[Federal Register Volume 64, Number 157 (Monday, August 16, 1999)]
[Notices]
[Pages 44559-44560]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-21192]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Release No. 23939; 812-11566]
BHF Finance (Delaware) Inc.; Notice of Application
August 10, 1999.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under section 6(c) of the
Investment Company Act of 1940 (the Act'') from all provision of the
Act.
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SUMMARY OF APPLICATION: Applicant, BHF Finance (Delaware) Inc. (``BHF
Finance''), seeks an order to permit BHF Finance to sell securities and
use the proceeds to finance the business activities of its parent
company, BHF-BANK Aktiengesellschaft (``BHF''), and certain companies
controlled by BHF.
FILING DATES: The application was filed on March 17, 1999, and amended
on August 4, 1999.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
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 mail. Hearing
requests should be received by the SEC by 5:30 p.m. on September 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 who wish to be
notified of a hearing may request notification by writing to the SEC's
Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549-0609. Applicant, 590 Madison Avenue, New York, NY 10022.
FOR FURTHER INFORMATION CONTACT: Janet M. Grossnickle, Attorney-
Adviser, at (202) 942-0526, or Mary Kay Frech, Branch Chief, at (202)
942-0564 (Office of Investment Company Regulation, Division of
Investment Management).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C.
20549-0102 (tel. 202-942-8090).
Applicant's Representations
1. BHF is a commercial bank organized under the laws of the Federal
Republic of Germany (``Germany''). BHF provides, directly or through
its subsidiaries, a wide range of financial services to individuals
businesses, governments and financial institutions throughout Germany
and internationally. As of December 31, 1998, BHF was the seventh
largest publicly traded commercial bank in Germany in terms of
consolidated total assets, which totaled approximately DM 89 billion.
BHF Finance is a Delaware corporation and wholly-owned subsidiary of
BHF that was organized to engage in financing activities and to provide
funds for BHF and companies controlled by BHF.
2. On December 30, 1998, approximately 39% of the shares of BHF
were indirectly acquired by ING Groep N.V. (``ING Group''), a
Netherlands corporation engaged in insurance activities in the United
States. BHF Finance states that ING Group's investment is considered a
controlling interest under the Bank Holding Company Act of 1956
(``BHCA''), which prohibits a foreign entity from engaging directly or
indirectly in banking and insurance activities in the United States at
the same time. Accordingly, BHF is in the process of terminating all
banking activities, as defined in the BHCA, in the United States (``de-
banking'').
3. BHF Finance previously issued and sold commercial paper in the
United States pursuant to an SEC order issued in 1986 and amended in
1993 (``Prior Order'') exempting it from all provisions of the Act.\1\
BHF Finance has discontinued the issuance and sale of commercial paper
pursuant to the Prior Order in connection with the de-banking. All of
the commercial paper issued pursuant to the Prior Order matured on or
prior to June 18, 1999. The order requested by BHF Finance will
supersede the Prior Order.
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1\1\ Berliner Handels-Und Frandfurter Bank and BHF Finance
(Delaware) Inc., Investment Company Act Release Nos. 19603 (July 38,
1993) (notice) and 19649 (Aug. 24, 1993) (order); Berliner Handels-
Und Frandfurter Bank and BHF Finance (Delaware) Inc., Investment
Company Act Release Nos. 15188 (July 2, 1986) (notice) and 15230
(July 29, 1986) (order).
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4. BHF intends to continue to engage in some business activities in
the BHF Finance, primarily the business of extending commercial credit
to third parties, through BHF (USA) Capital Corporation (``BHF
Capital''), a Delaware corporation, which is an
[[Page 44560]]
indirect, wholly-owned subsidiary of BHF. All of the outstanding
securities of BHF Capital are indirectly owned by BHF.
5. BHF Finance proposes to issue commercial paper in the United
States pursuant to the exemption contained in section 3(a)(3) of the
Securities Act of 1933 (the ``1933 Act''). BHF Finance may also offer
debt securities other than commercial paper or non-voting preferred
stock in the United States, and lend the proceeds to or invest the
proceeds in BHF, BHF Capital and other companies that, after giving
effect to the exemption requested in the application, will be companies
controlled by BHF within the meaning of rule 3a-5(b) under the Act as
discussed below (``Controlled Companies''). Rule 3a-5 generally exempts
finance subsidiaries of operating companies from the definition of
investment company.
6. Any issuance of debt securities or non-voting preferred stock by
BHF Finance will be guaranteed unconditionally by BHF with a guarantee
that meets the requirements of rule 3a-5(a)(1) or (2), respectively
(the ``Guarantee'`). In accordance with rule 3a-5(a)(5), at least 85%
of any cash or cash equivalents raised by BHF Finance will be invested
in or loaned to BHF and Controlled Companies as soon as practicable,
but in no event later than six months after BHF Finance's receipt of
such cash or cash equivalents. In accordance with rule 3a-5(a)(6), all
investments by BHF Finance, including temporary investments, will be
made in government securities, securities of BHF and Controlled
Companies, or debt securities that are exempted from the provisions of
the 1933 Act by section 3(a)(3) of the 1933 Act.
7. In connection with BHF Finance's offering of securities
guaranteed by BHF, BHF will submit to the jurisdiction of any state or
Federal court in the County of New York, State of New York and will
appoint an agent to accept any process which may be served in any
action based upon BHF's obligations to BHF Finance as described in the
application. Such consent to jurisdiction and such appointment of an
authorized agent to accept service of process will be irrevocable until
all amounts due and to become due with respect to securities issued by
BHF Finance as described in the application have been paid.
Applicant's Legal Analysis
1. BHF Finance requests relief under section 6(c) of the Act for an
exemption from all provisions of the Act. 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.
2. Rule 3a-5(b)(3)(i) in relevant part defines a ``company
controlled by the parent company'' to be a corporation, partnership, or
joint venture that is not considered an investment company under
section 3(a) of the Act or that is excepted or exempted by order from
the definition of investment company by section 3(b) of the Act or by
the rules and regulations under section 3(a). Certain of BHF's
subsidiaries do not fit within the definition of ``companies controlled
by the parent company'' because they derive their non-investment
company status from section 3(c) of the Act. In addition, BHF engages
in certain activities (including certain investment activities) through
BHF Capital. BHF Capital has no outstanding securities other than those
owned directly or indirectly by BHF (excluding short-term paper,
directors' qualifying shares, and debt securities owned by the Small
Business Administration). BHF Capital would be eligible for exemption
under rule 3a-3 under the Act, except that BHF is a foreign bank.\2\
Accordingly, BHF Finance requests exemptive relief to permit it to lend
the proceeds of its debt offerings to certain subsidiaries of BHF that
are excluded from the definition of investment company by virtue of
section 3(c) and subsidiaries that would be excluded by virtue of rule
3a-3, but for BHF's status as their parent company. BHF Finance states
that neither itself, nor BHF, nor BHF Capital engage primarily in
investment company activities.
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\2\ Rule 3a-3 generally exempts an issuer from the definition of
investment company if all of its outstanding securities (other than
short-term paper, directors' qualifying shares, and debt securities
owned by the Small Business Administration) are owned by an eligible
parent company. A parent company generally is eligible if it meets
certain asset and income tests and (i) it is not an investment
company as defined in section 3(a) of the Act; (ii) it is excluded
from the definition of investment company by section 3(b) of the
Act; or (iii) it is deemed not to be an investment company under
rule 3a-1 of the Act.
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3. Section 6(c) of the Act, in pertinent part, provides that the
SEC, by order upon application, may conditionally or unconditionally
exempt any person, security or transaction, or any class or classes of
persons, securities or transactions, from any provision or provisions
of the Act to the extent that such 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. BHF Finance submits that its exemptive request
meets the standards set out in section 6(c).
Applicant's Condition
BHF Finance agrees that the order granting the requested relief
will be subject to the following condition:
BHF Finance will comply with all of the provisions of rule 3a-5
under the Act, except paragraph 9b)(3)(i) to the extent that BHF
Finance will be permitted to invest in or make loans to entities that
do not meet the portion of the definition of ``company controlled by
the parent company'' solely because they are:
(1) subsidiaries of BHF that would be excluded from the definition
of investment company by virtue of rule 3a-3 under the Act, but for
BHF's status as their parent company; or
(2) corporations, partnerships, and joint ventures that are
excluded from the definition of investment company by section 3(c)(1),
(2), (4), (6) or (7) of the Act, provided that any such entity:
(a) if excluded from the definition of investment company pursuant
to section 3(c)(1) or section 3(c)(7) of the Act, will be engaged
solely in lending, leasing or related activities (such as entering into
credit derivatives to manage the credit risk exposures of its lending
and leasing activities) and will not be structured as a means of
avoiding regulation under the Act; and
(b) if excluded from the definition of investment company pursuant
to section 3(c)(6) of the Act, will not be engaged primarily, directly
or indirectly, in one or more of the businesses described in section
3(c)(5) of the Act.
For the SEC, by the Division of Investment Management, pursuant
to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-21192 Filed 8-13-99; 8:45 am]
BILLING CODE 8010-01-M