[Federal Register Volume 66, Number 177 (Wednesday, September 12, 2001)]
[Notices]
[Pages 47512-47514]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-22858]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 25151; 812-12596]


BHF Finance (Delaware) Inc.; Notice of Application

September 6, 2001
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for exemption under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') from all provisions 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 prospective 
parent company, Deutsche Postbank (``Postbank''), and certain companies 
controlled by Postbank.

Filing Dates: The application was filed on July 30, 2001. Applicant has 
agreed to file an amendment during the notice period, the substance of 
which is reflected in this notice.

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 applicant with a copy of the request, personally or by 
mail. Hearing requests should be received by the Commission by 5:30 
p.m. on September 27, 2001, and should be accompanied by proof of 
service on applicant in the form of an affidavit or, for lawyers, a 
certificate of

[[Page 47513]]

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: Secretary, Commission, 450 Fifth Street, NW., Washington, DC 
20549-0609, Applicant, 590 Madison Avenue, New York, NY 10022.

FOR FURTHER INFORMATION CONTACT: John L. Sullivan, Senior Counsel, at 
(202) 942-0681, or Janet M. Grossnickle, 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 
Commission's Public Reference Branch, 450 Fifth Street, NW., 
Washington, DC 20549-0102 (tel. 202-942-8090).

Applicant's Representations

    1. Postbank is a commercial bank organized under the laws of the 
Federal Republic of Germany (``Germany''). Postbank provides, directly 
or through its subsidiaries, a broad spectrum of financial services to 
corporations and private clients. Postbank has established itself as 
one of Germany's leading retail banks with consolidated total assets, 
as of December 31, 2000, of approximately DM 134 billion.
    2. BHF Finance, a Delaware corporation, is the wholly-owned 
subsidiary of BHF (USA) Holdings, Inc. (``BHF Holdings''), a Delaware 
corporation, which is the wholly-owned subsidiary of BHF-Bank 
Aktiengesellschaft (``BHF-Bank''), BHF (USA) Capital Corporation (``BHF 
Capital''), a Delaware corporation that extends commercial credit to 
third parties, is also a wholly-owned subsidiary of BHF Holdings. 
Pursuant to a stock purchase agreement between BHF-Bank and Postbank, 
dated June 29, 2001, BHF-Bank will sell all of the issued and 
outstanding shares of common stock of BHF Holdings to Postbank. Upon 
the closing of this stock purchase agreement (``Closing''), Postbank 
will own all of the outstanding shares of common stock of BHF Holdings, 
and BHF Finance and BHF Capital will be indirect wholly-owned 
subsidiaries of Postbank.\1\ Applicant anticipates the Closing to occur 
on September 30, 2001.
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    \1\ After the Closing, BHF Finance and BHF Capital will change 
their names to PB Finance (Delaware) Inc. and PB (USA) Capital 
Corporation, respectively.
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    3. 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 (``1933 Act''). BHF Finance may also offer debt 
securities other than commercial paper or non-voting preferred stock in 
the United States. After the Closing, BHF Finance intends to lend the 
proceeds to or invest the proceeds in Postbank, BHF Capital, and other 
companies controlled by Postbank within the meaning of rule 3a-5(b)(3) 
under the Act (``Controlled Companies''). Rule 3a-5 generally exempts 
finance subsidiaries of operating companies from the definition of 
investment company.
    4. Any issuance of debt securities or non-voting preferred stock by 
BHF Finance will be guaranteed unconditionally by Postbank with a 
guarantee that meets the requirements of rule 3a-5(a)(1) or (2), 
respectively (``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 Postbank, Controlled Companies, and after the 
order requested by the application has been issued, BHF Capital, 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 (as defined in the 
Act), securities of Postbank or of Controlled Companies and, after the 
order requested by the application has been issued, BHF Capital, or 
debt securities that are exempted from the provisions of the 1933 Act 
by section 3(a)(3) of the 1993 Act.
    5. In connection with BHF Finance's offering of securities 
guaranteed by Postbank, Postbank will submit to the jurisdiction of the 
Supreme Court of New York or the Federal court located 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 Postbank'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 accounts 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 Postbank's 
subsidiaries, after the Closing, will 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, after the Closing, Postbank will engage in certain activities 
(including certain investment activities) through BHF Capital. BHF 
Capital has no outstanding securities other than those owned indirectly 
by Postbank (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 Postbank 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 Postbank 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 
Postbank's status as their parent company. BHF Finance states that, 
after the Closing, neither itself, nor Postbank, nor BHF Capital will 
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 it is (i) not an investment 
company as defined in section 3(a) of the Act; (ii) excluded from 
the definition of investment company by section 3(b) of the Act; or 
(iii) 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 
Commission, 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

[[Page 47514]]

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 (b)(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 Postbank that would be excluded from the 
definition of investment company by virtue of rule 3a-3 under the Act, 
but for Postbank'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 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 Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-22858 Filed 9-11-01; 8:45 am]
BILLING CODE 8010-01-M