldCo SPV, TrustCo, or 
applicant.
    8. HoldCo SPV's articles of association and its memorandum of 
association will:
    (i) limit its activities to borrowing funds from applicant to 
purchase and hold shares of SPV;

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    (ii) prohibit the transfer of HoldCo SPV's shares to any party 
other than TrustCo or applicant;
    (iii) prohibit the transfer of SPV's shares to any party other than 
TrustCo or applicant; and
    (iv) prohibit HoldCo SPV from issuing any securities (other than 
the initial issuance of its share capital to TrustCo) or otherwise 
incurring any indebtedness other than the loan from applicant 
sufficient to cover the cost of purchasing the shares of SPV and costs 
incidental to the maintenance of HoldCo SPV and SPV.

Applicant's Legal Analysis

    1. Applicant states that SPV may be viewed as falling technically 
within the definition of an investment company under section 3(a)(1) of 
the Act. Applicant requests an exemption under section 6(c) of the Act 
exempting SPV from all provisions of the Act. Section 6(c) of the Act 
permits the Commission to grant an exemption from the provisions of the 
Act if, and to the extent, that such exemption is necessary and 
appropriate in the public interest, consistent with the protection of 
investors, and consistent with the purposes fairly intended by the 
policy and provisions of the Act.
    2. Applicant state that rule 3a-5 under the Act provides an 
exemption from the definition of investment company for certain 
companies organized primarily to finance the business operations of 
their parent companies or companies controlled by their parent 
companies. Applicant states that SPV meets all of the requirements of 
rule 3a-5 except for one, which it cannot meet for Spanish tax and 
corporate law reasons. Rule 3a-5(b)(1)(i) under the Act requires that 
all of SPV's common stock be owned by applicant or a company controlled 
by applicant. Applicant asserts that, while for Spanish tax and 
corporate law reasons SPV's common stock will be held by HoldCo SPV, 
SPV will be organized to serve solely as a conduit for applicant's and 
the Operating Companies' capital raising activities. Applicant further 
states that SPV's function will be limited by its constitutional 
documents and any trust indenture agreement to the activities of a 
traditional finance subsidiary.

Applicant's Conditions

    Applicant agrees that any order granting the requested relief will 
be subject to the following conditions:
    1. SPV will comply with all provisions of rule 3a-5 under the Act, 
except with respect to rule 3a-5(b)(1)(i), over 95% of SPV's common 
shares will be held by HoldCo SPV (all of whose shares will in turn be 
held under the terms of an English law charitable trust), with the rest 
held by applicant. For purposes of rule 3a-5 under the Act, applicant 
will be deemed to be SPV's ``parent company'' and each Operating 
Company will be deemed to be a ``company controlled by the parent 
company.''
    2. SPV's articles of association and memorandum of association and 
any trust indenture agreement will: (i) limit the SPV's activities is 
issuing the Notes or other debt securities and loaning the proceeds to 
applicant and the Operating Companies (as well as other activities 
incidental to the issuance of the Notes, loaning the proceeds thereof, 
and the day-to-day operations of the SPV); and (ii) prohibit the 
transfer of SPV's shares to any party other than HoldCo SPV, TrustCo, 
or applicant.
    3. HoldCo SPV's articles of association and its memorandum of 
association will: (i) limit HoldCo SPV's activities to borrowing funds 
from applicant to purchase and hold shares of SPV; (ii) prohibit the 
transfer of HoldCo SPV's shares to any party other than TrustCo 
(pursuant to the terms of the charitable trust) or applicant; (iii) 
prohibit the transfer of SPV's shares to any party other than TrustCo 
or applicant; and (iv) prohibit HoldCo SPV from issuing any securities 
(other than the initial issuance of its share capital to TrustCo) or 
otherwise incurring any indebtedness, other than a loan from applicant 
sufficient to cover the costs of purchasing the shares of SPV and costs 
incidental to the maintenance of HoldCo SPV and SPV.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-33134 Filed 12-14-98; 8:45 am]
BILLING CODE 8010-01-M