<PAGE> 1
File No. 70-8659
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to Form U-1
APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
THE COLUMBIA GAS SYSTEM, INC.
20 Montchanin Road
Wilmington, DE 19807
- --------------------------------------------------------------------------------
(Name of Company or Companies Filing This Statement
and Addresses of the Principal Executive Offices)
THE COLUMBIA GAS SYSTEM, INC.
- --------------------------------------------------------------------------------
(Name of Top Registered Holding Company Parent of
Each Applicant or Declarant)
L. J. BAINTER, TREASURER
The Columbia Gas System, Inc.
20 Montchanin Road
Wilmington, DE 19807
- --------------------------------------------------------------------------------
(Name and Address of Principal Agent for Service)
<PAGE> 2
PAGE 2
The Application-Declaration as previously filed is hereby amended as
follows:
Item 1. Description of Proposed Transaction
On p. 5, add to the end of the carryover paragraph from p. 4 the
following:
"The Hedge Program will not exceed, in notional amount, $400
million for Series A and will not exceed, in notional amount,
$300 million each for Series B through Series G, inclusive."
On p. 14, delete the fifth bullet under Reporting Requirements and
replace it with the following:
" - the market value of all open positions as of the end of
such quarter, and"
Item 6. Exhibits
(a) Exhibits
D-1 Bankruptcy Court Motion and Order
F Opinion of Counsel
<PAGE> 3
PAGE 3
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned company has duly caused this
Application-Declaration to be signed on its behalf by the undersigned thereunto
duly authorized.
THE COLUMBIA GAS SYSTEM, INC.
Date: September 29, 1995 By: /s/ L. J. BAINTER
--------------------------------- -------------------------------
L. J. Bainter
Treasurer
<PAGE> 4
PAGE 1
EXHIBIT INDEX
(a) Exhibits
D-1 Bankruptcy Court Motion and Order
F Opinion of Counsel
<PAGE> 1
PAGE 1
EXHIBIT D-1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re ) Chapter 11
)
THE COLUMBIA GAS SYSTEM, INC. and )
COLUMBIA GAS TRANSMISSION CORPORATION ) Case Nos. 91-803 (HSB)
) 804
Debtors. )
MOTION OF THE COLUMBIA GAS SYSTEM, INC.
FOR AN ORDER AUTHORIZING INTEREST-RATE HEDGING PROGRAM
TO: THE HONORABLE HELEN S. BALICK
CHIEF UNITED STATES BANKRUPTCY JUDGE
The Columbia Gas System, Inc. ("CG") hereby files this motion
(the "Motion") for an Order Authorizing an Interest-Rate Hedge Program. In
support of this Motion, CG respectfully represents as follows:
PRELIMINARY STATEMENT
1. By this Motion, CG seeks authorization to implement
certain interest-rate hedging strategies described below (the "Hedge Program")
prior to the issuance of approximately $2.1 billion in principal amount of new
debentures ranging in final maturities from five (5) years to thirty (30) years
(the "New Indenture Securities") pursuant to its Third Amended Plan of
Reorganization dated July 27, 1995 (the "Plan"). Under the Hedge Program, CG
proposes to hedge
<PAGE> 2
PAGE 2
the U.S. Treasury securities ("U.S. Treasuries") component embedded in the cost
of the New Indenture Securities, using one or more strategies, in order to
mitigate the interest rate risk inherent in the future issuance of such
securities. CG also seeks authority to implement the Hedge Program, after
first obtaining the approval of the Official Committee of Unsecured Creditors
for CG (the "Creditors Committee") and the Official Committee of Equity
Security Holders for CG (the "Equity Committee") or their respective
designates, using whatever strategy or strategies it deems appropriate at the
time of implementation in order to limit its exposure to interest rate
fluctuation and to arrange the most effective interest-rate hedging strategies.
Declines in long-term interest rates permit CG to lock in historically
attractive and favorable interest rates on the New Indenture Securities. U.S.
Treasury yields are currently trading close to twenty-five year lows. Thus,
upon emergence from bankruptcy, CG could have one of the lowest long-term debt
cost structures in its industry if it were afforded the opportunity to lock-in
current rates. In general, under the Hedge Program, CG will be able to utilize
the various strategies described below to lock in interest rates prior to the
pricing and issuance of the New Indenture Securities. CG believes that the
costs and risks associated with the Hedge Program are reasonable given the
potential benefit of the Hedge Program to it, its creditors and its equity
holders, and the large potential cost of not undertaking such hedging
strategies during favorable market conditions. Accordingly, CG avers that this
Court's authorization of the Hedge Program is in the best interests of its
estate both pre-emergence and post-emergence.
-2-
<PAGE> 3
PAGE 3
INTRODUCTION
2. On July 31, 1991, CG and one of its wholly-owned
subsidiaries, Columbia Gas Transmission Corporation ("TCO" and together with
CG, the "Debtors") filed petitions for reorganization under Chapter 11 of title
11 of the United States Code (the "Bankruptcy Code") with this Court and were
thereupon continued in the management of their respective businesses and
possession of their respective properties as debtors-in-possession pursuant to
sections 1107 and 1108 of the Bankruptcy Code. No trustee or examiner has been
appointed in these cases, except a fee examiner has been appointed by order of
this Court.
3. On August 12, 1991, the United States Trustee
appointed the Creditors Committee and the Official Committee of Unsecured
Creditors for TCO. On September 30, 1991, the United States Trustee appointed
an Official Committee of Customers for TCO, and on October 18, 1991, the United
States Trustee appointed the Equity Committee.
4. This Court has jurisdiction over this application
pursuant to 28 U.S.C. sections 157 and 1334. Venue of these proceedings and
the within application in this district is proper pursuant to 28 U.S.C.
sections 1408 and 1409. The statutory predicates for the relief sought herein
are sections 105(a) and 363 of the Bankruptcy Code.
-3-
<PAGE> 4
PAGE 4
5. The Debtors and their affiliates comprise one of the
largest natural gas systems in the United States, composed of CG, a public
utility holding company registered as such under the Public Utility Holding
Company Act of 1935, as amended ("PUHCA"), a service company and eighteen other
operating subsidiaries, including TCO. The subsidiaries of CG are primarily
engaged in the three principal segments of the natural gas business --
exploration and production, interstate transmission and local distribution --
as well as other energy ventures such as cogeneration, propane marketing and
non-regulated gas marketing.
BACKGROUND
6. On July 27, 1995, CG filed its Third Amended Plan of
Reorganization (the "Plan"). A disclosure statement relating to that Plan has
been approved, and CG has been authorized to solicit the votes of its creditors
and shareholders on the Plan, subject only to the issuance of a report of the
Securities and Exchange Commission under PUHCA approving the financing and
restructuring provisions contained in the Plan.
7. Under the Plan, CG is projected to issue
approximately $2.1 billion in principal amount of the New Indenture Securities,
which will be priced in relation to the long-term interest rates in effect just
prior to their issuance. Due to the potential size of the issuance (up to $2.1
billion), CG has significant interest-rate exposure in connection with the
issuance of the New Indenture Securities between now and the issuance date.
The interest rates under the New Indenture Securities will be equal to the
yield on benchmark U.S. Treasuries plus a spread based on the average spread
over the relevant Treasury yields to maturity for market baskets of debt
securities having comparable maturities, ratings, and call protection and
issued by comparable companies. If long-term interest
-4-
<PAGE> 5
PAGE 5
rates were to rise between the time CG enters into the proposed hedging
transactions and the date the New Indenture Securities are priced under the
pricing formula, the interest rates under the New Indenture Securities would
rise and CG's cost of capital would increase. For example, a 100 basis point
increase in interest rates would cost CG approximately $21 million annually in
pre-tax dollars on the new Indenture Securities.
8. As discussed more fully below, the financial markets
provide an avenue to hedge the U.S. Treasury component embedded in the ultimate
cost of borrowing to CG, but not the spread.
RELIEF REQUESTED
9. By this motion, CG seeks authorization to implement
the Hedge Program prior to the issuance of the New Indenture Securities in
order to limit its exposure to a rise in long-term interest rates.
10. The Hedge Program may utilize one or more strategies
to fix and/or limit the interest-rate exposure on the U.S. Treasury component
embedded in the ultimate cost of the New Indenture Securities. Such strategies
include: (i) a forward sale of exchange-traded future contracts, U.S.
Treasuries and/or a forward swap (each a "Forward Sale"), (ii) the purchase of
put options on U.S. Treasuries (a "Put Options Purchase"), (iii) a Put Options
Purchase in combination with the sale of call options on U.S. Treasuries (a
"Zero Cost Collar"), or (iv) some combination of the foregoing as described
below in paragraphs 12 through 15.
-5-
<PAGE> 6
PAGE 6
11. Moreover, the Hedge Program may be executed
on-exchange ("On-Exchange Trades") through the opening of futures and/or
options positions traded on the Chicago Board of Trade (the "CBOT") or
off-exchange ("Off-Exchange Trades") through the opening of over-the-counter
futures and/or option positions with one or more counterparties, or a
combination of any of the foregoing. CG may elect Off-Exchange Trades in order
to avoid the execution costs associated with On-Exchange Trades.(1)
Additionally, Off-Exchange Trades may match more effectively the duration of
the Hedge Program with the timing of the New Issuance. While Off-Exchange
Trades, which are entered into with a financial counterparty such as an
investment banking firm, commercial bank or other financial intermediary,
provide similar interest-rate protection as On-Exchange Trades, Off-Exchange
Trades do not have the credit support of the CBOT. Accordingly, CG and the
counterparty to the Off-Exchange Trade would bear the credit risk of the
inability to perform. To minimize this risk, CG may elect to diversify any
Off-Exchange Trades with multiple counterparties or only enter into trades
with counterparties whose deposits or long-term debt have, at the time the
Off-Exchange Trades are entered into, no lower than an "BBB3" rating from
Moody's Investors Service, Inc., or an "BBB-" rating from Standard & Poor's
Ratings Group, or an equivalent rating from Fitch Investors Service or Duff &
Phelps. Moreover, the duration of the Hedge Program will be short-term,
lasting from the date of execution until the date of the issuance of the New
Indenture Securities under the Plan, which is anticipated to occur prior to
year end 1995. The short length of the Hedge Program accordingly reduces this
counterparty risk. Whether an On-Exchange Trade or an
- ----------------------------------
(1) Execution costs of On-Exchange Trades include opening the positions at
the bid price and closing the positions at the asking price. The bid/ask
spread is an embedded cost of executing On-Exchange Trades.
-6-
<PAGE> 7
PAGE 7
Off-Exchange Trade, CG will hedge only the U.S. Treasury component of the
interest rate risk exposure associated with the issuance of the New Indenture
Securities.
12. A Forward Sale would be designed to lock in the U.S.
Treasury component of the New Indenture Securities at the then current U.S.
Treasury forward yield by selling ("shorting") in the U.S. Treasury futures
market and/or by selling spot U.S. Treasuries forward. CG would close out its
short positions on or around the date of the issuance of the New Indenture
Securities by purchasing the U.S. Treasury future contracts and/or U.S
Treasuries previously sold. With a Forward Sale utilizing a forward swap, CG
would lock-in the swap rate (U.S. Treasury component + swap spread) by entering
into a forward swap (with a counterparty) as the fixed rate payor. The swap
spread is due, in part, to the relative demand by investors and borrowers for
fixed versus floating interest rates. With a forward swap, CG would agree to
enter into a fixed-to-floating rate swap as of a future settlement date on or
about the date of the issuance of the New Indenture Securities. CG would agree
to pay a fixed rate and would receive, in turn, floating rate payments. CG
would then unwind the swap by entering a floating-to-fixed rate swap on or
about the date of the issuance of the New Indenture Securities. Each of the
Forward Sale alternatives would provide CG with similar lock-in protection with
respect to future movements in U.S. Treasury rates.
13. The alternative or alternatives ultimately selected
in connection with Forward Sales will depend on market conditions (i.e.,
pricing) at the time of entering the hedge position. Since U.S. Treasury
futures are traded on the CBOT, On-Exchange Trades would be available for
Forward Sales. Under each of the Forward Sale alternatives, if long-term
interest rates rise, prices of the shorted hedge contracts would fall resulting
in gains to CG upon the closing by CG of the short
-7-
<PAGE> 8
PAGE 8
contracts at a lower price. The gains from the hedge positions would be offset
over time from the higher financing costs of the New Indenture Securities. If
long-term interest rates decline, the losses by the hedge positions would be
offset over time by the lower financing costs of the New Indenture Securities.
There is no up-front cost associated with such a strategy.
14. A Put Options Purchase strategy would provide CG with the
right, but not the obligation, to sell U.S. Treasuries at a predetermined
price or yield, thereby protecting CG from a rise in the rates for U.S.
Treasuries and allowing it to benefit from a decline in such rates. To
purchase this right, CG would be required to pay an up-front option premium.
Under a Put Option Purchase, if long-term interest rates rise, gains from the
put option hedge positions will be offset over time by the higher financing
costs of the New Debenture Securities. If long-term interest rates decline, CG
would benefit from the lower financing costs of the New Debenture Securities;
however, the cost of the option, which could be worthless upon its expiration,
would lower this benefit.
15. A Zero Cost Collar strategy would entail CG acquiring
put options for the right to sell U.S. Treasuries forward at a predetermined
price and yield (through a put option purchase), and selling call options
giving a third party the right to buy the same U.S. Treasuries forward at a
higher predetermined price and lower yield (a sale of a call option).
On-Exchange Trades would also be available since options are traded on the
CBOT. CG would participate in market rate movements between the put options
and the call options strike and yield levels. If comparable U.S. Treasury
yields rise above the put option strike level, CG would exercise the put
options and lock in the puts' strike yield. If the U.S. Treasury yield
declines below the call options strike level, a counterparty would exercise the
call options and CG would have locked in an interest rate floor at the calls'
strike
-8-
<PAGE> 9
PAGE 9
yield. As with the Forward Sale and Put Options Purchase strategies, gains
from a rise in long-term interest rates above the put strike yield will be
offset over time by the higher financing costs of the New Debenture Securities
and losses from a decline in long-term interest rates below the call strike
yield will be offset over time by the lower financing costs of the New
Indenture Securities. Since the premiums for the put options under the Zero
Cost Collar strategy are financed with the premiums received from the sale of
the call options, this strategy is often called "zero cost."
16. The costs, if any, to CG's estate of the various
strategies will depend on the hedging transaction or transactions implemented.
The following discussion of the costs associated with various hedging
strategies (using current market information) assumes that the full $2.1
billion of the New Indenture Securities will be hedged using each such strategy
described below exclusively, and not in combination with any other strategy:
a. Forward Sales: This strategy would not
require an up-front premium. There would be, however, cash costs to
CG upon emergence from bankruptcy associated with a decline in
interest rates between the time CG locks in a Forward Sales position
and the date the New Indenture Securities are priced, thereby
increasing CG's cost of capital associated with the New Indenture
Securities above that which would have been achieved absent the
Forward Sales. For a 25 basis point decrease in interest rates, CG's
cash payment at termination would be approximately $45 million. For a
50 basis point decrease in interest rates, CG's cash payment at
termination would be approximately $90 million. For a 75 basis point
decrease in interest rates, CG's cash payment at termination would be
approximately $140 million. For a 100 basis point decrease in
interest rates, CG's cash payment at termination would be
approximately $190 million. If long-term interest rates remain
unchanged, no cash payments would be required by CG at termination and
CG's cost of capital would be unaffected. If long-term interest rates
rise, termination payments received by CG from counterparties will
offset the higher financing costs of the New Debenture Securities
resulting in a lower cost of capital for CG than that which would have
been achieved absent the Forward Sale.
b. Put Options Purchase: This strategy would
require an up-front premium of approximately $53 million with no cash
payment upon termination if interest rates decline. If long-term
interest rates were to decline between the time CG locks in a Put
-9-
<PAGE> 10
PAGE 10
Options Purchase strategy and the date the New Indenture Securities
are priced, the $53 million premium would be offset, in part or in
entirety, over time by the lower financing costs of the New Indenture
Securities due to the expiration of the Put Options having no value.
If long-term interest rates remain unchanged, the up-front premium
would be the only cost of this strategy. If long-term interest rates
rise, CG's option would be exercised resulting in gains that will
offset the higher financing costs of the New Debenture Securities
resulting in a lower cost of capital for CG than that which would have
been achieved absent the Put Option Purchase.
c. Zero Cost Collar: This strategy would not
require an up-front premium. There would be, however, cash costs to
CG associated with interest rate decreases beyond the lower boundary
established by the collar, thereby increasing CG's cost of capital
associated with the New Indenture Securities above that which would
have been achieved absent the Zero Cost Collar, which would require a
cash payment upon termination of the hedging transaction upon CG's
emergence from bankruptcy. For a 25 basis point decrease in interest
rates below the lower boundary established by the collar, CG's cash
payment at termination would be approximately $15 million. For a 50
basis point decrease below such boundary, CG's cash payment at
termination would be approximately $60 million. For a 75 basis point
decrease, CG's cash payment at termination would be approximately $110
million. For a 100 basis point decrease, CG's cash payment at
termination would be approximately $160 million. If long-term
interest rates remain unchanged, no cash payments would be required by
CG at termination and CG's cost of capital would be unaffected. If
long-term interest rates rise beyond the upper boundary established by
the collar, termination payments received by CG from counterparties
will partially offset the higher financing costs of the New Debenture
Securities resulting in a lower cost of capital for CG.
17. In order to provide the most flexibility in limiting
its exposure to long-term interest rates, CG also seeks authority to implement
each of the strategies under the Hedge Program, after the approval of the
Creditors Committee and Equity Committee or their respective designates,
depending upon the strategy or strategies it deems appropriate at the time.
Such strategies may include the decision to lock in interest rates and/or limit
CG's exposure to interest rate increases. All open positions under the Hedge
Program will be closed on or prior to the date of the issuance of the New
Indenture Securities and CG will not, at any time, take possession of the
underlying securities.
-10-
<PAGE> 11
PAGE 11
18. Section 363 of the Bankruptcy Code requires the
Debtor to obtain approval for the Hedge Program. Section 363(c)(1) of the
Bankruptcy Code permits a debtor-in-possession to enter into transactions in
the ordinary course of business without notice or hearing, the clear
implication thereof being that a debtor-in-possession cannot enter into a
transaction outside the ordinary course without proper notice and hearing.
19. Section 363(b)(1) provides that after notice and a
hearing a debtor may use property of its estate "other than in the ordinary
course of business . . . ." 11 U.S.C. Section 363(b)(1). Relevant case law in
this circuit provides that use of property of a debtor's estate will be
approved if the debtor can demonstrate its good faith and sound business
justification for such a transaction. Abbotts Dairies of Pennsylvania, Inc.,
788 F.2d 143 (3d Cir. 1986); In re Delaware Hudson Ry. Co., 124 B.R. 169 (D.
Del. 1991).
20. There is prior precedent under section 363 for
authorizing a debtor to enter into a hedging transaction prior to its emergence
from bankruptcy. On November 25, 1991, the U.S. Bankruptcy Court for the
Southern District of Ohio authorized Federated Department Stores, Inc., Allied
Stores Corporation and Allied Stores Credit Corp. (together, "Federated"),
debtors and debtors in possession, to purchase "interest rate caps," another
form of hedging instrument, in connection with Federated's proposed plan of
reorganization. Federated sought to expend up to $18 million to purchase the
interest rate caps prior to the effective date of its Third Amended Joint Plan
of Reorganization in order to protect itself from increases in debt servicing
costs associated with approximately $2.3 billion in floating rate debt
projected to be outstanding following its emergence from bankruptcy.
-11-
<PAGE> 12
PAGE 12
21. With respect to the Hedge Program, CG avers that it
has satisfied the sound-business-justification tests for purposes of section
363(b)(1), in that (i) the business reason for entering into the Hedge Program
is to prudently limit CG's exposure to a potential rise in long-term interest
rates from the time the hedging transactions are entered into until the date
the New Indenture Securities are issued, (ii) notice of this Motion and the
hearing thereon has been provided to all interested parties and all parties
requesting notices in this case, (iii) the costs to the estate are fair and
reasonable given the potential debt-cost savings and the risk of counterparty
default, and (iv) the Hedge Program is being proposed by CG in good faith.
22. Section 105(a) allows the Court to "issue any order,
process, or judgment that is necessary or appropriate to carry out the
provisions of this title." While the costs associated with the Hedge Program
depend on the transaction or transactions ultimately entered into by CG, the
nature of the transactions hereunder is such that the Debtor believes that
Bankruptcy Court approval is appropriate and needed to satisfy counterparties.
CG also submits that implementation of the Hedge Program may enable it to have
one of the lowest long-term debt cost structures in its industry post-emergence
from bankruptcy.
23. In addition to Bankruptcy Court approval for the
implementation of the Hedge Program, approval of the U.S. Securities and
Exchange Commission under PUHCA is necessary and is currently being sought.
24. No prior motion for the relief sought herein has been
made to this or any other court.
-12-
<PAGE> 13
PAGE 13
WHEREFORE, CG respectfully requests the Court to enter an
order in the form annexed hereto authorizing the Hedge Program, after the
approval of the Creditors Committee and Equity Committee or their respective
designates, including authorization for CG to take whatever actions it deems
appropriate to or consistent with the purposes of the Hedge Program, and grant
such other and further relief as the Court may deem just and proper.
Dated: Wilmington, Delaware
August 25, 1995
YOUNG, CONAWAY, STARGATT & TAYLOR
/s/ Robert S. Brady
---------------------------------
James L. Patton, Jr.
Robert S. Brady
11th Floor - Rodney Square North
P.O. Box 391
Wilmington, Delaware 19899-0391
(302) 571-6600
STROOCK & STROOCK & LAVAN
Lewis Kruger
Robin E. Keller
Seven Hanover Square
New York, New York 10004
(212) 806-5400
CRAVATH, SWAINE & MOORE
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
(212) 474-1000
Co-Counsel for the Debtors and Debtors-in-
Possession
-13-
<PAGE> 14
PAGE 1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re ) Chapter 11
)
THE COLUMBIA GAS SYSTEM, INC. and )
COLUMBIA GAS TRANSMISSION CORPORATION ) Case Nos. 91-803 (HSB)
) 804
Debtors. )
AFFIDAVIT IN SUPPORT OF THE MOTION FOR AN ORDER
AUTHORIZING THE IMPLEMENTATION OF INTEREST-RATE
HEDGE PROGRAM BY THE COLUMBIA GAS SYSTEM, INC.
STATE OF DELAWARE )
) ss.:
COUNTY OF NEW CASTLE )
Michael W. O'Donnell, being duly sworn, deposes and says:
1. I am the Chief Financial Officer of The Columbia Gas
System, Inc. ("CG"). I make this affidavit in support of CG's motion for an
Order Authorizing an Interest-Rate Hedge Program (the "Motion").
2. I have read the foregoing Motion, have personal
knowledge as to the facts stated therein and know them to be true and correct.
If called upon to testify as to such facts, I am qualified to competently so
testify.
/s/ Michael W. O'Donnell
-------------------------------
Michael W. O'Donnell
Sworn to before me
this 25th day of August, 1995.
/s / Ellen M. Patterson
- ------------------------------------------
Notary Public
<PAGE> 15
PAGE 1
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
In re ) Chapter 11
)
THE COLUMBIA GAS SYSTEM, INC. and )
COLUMBIA GAS TRANSMISSION CORPORATION ) Case Nos. 91-803 (HSB)
) 804
Debtors. )
ORDER AUTHORIZING THE IMPLEMENTATION OF INTEREST-RATE
HEDGE PROGRAM BY THE COLUMBIA GAS SYSTEM, INC.
Upon the motion of The Columbia Gas System, Inc., debtor and
debtor-in-possession ("CG") dated August 25, 1995, (the "Motion") for an Order
Authorizing an Interest-Rate Hedge Program (the "Hedge Program"); and after due
and proper notice as previously ordered by this Court; a hearing on the Motion
having been held on September 29, 1995; and after due deliberation and
sufficient cause appearing therefore, it is hereby
ORDERED that the Motion is hereby granted; and it is further
ORDERED that CG is authorized to implement the Hedge Program,
after first obtaining the approval of the Official Committee of Unsecured
Creditors for CG and the Official Committee of Equity Security Holders for CG
or their respective designates, as described more fully
<PAGE> 16
PAGE 2
in the Motion, including authorization for CG to take whatever actions it deems
appropriate to or consistent with the purposes of the Hedge Program, using
whatever strategy or strategies it deems appropriate at the time.
Dated: Wilmington, Delaware
September 29, 1995
/s/ HELEN S. BALICK
-----------------------------------
The Honorable Helen S. Balick
United States Bankruptcy Judge
-2-
<PAGE> 1
PAGE 1
September 29, 1995
U.S. Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
Re: The Columbia Gas System, Inc.
File No. 70-8659
As Counsel for The Columbia Gas System, Inc. ("Columbia"), a
Delaware corporation and holding company registered under the Public Utility
Holding Company Act of 1935 (the "Act"), and at its request, I deliver to you
this opinion for filing as Exhibit F to the Joint Application-Declaration on
Form U-1 (File No. 70-8659), as amended by Amendment No. 1 (hereinafter
referred to together as the "Application-Declaration"), relating to the
proposed interest rate hedge transactions to be entered into by Columbia in
order to limit its exposure to a potential rise in long-term interest rates
from now until its issuance of approximately $2.1 billion of fixed rate debt
(the "New Indenture Securities") upon its emergence from bankruptcy.
The proposed interest rate hedging program, as more fully
described in the Application-Declaration, is hereinafter sometimes referred to
as the "Proposed Transaction."
In connection with the foregoing, I have examined:
(i) the Application-Declaration,
(ii) the form of New Indenture to be utilized for the
issuance of the New Indenture Securities;
(iii) copies of the Restated Certificate of Incorporation
and Bylaws of Columbia;
(iv) the Order Authorizing Interest-Rate Hedging Program
issued by the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court") on
September 29, 1995; and
<PAGE> 2
PAGE 2
(v) such other documents, records and matters of law as I
deemed necessary to enable me to render this opinion.
Based upon the foregoing and relying thereon, I am of the
opinion, assuming that (i) the Proposed Transaction is consummated in
accordance with the Application-Declaration, and (ii) all taxes and government
charges in connection with the Proposed Transaction are paid:
(a) all state and federal laws applicable to the
Proposed Transaction will have been complied
with;
(b) Columbia is a validly organized and duly
existing corporation in good standing under
the laws of the State of Delaware;
(c) to the extent, if at all, the Proposed
Transaction involves the issuance of an
instrument which might be deemed to be debt,
such instrument will be a valid and binding
obligation of Columbia in accordance with the
terms of the instrument; and
(d) the consummation of the Proposed Transaction
does not violate the legal rights of the
holders of any securities issued by Columbia
or any associate company thereof.
I hereby consent to the filing of this opinion as an Exhibit
to the Application-Declaration.
Very truly yours,
/s/ JOYCE KORIA HAYES
--------------------------
Joyce Koria Hayes
Associate General Counsel
and Assistant Secretary
Columbia Gas System
Service Corporation
