[Federal Register Volume 63, Number 248 (Monday, December 28, 1998)]
[Notices]
[Pages 71519-71520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34204]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 23612; 812-11148]
IEI Capital Corp; Notice of Application
December 18, 1998.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') granting an exemption from
all provisions of the Act.
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SUMMARY OF APPLICATION: Applicant requests an order exempting it from
all provisions of the Act.
FILING DATES: The application was filed on September 24, 1998, and
amended on December 18, 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 applicants 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 12, 1999, and should be accompanied by proof of service
on applicants, 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: Secretaries and Exchange Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Applicant, 1630 North Meridian Street,
Indianapolis, IN 46202-1496.
FOR FURTHER INFORMATION CONTACT: Kathleen L. Knisely, Staff Attorney,
at (202) 942-0517, or George J. Zornada, Branch Chief, 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, N.W.,
Washington, D.C. 20549. (tel. 202-942-8090).
Applicant's Representations
1. Applicant is an Indiana corporation and a wholly-owned finance
subsidiary for Indiana Energy, Inc. (``IEI''). IEI, incorporated in
Indiana, is a public utility holding company exempt from the Public
Utility Holding Company Act of 1940. In addition to applicant, IEI's
wholly-owned subsidiaries are IEI Investments, Inc. (``Investments''),
Indiana Gas Company (``Indian Gas''), Indiana Energy Foundation
(``Energy''), and IEI Services, LLC (``IEI Services''). Investments has
three wholly-owned subsidiaries, IGC Energy, Inc. (``IGC Energy''),
Energy Realty, Inc. (``Energy Realty''), and Energy Financial Group,
Inc. (``EFGI''). IGC Energy has four subsidiaries, ProLiance Energy LLC
(``ProLiance''), CIGMA, LLC (``CIGMA''), Energy Systems Group, LLC
(``ESG''), and Reliant Services LLC (``Reliant''). EFGI has two
subsidiaries, IEI Synfuels, Inc. and IEI Financial Services, LLC
(together with Investments, Energy, IEI Services, IGC Energy, Energy
Realty, EFGI, Proliance, CIGMA, ESG, and Reliant, the
``Subsidiaries''). Indiana Gas has two wholly-owned subsidiaries, Terre
Haute Gas Corporation and Richmond Gas Corporation (collectively, the
``Indiana Gas Subsidiaries'').
2. Indiana Gas is a natural gas public utility operating company,
subject to regulation by the Indiana Utility Regulatory Commission
(``IURC'') in respect to, among other things, rates, charges, services
accounts, and the issuance of securities. Indiana Gas is also subject
to limited regulation by the Federal Energy Regulatory Commission
(``FERC''). Neither IEI nor any of the Subsidiaries is subject to
regulation by the IURC or the FERC.
3. Applicant was formed as a financing conduit for IEI and the
Subsidiaries. Applicant's primary function will be to raise funds
through the offer and sale of debt securities, and to lend at least 85%
of the proceeds of such offering to IEI or its Subsidiaries. Applicant
will comply with all of the provisions of rule 3a-5 under the Act
except that, due to the regulated nature of Indiana Gas, IEI cannot
directly guarantee the debt securities. Instead of an unconditional
guarantee, IEI will use a support agreement (``Support Agreement'')
which will be the functional equivalent of an unconditional guarantee
except that it will provide that the holders of debt will have no
recourse against the stock or assets of Indiana Gas, the Indiana Gas
Subsidiaries, or any interest of applicant or IEI therein.
4. Because applicant's securities are not beneficially owned by
more than 100 persons and applicant is not making and does not propose
to make a public offering of its securities, applicant is not an
``investment company'' by virtue of the exemption contained in section
3(c)(1) of the Act. Applicant is applying for an exemption because it
may in the future engage in a public offering or an offering exempt
from the registration requirements of the Securities Act of 1933
(``Securities Act'') which may result in applicant's securities being
beneficiary held by more than 100 persons. Applicant, therefore,
requests an order under section 6(c) of the Act exempting it from all
provisions of the Act.
Applicant's Legal Analysis
1. 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. Rule 3a-5 under the Act provides an exemption from the
definition of an 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 it meets all of the requirements of rule 3a-5 except that IEI
cannot directly guarantee the debt securities.
3. Applicant believes that the Support Agreement provides a
functional equivalent of an unconditional guarantee of applicant's
securities because it grants holders of applicant's securities the
right to proceed directly against IEI in the event applicant fails to
pay when due principal, interest, and premium, if any, owed by it on
such securities. IEI states that it determined to enter into the
Support Agreement in lieu of an unconditional guarantee because it
wished to separate entirely the financing of its unregulated activities
from the regulated business of Indiana Gas. Applicant states that for
business and regulatory reasons the right to proceed directly against
IEI is limited only so as to exclude the stock and assets of Indiana
Gas, the Indiana Gas subsidiaries, and any interest of IEI and
applicant therein. Applicant also states that funds available to IEI to
satisfy any obligation under the Support Agreement will include
dividends paid by Indiana Gas to IEI, as well as revenues and other
assets of IEI, which include its interest in subsidiaries other than
Indiana Gas.
Applicant's Condition
Applicant agrees that the order granting the requested relief will
be subject to the following conditions:
1. Applicant will meet all of the requirements of rule 3a-5 except
for the
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unconditional guarantee requirement. In lieu of the unconditional
guarantee requirement, applicant has entered into, and will keep in
force (except as contemplated below), the Support Agreement, which is
and shall be the functional equivalent of an unconditional guarantee.
The Support Agreement provides, and will continue to provide, as
follows:
a. IEI owns and shall continue to own all of the outstanding voting
stock of applicant.
b. IEI will provide to applicant funds (as capital, or if IEI and
applicant agree, as a subordinated loan) as required if applicant is
unable to make timely payment of interest, principal or premium, if
any, on any debt issued by applicant.
c. IEI will cause applicant to have at all times a positive net
worth (net assets less intangible assets, if any), as determined in
accordance with generally accepted accounting principles.
d. If applicant fails or refuses to take timely action to enforce
its rights under the Support Agreement or if applicant defaults in the
timely payment of interest, principal or premium, any lender may
proceed directly against IEI to enforce applicant's rights under the
Support Agreement or to obtain payment of such defaulted interest,
principal or premium.
2. The Support Agreement may be modified or amended in a manner
that adversely affects the rights of creditors of applicant only if
such modification or amendment occurs after all debt securities
theretofore issued by the applicant are paid in full, unless all
affected creditors consent in advance and in writing to such
modification or amendment. No modification of or amendment to the
Support Agreement relating to the four provisions set forth in
paragraph 1, above, shall be made unless (1) all creditors consent in
advance and in writing to such modification or amendment and (2)
applicant applies to the Commission for an amended order relating to
such modification or amendment, and the Commission grants such amended
order. The Support Agreement may be terminated only after (1) all debt
securities issued by applicant are paid in full and (2) applicant
applies to the Commission for an amended order relating to such
termination, and the Commission grants such amended order.
3. Although applicant does not presently intend to initiate a non-
public offering of its securities which may result in its securities
(other than short-term paper, as that term is defined in section
2(a)(38) of the Act) being beneficially held by more than 100 persons,
or to make a public offering of its securities, if such offerings are
made, they will consist of short-term, intermediate-term, and long-term
debt securities to be offered and sold either in transactions exempt
from the registration requirements of the Securities Act or in public
offerings of securities registered under the Securities Act. No future
public offerings will involve voting securities of applicant.
4. If applicant offers or sells securities not requiring
registration under the Securities Act, applicant will provide each
offeree with disclosure materials which will include a description of
the business of IEI and its subsidiaries and other data of the
character customarily supplied in such offerings, or will otherwise
comply with the disclosure requirements of Regulation D under the
Securities Act. In the event of a subsequent offering, these materials
will be appropriately updated at the time thereof (by supplementing the
disclosure materials or by incorporating by reference filings under the
Securities Exchange Act of 1934) to reflect material changes in the
financial condition of IEI and its subsidiaries, taken as a whole.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland
Deputy Secretary.
[FR Doc. 98-34204 Filed 12-24-98; 8:45 am]
BILLING CODE 8010-01-M