[Federal Register Volume 70, Number 29 (Monday, February 14, 2005)]
[Notices]
[Pages 7528-7530]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-591]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-26751; 812-12987]


MBIA Global Funding, LLC; Notice of Application

February 8, 2005.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from all provisions 
of the Act.

-----------------------------------------------------------------------

Summary of Application: MBIA Global Funding, LLC (``Applicant'') 
requests an order that would permit it to sell debt securities and non-
voting preferred stock and use the proceeds to finance the business 
operations of its parent company, MBIA Inc., (``MBIA'') and certain 
companies controlled by MBIA.

Filing Dates: The application was filed on July 3, 2003, and amended on 
November 2, 2004. 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 requested 
relief 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 March 7, 2005, and should be accompanied by proof of 
service on applicant, in the form of an affidavit, or for lawyers, a 
certificate of

[[Page 7529]]

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: 113 King Street, Armonk, NY 10504.

FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at 
202-942-0567, or Todd F. Kuehl, Branch Chief, at 202-942-0564 (Division 
of Investment Management, Office of Investment Company Regulation).

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 (telephone 202-942-8090).

Applicant's Representations

    1. Applicant is a Delaware limited liability company and a direct 
wholly-owned subsidiary of MBIA.\1\ MBIA, a Connecticut corporation, is 
an insurance holding company that, through its subsidiaries, is engaged 
primarily in providing financial guarantee insurance and investment 
management and financial services to public finance clients and 
financial institutions on a global basis.
---------------------------------------------------------------------------

    \1\ Applicant also requests that the requested order apply to 
any other wholly-owned finance subsidiary of MBIA that MBIA 
establishes in the future provided that any such future finance 
subsidiary relying on the order will comply with the terms and 
condition stated in the application. Applicant is the only wholly-
owned finance subsidiary of MBIA that presently intends to rely on 
the requested order.
---------------------------------------------------------------------------

    2. Applicant was formed for the purpose of financing the operations 
of MBIA through the issuance of debt securities and non-voting 
preferred stock. Applicant presently has not issued any securities 
other than shares of its common stock, all of which MBIA owns, and 
medium term notes, which Applicant has offered and sold in private 
placement transactions in reliance on the exemption from the 
registration requirements of the Securities Act of 1933 (the 
``Securities Act'') provided in section 4(2) of the Securities Act and 
pursuant to Regulations S under the Securities Act.
    3. Applicant currently intends to offer debt securities and non-
voting preferred stock in private placement transactions in reliance on 
the exemption from the registration requirements of the Securities Act 
provided in section 4(2) of the Securities Act or in transactions 
pursuant to Regulation S under the Securities Act. Applicant also seeks 
the flexibility to offer debt securities and non-voting preferred stock 
to the public in the United States pursuant to a registration statement 
under the Securities Act (such securities that are issued to or held by 
the public are referred to hereafter as ``Public Securities''). 
Applicant proposes to use the proceeds from any of the above offerings 
to make loans to or invest in MBIA and certain companies controlled by 
MBIA (the ``Controlled Companies''). Certain of the Controlled 
Companies may be excepted from the definition of investment company 
pursuant to certain provisions of section 3(c) of the Act (the 
``Subject Controlled Companies''). Any other Controlled Company whose 
activities Applicant finances will meet the definition of ``company 
controlled by the parent company'' in rule 3a-5 under the Act.
    4. All Public Securities will be unconditionally guaranteed by MBIA 
as to the payment of, as applicable, principal, interest, premium, 
dividends, liquidation preference and sinking fund payments. MBIA's 
guarantee of the Public Securities will provide that, in the event of 
any default in payment of any such amount, the holders of Public 
Securities may institute legal proceedings directly against MBIA to 
enforce the guarantee without first proceeding against Applicant.
    5. Any convertible or exchangeable security issued by Applicant 
will be convertible or exchangeable only for securities issued by MBIA 
or for debt securities or non-voting preferred stock of Applicant 
meeting the applicable requirements of rule 3a-5(a)(1) through (a)(3). 
In addition, Applicant will invest in or loan at least 85% of any cash 
or cash equivalents it raises to either MBIA or one or more Controlled 
Companies as soon as practicable, but in no event later than six months 
after Applicant receives the cash or cash equivalents. Further, if 
Applicant borrows amounts in excess of the amounts required by MBIA or 
the Controlled Companies, Applicant will invest this excess in certain 
temporary investments pursuant to rule 3a-5 under the Act.

Applicant's Legal Analysis

    1. Applicant requests an order 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)(2) (i) in relevant part defines a ``parent 
company'' to be any 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 or regulations under 
section 3(a) of the Act. Applicant states that while MBIA is not an 
investment company within the definition of section 3(a) of the Act 
(and/or is excepted from such definition by section 3(b)(1) of the 
Act), MBIA may rely on the exception from investment company status 
provided by section 3(c)(6). Applicant states that to the extent MBIA 
derives its non-investment company status from section 3(c)(6) of the 
Act, MBIA would not qualify as an eligible parent company under rule 
3a-5(b)(2).
    3. Rule 3a-5(b)(3)(i) in relevant part defines a ``company 
controlled by the parent company'' to be any 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) of the Act. Applicant 
proposes that it be allowed to provide financing to any Subject 
Controlled Company that will not satisfy the definition of ``company 
controlled by the parent company'' under rule 3a-5(b)(3) solely because 
it is excluded from the definition of investment company under section 
3(c)(2), 3(c)(3), 3(c)(4), 3(c)(5)(A), 3(c)(5)(B) or 3(c)(6) of the 
Act.
    4. Applicant states that its primary business purpose is to engage 
in financing activities that will provide funds for MBIA, the 
Controlled Companies and the Subject Controlled Companies. Applicant 
also states that neither MBIA nor any of the Subject Controlled 
Companies is engaged primarily in investment company activities.
    5. 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 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. Applicant submits that its exemptive request 
meets the standards set out in section 6(c).

[[Page 7530]]

Applicant's Condition

    Applicant agrees that any order granting the requested relief will 
be subject to the following condition:
    Applicant will comply with all of the provisions of rule 3a-5 under 
the Act, except that:
    (1) MBIA will not meet the portion of the definition of ``parent 
company'' under rule 3a-5(b)(2)(i) solely because it is excluded from 
the definition of investment company under section 3(c)(6) of the Act; 
and
    (2) The Subject Controlled Companies will not meet the portion of 
the definition of ``company controlled by the parent company'' in rule 
3a-5(b)(3)(i) solely because they are excluded from the definition of 
investment company under section 3(c)(2), 3(c)(3), 3(c)(4), 3(c)(5) or 
3(c)(6) of the Act;

provided that:

    (a) Any Subject Controlled Company excluded from the definition of 
investment company under section 3(c)(5) of the Act will fall within 
section 3(c)(5)(A) or section 3(c)(5)(B) solely by reason of its 
holdings of accounts receivable of either its own customers or of the 
customers of other Controlled Companies, or by reason of loans made by 
it to such Controlled Companies or customers, and
    (b) MBIA and any Subject Controlled Company excluded from the 
definition of investment company under section 3(c)(6) of the Act will 
not be engaged primarily, directly, or through majority-owned 
subsidiaries in one or more of the businesses described in section 
3(c)(5) of the Act (except as permitted in (a) above).

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-591 Filed 2-11-05; 8:45 am]
BILLING CODE 8010-01-P