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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): August 18, 1999
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BEC FUNDING LLC
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 333-74671 04-3454484
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(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
800 Boylston Street, 35th Floor, Boston, MA 02199
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER: (617) 369-6000
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N/A
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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Items 1 through 4 and 6 and 8 are not included because they are not applicable.
ITEM 5. OTHER EVENTS
On July 29, 1999, BEC Funding LLC closed the sale of $725 million of notes to
Massachusetts RRB Special Purpose Trust BEC-1, a special purpose trust. The
trust in turn sold $725 million of rate reduction bonds to the public. The notes
were issued in five classes with varying maturities. The bonds were issued in
five identical classes with identical maturities. A Form 8-K with respect to the
sales was filed on August 13, 1999. Audited financial statements with respect to
BEC Funding LLC were included in the Registration Statement No. 333-74671 with
respect to the notes and bonds. Audited financial statements for the trust for
the period July 28, 1999 (inception) through July 29, 1999 (closing) were
recently completed and are filed herewith.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
(b) NOT APPLICABLE
(c) EXHIBITS:
NOT APPLICABLE
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[LETTERHEAD OF PRICEWATERHOUSECOOPERS LLP]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
BEC Funding LLC:
We have audited the accompanying statement of net assets available for trust
activities of Massachusetts RRB Special Purpose Trust BEC-1 (the "Trust") as of
July 29, 1999, and the related statement of changes in net assets available for
trust activities for the period from July 28, 1999 (date of trust inception) to
July 29, 1999. These financial statements are the responsibility of the BEC
Funding LLC. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for trust activities as of July
29, 1999, and the changes in net assets available for trust activities for the
period from July 28, 1999 to July 29, 1999 in conformity with generally accepted
accounting principles.
August 18, 1999 /s/ PRICEWATERHOUSECOOPERS LLP
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MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
(A SPECIAL PURPOSE ENTITY)
FINANCIAL STATEMENTS
FOR THE PERIOD FROM JULY 28, 1999 (DATE OF INCEPTION)
TO JULY 29, 1999
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MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
(A SPECIAL PURPOSE ENTITY)
STATEMENT OF NET ASSETS AVAILABLE FOR TRUST ACTIVITIES
July 29, 1999
<TABLE>
ASSETS
<S> <C>
Current Assets:
Due from BEC Funding LLC:
Interest receivable $ 133,946
Notes receivable - current portion due in one year 40,000,000
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Total current assets 40,133,946
Due from BEC Funding LLC:
Long Term Notes receivable, 684,755,142
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Total Assets $724,889,088
============
LIABILITIES
Current Liabilities:
Current Portion of Certificates outstanding $ 40,000,000
Interest Payable on Certificates outstanding 133,946
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Total current liabilities 40,133,946
Long Term Certificates outstanding, net 684,755,142
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Total Liabilities $724,889,088
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Net Assets Available for Trust Activities $ 0
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
(A SPECIAL PURPOSE ENTITY)
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR TRUST ACTIVITIES
for the period from July 28, 1999 (date of inception) to July 29, 1999
<TABLE>
<S> <C>
Additions:
Due from BEC Funding LLC $ 724,755,142
Interest Receivable from BEC Funding LLC 133,946
Deductions:
Certificates Outstanding $(724,755,142)
Interest Payable on Certificates Outstanding (133,946)
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Net Assets Available for Trust Activities at July 29, 1999 $ -0-
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
(A SPECIAL PURPOSE ENTITY)
NOTES TO FINANCIAL STATEMENTS
A. OVERVIEW
NATURE OF BUSINESS
Massachusetts RRB Special Purpose Trust BEC-1 ("the Trust") was established
on July 28, 1999 as a Delaware business trust. The Massachusetts
Development Finance Agency and the Massachusetts Health and Educational
Facilities Authority formed the Trust to issue bonds pursuant to certain
provisions of Chapter 164 of the Acts of the Massachusetts General Court of
1997 (the "Electric Industry Restructuring Act"). The Trust issued
$725,000,000 of Rate Reduction Certificates ("certificates") on July 29,
1999 for the purpose of acquiring related notes from BEC Funding LLC (the
"Note Issuer"). The Massachusetts Development Finance Agency, the
Massachusetts Health and Educational Facilities Authority and The Bank of
New York (Delaware), a Delaware banking corporation, acting as the Delaware
Trustee, entered into a Declaration of Trust to form the Trust. The Trust
is not an agency nor instrumentality of The Commonwealth of Massachusetts.
The Trust has minimal assets other than the notes. The Declaration of Trust
does not permit the Trust to engage in any activities other than holding
the notes, issuing the certificates, and engaging in other related
activities.
Each class of certificates represents a fractional undivided beneficial
interest in a related class of notes issued by BEC Funding LLC, including
all amounts due and to become due under the related class of notes, and
represents the right to receive the payments on the related class of notes.
The Note Issuer, the Massachusetts Development Finance Agency, the
Massachusetts Health and Educational Facilities Authority, the Trust, the
Delaware Trustee and the certificate trustee have entered into a fee and
indemnity agreement under which the Note Issuer pays the Delaware trustee's
and the certificate trustee's reasonable compensation and reasonable fees
and expenses. The fee and indemnity agreement further provides that the
Note Issuer will indemnify the Trust, the Delaware trustee, the certificate
trustee, the Massachusetts Development Finance Agency, the Massachusetts
Health and Educational Facilities Authority and the Executive Office for
Administration and Finance of The Commonwealth of Massachusetts for, and
hold them harmless against, among other things, any loss, liability or
expense incurred by them arising from the failure of any party to perform
its obligations under various transaction documents. Neither the
certificates, the notes or the property securing the notes is an obligation
of The Commonwealth of Massachusetts or any governmental agency, authority
or instrumentality of The Commonwealth of Massachusetts or of Boston Edison
Company or any of its affiliates, except for BEC Funding LLC, which is an
affiliate of Boston Edison Company.
The fiscal year of the Trust is the calendar year.
BASIS OF PRESENTATION
Substantially all expenses of the Trust are paid by the Note Issuer.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
REVENUE RECOGNITION
The Trust recognizes revenues on the notes, which are the only assets of
the Trust, on the accrual basis.
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MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
(A SPECIAL PURPOSE ENTITY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
INCOME TAXES
The Trust is considered to be a grantor trust for income tax purposes and
accordingly there is no provision for income taxes.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CONCENTRATION OF CREDIT RISK
The Trust has exposure to credit risk for its notes receivable from the
Note Issuer. BEC Funding LLC is a wholly-owned subsidiary of Boston Edison
Company, which is a wholly-owned subsidiary of BEC Energy. Neither the
notes nor the property securing the notes is an obligation of The
Commonwealth of Massachusetts, or any governmental agency, authority or
instrumentality of The Commonwealth of Massachusetts or of Boston Edison
Company or any of its affiliates, except for BEC Funding LLC.
C. CERTIFICATES
The Trust issued $725,000,000 of Rate Reduction Certificates on July 29,
1999 pursuant to the certificate indenture among the Trust, the Delaware
trustee, and the certificate trustee. The certificates were issued in
minimum denominations of $1,000 and in integral multiples of that amount.
The certificates consist of five classes as summarized in the table below:
<TABLE>
<CAPTION>
Scheduled
Initial Certificate Final Final
Principal Interest Distribution Termination
Class Amount Rate Date Date
- ----- ------ ---- ---- ----
<S> <C> <C> <C> <C>
A-1 $108,500,000 5.99% 3/15/01 3/15/03
A-2 170,609,837 6.45% 9/15/03 9/15/05
A-3 103,390,163 6.62% 3/15/05 3/15/07
A-4 170,875,702 6.91% 9/15/07 9/15/09
A-5 171,624,298 7.03% 3/15/10 3/15/12
</TABLE>
The scheduled final distribution date for a class of certificates is the
date by which the Trust expects to distribute in full all interest on and
principal of that class of certificates. The final termination date for a
class of certificates is the legal maturity date of that class. The failure
to distribute principal of any class of certificates in full by the final
termination date for that class is an event of default, and the certificate
trustee may, and with the written direction of the holders of at least a
majority in principal amount of all outstanding certificates shall, declare
the unpaid principal amount of all outstanding notes and accrued interest
to be due and payable.
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MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
(A SPECIAL PURPOSE ENTITY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Interest on each class of certificates will accrue from its issuance date
at the interest rate set forth in the table above. Beginning March 15,
2000, the trust is required to distribute interest semiannually on March 15
and September 15 (or, if any distribution date is not a business day, the
following business day) of each year. On each distribution date, the
certificate trustee will distribute interest to the extent paid on the
related class of notes to the holders of each class of certificates as of
the close of business on the record date. The record date for any
distribution of interest on and principal of the certificates will be the
business day immediately before the distribution date. Each distribution
date will also be a payment date for interest on and principal of the
notes.
On each distribution date, the certificate trustee will distribute
principal as paid on the related class of notes to the holders of each
class of certificates as of the close of business on the record date.
D. NOTES RECEIVABLE
BEC Funding LLC, the Note Issuer, has issued to the Trust notes in the
principal amount of $725,000,000, in exchange for the net proceeds from the
sale of the certificates by the Trust. Each class of notes secures the
payment of the related class of certificates and has the same principal
balance, interest rate, amortization schedule and legal maturity date as
its related class of certificates. The notes consist of five classes, in
the initial principal amounts and bearing the interest rates and having the
scheduled maturity and final maturity dates set forth in the table below:
<TABLE>
<CAPTION>
Initial Note Scheduled Final
Principal Interest Maturity Maturity
Class Amount Rate Date Date
----- ------ ---- ---- ----
<S> <C> <C> <C> <C>
A-1 $108,500,000 5.99% 3/15/01 3/15/03
A-2 170,609,837 6.45% 9/15/03 9/15/05
A-3 103,390,163 6.62% 3/15/05 3/15/07
A-4 170,875,702 6.91% 9/15/07 9/15/09
A-5 171,624,298 7.03% 3/15/10 3/15/12
</TABLE>
The scheduled maturity date for a class of notes is the date by which the
note issuer expects to distribute in full all interest on and principal of
that class of notes. The final maturity date for a class of notes is the
legal maturity date of that class.
INTEREST
Interest on each class of notes accrues from its issuance date at the
interest rate set forth in the table above. Beginning March 15, 2000, the
Note Issuer is required to pay interest semiannually on March 15 and
September 15 (or, if any payment date is not a business day, the following
business day) of each year, to the Trust. The Note Issuer will pay interest
on the notes prior to paying principal of the notes.
On each payment date, the Note Issuer will pay interest as follows:
* if there has been a payment default, any unpaid interest payable on
any prior payment dates, together with interest at the applicable note
interest rate on any of this unpaid interest; and
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MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
(A SPECIAL PURPOSE ENTITY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
* accrued interest on the principal balance of each class of notes as of
the close of business on the preceding payment date, or the date of
the original issuance of the class of notes if applicable, after
giving effect to all payments made on the preceding payment date, or
the date of the original issuance of the class of notes if applicable.
If there is a shortfall in the amounts necessary to make these interest
payments, the note trustee will distribute interest pro rata to each class
of notes based on the outstanding principal amount of that class and the
applicable interest rate. The Note Issuer will calculate interest on the
basis of a 360-day year of twelve 30-day months.
PRINCIPAL
The Note Issuer will pay principal on each payment date to the holders of
the notes in accordance with the expected amortization schedule as set
forth in the prospectus.
The Note Issuer will not, however, pay principal on a payment date on any
class of notes if making the payment would reduce the principal balance of
a class to an amount lower than that specified in the expected amortization
schedule for that class on that payment date. If an event of default under
the note indenture has occurred and is continuing, the note trustee may
declare the unpaid principal amount of all outstanding notes and accrued
interest to be due and payable.
The expected amortization schedule for the principal of each class of notes
gives effect to the payments expected to be made on each payment date and
is based upon the issuance date of the notes on July 29, 1999 and also the
following assumptions:
* payments on the certificates are made on each distribution date,
commencing March 15, 2000;
* the servicing fee equals 0.05 percent annually of the initial
principal amount of the notes, or $362,500;
* there are no net earnings on amounts on deposit in the collection
account;
* the administration fee (which is $75,000 per year, payable
semiannually) and other ongoing operating expenses are estimated to be
approximately $220,000 per annum, and these amounts are payable in
arrears, and;
* payments arising from the property securing the notes are deposited in
the collection account as expected.
There can be no assurance that the principal balances of the classes of
notes receivable and the related classes of certificates outstanding will
be reduced at the rates expected. The actual rates of reduction in class
principal balances may be slower (but cannot be faster) than those
indicated in the expected amortization schedule.
UNAMORTIZED DEBT DISCOUNT
Unamortized debt discount in the amount of $244,758 is included (net) in
both Notes receivable and Certificates outstanding on the accompanying
Statement of Net Assets Available for Trust Activities.
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MASSACHUSETTS RRB SPECIAL PURPOSE TRUST BEC-1
(A SPECIAL PURPOSE ENTITY)
NOTES TO FINANCIAL STATEMENTS, CONTINUED
The note trustee has established a collection account to hold amounts
remitted by the servicer of the property securing the notes. The notes are
secured primarily by transition property of the note issuer, which is the
right to assess and collect all revenues arising from a portion of the
transition charge included in the bills of all classes of retail users of
Boston Edison Company's electric distribution system within its geographic
service territory as in effect on July 1, 1997. This portion of the
transition charge, which is a usage-based charge, is referred to as the
reimbursable transition costs ("RTC") charge. As of July 29, 1999, the RTC
charge is approximately 1.10 cents per kilowatt-hour.
THE NOTE ISSUER
BEC Funding LLC is a special purpose, single member limited liability
company whose sole member is Boston Edison Company. BEC Funding LLC is a
wholly-owned subsidiary of Boston Edison Company, which is a wholly-owned
subsidiary of BEC Energy.
BEC Funding LLC was organized on January 29, 1999 under the laws of the
State of Delaware for the sole purpose of acquiring and holding transition
property which BEC Funding LLC acquired on July 29, 1999 from Boston Edison
Company. The purchase price of such transition property was paid from net
proceeds of the notes issued to the Trust. The assets of BEC Funding LLC
consist primarily of transition property acquired from Boston Edison
Company.
Both BEC Funding LLC's organizational documents and covenants in the note
indenture restrict its business activities to financing, purchasing, owning
and managing transition property. The organizational documents and note
indenture covenants also require that BEC Funding LLC be operated in a
manner intended to reduce the likelihood that it would be consolidated in
Boston Edison Company's bankruptcy estate if Boston Edison Company became a
debtor in a bankruptcy case.
BEC Funding LLC is legally separate from Boston Edison Company. The assets
and revenues of BEC Funding LLC, including, without limitation, the
transition property, are not available to creditors of Boston Edison
Company nor BEC Energy.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
BEC Funding LLC
Date: September 9, 1999 By: /s/ Robert J. Weafer, Jr.
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Name: Robert J. Weafer, Jr.
Title: President
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