[Federal Register Volume 64, Number 97 (Thursday, May 20, 1999)]
[Notices]
[Pages 27608-27609]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12664]


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SECURITIES AND EXCHANGE COMMISSION

[Rel. No. IC-23837; 812-11526]


Allegiance Telecom, Inc.; Notice of Application

May 13, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for an order under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'').

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SUMMARY: Applicant requests an order exempting it from all provisions 
of the Act until the earlier of one year from the date the requested 
order is issued or the date applicant no longer may be deemed to be an 
investment company.

FILING DATE: The application was filed on March 2, 1999, and amended on 
April 19, 1999, and on May 11, 1999.

HEARING OR NOTIFICATION OF HEARING: An order granting the requested 
relief will be issued unless the SEC orders a hearing. Interested 
persons may request a hearing by writing to the SEC's Secretary and 
serving applicant with a copy of the request, personally or by

[[Page 27609]]

mail. Hearing requests should be received by the SEC by 5:30 p.m. on 
June 7, 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 
may request notification of a hearing by writing to the SEC's 
Secretary.

ADDRESSES: Secretary, SEC, 450 5th Street NW, Washington, DC 20549-
0609. Applicant, 1950 Stemmons Freeway, Suite 3026, Dallas, TX 75207.

FOR FURTHER INFORMATION CONTACT: 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 
SEC's Preference Branch, 450 5th Street NW, Washington, DC 20549-0102 
(tel. 202-942-8090).

Applicant's Representations

    1. Applicant is a Delaware corporation formed in 1997. Applicant, 
through its wholly-owned subsidiaries, is a facilities-based provider 
of telecommunications services. Applicant owns and operates certain 
portions of the telecommunications networks, primarily 
telecommunication switches, through which applicant provides 
telecommunications services to its customers (``Service''). Applicant 
is actively engaged in deploying telecommunications networks in 24 of 
the largest metropolitan markets in the United States through which it 
plans to provide an integrated set of telecommunications services to 
business, government and other institutional users.
    2. To finance the acquisition and construction of its network 
facilities in each of its target markets, applicant requires a 
significant amount of capital. In addition, as a key element of its 
strategy, applicant has developed a financing plan predicated on pre-
funding each market's expansion to the point at which such market's 
operating cash flow is sufficient to fund both the operating costs 
(including working capital, debt service and cash flow deficits) and 
capital expenditures. Consistent with this financing plan, applicant 
has raised capital whenever it is available on attractive terms and may 
do so in the future in order to pre-fund intended markets.
    3. As of March 31, 1999, applicant had invested approximately 232.4 
million in property, plant and equipment, and had approximately $351.9 
million invested in short-term U.S. Government securities, money market 
funds, certificates of deposit, and commercial paper rated A-1/P-1 (the 
``Qualified Investments''). Applicant currently has allocated a 
significant portion of its investments to Government securities. 
Applicant states that it holds Qualified Investments with the objective 
of preserving capital and maintaining liquidity to meet daily cash 
needs.

Applicant's Legal Analysis

    1. Under section 3(a)(1)(C) of the act, an issuer is an investment 
company if it ``is engaged or proposes to engage in the business of 
investing, reinvesting, owning, holding, or trading in securities, and 
owns or proposes to acquire investment securities having a value 
exceeding 40 percent of the value of such issuer's total assets 
(exclusive of Government securities and cash items) on an 
unconsolidated basis.'' Section 3(a)(2) of the Act defines ``investment 
securities'' to include all securities except government securities, 
and securities which are issued by majority-owned subsidiaries of the 
owner which are not investment companies, and are not relying on the 
exception from the definition of investment company in section 3(c)(1) 
or 3(c)(7) of the Act.
    2. Applicant states that, pending utilization in the development of 
the Service, capital raised by applicant may be held in ``investment 
securities'' within the meaning of section 3(a)(2) of the Act. As of 
March 31, 1999, approximately 56% of applicant's total assets consisted 
of Qualified Investments. Applicant states, therefore, that it may come 
within the definition of investment company in section 3(a)(1)(C) of 
the Act.
    3. Section 6(c) of the Act permits the SEC to exempt any person, 
security, or transaction from any provision of the Act, if and to the 
extent that the exemption is necessary or appropriate in the public 
interest and consistent with the protection of investors and the 
purposes fairly intended by the policy and provisions of the Act.
    4. Applicant requests an exemption under section 6(c) from all 
provisions of the Act until the earlier of one year from the date the 
requested order is issued or the date applicant ceases to be an 
investment company. Applicant believes that within this period it will 
have sufficient expenditures of funds on the development and operation 
of the Service to cure its temporary status under section 3(a)(1)(C) of 
the Act.
    5. Applicant states that, as a company that was created to develop 
competitive local exchange networks in major metropolitan areas through 
the U.S., applicant is not the type of entity that was intended to be 
governed by the Act. Applicant states that, since its inception, its 
principal activities have been primarily the procurement of 
governmental authorizations, the acquisition of telecommunications 
equipment and facilities, the hiring of management and other key 
personnel, the raising of capital, the development, acquisition and 
integration of operations support systems and other back office systems 
and the negotiation of interconnection agreements with incumbent local 
exchange carriers. Applicant thus asserts that the requested relief is 
consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Act.

Applicant's Conditions

    Applicant agrees that the requested exemption will be subject to 
the following conditions:
    1. Applicant will not purchase or otherwise acquire any investment 
securities other than Qualified Investments.
    2. Applicant will not hold itself out as being engaged in the 
business of investing, reinvesting, owning, holding, or trading in 
securities.
    3. Applicant will allocate and utilize its accumulated cash and 
securities for the purpose of funding the development of its networks 
and competitive local exchange business.

    For the SEC, by the Division of Investment Management, under 
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-12664 Filed 5-19-99; 8:45 am]
BILLING CODE 8010-01-M