[Federal Register Volume 70, Number 100 (Wednesday, May 25, 2005)]
[Notices]
[Pages 30166-30169]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2604]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51706; File No. SR-NYSE-2005-27]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change and Amendment No. 2 Thereto Relating to the Listing of 
PIES\SM\ Issued by Sierra Pacific Resources Under Section 703.19

May 18, 2005.
    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 April 19, 2005, the New York Stock Exchange, Inc. 
(``NYSE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
On May 16, 2005, the Exchange filed Amendment No. 1 to the proposed 
rule change. On May 18, 2005, the Exchange withdrew Amendment No. 1 and 
filed Amendment No. 2.\3\ The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons and is approving the proposal on an accelerated 
basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 2, the Exchange requested that the 
proposal, which had initially been submitted under section 
19(b)(3)(A) of the Act, 15 U.S.C. 78s(b)(3)(A), and Rule 19b-4(f)(6) 
thereunder, 17 CFR 240.19b-4(f)(6), be approved pursuant to section 
19(b)(2) of the Act, 15 U.S.C. 78s(b)(2) and Rule 19b-4(a) 
thereunder, 17 CFR 240.19b-4(a).

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[[Page 30167]]

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

    The Exchange proposes to list and trade Premium Income Equity 
Securities (PIESsm ) (the ``New PIES''), each of which 
consists of a purchase contract issued by Sierra Pacific Resources 
(``SPR'') that requires the holder to purchase a variable amount of SPR 
common stock and a 5% undivided beneficial ownership interest in a 
senior note of SPR with a principal amount of $1,000 due November 15, 
2007 (unless its maturity is extended as described below).

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

    In its filing with the Commission, NYSE included statements 
concerning the purpose of and basis for the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III below. The Exchange 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 NYSE Listed Company Manual (the 
``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.\4\ 
The Exchange proposes to list and trade, under section 703.19 of the 
Manual, the New PIES, each of which consists of (1) a purchase contract 
(``Purchase Contract'') issued by SPR and (2) a 5% undivided beneficial 
ownership interest in a senior note of SPR with a principal amount of 
$1,000 (the ``Note'', and collectively, the ``Notes'') due November 15, 
2007.\5\
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    \4\ Securities Exchange Act Release No. 28217 (July 18, 1990), 
55 FR 30056 (July 24, 1990).
    \5\ SPR filed a Form S-4 relating to the New PIES (the 
``Registration Statement'') on April 15, 2005. The information 
provided in this Rule 19b-4 filing relating to the New PIES is based 
entirely on information included in the Registration Statement.
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    The New PIES are being offered pursuant to an exchange offer, the 
full terms of which are set out in the Registration Statement.\6\ 
Specifically, SPR offers to exchange the New PIES and a cash payment of 
$0.125 for each validly tendered and accepted currently existing 
Corporate PIES of SPR (collectively referred to as the ``Old PIES''), 
subject to, among other things, the condition that the Old PIES remain 
listed on the Exchange.
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    \6\ In particular, the Registration Statement provides a 
detailed discussion and comparison of the Old PIES and the New PIES 
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 New PIES to 
purchase from SPR, no later than November 15, 2005 (the ``Purchase 
Contract Settlement Date''), for a price of $50, the following number 
of shares of SPR common stock, $1.00 par value: (a) If the average of 
the closing prices of SPR's common stock over the 20-trading day period 
ending on the third trading day prior to the Purchase Contract 
Settlement Date (the ``Applicable Market Value'') is equal to or 
greater than $16.62, 3.0084 shares; (b) if the Applicable Market Value 
is less than $16.62 but greater than $13.85, a number of shares 
determined by dividing the stated amount of $50 by the Applicable 
Market Value; and (c) if the Applicable Market Value over the same 
period is less than or equal to $13.85, 3.6101 shares. SPR will also 
pay New PIES holders a quarterly fixed amount in cash, called a 
contract adjustment payment, at a rate of 1.07% per year of the stated 
amount of $50 per New PIES, or $0.535 per year.
    The Notes will constitute senior obligations of SPR. Prior to the 
Purchase Contract Settlement Date, the ownership interest in the Notes 
will be pledged to secure the New PIES holders' obligation to purchase 
SPR's common stock under the purchase contract. SPR will appoint one or 
more remarketing agents to remarket, the Notes to third party investors 
at any time during the period for early remarketing, which is the 
period beginning the day following the consummation of the exchange 
offer on May 18, 2005 and ending on the ninth business day prior to the 
Purchase Contract Settlement Date in one or more three-day remarketing 
periods that consist of three sequential possible remarketing dates 
selected by SPR, or during a final remarketing period, which is the 
period beginning on the fifth business day, and ending on and including 
the third business day, preceding the Purchase Contract Settlement 
Date. New PIES 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 New PIES holder who opts out of the 
remarketing of the Notes would be required to settle each Purchase 
Contract for $50.00 in cash.
    Prior to a successful remarketing of the Notes, SPR will pay New 
PIES holders interest at a rate of 7.93% per year on the principal 
amount of the Note, payable quarterly. In connection with a successful 
remarketing of the Notes, certain terms of the Notes, including the 
interest rate (which may be reset to a rate greater or less than 7.93% 
per year), the maturity date (which may be extended to a maximum term 
of 11 years from the remarketing settlement date), the redemption 
provisions, the interest payment dates and the addition of covenants 
applicable to the Notes, may be modified to allow a remarketing of the 
Notes.
    The material differences between the Old PIES and New PIES are 
illustrated in the table below.

------------------------------------------------------------------------
                                     Old PIES             New PIES
------------------------------------------------------------------------
Remarketing Date..............  The senior notes   The Notes associated
                                 beneficially       with the New PIES
                                 owned by each      may be remarketed
                                 holder of Old      at any time
                                 PIES will be       during the period
                                 remarketed on      for early
                                 August 10, 2005,   remarketing, which
                                 unless the         is the period
                                 remarketing        beginning the day
                                 agent delays the   following the
                                 remarketing to a   consummation of the
                                 later date.        exchange offer and
                                                    ending on the ninth
                                                    business day prior
                                                    to the Purchase
                                                    Contract Settlement
                                                    Date in one or more
                                                    three-day
                                                    remarketing periods
                                                    that consist of
                                                    three sequential
                                                    possible remarketing
                                                    dates selected by
                                                    SPR, or
                                                    during the
                                                    final remarketing
                                                    period, which is the
                                                    period beginning on
                                                    the fifth business
                                                    day, and ending on
                                                    and including the
                                                    third business day,
                                                    immediately
                                                    preceding the
                                                    Purchase Contract
                                                    Settlement Date.
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[[Page 30168]]

 
Terms of the Notes Upon         In connection      In connection with
 Remarketing.                    with the           the remarketing of
                                 remarketing of     the Notes, the
                                 the senior         interest rate on all
                                 notes, the         Notes will be reset
                                 interest rate on   and certain terms of
                                 all senior         the Notes may be
                                 notes, whether     modified, including
                                 or not a part of   the interest rate,
                                 Old PIES, will     the maturity date
                                 be reset to an     (which may be
                                 interest rate      extended to a
                                 sufficient to      maximum term of 11
                                 allow a            years from the
                                 remarketing of     remarketing
                                 the senior         settlement date),
                                 notes. The         the redemption
                                 senior notes       provisions, the
                                 mature November    interest payment
                                 15, 2007.          dates and the
                                                    addition of
                                                    covenants applicable
                                                    to Notes. However,
                                                    terms set forth in
                                                    the indenture under
                                                    which the Notes were
                                                    issued, such as
                                                    ranking and events
                                                    of default, may not
                                                    be modified in
                                                    connection with the
                                                    remarketing, except
                                                    pursuant to the
                                                    terms of the
                                                    indenture.
------------------------------------------------------------------------

    The New PIES represent both an equity and fixed income investment 
in SPR. The equity investment is in the form of the Purchase Contract, 
which, unless earlier terminated, requires a New PIES holder to 
purchase a variable number of shares of SPR common stock on the 
Purchase Contract Settlement Date. The fixed income investment is in 
the form of the Notes, which are senior indebtedness of SPR.
    The New PIES 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.\7\ The 
Exchange will impose the issuer listing requirements of section 703.19 
on SPR. Under section 703.19, among other things, if the issuer is an 
NYSE-listed company, it must be a company in good standing. SPR is an 
NYSE-listed company in good standing. The New PIES will also meet the 
equity listing standards found in section 703.19(2) of the Manual, 
except that the New PIES will not have the minimum life of one year 
required for equity listings. However, the Exchange does not believe 
that the New PIES will raise any significant new regulatory issues. 
Because the New PIES will meet or exceed the other equity listing 
requirements under section 703.19, the Exchange believes that the New 
PIES 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 SPR common stock from which the value of the New PIES is in 
part derived will remain outstanding and listed on the Exchange 
following maturity of the New PIES on the Purchase Contract Settlement 
Date.
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    \7\ Section 801.00 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 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.
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    The Exchange's existing equity trading rules will apply to trading 
of the New PIES. 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 New PIES.\8\ Second, the New 
PIES will be subject to the equity margin rules of the Exchange.\9\ 
Third, the Exchange will, prior to trading the New PIES, distribute a 
circular to the membership providing guidance with regard to member 
firm compliance responsibilities (including suitability 
recommendations) when handling transactions in the New PIES and 
highlighting the special risks and characteristics of the New PIES. 
With respect to suitability recommendations and risks, the Exchange 
will require members, member organizations, and employees thereof 
recommending a transaction in the New PIES: (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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    \8\ 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.
    \9\ See NYSE Rule 431.
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    The Exchange represents that its surveillance procedures are 
adequate to properly monitor the trading of the New PIES. Specifically, 
the Exchange will rely on its existing surveillance procedures 
governing equity, which have been deemed adequate under the Exchange 
Act.
2. Statutory Basis
    The Exchange states that the basis for the proposed rule change is 
the requirement under section 6(b)(5) \10\ that an exchange have rules 
that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
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    \10\ 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 that is not necessary or appropriate 
in furtherance of the purposes of the Exchange Act.

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. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, is consistent with the Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NYSE-2005-27 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.

All submissions should refer to File Number SR-NYSE-2005-27. This file 
number should be included on the subject line if e-mail is used. To 
help the

[[Page 30169]]

Commission process and review your comments more efficiently, please 
use only one method. The Commission will post all comments on the 
Commission's Internet Web site (http://www.sec.gov/rules/sro/shtml). 
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 also will be 
available for inspection and copying at the principal office of the 
NYSE. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSE-2005-27 and should be submitted on or before June 15, 2005.

IV. Commission Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    After careful consideration, the Commission finds that the proposed 
rule change, as amended, is consistent with the requirements of the Act 
and the rules and regulations thereunder, applicable to a national 
securities exchange, and, in particular, with the requirements of 
Section 6(b)(5) of the Act.\11\ The Commission notes that the proposal 
is substantially similar to approved instruments currently listed and 
traded on the NYSE.\12\ Accordingly, the Commission finds that the 
listing and trading of the Units is consistent with the Act and will 
promote just and equitable principles of trade, foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, and, in general, protect investors and the public 
interest consistent with section 6(b)(5) of the Act.\13\
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    \11\ 15 U.S.C. 78f(b)(5).
    \12\ See, e.g., Securities Exchange Act Release No. 49112 
(January 21, 2004), 69 FR 4196 (January 28, 2004) (SR-NYSE-2003-40) 
(approving the listing and trading of Premium Equity Participating 
Security Units issued by PPL Corporation).
    \13\ 15 U.S.C. 78f(b)(5). In approving this rule, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    As described more fully above, the Exchange proposes to list and 
trade the New PIES, which represent both an equity and fixed income 
investment in SPR. The equity investment is in the form of the Purchase 
Contract, which, unless earlier terminated, requires a New PIES holder 
to purchase a variable number of shares of SPR common stock on the 
Purchase Contract Settlement Date. The fixed income investment is in 
the form of the Notes, which are senior indebtedness of SPR. As set 
forth above, the New PIES are being offered pursuant to an exchange 
offer, the full terms of which are explained in the Registration 
Statement.\14\ The Registration Statement contains a comparison of Old 
PIES and New PIES so that holders can evaluate whether it is in their 
best interests to participate in the exchange offer.
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    \14\ See supra note 6.
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    The Commission notes that the Exchange's rules and procedures 
address the special concerns attendant to the trading of certain types 
of hybrid securities. In particular, by requiring the New PIES to 
comply with the initial listing standards under section 703.19 of the 
Manual and the continued listing standards under section 801 and 802 of 
the Manual, as well as the equity trading rules, suitability standards, 
and disclosure requirements described above, the Commission believes 
the Exchange has addressed adequately the potential problems that could 
arise from the hybrid nature of the PIES. The Commission also notes 
that the Exchange will distribute a circular to its members regarding 
member firm compliance responsibilities when handling transactions in 
the New PIES and highlighting the special risks and characteristics of 
the New PIES.
    The Exchange's ''Other Securities'' listing standards in section 
703.19 of the Manual provide that issuers satisfying earnings and net 
tangible assets requirements may issue securities such as the New PIES, 
provided that the issue is suited for auction market trading. The 
Exchange has represented that the New PIES will meet all of the 
relevant listing standards found in section 703.19 of the Manual except 
that they will not have the minimum life of one year.\15\ Because the 
New PIES are being offered in connection with an exchange offer, the 
Commission believes that the New PIES will have sufficient liquidity 
and depth of market, even if listed for a period of shorter than one 
year. Further, because the issuer of the New PIES is SPR (the Purchase 
Contract issued by SPR and the Note issued by SPR and guaranteed by 
SPR), the Commission does not object to the Exchange's reliance on SPR 
to meet the issuer listing requirements of section 703.19 of the 
Manual.
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    \15\ Specifically, the Exchange has represented the following in 
accordance with the listing standards of section 703.19 of the 
Manual: (1) SPR is an NYSE-listed company in good standing; (2) 
there will be at least 1 million securities outstanding; (3) there 
will be at least 400 holders; and (4) at least $4 million from which 
the value of the New PIES is in part derived will remain outstanding 
and listed on the Exchange following maturity of the New PIES.
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    The Commission also notes that the Exchange's existing equity 
trading rules and equity margin rules will apply to trading of the New 
PIES, and, as discussed more fully above, the Exchange will also have 
in place certain other requirements to provide additional investor 
protection. The Commission notes that the Exchange will rely on its 
existing surveillance procedures governing equity, which the Exchange 
represents have been deemed adequate under the Act.
    The Commission finds good cause, consistent with sections 6(b)(5) 
and 19(b)(2) of the Act,\16\ to approve the proposal prior to the 
thirtieth day after the date of publication of notice of filing thereof 
in the Federal Register. Accelerating approval of the proposal will 
enable the Exchange to accommodate the listing of the New PIES on or 
shortly after May 18, 2005, the expiration date of the exchange offer 
pursuant to which the New PIES are being offered. The Commission notes 
that it has previously approved a substantially similar proposal 
involving another listed company.\17\ The Commission believes that 
permitting the expeditious listing of New PIES will serve the interests 
of investors and the public interest. Accordingly, the Commission finds 
that it is appropriate to approve the proposed rule change on an 
accelerated basis.
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    \16\ 15 U.S.C. 78f(b)(5) and 78s(b)(2).
    \17\ See Securities Exchange Act Release No. 49112 (January 21, 
2004), 69 FR 4196 (January 28, 2004) (SR-NYSE-2003-40).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the Act, 
that the proposed rule change (SR-NYSE-2005-27) is approved on an 
accelerated basis.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2604 Filed 5-24-05; 8:45 am]
BILLING CODE 8010-01-P