[Federal Register Volume 68, Number 244 (Friday, December 19, 2003)]
[Notices]
[Pages 70851-70853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-31262]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48918; File No. SR-NYSE-2003-40]


Self-Regulatory Organizations; Notice of Filing of a Proposed 
Rule Change by the New York Stock Exchange, Inc. Relating to the 
Listing of Certain 7\3/4\% PEPSSM Units Under Section 703.19

December 12, 2003.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 26, 2003, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the NYSE.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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    The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The NYSE proposes to list and trade 7\3/4\% Premium Equity 
Participating Security Units (PEPS\SM\ Units), Series B (``Units''), 
each of which consists of a purchase contract issued by PPL Corporation 
(``PPL''), and a 2.5% undivided beneficial ownership interest in a 
$1,000 principal amount note due 2006 issued by PPL Capital Funding, 
Inc. (``PPL Capital'') and guaranteed by PPL.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the NYSE included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. NYSE has prepared summaries, set forth in Sections A, B, 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Under Section 703.19 of the Listed Company Manual (``Manual''), the 
Exchange may approve for listing and trading securities not otherwise 
covered by the criteria of Sections 1 and 7 of the Manual, provided the 
issue is suited for auction market trading.\3\ The Exchange proposes to 
list and trade, under Section 703.19 of the Manual, the Units, each of 
which consists of (1) a purchase contract (``Purchase Contract'') 
issued by PPL and (2) a 2.5% undivided beneficial ownership interest in 
a $1,000 principal amount note (``Note'') due May 2006 issued by PPL 
Capital and guaranteed by PPL.\4\
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    \3\ See Securities Exchange Release No. 28217 (July 18, 1990), 
55 FR 30056-01 (July 24, 1990).
    \4\ PPL and PPL Capital filed Amendment No. 1 to Form S-4 
relating to the Units (the ``Registration Statement'') on October 
20, 2003. See Registration No. 333-108450. The information provided 
in this Rule 19b-4 filing relating to the Units is based entirely on 
information included in the Registration Statement.
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    The Units are being offered pursuant to an exchange offer, the full 
terms of which are set out in the Registration Statement.\5\ 
Specifically, PPL offers to exchange the Units and a cash payment of 
$0.375 for each validly tendered and accepted 7 \3/4\% Premium Equity 
Participating Security Unit (collectively referred to as the ``Old 
Units''), subject to, among other things, the minimum condition that 
there are validly tendered at the expiration of the exchange offer at 
least 35% of the Old Units, and the condition that the Old Units remain 
listed on the Exchange.
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    \5\ In particular, the Registration Statement provides a 
detailed discussion and comparison of the Old Units and the Units so 
that holders can evaluate whether it is in their best interests to 
participate in the exchange offer.
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    Each Purchase Contract obligates the holder of a Unit to purchase 
from PPL, no later than May 18, 2004 (the

[[Page 70852]]

``Contract Settlement Date''), for a price of $25, the following number 
of shares of PPL common stock, $0.01 par value: (a) If the average of 
the closing prices of PPL's common stock over the 20-trading day period 
ending on the third trading day prior to the Contract Settlement Date 
multiplied by 1.017 is equal to or greater than $65.03, 0.3910 shares; 
(b) if the average of the closing prices of PPL's common stock over the 
same period multiplied by 1.017 is less than $65.03 but greater than 
$53.30, a number of shares, between 0.3910 and 0.4770 shares, having a 
value, based on the 20-trading day average of the closing prices, equal 
to $25; and (c) if the average of the closing prices of PPL's common 
stock over the same period multiplied by 1.017 is less than or equal to 
$53.30, 0.4770 shares. PPL will also pay Unit holders a quarterly fixed 
amount in cash, called a contract adjustment payment, at a rate of 
0.46% per year of the stated amount of $25 per Unit, or $0.1150 per 
year.
    From the date of issuance until the Contract Settlement Date, the 
Notes will constitute subordinated obligations of PPL Capital and will 
be guaranteed on a subordinated basis by PPL. On or after Contract 
Settlement Date, the Notes will constitute senior obligations of PPL 
Capital and will be guaranteed on a senior basis by PPL. Prior to the 
Contract Settlement Date, the ownership interest in the Notes will be 
pledged to secure the Unit holders' obligation to purchase PPL's common 
stock under the purchase contract. PPL has appointed a remarketing 
agent to remarket, or sell on behalf of Unit holders, the Notes to 
third party investors on a date (the ``Remarketing Date'') just prior 
to the Contract Settlement Date. Unit holders may choose to opt out of 
the remarketing of the Notes to third party investors to satisfy their 
payment obligations on the Contract Settlement Date. A Unit holder who 
opts out of the remarketing of the Notes would be required to settle 
each Purchase Contract for $25.00 in cash.
    PPL Capital will also pay Unit holders interest at a rate of 7.29% 
per year on the principal amount of the Note. If there is a successful 
remarketing of the Notes, the interest rate will be reset and may be 
greater or less than 7.29% per year. PPL unconditionally guarantees the 
payment of principal and interest on the Notes of PPL Capital.
    The Units represent both an equity and fixed income investment in 
PPL. The equity investment is in the form of the Purchase Contract, 
which, unless earlier terminated, requires a Unit holder to purchase a 
variable number of shares of PPL common stock. The fixed income 
investment is in the form of a trust preferred security that represents 
an undivided beneficial interest in the subordinated Notes of PPL 
Capital which are guaranteed on a subordinated basis by PPL.
    The Units will conform to the issuer listing criteria under Section 
703.19 of the Manual and be subject to the relevant continuing listing 
criteria under Section 801 and 802 of the Manual.\6\ The Exchange will 
impose the issuer listing requirements of Section 703.19 of the Manual 
on PPL. Under Section 703.19(1) of the Manual, among other things, if 
the issuer is an affiliate of an NYSE-listed company, the NYSE-listed 
company must be a company in good standing.\7\ The Exchange represents 
that PPL is an NYSE-listed company in good standing. The Units will 
also meet the listing standards found in Section 703.19(2) of the 
Manual, except that the Units will not have the minimum life of one 
year required for listings.\8\ However, the Exchange does not believe 
that the Units will raise any significant new regulatory issues. 
Because the Units will meet or exceed the other requirements under 
Section 703.19 of the Manual, the Exchange believes that the Units will 
have sufficient liquidity and depth of market, even if listed for a 
period shorter than one year. The Exchange also notes that the 
underlying PPL common stock from which the value of the Unit is in part 
derived will remain outstanding and listed on the Exchange following 
maturity of the Units.
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    \6\ Section 801.00 of the Manual provides, in relevant part, 
that when an issuer that has fallen below any of the continued 
listing criteria has more than one class of securities listed, the 
Exchange will give consideration to delisting all such classes. 
Section 802.01D of the Manual states, in relevant part, that 
delisting of specialized securities will be considered when the 
number of publicly-held shares is less than 100,000; the number of 
holders is less than 100; and aggregate market value of shares 
outstanding is less than $1 million. The Exchange also notes that it 
may, at any time, suspend a security if it believes that continued 
dealings in the security on the Exchange are not advisable.
    \7\ The issuer listing standards require: (1) If the issuer is a 
NYSE-listed company, the issuer must be a company in good standing; 
(2) if the issuer is an affiliate of an NYSE-listed company, the 
NYSE-listed company must be a company in good standing; and (3) if 
not listed, the issuer must meet NYSE original listing standards as 
set forth in Sections 102.01-102.03 and 103.01-05 of the Manual.
    \8\ The equity listing standards require: (1) At least 1 million 
securities outstanding; (2) at least 400 holders; (3) minimum life 
of one year; and (4) at least $4 million market value. The Units 
will not have a minimum life of one year because the Contract 
Settlement Date is May 18, 2004.
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    The Exchange's existing equity trading rules apply to trading of 
the Units. The Exchange will also have in place certain other 
requirements to provide additional investor protection. First, pursuant 
to Exchange Rule 405, the Exchange will impose a duty of due diligence 
on its members and member firms to learn the essential facts relating 
to every customer prior to trading the Units.\9\ Second, the Units will 
be subject to the equity margin rules of the Exchange.\10\ Third, the 
Exchange will, prior to trading the Units, distribute a circular to the 
membership providing guidance with regard to member firm compliance 
responsibilities (including suitability recommendations) when handling 
transactions in the Units and highlighting the special risks and 
characteristics of the Units. With respect to suitability 
recommendations and risks, the Exchange will require members, member 
organizations and employees thereof recommending a transaction in the 
Units: (1) To determine that such transaction is suitable for the 
customer, and (2) to have a reasonable basis for believing that the 
customer can evaluate the special characteristics of, and is able to 
bear the financial risks of, such transaction.
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    \9\ NYSE Rule 405 requires that every member, member firm or 
member corporation use due diligence to learn the essential facts 
relative to every customer and to every order or account accepted.
    \10\ See NYSE Rule 431.
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    The Exchange represents that its surveillance procedures are 
adequate to properly monitor the trading of the Units. Specifically, 
the Exchange will rely on its existing surveillance procedures 
governing equity, which have been deemed adequate under the Act.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act,\11\ in general, and furthers the 
objectives of section 6(b)(5) of the Act,\12\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transaction in securities, and, in general to protect 
investors and the public interest.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition.

[[Page 70853]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    NYSE requested that the Commission find good cause for approving 
the proposal to accommodate the listing of the Units by December 18, 
2003, the expiration date of the exchange offer pursuant to which the 
Units are being offered. The Commission, however, does not find good 
cause to accelerate approval of this proposal.
    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal is 
consistent with the Act. Persons making written submissions should file 
six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street NW., Washington, DC 20549-0609. Comments 
may also be submitted electronically at the following e-mail address: 
[email protected]. All comment letters should refer to File No. SR-
NYSE-2003-40. The file number should be included on the subject line if 
e-mail is used. To help the Commission process and review your comments 
more efficiently, comments should be sent in hardcopy or by e-mail but 
not by both methods. Copies of the submission, all subsequent 
amendments, all written statements with respect to the proposed rule 
change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for inspection and copying in the Commission's Public 
Reference Room. Copies of such filing will also be available for 
inspection and copying at the principal office of the Exchange. All 
submissions should refer to the File No. SR-NYSE-2003-40 and should be 
submitted by January 9, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR.200.30-3(a)(12).

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-31262 Filed 12-18-03; 8:45 am]
BILLING CODE 8010-01-P