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File No. 70-8575
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
- --------------------------------------------------------------------------------
(Names of company or companies filing
this statement and addresses of
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 agent for service)
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The Application-Declaration as previously filed is hereby amended
as follows:
Item 1. Description of Proposed Transaction is amended to add the
following:
The following is added to the end of Item 1.
"It is contemplated that the proposed transaction may not
be consummated within 60 days of the issuance of an order in this
file but will proceed as soon as practicable after all necessary
or appropriate regulatory and court approvals or agreements are
secured, including those of the Commission, the Department of
Labor, the Bankruptcy Court, and the Internal Revenue Service."
Item 6. Exhibits and Financial Statements.
(a) Exhibits
A Form of Promissory Note
D Bankruptcy Court Motion and Order Approving
Transaction
F Opinion of Counsel (to be filed by Amendment)
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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: March 20, 1995 By: /s/ L. J. Bainter
--------------------------------
L. J. Bainter, Treasurer
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PAGE 1
EXHIBIT INDEX
(a) Exhibits
A Form of Promissory Note
D Bankruptcy Court Motion and Order Approving
Transaction
F Opinion of Counsel (to be filed by Amendment).
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Exhibit A
EMPLOYEES' THRIFT PLAN OF COLUMBIA GAS SYSTEM TRUST
NOTE
$_____________ [principal amount] [Date ]
FOR VALUE RECEIVED, the undersigned Employees' Thrift Plan of
Columbia Gas System Trust (the "Maker") hereby promises to pay to the order of
The Columbia Gas System, Inc. (the "Holder") at 20 Montchanin Road, Wilmington,
Delaware 19807 or at such other place within the United States of America which
the Holder hereof may designate in writing to the undersigned, the principal
amount of [amount of loan] Dollars ($[numerical amount of loan]). Such
principal shall be paid in lawful money of the United States of America and
shall accrue no interest.
Section 1. This Note shall become immediately due and payable
from proceeds received in respect to Confederation Life Insurance Company
Guaranteed Investment Contract No. 61969, for which this loan is granted to
provide liquidity to the Holder's Employees' Thrift Plan of Columbia Gas System
("Thrift Plan") participants (but not including the participants of Columbia
Gas Transmission Corporation) in the Confederation Life subaccount of the Money
Market/Investment Contract Fund. Sources of repayment are limited to:
a. Proceeds received from the liquidation or rehabilitation
of Confederation Life Insurance Company and any of its
affiliated entities;
b. Proceeds from any U.S. state guaranty funds or similar
funds in Canada;
c. Litigation and other proceeds received for the benefit of
the Holder's Thrift Plan participants; and
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d. Amounts paid subsequent to this date on behalf of the
Holder's Thrift Plan participants by Confederation Life
Insurance Company under benefit-withdrawal procedures.
Section 2. The loan amount will be reduced periodically as
amounts are received from the sources described above in Section 1.
Section 3. The loan shall be non-recourse to the Maker. In no
event will the Maker bear any responsibility or liability for repayment of any
shortfall in the event that the repayment proceeds listed above in Section 1
are ultimately less than the principal amount.
Section 4. In the event that proceeds ultimately received do not
fully discharge the Note, the Holder hereby agrees to forgive the remaining
balance and cancel the Note.
Section 5. If proceeds from the sources listed above in Section 1
exceed the amount of this Note, such excess will be allocated and disbursed to
the Holder's affected Thrift Plan participants who had investments in
Confederation Life Insurance Company Guaranteed Investment Contract No. 61969
on August 12, 1994. In no event shall the repayments made by the Maker to the
Holder exceed the principal amount of this Note.
Section 6. This Note and the rights and remedies of the Holder
hereof shall be governed by the laws of the State of Delaware.
Section 7. This Note may be amended or modified only by an
instrument in writing executed by the parties hereto. In addition, the
provisions of this Note shall inure to the benefit of, and shall bind, the
successors-in-interest of the parties hereto.
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IN WITNESS WHEREOF, the undersigned has caused this Note to be
duly executed and delivered this [day] day of [month] [year].
EMPLOYEES' THRIFT PLAN OF COLUMBIA GAS
SYSTEM TRUST
Acting by and through:
FIDELITY MANAGEMENT TRUST COMPANY,
not in its individual capacity but solely as Plan Trustee
By:
---------------------------------------
Name:
Title:
THRIFT PLAN COMMITTEE,
not in its individual capacity but solely as Named Fiduciary and Plan
Administrator
By:
---------------------------------------
Name:
Title: Committee Member
By:
---------------------------------------
Name:
Title: Committee Member/Secretary
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Exhibit D
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
) 804
Debtors. )
MOTION OF THE COLUMBIA GAS SYSTEM, INC. FOR
AN ORDER AUTHORIZING A LOAN TO THE
EMPLOYEES' THRIFT PLAN OF COLUMBIA GAS SYSTEM
TO: THE HONORABLE HELEN S. BALICK
CHIEF UNITED STATES BANKRUPTCY JUDGE
The Columbia Gas System, Inc. ("CG" or "Debtor") hereby files
this motion (the "Motion") for an Order authorizing it to make a loan to the
Employees' Thrift Plan of Columbia Gas System (the "Thrift Plan") so as to
allow certain participants immediate access to frozen funds. In support
thereof, CG respectfully represents as follows:
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PRELIMINARY STATEMENT
1. By this Motion, CG seeks authority to make an
interest-free loan (the "Loan") to the Thrift Plan so as to allow all
participants in the Thrift Plan except for those who are current and former
employees of Columbia Gas Transmission Corporation ("TCO") or their
beneficiaries (the "Participants") immediate access to funds that were frozen
as a result of the seizure by regulators of Confederation Life Insurance
Company ("Confederation Life"). Contemporaneously herewith, TCO is filing a
motion for entry of an order authorizing a separate loan to the Thrift Plan so
as to allow plan participants, other than the Participants hereunder, access to
their frozen funds.
2. The Confederation Life situation has affected 2,423
current and former employees and their beneficiaries of CG's subsidiaries
including TCO, 184 of whom are retirees, 11 of whom are on long-term disability
and 12 of whom are beneficiaries of deceased participants. For
employee-relations purposes, CG believes that the Loan is important in order to
provide liquidity to the otherwise frozen funds, thereby avoiding both a
serious blow to the morale of the Participants who are affected by the
Confederation Life situation and a financial hardship to such Participants. CG
proposes the Loan to the Thrift Plan only as a result of these unique
circumstances surrounding the seizure of Confederation Life; the Loan is not
intended by CG to create any obligation to backstop or otherwise guarantee any
other investment losses by Thrift Plan Participants whether occurring in the
past, now, or in the future.
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INTRODUCTION
3. On July 31, 1991 (the "Petition Date"), CG and its
wholly-owned subsidiary TCO 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.
4. On August 12, 1991, the United States Trustee
appointed an Official Committee of Unsecured Creditors for CG and an 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 an Official Committee of
Equity Security Holders for CG.
5. 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.
6. CG, TCO 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
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Utility Holding Company Act of 1935 ("PUHCA"), a service company and eighteen
other operating subsidiaries, including TCO. The subsidiaries of CG are
primarily engaged in the exploration and production, purchase, storage,
transmission and distribution of natural gas at wholesale and retail, as well
as related resource development.
BACKGROUND
7. CG is a plan sponsor of the Thrift Plan, a defined
contribution plan which is qualified under the requirements of Sections 401(a)
and 401(k) of the Internal Revenue Code. Sixteen of its subsidiaries including
TCO are participating employers in the Thrift Plan. CG currently administers
the Thrift Plan for the benefit of its subsidiaries' current and former
employees and their beneficiaries. The Plan has approximately 9,200
participants and beneficiaries, and as of December 31, 1994, the approximate
aggregate fair market value of the Thrift Plan's assets was $342 million.
8. Under the Plan, participants are able to self-direct
their savings deposits as well as employer matching contributions (if over age
55) into 14 investment options, 12 of which are diversified investment mutual
funds offered by Fidelity Investments of Boston, MA ("Fidelity"), including two
Bond Funds, a Balanced Fund, an Equity Index Fund, a Growth and Income Fund,
four Growth Funds and three International Funds. A thirteenth fund, the Money
Market/Investment Contract Fund (the "Fund"), was designed to hold
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interests in Fidelity's Money Market Fund and guaranteed investment contracts.
Participants may also invest in the Columbia Gas System Stock Fund.
9. On January 2, 1990, the Thrift Plan acquired an
investment contract issued by Confederation Life, which is the sole remaining
investment contract held in the Fund, in the amount of $6.5 million. On August
12, 1994, Canadian and Michigan regulators seized the assets of Confederation
Life because of the insurer's financial condition. As a result of the seizure,
a new segregated subaccount was established within the Fund to hold the
investment contract thereby freezing approximately 17% of the Fund's
investments. As a result, 2,423 Thrift Plan participants (approximately 26% of
the total Thrift Plan participants) cannot access their funds in the
subaccount. Current estimates are that, ultimately, full recovery of the
Confederation Life investment will occur, although the payout is not likely to
occur for several years.
10. The Confederation Life situation has impacted the
plans of many other companies. To alleviate the serious employee relations
problem and hardship on participants who hold investments in frozen
Confederation Life contracts, many plan sponsors have begun seeking regulatory
approvals to enter into transactions that would provide participants with
immediate access to their frozen funds. Typically, such transactions consist
of a loan by a plan sponsor to the benefit plan.
11. CG's Thrift Plan Committee, which is the Thrift
Plan's named fiduciary and plan administrator and which consists of
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representatives from senior management of CG, TCO and other major subsidiaries
of CG, has recommended to the Board of Directors for CG that the Loan be made
to the Thrift Plan in order to allow Thrift Plan Participants access to their
frozen funds as soon as practicable. On January 18, 1995 the Board of
Directors for CG approved the recommended structure for the Loan, subject to
all necessary approvals.
RELIEF REQUESTED
12. By this Motion, CG proposes to make the Loan to the
Thrift Plan so as to allow the plan to process requests from Participants for
withdrawals and transfers from the frozen subaccount.
13. The total amount of the Loan would be approximately
$4.3 million which, for administrative convenience, would represent the
apportionment for CG's subsidiaries other than TCO and which represents the
accumulated value of the frozen investment in the Confederation Life investment
contract (including accrued interest) as of the close of business on August 11,
1994 (the date Confederation Life's assets were seized). As is the general
practice for these types of transactions, the Loan would be made without
interest and in the principal amount of the cash infusion to the Thrift Plan,
and would be unsecured and evidenced by a note to CG. Repayment of the Loan
would be made only from proceeds received from the liquidation and
rehabilitation of Confederation Life, state guaranty funds, litigation proceeds
received for the benefit of the
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Participants, and other sources in connection with the Confederation Life
investment contract. Repayment of the Loan will be waived to the extent that
the Loan exceeds the ultimate recovery of proceeds from the Confederation Life
account and related sources, and if amounts in excess of 100 percent of the
Loan are received, repayment would in no event exceed the amount of the Loan.
14. The Loan would provide immediate liquidity to the
Participants so that they will not have to suffer the hardship of waiting years
to gain access to their funds. CG has determined that advancing the Loan is
necessary to preserve its estate by providing assurance to employees of the
viability of their Thrift Plan investments, and that the Loan is in the best
interests of its estate when employee-morale concerns and hardships are weighed
against the costs and risks of the Loan.
15. Upon receipt of regulatory approvals, currently
expected around May 1, 1995, CG would make the Loan, which would require an
immediate cash infusion from CG of approximately $4.3 million. Should the
ultimate recovery of these funds from Confederation Life be less than 100%,
this cost would also be borne by CG. Since recovery of all the Confederation
Life funds probably will not occur for several years, the timing and total
amount of these costs to the Debtor is uncertain.
16. Section 363 of the Bankruptcy Code requires the
Debtor to obtain Court approval for the Loan. 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
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hearing, the clear implication thereof being that a debtor-in-possession cannot
enter into a transaction outside of the ordinary course without proper notice
and hearing. While the estimated costs associated with the Loan are expected
to be limited to the time-value of the outstanding principal balances on the
Loan to the Thrift Plan over the repayment period, the nature of the
transactions hereunder is such that the Debtor believes that Bankruptcy Court
approval is appropriate.
17. 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).
18. With respect to providing the Loan, 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 providing the Loan is to
maintain employee morale by supplying immediate liquidity to the affected
Participants so that they will avoid the hardship of waiting years to gain
access to their funds, (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 and the risk
of partial non-repayment of the Loan is de minimis when weighed against the
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hardships faced by affected employees, and (iv) the Loan is being proposed by
CG in good faith.
19. Moreover, 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." CG submits that the payments proposed are
important to its ability to continue operations and reorganize successfully
under Chapter 11.
20. Accordingly, since CG has satisfied the applicable
legal standards, the Debtor respectfully requests that this Court enter an
Order approving the Loan to the Thrift Plan.
21. In addition to Bankruptcy Court approval for the
Loan, other approvals are necessary. The U.S. Department of Labor must provide
an exemption to the prohibited-transaction provisions of the Employee
Retirement Income Security Act of 1974. Authorizations are also required from
the Internal Revenue Service and the U.S. Securities and Exchange Commission
under PUHCA. CG has filed or will shortly file the necessary requests for
those regulatory authorizations and expects them to be forthcoming.
22. No prior motion for the relief sought herein has been
made to this or any other court.
WHEREFORE, CG respectfully requests the Court to enter an
order in the form annexed hereto authorizing the Debtor to make the Loan to the
Thrift Plan on the terms and conditions set forth herein so as to allow certain
Participants immediate access to funds that have been frozen as a result of the
seizure of Confederation Life,
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and providing for such other and further relief as the Court may deem just and
proper.
Dated: Wilmington, Delaware
February 10, 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 Debtor and
Debtor-in-Possession
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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
) 804
Debtors. )
AFFIDAVIT OF DENNIS P. GERAN IN SUPPORT OF THE MOTION
OF THE COLUMBIA GAS SYSTEM, INC. FOR AN ORDER
AUTHORIZING A LOAN TO THE COLUMBIA GAS SYSTEM THRIFT PLAN
STATE OF DELAWARE )
) ss.:
COUNTY OF NEW CASTLE )
Dennis P. Geran, being duly sworn, deposes and says:
1. I am Vice President, Human Resources of the Columbia
Gas System Service Corporation, a wholly-owned subsidiary of The Columbia Gas
System, Inc. ("CG") which serves CG and its subsidiaries. I have direct
knowledge of this matter as Secretary of the Thrift Plan Committee of the
Employees' Thrift Plan of Columbia Gas System (the "Thrift Plan"), a defined
contribution plan qualified under the Internal Revenue Code. I make this
affidavit in support of CG's motion (the "Motion") for entry of an order
authorizing a loan to the Thrift Plan.
2. I have read the foregoing Motion, have personal
knowledge as to the facts stated therein and know them to be true
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and correct. If called upon to testify as to such facts, I am
qualified to competently so testify.
/s/ Dennis P. Geran
---------------------------------
Dennis P. Geran
SWORN TO AND SUBSCRIBED before me this tenth day of February,
1995.
/s/ Ellen M. Patterson
---------------------------------
Notary Public
My Commission Expires: 10/24/98
---------
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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
) 804
Debtors. )
ORDER AUTHORIZING THE COLUMBIA GAS
SYSTEM, INC.'S LOAN TO THE EMPLOYEES'
THRIFT PLAN OF COLUMBIA GAS SYSTEM
Upon the motion of The Columbia Gas System, Inc. ("CG") dated
February 10, 1995, (the "Motion") for entry of an order authorizing CG to make
a loan to the Employees' Thrift Plan of Columbia Gas System (the "Thrift Plan")
so as to allow certain participants immediate access to frozen funds; due
notice thereby having been given; and after due deliberation and sufficient
cause appearing therefor, it is hereby
ORDERED that the Motion is hereby granted in all respects; and
it is further
ORDERED that the Debtor may make a loan to the Thrift Plan by
providing a cash infusion in exchange for an unsecured, non-interest bearing
note in the principal amount of such cash
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infusion, all as described in the Motion.
Dated: Wilmington, Delaware
March 8, 1995
/s/ Helen S. Balick
-----------------------------------
The Honorable Helen S. Balick
United States Bankruptcy Judge
