<PAGE> File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM U-1
_______________________________
APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
* * *
COLUMBUS SOUTHERN POWER COMPANY
215 North Front Street, Columbus, Ohio 43215
KENTUCKY POWER COMPANY
1701 Central Avenue, P.O. Box 1428, Ashland, Kentucky 41101
OHIO POWER COMPANY
301 Cleveland Avenue, S.W., Canton, Ohio 44702
(Name of companies filing this statement and
addresses of principal executive offices)
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of top registered holding company
parent of each applicant or declarant)
* * *
G. P. Maloney, Executive Vice President
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
Jeffrey D. Cross, Assistant General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
(Names and addresses of agents for service)
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
Columbus Southern Power Company ("CSPCo"), Kentucky Power
Company ("KPCo") and Ohio Power Company ("OPCo") are wholly owned
subsidiaries of American Electric Power Company, Inc. ("AEP"), a
registered holding company under the Public Utility Holding Company
Act of 1935, as amended (the "Act"). CSPCo, KPCo and OPCo are
sometimes hereinafter referred to individually as an "Operating
Affiliate" and collectively as the "Operating Affiliates". The
Operating Affiliates propose to issue and sell Junior Subordinated
Debentures (the "Debentures"), each series of Debentures to mature
in not more than 50 years.
A. Debentures
The Operating Affiliates propose to issue and sell the
Debentures through December 31, 1997 in aggregate principal amounts
up to the following: $80,000,000 in the case of CSPCo; $65,000,000
in the case of KPCo and $90,000,000 in the case of OPCo. The
Debentures will be sold by (i) competitive bidding or (ii) through
negotiation with underwriters or agents. The Debentures will be
offered for sale at an initial public offering price resulting in
a yield to maturity which shall not exceed by more than 3.0% the
yield to maturity on United States Treasury bonds of comparable
maturity at the time of pricing of the Debentures. The commission
payable to agents or underwriters will not exceed 3.5% of the
principal amount of the Debentures sold.
The Operating Affiliate may have the right to defer payment of
interest on the Debentures for up to five years. However, the
Operating Affiliate may not declare and pay dividends on its
outstanding stock if payments under the Debentures are deferred.
The payment of principal, premium and interest on the Debentures
will be subordinated in right of payment to the prior payment in
full of its senior indebtedness. The Operating Affiliate will
agree to specific redemption provisions, if any, at the time of the
pricing of the Debentures.
The Debentures will be issued under an Indenture (the
"Indenture"), as to be supplemented and amended by one or more
Supplemental Indentures. Copies of the forms of Indenture and
Supplemental Indenture for Debentures proposed to be utilized by
the Operating Affiliate for one or more series of the Debentures
(except for provisions such as interest rate, maturity, redemption
terms and certain administrative matters are attached hereto as
Exhibits B-1 and B-2, respectively). Such forms of Indenture and
Supplemental Indenture contain a more complete description of the
terms of the Debentures.
B. Preferred Securities
If the Operating Affiliates determine that it is not advisable
to sell the Debentures directly to the public, they may organize a
separate special purpose subsidiary as either (a) a limited
liability company under the Limited Liability Company Act (the "LLC
Act") of the State of Ohio in the case of CSPCo and OPCo and of the
State of Kentucky in the case of KPCo, or of the State of Delaware
or other jurisdiction considered advantageous in the case of the
Operating Affiliates, or (b) a limited partnership under the
Revised Uniform Limited Partnership Act of the State of Ohio in the
case of CSPCo and OPCo and of the State of Kentucky in the case of
KPCo, or of the State of Delaware or other jurisdiction considered
advantageous in the case of any of the Operating Affiliates. The
special purpose subsidiaries to be so organized by the Operating
Affiliates are hereinafter referred to individually as a "Special
Purpose Subsidiary" and collectively as the "Special Purpose
Subsidiaries".
In the event that any Operating Affiliate organizes its
Special Purpose Subsidiary as a limited liability company, such
Operating Affiliate may also organize a second special purpose
wholly-owned subsidiary under the General Corporation Law of the
State of Ohio, the State of Kentucky, or the State of Delaware or
other jurisdiction, as the case may be ("Investment Sub"), for the
purpose of acquiring and holding Special Purpose Subsidiary common
stock so as to comply with the requirement under the applicable LLC
Act that a limited liability company have at least two members.
In the event that any Operating Affiliate organizes its
Special Purpose Subsidiary as a limited partnership, such Operating
Affiliate may also organize an Investment Sub for the purpose of
acting, or may itself act, as the general partner of such Special
Purpose Subsidiary and may acquire, either directly or indirectly
through such Investment Sub, a limited partnership interest in such
Special Purpose Subsidiary to ensure that such Special Purpose
Subsidiary will at all times have a limited partner to the extent
required by applicable law.
The respective Special Purpose Subsidiaries then will issue
and sell at any time or from time to time in one or more series
through December 31, 1997 preferred securities described
hereinbelow (the "Preferred Securities"), up to $75 million
aggregate par or stated value or liquidation preference of
Preferred Securities, with a par or stated value or liquidation
preference of up to $100 per security in the case of CSPCo; up to
$60 million aggregate par or stated value or liquidation preference
of Preferred Securities, with a par or stated value or liquidation
preference of up to $100 per security in the case of KPCo; up to
$85 million aggregate par or stated value or liquidation preference
of Preferred Securities, with a par or stated value or liquidation
preference of up to $100 per security in the case of OPCo.
Each Operating Affiliate and/or its respective Investment Sub
will acquire all of the common stock or all of the general
partnership interests, as the case may be, of its Special Purpose
Subsidiary for an amount up to 5% of the total equity capitali-
zation from time to time of such Special Purpose Subsidiary (the
aggregate of such investment by an Operating Affiliate and its
Investment Sub being herein referred to in either case as the
"Equity Contribution"). Each Operating Affiliate may issue and
sell to its Special Purpose Subsidiary the Debentures, at any time
or from time to time in one or more series and such Special Purpose
Subsidiary will apply both the Equity Contribution made to it and
the proceeds from the sale of Preferred Securities by it from time
to time to purchase Debentures of such Operating Affiliate. The
payment rate, terms, redemption and other similar provisions of the
Preferred Securities will correspond to those of the Debentures
purchased from the Operating Affiliate.
Each Operating Affiliate may also guarantee (individually, a
"Guarantee" and collectively, the "Guarantees") (i) payment of
dividends or distributions on the Preferred Securities of its
Special Purpose Subsidiary if and to the extent such Special
Purpose Subsidiary has declared dividends or distributions out of
funds legally available therefor; (ii) payments to the Preferred
Securities holders of amounts due upon liquidation of such Special
Purpose Subsidiary or redemption of the Preferred Securities of
such Special Purpose Subsidiary; and (iii) certain additional
amounts that may be payable in respect of such Preferred
Securities.
It is expected that each Operating Affiliate's interest
payments on the Debentures issued by it will be deductible for
federal income tax purposes and that its Special Purpose Subsidiary
will be treated as a partnership for federal income tax purposes.
If Preferred Securities are issued, any series may be redeemable at
the option of the Special Purpose Subsidiary issuing such series
(with the consent or at the direction of the related Operating
Affiliate) at a price equal to their par or stated value or
liquidation preference, plus any accrued and unpaid dividends or
distributions, upon the occurrence of certain events, among them
that (x) such Special Purpose Subsidiary is required to withhold or
deduct certain amounts in connection with dividend, distribution or
other payments or is subject to federal income tax with respect to
interest received on the Debentures issued to such Special Purpose
Subsidiary, or (y) it is determined that the interest payments by
such Operating Affiliate on its Debentures are not deductible by
the Operating Affiliate for income tax purposes, or (z) such
Special Purpose Subsidiary becomes subject to the regulation as an
"investment company" under the Investment Company Act of 1940, as
amended. The Preferred Securities of any series may also be
subject to mandatory redemption upon the occurrence of certain
events. Each Operating Affiliate also may have the right in
certain cases to exchange the Preferred Securities of its Special
Purpose Subsidiary for the Debentures of such Operating Affiliate.
In the event that any Special Purpose Subsidiary is required
to withhold or deduct certain amounts in connection with dividend,
distribution or other payments, such Special Purpose Subsidiary may
also have the obligation to "gross up" such payments so that the
holders of the Preferred Securities issued by such Special purpose
Subsidiary will receive the same payment after such withholding or
deduction as they would have received if no such withholding or
deduction were required.
If any Special Purpose Subsidiary is required to pay taxes
with respect to income derived from interest payments on the
Debentures issued to it, the related Operating Affiliate may be
required to pay such additional interest on the Debentures as shall
be necessary in order that net amounts received and retained by
such Special Purpose Subsidiary, after the payment of such taxes,
shall result in the Special Purpose Subsidiary's having such funds
as it would have had in the absence of such payment of taxes.
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of any Special Purpose Subsidiary, the
holders of the Preferred Securities of such Special Purpose
Subsidiary will be entitled to receive, out of the assets of such
Special Purpose Subsidiary available for distribution to its
shareholders or partners, before any distribution of assets to the
common shareholders or general partner of such Special Purpose
Subsidiary, an amount equal to the par or stated value or
liquidation preference of such Preferred Securities plus any
accrued and unpaid dividends or distributions.
The constituent instruments of each Special Purpose
Subsidiary, including its Limited Liability Company Agreement or
Limited Partnership Agreement, as the case may be, will provide,
among other things, that such Special Purpose Subsidiary's
activities will be limited to the issuance and sale of Preferred
Securities from time to time and the lending to its respective
Operating Affiliate or Investment Sub of (i) the proceeds thereof
and (ii) the Equity Contribution to such Special Purpose
Subsidiary, and certain other related activities. Accordingly, it
is proposed that no Special Purpose Subsidiary's constituent
instruments include any interest or dividend coverage or
capitalization ratio restrictions on its ability to issue and sell
Preferred Securities because each such issuance will be supported
by an Operating Affiliate Debenture and Guarantee and such
restrictions would therefore not be relevant or necessary for any
Special Purpose Subsidiary to maintain an appropriate capital
structure.
Each Special Purpose Subsidiary's constituent instruments will
further state that its common stock or general partnership
interests are not transferable (except to certain permitted
successors), that its business and affairs will be managed and
controlled by the respective Operating Affiliate and/or its
Investment Sub (or permitted successor), and that such Operating
Affiliate (or permitted successor) will pay all expenses of its
Special Purpose Subsidiary.
C. Benefits of Financing Program
The Operating Affiliates believe that the proposed financing
programs will provide substantial benefits over traditional
perpetual preferred stock issuances. While the Operating
Affiliates expect that the Debentures will carry a somewhat higher
interest rate than the dividend on a perpetual preferred issue, the
expected tax deductibility of interest payments will afford
increased cash flow and net income and then ultimately lower
customer rates. Moreover, the Operating Affiliates are informed
that the market for securities comparable to the Debentures or
Preferred Securities currently is broader than that for perpetual
preferred stocks, thus affording potential benefits in the form of
more relatively competitive pricing conditions. At the same time,
the Operating Affiliates understand that the financial markets will
view the financing that each Operating Affiliate obtains through
the Debentures or Preferred Securities program as having
essentially the same equity characteristics as would be the case if
such Operating Affiliate were to issue traditional perpetual
preferred stock.
The Operating Affiliates also understand that the rating
agencies will view the financing that each Operating Affiliate
obtains through the proposed program as having equity charac-
teristics somewhere between sinking fund preferred stock and
traditional perpetual preferred stock. Indeed, based on an assumed
dividend rate of about 8.50% for an Operating Affiliate perpetual
preferred issue and an assumed 9.125% interest rate for the
Debentures, the Operating Affiliates believe that over the assumed
30 year life of a $100 million Debentures issue approximately $29
million of after-tax savings, on a net present value basis, would
be achieved. The Debentures will be carried in the debt
capitalization section of the Operating Affiliates balance sheets.
The Preferred Securities, if issued, will be carried in the non-
debt capitalization section of the respective Operating Affiliates'
consolidated balance sheets.
D. Use of Proceeds
Each Operating Affiliate, individually, expects to apply the
net proceeds of the Debentures to the repayment of outstanding
short-term debt, for construction purposes, and for other general
corporate purposes, including the redemption or other retirement of
outstanding preferred stock and senior securities. Each Operating
Affiliate, individually, represents that it will not so redeem its
outstanding securities unless the estimated present value savings
derived from the difference between interest payments on the
Debentures and those securities refunded is on an after-tax basis
greater than the estimated present value of all redemption,
tendering and issuing costs, assuming an appropriate discount rate.
Such discount rate will be based on meeting each Operating
Affiliate's long-term capital structure goals, with appropriate
adjustments for income taxes.
E. Compliance with Rule 54
AEP Resources International, Limited ("AEPRI"), an indirect
subsidiary of AEP, is an exempt wholesale generator ("EWG"), as
defined in Section 32 of the Act. AEP, through its subsidiary, AEP
Resources, Inc., invested $5,000 in AEPRI. This investment
represents less than 1% of $1,304,478,000, the average of the
consolidated retained earnings of AEP reported on Form 10-K or Form
10-Q, as applicable, for the four consecutive quarters ended
September 30, 1994.
AEPRI will maintain books and records and make available the
books and records required by Rule 53(a)(2). No more than 2% of
the employees of the operating subsidiaries of AEP will, at any one
time, directly or indirectly, render services to AEPRI. AEP will
submit a copy of Item 9 and Exhibits G and H of AEP's Form U5S
(commencing with the Form U5S filed for the first calendar year for
which AEP reports any data under Item 9 or Exhibits G and H), to
each of the public service commissions having jurisdiction over the
retail rates of AEP's operating utility subsidiaries. No data was
filed under Item 9 or Exhibits G or H in AEP's Form U5S for the
calendar year 1993.
In addition, (i) neither AEP nor any subsidiary of AEP is the
subject of any pending bankruptcy or similar proceeding; (ii) AEP's
average consolidated retained earnings for the four most recent
quarterly periods ($1,304,478,000) represented a decrease of
approximately $28,532,000 (or 2.1%) in the average consolidated
retained earnings from the previous four quarterly periods
($1,333,010,000); and (iii) for the year ended December 31, 1993,
there were no losses attributable to AEP's direct or indirect
investments in AEPRI.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
The estimated fees, commissions and expenses to be incurred in
connection herewith will be filed by amendment.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
The issuance of the Debentures and Guarantees by each
Operating Affiliate will be subject to Sections 6(a) and 7 of the
Act and Rule 54 thereunder.
The acquisition by each Operating Affiliate of shares of the
capital stock or partnership interests of its Special Purpose
Subsidiary and shares of the capital stock of its respective
Investment Sub, the acquisition by each Operating Affiliate's
respective Investment Sub of shares of the capital stock or
partnership interests of Special Purpose Subsidiary, and the
acquisition by Special Purpose Subsidiary of the Debentures and
Guarantees are subject to Sections 9(a), 10 and 12(b) of the Act
and Rule 45 thereunder.
The issuance and sale of the Preferred Securities by the
Special Purpose Subsidiaries are subject to Sections 6(a) and 7 of
the Act and Rule 54 thereunder.
ITEM 4. REGULATORY APPROVALS.
The issuance of the respective Debentures by CSPCo, KPCo and
OPCo has or will have been authorized by The Public Utilities
Commission of Ohio in the case of CSPCo and OPCo. No other state
commission (except as aforesaid) has jurisdiction with respect to
the subject transactions and no federal commission other than the
Securities and Exchange Commission has jurisdiction with respect
thereto.
Section 278.300 of the Kentucky Revised Statutes (which
relates to required authorizations for the issuance of securities
and evidences of indebtedness by a utility) provides, in subsection
(10) thereof, that authorization of the Kentucky Public Service
Commission is not required in any instance in which the issuance of
securities or evidences of indebtedness is subject to the
supervision or control of the federal government or any agency
thereof.
The Operating Affiliates consider that the Special Purpose
Subsidiaries will be exempt from regulation under the Investment
Company Act of 1940, as amended, pursuant to the "finance company"
exemption afforded by Rule 3a-5 under such Act.
ITEM 5. PROCEDURE.
It is hereby requested that the Commission's order be issued
as soon as the rules allow, and that there be no thirty-day waiting
period between the issuance of the Commissions's order and the date
on which it is to become effective. The Operating Affiliates
hereby waive a recommended decision by a hearing officer or other
responsible officer of the Commission and hereby consent that the
Division of Investment Management may assist in the preparation of
the Commission's decision and/or order in this matter unless such
Division opposes the matters covered thereby.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
A. Exhibits:
A-1 Form of Limited Partnership Agreement of Special
Purpose Subsidiary (to be filed by amendment)
A-2 Form of Action of General Partner (to be filed by
amendment)
B-1 Form of Indenture (to be filed be amendment)
B-2 Form of Supplemental Indenture including form of
Debenture (to be filed by amendment)
B-3 Form of Guarantee (to be filed by amendment)
B-4 Form of Underwriting Agreement (to be filed by
amendment)
C Registration Statements under the Securities Act of
1933, as amended, relating to the various
securities which are the subject hereof (to be
filed by amendment)
D-1 Copy of CSPCo's Application to The Public Utilities
Commission of Ohio (to be filed by amendment)
D-2 Copy of CSPCo's Order of The Public Utilities
Commission of Ohio (to be filed by amendment)
D-3 Copy of OPCo's Application to The Public Utilities
Commission of Ohio (to be filed by amendment)
D-4 Copy of OPCo's Order of The Public Utilities
Commission of Ohio (to be filed by amendment)
F Opinion of counsel (to be filed by amendment)
H Proposed form of notice
B. Financial Statements to be filed by amendment.
ITEM 7. INFORMATION AS TO INDIVIDUAL EFFECTS.
As described in Item 1, the proposed transactions are of a
routine and strictly financial nature in the ordinary course of the
respective Operating Affiliates' businesses. Accordingly, the
Commission's action in this matter will not constitute any major
federal action significantly affecting the quality of the human
environment. No other federal agency has prepared or is preparing
an environmental impact statement with respect to the proposed
transactions.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this statement to be signed on their behalf by the undersigned
thereunto duly authorized.
COLUMBUS SOUTHERN POWER COMPANY
KENTUCKY POWER COMPANY
OHIO POWER COMPANY
By_/s/ G. P. Maloney_____
Vice President
Date: February 14, 1995
a:\formu-1.mip
Exhibit H
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Release No. /March , 1995
:
In the Matter of :
:
COLUMBUS SOUTHERN POWER COMPANY :
215 North Front Street :
Columbus, OH 43215 :
:
KENTUCKY POWER COMPANY :
1701 Central Avenue :
Ashland, KY 41101 :
:
OHIO POWER COMPANY :
301 Cleveland Avenue, S.W. :
Canton, OH 44702 :
:
(70- ) :
________________________________________:
NOTICE OF PROPOSED SALE OF JUNIOR SUBORDINATED DEBENTURES
Columbus Southern Power Company ("CSPCo"), Kentucky Power
Company ("KPCo") and Ohio Power Company ("OPCo") (collectively, the
"Companies"), electric utility subsidiaries of American Electric
Power Company, Inc. ("American"), a registered holding company,
have filed with this Commission an Application or Declaration
pursuant to Sections 6(a), 7, 9, 10 and 12(b) of the Public Utility
Holding Company Act of 1935 (the "Act") and Rules 45 and 54
thereunder.
The Companies propose, subject to the receipt of appropriate
authorization, to issue and sell Junior Subordinated Debentures
(the "Debentures") through December 31, 1997; each series of
Debentures to mature in not more than 50 years in aggregate
principal amounts up to the following: $80,000,000 in the case of
CSPCo; $65,000,000 in the case of KPCo and $90,000,000 in the case
of OPCo. The Debentures will be sold by (i) competitive bidding or
(ii) through negotiation with underwriters or agents. The
Debentures will be offered for sale at an initial public offering
price resulting in a yield to maturity which shall not exceed by
more than 3.0% the yield to maturity on United States Treasury
bonds of comparable maturity at the time of pricing of the
Debentures. The commission payable to agents or underwriters will
not exceed 3.5% of the principal amount of the Debentures sold.
The Operating Affiliate may have the right to defer payment of
interest on the Debentures for up to five years. However, the
Operating Affiliate may not declare and pay dividends on its
outstanding stock if payments under the Debentures are deferred.
The payment of principal, premium and interest on the Debentures
will be subordinated in right of payment to the prior payment in
full of its senior indebtedness. The Operating Affiliate will
agree to specific redemption provisions, if any, at the time of the
pricing of the Debentures.
If the Operating Affiliates determine that it is not advisable
to sell the Debentures directly to the public, they may organize a
separate special purpose subsidiary as either (a) a limited
liability company under the Limited Liability Company Act (the "LLC
Act") of the State of Ohio in the case of CSPCo and OPCo and of the
State of Kentucky in the case of KPCo, or of the State of Delaware
or other jurisdiction considered advantageous in the case of the
Operating Affiliates, or (b) a limited partnership under the
Revised Uniform Limited Partnership Act of the State of Ohio in the
case of CSPCo and OPCo and of the State of Kentucky in the case of
KPCo, or of the State of Delaware or other jurisdiction considered
advantageous in the case of any of the Operating Affiliates. The
special purpose subsidiaries to be so organized by the Operating
Affiliates are hereinafter referred to individually as a "Special
Purpose Subsidiary" and collectively as the "Special Purpose
Subsidiaries".
In the event that any Operating Affiliate organizes its
Special Purpose Subsidiary as a limited liability company, such
Operating Affiliate may also organize a second special purpose
wholly-owned subsidiary under the General Corporation Law of the
State of Ohio, the State of Kentucky, or the State of Delaware or
other jurisdiction, as the case may be ("Investment Sub"), for the
purpose of acquiring and holding Special Purpose Subsidiary common
stock so as to comply with the requirement under the applicable LLC
Act that a limited liability company have at least two members.
In the event that any Operating Affiliate organizes its
Special Purpose Subsidiary as a limited partnership, such Operating
Affiliate may also organize an Investment Sub for the purpose of
acting, or may itself act, as the general partner of such Special
Purpose Subsidiary and may acquire, either directly or indirectly
through such Investment Sub, a limited partnership interest in such
Special Purpose Subsidiary to ensure that such Special Purpose
Subsidiary will at all times have a limited partner to the extent
required by applicable law.
The respective Special Purpose Subsidiaries then will issue
and sell at any time or from time to time in one or more series
through December 31, 1997 preferred securities described
hereinbelow (the "Preferred Securities"), up to $75 million
aggregate par or stated value or liquidation preference of
Preferred Securities, with a par or stated value or liquidation
preference of up to $100 per security in the case of CSPCo; up to
$60 million aggregate par or stated value or liquidation preference
of Preferred Securities, with a par or stated value or liquidation
preference of up to $100 per security in the case of KPCo; up to
$85 million aggregate par or stated value or liquidation preference
of Preferred Securities, with a par or stated value or liquidation
preference of up to $100 per security in the case of OPCo.
Each Operating Affiliate and/or its respective Investment Sub
will acquire all of the common stock or all of the general
partnership interests, as the case may be, of its Special Purpose
Subsidiary for an amount up to 5% of the total equity capitali-
zation from time to time of such Special Purpose Subsidiary (the
aggregate of such investment by an Operating Affiliate and its
Investment Sub being herein referred to in either case as the
"Equity Contribution"). Each Operating Affiliate may issue and
sell to its Special Purpose Subsidiary the Debentures, at any time
or from time to time in one or more series and such Special Purpose
Subsidiary will apply both the Equity Contribution made to it and
the proceeds from the sale of Preferred Securities by it from time
to time to purchase Debentures of such Operating Affiliate. The
payment rate, terms, redemption and other similar provisions of the
Preferred Securities will correspond to those of the Debentures
purchased from the Operating Affiliate.
Each Operating Affiliate may also guarantee (individually, a
"Guarantee" and collectively, the "Guarantees") (i) payment of
dividends or distributions on the Preferred Securities of its
Special Purpose Subsidiary if and to the extent such Special
Purpose Subsidiary has declared dividends or distributions out of
funds legally available therefor; (ii) payments to the Preferred
Securities holders of amounts due upon liquidation of such Special
Purpose Subsidiary or redemption of the Preferred Securities of
such Special Purpose Subsidiary; and (iii) certain additional
amounts that may be payable in respect of such Preferred
Securities.
It is expected that each Operating Affiliate's interest
payments on the Debentures issued by it will be deductible for
federal income tax purposes and that its Special Purpose Subsidiary
will be treated as a partnership for federal income tax purposes.
If Preferred Securities are issued, any series may be redeemable at
the option of the Special Purpose Subsidiary issuing such series
(with the consent or at the direction of the related Operating
Affiliate) at a price equal to their par or stated value or
liquidation preference, plus any accrued and unpaid dividends or
distributions, upon the occurrence of certain events, among them
that (x) such Special Purpose Subsidiary is required to withhold or
deduct certain amounts in connection with dividend, distribution or
other payments or is subject to federal income tax with respect to
interest received on the Debentures issued to such Special Purpose
Subsidiary, or (y) it is determined that the interest payments by
such Operating Affiliate on its Debentures are not deductible by
the Operating Affiliate for income tax purposes, or (z) such
Special Purpose Subsidiary becomes subject to the regulation as an
"investment company" under the Investment Company Act of 1940, as
amended. The Preferred Securities of any series may also be
subject to mandatory redemption upon the occurrence of certain
events. Each Operating Affiliate also may have the right in
certain cases to exchange the Preferred Securities of its Special
Purpose Subsidiary for the Debentures of such Operating Affiliate.
In the event that any Special Purpose Subsidiary is required
to withhold or deduct certain amounts in connection with dividend,
distribution or other payments, such Special Purpose Subsidiary may
also have the obligation to "gross up" such payments so that the
holders of the Preferred Securities issued by such Special purpose
Subsidiary will receive the same payment after such withholding or
deduction as they would have received if no such withholding or
deduction were required.
If any Special Purpose Subsidiary is required to pay taxes
with respect to income derived from interest payments on the
Debentures issued to it, the related Operating Affiliate may be
required to pay such additional interest on the Debentures as shall
be necessary in order that net amounts received and retained by
such Special Purpose Subsidiary, after the payment of such taxes,
shall result in the Special Purpose Subsidiary's having such funds
as it would have had in the absence of such payment of taxes.
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of any Special Purpose Subsidiary, the
holders of the Preferred Securities of such Special Purpose
Subsidiary will be entitled to receive, out of the assets of such
Special Purpose Subsidiary available for distribution to its
shareholders or partners, before any distribution of assets to the
common shareholders or general partner of such Special Purpose
Subsidiary, an amount equal to the par or stated value or
liquidation preference of such Preferred Securities plus any
accrued and unpaid dividends or distributions.
The constituent instruments of each Special Purpose
Subsidiary, including its Limited Liability Company Agreement or
Limited Partnership Agreement, as the case may be, will provide,
among other things, that such Special Purpose Subsidiary's
activities will be limited to the issuance and sale of Preferred
Securities from time to time and the lending to its respective
Operating Affiliate or Investment Sub of (i) the proceeds thereof
and (ii) the Equity Contribution to such Special Purpose
Subsidiary, and certain other related activities.
Each Special Purpose Subsidiary's constituent instruments will
further state that its common stock or general partnership
interests are not transferable (except to certain permitted
successors), that its business and affairs will be managed and
controlled by the respective Operating Affiliate and/or its
Investment Sub (or permitted successor), and that such Operating
Affiliate (or permitted successor) will pay all expenses of its
Special Purpose Subsidiary.
Each Operating Affiliate, individually, expects to apply the
net proceeds of the Debentures to the repayment of outstanding
short-term debt, for construction purposes, and for other general
corporate purposes, including the redemption or other retirement of
outstanding preferred stock and senior securities. Each Operating
Affiliate, individually, represents that it will not so redeem its
outstanding securities unless the estimated present value savings
derived from the difference between interest payments on the
Debentures and those securities refunded is on an after-tax basis
greater than the estimated present value of all redemption,
tendering and issuing costs, assuming an appropriate discount rate.
Such discount rate will be based on meeting each Operating
Affiliate's long-term capital structure goals, with appropriate
adjustments for income taxes.
The Application or Declaration and any amendments thereto are
available for public inspection through the Commission's Office of
Public Reference. Interested persons wishing to comment or request
a hearing should submit their views in writing by March , 1995 to
the Secretary, Securities and Exchange Commission, Washington, D.C.
20549, and serve a copy on the applicants at the addresses
specified above. Proof of service (by affidavit or, in case of any
attorney at law, by certificate) should be filed with the request.
Any request for a hearing shall identify specifically the issues of
fact or law that are disputed. A person who so requests will be
notified of any hearing, if ordered, and will receive a copy of any
notice or order issued in this matter. After said date, the
Application or Declaration, as filed or as it may be amended, may
be permitted to become effective.
For the Commission, by the Office of Public Utility Regulation,
pursuant to delegated authority.
Jonathan G. Katz
Secretary
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