[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