[Federal Register Volume 64, Number 205 (Monday, October 25, 1999)]
[Notices]
[Pages 57488-57489]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-27712]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[File No. 22-28212]


Application and Opportunity for Hearing: Altos Hornos De Mexico, 
S.A., DE C.V.

October 18, 1999.
    Notice is hereby given that Altos Hornos De Mexico, S.A., De C.V. 
(``Applicant''), has filed an application (``Application'') under 
Section 310(b)(1)(ii) of the Trust Indenture Act of 1939 (``Act'') for 
a finding by the Securities and Exchange Commission (``Commission'') 
that the trusteeship of Norwest Bank of Minnesota, N.A. (``Norwest'') 
as successor trustee under (i) an Indenture dated as of May 6, 1997 
(``1997 Indenture''), by and between the Applicant and the Chase 
Manhattan Bank (``Chase''), the predecessor trustee, with respect to 
11\3/8\% Series A Senior Notes due April 30, 2002 (``Series A Notes''), 
and 11\7/8\% Series B Senior Notes due April 30, 2004 (``Series B 
Notes,'' together with the Series A Notes, the ``1997 Notes''), and 
(ii) an Indenture dated as of December 16, 1996 (``1996 Indenture,'' 
together with the 1997 Indenture, ``Indentures'') by and between the 
Applicant and Chase, the predecessor trustee, with respect to the 
issuance of 5\1/2\% Senior Discounted Convertible Notes (``1996 
Notes,'' together with 1997 Notes, ``Notes'') due 2001, is not so 
likely to involve a material conflict of interest as to make it 
necessary in the public interest or for the protection of investors to 
disqualify Norwest from acting as trustee under either of the 
Indentures. Section 310(b) provides that if a trustee under an 
indenture qualified under the Act has or acquires any conflicting 
interest, it shall, within ninety days after ascertaining such a 
conflicting interest, either eliminate such conflicting interest or 
resign. Section 310(b)(1) of the Act provides that with certain 
exceptions, a trustee shall be deemed to have a conflicting interest if 
such trustee is a trustee under another indenture in which any other 
securities of the same issuer are outstanding. However, under Section 
310(b)(1)(ii) of the Act, certain situations are exempt from the deemed 
conflict of interest under Section 310(b)(1). Section 310(b)(1)(ii) 
provides in pertinent part that an indenture to be qualified shall be 
deemed exempt from Section 310(b)(1) if:

the issuer shall have sustained the burden of proving, on 
application to the Commission and after opportunity for hearing 
thereon, that trusteeship under the indenture * * * is not likely to 
involve a material conflict of interest as to make it necessary in 
the public interest or for the protection of investors to disqualify 
such trustee from acting as such under one of such indentures * * *

Section 310(b)(1)(ii) (emphasis supplied). In other words, dual 
trusteeship by Norwest under the Indentures may be excluded from the 
operation of Section 310(b)(1) if the Applicant sustains the burden of 
proving, on application to the Commission that a material conflict of 
interest is no so likely as to make it necessary in the public interest 
or for the protection of investors to disqualify Norwest from acting 
under either of the Indentures.
    The Applicant alleges that:
    1. The 1996 Notes and the 1997 Notes were issued in registered 
public offerings in the United States (Registration Statement No. 333-
6094 and No. 333-7252), and both Indentures are qualified under the 
Act. The Notes under the Indenture rank pari passu with each other and 
are wholly unsecured. However, neither Indenture references the other 
Indenture.
    2. Pursuant to the Instrument of Resignation, Appointment and 
Acceptance, dated July 27, 1999 (the ``Succession Agreement''), 
effective as of July 27, 1999, Norwest succeeded to Chase as trustee 
under the Indentures.
    3. As of the date of this Application, the Applicant is in default 
under the 1997 Indenture for failing to pay interest that was due on 
May 1, 1999. This default has continued for more than 30 days, thus 
constituting an Event of Default under Section 501(1) of the 1997 
Indenture. Based on this default, the Applicant is also in default 
under the 1996 Indenture. Section 501(5) of the 1996 Indenture provides 
that an event of default includes:

a default under * * * any mortgage, indenture or instrument under 
which there may be issued or by which there may be secured or 
evidence any indebtedness for money borrowed by the Company * * * in 
an amount exceeding $10,000,000 * * *

[[Page 57489]]

which default shall constitute a failure to pay * * * any interest 
or additional amounts on such indebtedness when due and payable 
after the expiration of any applicable grace period with respect 
thereto.

See 1996 Indenture, Sec. 501(5). Thus, the Applicant is in default 
under both of its Indentures.
    4. On May 25, 1999, the Applicant obtained from a Mexican court a 
declaration of suspension of payments (``Suspension of Payments''). 
Suspension of Payments is a form of protection from creditors under 
Mexican law afforded to a company to enable it to (i) seek a 
restructuring agreement with its creditors (ii) continue the operation 
of its business, and (iii) prevent liquidation. A description of 
certain effects of the Suspension of Payments is contained in the 
Applicant's form 20-F for the fiscal year ended December 31, 1998.
    5. The Application asserts that had the 1997 Indenture simply 
contained a descriptive reference to the 1996 Indenture, no conflict of 
interest would be deemed to exist under Section 310(b)(1)(i) of the 
Act, and the Application would not be required. Section 310(b)(i) 
exempts an indenture from the provisions of Section 310(b) ``if the 
indenture to be qualified and any such other indenture * * * or 
indentures * * * are wholly unsecured and rank equally and such other 
indenture or indentures * * * are specifically described in the 
indenture to be qualified or are thereafter qualified.'' The Section 
310(b)(1) issue arises only because the 1997 Indenture does not refer 
to the 1996 Indenture. The Application asserts that this technical 
omission does not create a risk of material conflict between the two 
Indentures where none otherwise exists.
    6. The Application asserts that because all of the Notes rank 
equally with one another in right of payment and are wholly unsecured, 
it is highly unlikely that Norwest would ever be subject to a conflict 
of interest with respect to issues relating to the priority of payment. 
Norwest would neither be in a position to, nor be required by the terms 
of either Indenture to, assert that the Notes outstanding under one 
Indenture are entitled to payment prior to payment of claims under the 
other Indenture.
    7. Further, both Indentures contain almost identical default and 
remedy provisions See 1996 Indenture, Sec. 501 et. seq., 1997 
Indenture, Sec. 501 et seq. The Application asserts that due to the 
similarity of these provisions (including the cross-default 
provisions), it is unlikely as a practical matter that Norwest would 
find itself in a position of proceeding against the Applicant for a 
default under one Indenture, but not the other Indenture.
    8. The Application also asserts that it is in the best interest of 
the Applicant and the holders of the Notes that Norwest serve 
simultaneously under both Indentures. Given the existence of a default, 
Chase was required to resign as trustee under both Indentures due to 
Chase's concurrent status as a creditor of the Applicant. By succeeding 
to Chase as trustee under both Indentures, rather than just one, 
Norwest relieved Chase of an actual conflict and prevented the risk of 
an ``orphan indenture'' where the predecessor trustee has submitted its 
resignation but no successor has been appointed. Norwest is not a 
creditor of the Applicant and has no business relationship with the 
Applicant other than under the Indentures. Norwest's dual trusteeship 
also will allow the Applicant to avoid the significant duplicative 
costs associated with having two separate trustees and their separate 
professionals review, understand, and administer two similar 
Indentures, and interact with the Applicant and other parties in 
interest as the Applicant works to address its present financial 
circumstances.
    Apart from granting relief under Section 301(b)(1)(ii) of the Act, 
the Commission may invoke its power to exempt Norwest under Section 
304(d). On application by any interested person, Section 304(d) 
empowers the Commission to ``exempt conditionally or unconditionally 
any person, registration statement, indenture, security or transaction 
* * * from any one or more of the provisions of this title, if and to 
the extent that such exemption is necessary or appropriate in the 
public interest and consistent with the protection of investors and 
purposes fairly intended by this title.'' Section 304(d) (emphasis 
supplied).
    The Applicant waives notice and hearing with respect to the 
Application.
    For a more detailed account of the matters of fact and law 
asserted, all persons are referred to said Application, which is a 
public document (File Number 22-28212) on file in the offices of the 
Commission at the Public Reference Section, 450 Fifth Street, NW, 
Washington, DC.
    Notice is hereby given that any interested person may, not later 
than November 8, 1999, request in writing that a hearing be held on 
such matter, stating the nature of his interest, the reasons for such 
request, and the issues of law or fact raised by such Application which 
he desires to controvert, or he may request that he be notified if the 
Commission would order a hearing thereon. Any such request should be 
addressed: Jonathan G. Katz, Secretary, U.S. Securities and Exchange 
Commission, Washington, DC 20549-0609. At any time after said date, the 
Commission may issue an order granting the Application, upon such terms 
and conditions as the Commission may deem necessary or appropriate in 
the public interest or for the protection of investors, unless a 
hearing is ordered by the Commission.

    For the Commission, by the Division of Corporation Finance, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-27712 Filed 10-22-99; 8:45 am]
BILLING CODE 8010-61-M