[Federal Register Volume 67, Number 140 (Monday, July 22, 2002)]
[Notices]
[Pages 47871-47872]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-18404]


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SECURITIES AND EXCHANGE COMMISSION

[File No. 22-28616]


Application and Opportunity for Hearing: Armstrong World 
Industries, Inc.

July 16, 2002.
    The Securities and Exchange Commission gives notice that Armstrong 
World Industries, Inc. has filed an application under section 
310(b)(1)(ii) of the Trust Indenture Act of 1939. Armstrong asks the 
Commission to find that the trusteeship of Wells Fargo Bank Minnesota, 
National Association as successor trustee under:
     An indenture dated August 6, 1996, between Armstrong and 
The Chase Manhattan Bank, a predecessor trustee, with respect to 6.35% 
Senior Notes due 2003, 6\1/2\% Senior Notes due 2005 and 7.45% Senior 
Quarterly Interest Bonds due 2038, and
     An indenture dated December 23, 1998 between Armstrong and 
Bank One Trust Company, N.A., a successor trustee, with respect to 
7.45% Senior Notes due 2029,

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 Wells Fargo from acting as trustee under both of those 
indentures.
    Section 310(b) of the 1939 Act provides, in part, that if a trustee 
under an indenture qualified under the Act has or acquires any 
conflicting interest described in that section, the trustee must, 
within ninety days after ascertaining that it has a conflicting 
interest, either eliminate the conflicting interest or resign. Section 
310(b)(1) provides, with stated exceptions, that a trustee shall be 
deemed to have a conflicting interest if the trustee is also a trustee 
under another indenture under which any other securities of the same 
obligor are outstanding. However, under Section 310(b)(1)(ii), 
specified situations are exempt from the deemed conflict of interest 
under Section 310(b)(1). Section 310(b)(1)(ii) provides, in 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 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 such trustee from acting as such under one of such 
indentures. * * * Section 310(b)(1)(ii) (emphasis added).

    Under this provision, Wells Fargo's trusteeship under the 
indentures may be excluded from the operation of Section 310(b)(1) if 
Armstrong sustains the burden of proving, on application to the 
Commission, that a material conflict of interest is not so likely as to 
make it necessary in the public interest or for the protection of 
investors to disqualify Wells Fargo from acting as trustee under either 
of the indentures.
    In its application, Armstrong alleges that:
    1. Armstrong issued the 1996 notes and the 1998 notes in registered 
public offerings in the United States (Registration Statement Nos. 333-
6333 and 333-74501), and Armstrong qualified the indentures under the 
1939 Act. The securities outstanding under the indentures rank pari 
passu with each other and are wholly unsecured. However, neither 
indenture references the other indenture.
    2. As a result of an Instrument of Resignation, Appointment and 
Acceptance, dated December 1, 2000, Wells Fargo succeeded Chase as 
trustee under the 1996 indenture. Under an Instrument of Resignation, 
Appointment and Acceptance, dated November 12, 2001, Wells Fargo will 
succeed Bank One as trustee under the 1998 indenture if the Commission 
grants Armstrong's application.
    3. As of the date of Armstrong's application, Armstrong is in 
default under the indentures due to its filing of a voluntary petition 
for relief under Chapter 11 of the U.S. Bankruptcy Code on December 6, 
2000. The commencement of a voluntary case under the U.S. Bankruptcy 
Code constituted an event of default under section 5.1(6) of the 1996 
indenture and Section 501(5) of the 1998 indenture. Thus, Armstrong is 
in default under both of the indentures.
    4. Had the 1998 indenture contained a specific description of the 
1996 indenture, no conflict of interest would be deemed to exist under 
section 310(b)(1)(i) of the 1939 Act, and the application would not be 
required. Section 310(b)(1)(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)(i) issue arises only because the 1998 indenture does not 
refer to the 1996 indenture. Armstrong asserts that this technical 
omission does not create a risk of material conflict between the two 
indentures where none otherwise exists.
    5. Armstrong asserts that because the securities outstanding under 
the two indentures rank equally with one another in right of payment 
and are wholly unsecured, it is highly unlikely that Wells Fargo would 
ever be subject to a conflict of interest with respect to issues 
relating to the priority of payment. Wells Fargo would neither be in a 
position, nor required by the terms of either indenture, to assert that 
securities outstanding under one indenture are entitled to payment 
prior to payment of claims under the other indenture.
    6. Further, the indentures contain almost identical default and 
remedy provisions. See Section 5 of the 1996 indenture and Article Five 
of the 1998 indenture. Armstrong asserts that it is highly unlikely as 
a practical matter that Wells Fargo will find itself in a position of 
proceeding against Armstrong for a default under one indenture but not 
under the other indenture.
    7. Armstrong asserts that it is in the best interest of Armstrong 
and the holders of the securities under the indentures that Wells Fargo 
serves simultaneously as trustee under both indentures. Bank One will 
be required to resign as trustee under the 1998 indenture because of 
Bank One's concurrent status as a creditor of Armstrong. Wells Fargo is 
not, except as indenture trustee, a creditor of Armstrong and has no 
business relationship with Armstrong other than under the 1996 
indenture. Wells Fargo's trusteeship also will allow Armstrong to avoid 
the significant duplicative costs associated with having two separate 
trustees and their respective separate professionals.
    Apart from granting relief under section 310(b)(1)(ii) of the 1939 
Act, the Commission may invoke its power to exempt Wells Fargo under 
Section 304(d). On application by any interested person, Section 304(d) 
empowers the Commission to ``exempt conditionally or unconditionally 
any person,

[[Page 47872]]

registration statement, indenture, security or transaction * * * from 
any one or more of the provisions of [the 1939 Act], if and 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 1939 Act].'' Section 304(d) (emphasis 
added).
    Armstrong has waived notice of a hearing and all rights to specify 
procedures under the Rules of Practice of the Commission in connection 
with this matter. Any interested persons should look to the application 
for a more detailed statement of the asserted matters of fact and law. 
The application is on file in the Commission's Public Reference 
Section, File No. 22-28616, 450 Fifth Street, NW., Washington, DC, 
20549.
    The Commission also gives notice that any interested persons may 
request in writing that a hearing be held on this matter. Interested 
persons must submit those requests to the Commission no later than 
August 12, 2002. Interested persons must include the following in their 
request for a hearing on this matter:
     The nature of that person's interest;
     The reasons for the request; and
     The issues of law or fact raised by the application that 
the interested person desires to refute or request a hearing on.
    The interested person should address this request for a hearing to: 
Jonathan G. Katz, Secretary, U.S. Securities and Exchange Commission, 
450 Fifth Street, NW., Washington, DC, 20549-0609. At any time after 
August 12, 2002, the Commission may issue an order granting the 
application, unless the Commission orders a hearing.

    For the Commission, by the Division of Corporation Finance, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-18404 Filed 7-19-02; 8:45 am]
BILLING CODE 8010-01-P