File No. 70-____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Fidelity Management & Research Company
82 Devonshire Street F7D
Boston, Massachusetts 02109-3614
Fidelity Management Trust Company
82 Devonshire Street F7D
Boston, Massachusetts 02109-3614
________________________________
(Names of companies filing this statement and
addresses of principal executive offices)
________________
Fidelity Management & Research Company
82 Devonshire Street F7D
Boston, Massachusetts 02109-3614
________________________________
(Names and addresses of agents for service)
The Commission is also requested to send copies of any
communications in connection with this matter to:
Joanne C. Rutkowski, Esq. Kimberly Phillips, Esq.
Reid & Priest LLP Reid & Priest LLP
Market Square 40 West 57th Street
701 Pennsylvania Avenue New York, New York 10019
Suite 800
Washington, D.C. 20004
<PAGE>
Item I. Description of Proposed Transaction.
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Fidelity Management & Research Company ("FMR Co.") and
Fidelity Management Trust Company ("FMTC") (FMR Co. and FMTC, are
herein collectively referred to as "Fidelity" or the
"Applicant"), anticipate that the funds and accounts managed by
them will receive, in the aggregate, more than ten percent (10%)
of the voting securities of the public utility company El Paso
Electric Company ("El Paso") pursuant to El Paso's Fourth Amended
Plan of Reorganization, dated October 27, 1995 ("Fourth Plan of
Reorganization").
The ownership of such securities by the various funds or
accounts managed by Fidelity should not result in Fidelity
becoming a holding company under the Public Utility
Holding Company Act of 1935, as amended (the "Act"). However,
positing solely for purposes of this application that the voting
interests of the various funds or accounts managed by Fidelity
could be aggregated, Fidelity requests an order under section
3(a)(4), or in the alternative, section 3(a)(3) of the Act,
exempting it from regulation as a holding company.
The Disclosure Statement dated October 27, 1995, filed in
connection with the Fourth Plan of Reorganization ("Disclosure
Statement"), indicates that by operation of the Fourth Plan of
Reorganization, Fidelity will receive, in addition to cash and
debt securities, voting securities of the reorganized El Paso, in
exchange for previously contracted bona fide debt of
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El Paso. Fidelity plans to hold the voting securities for
investment purposes only, and will reduce its interests to less
than ten percent of the outstanding voting securities of the
reorganized El Paso as soon as it is financially reasonable,
consistent with Fidelity's fiduciary obligations to its
investors. Accordingly, Fidelity will be "temporarily a holding
company" within the meaning of section 3(a)(4), and entitled to
exemption under that section.
In the alternative, Fidelity urges the Commission to
grant it an exemption under the plain meaning of section
3(a)(3). Fidelity is primarily engaged in investment
management. It is only incidentally a holding company
by reason of its ownership of the El Paso voting securities
pursuant to the operation of the Fourth Plan of Reorganization.
Fidelity will not derive a material amount of income from its
holdings of El Paso voting securities.
As explained more fully herein, the proposed exemption will
not result in detriment to the public interest or the interest of
investors or consumers. If an exemption is granted, Fidelity's
parent FMR Corp. and its controlling shareholders will claim
exemption from regulation pursuant to rule 10(a)(2).
A hearing on the Disclosure Statement is set for November 7,
1995, and confirmation of the Fourth Amended Plan of
Reorganization is anticipated on January 9, 1996. It is a
condition precedent to confirmation that Fidelity not be required
to register as a holding company under the Act, and that the
reorganized El Paso not be a subsidiary company of a registered
holding company. Accordingly, Fidelity requests expedited
consideration of its application, and asks the Commission to
issue an order in this matter no later than December 31, 1995.
A. Description of Fidelity
_______________________
FMR Co. is an investment adviser registered under section
203 of the Investment Advisers Act of 1940, as amended, and FMTC
is a bank as defined in section 3(a)(6) of the Securities
Exchange Act of 1934, as amended. FMR Co. and FMTC are each
Massachusetts corporations and wholly-owned subsidiaries of a
third Massachusetts corporation, FMR Corp., which is also engaged
in various other businesses.
FMR Co. provides investment advisory services to investment
companies which are registered under section 8 of the Investment
Company Act of 1940, as amended, and serves as investment adviser
to certain other funds which are generally offered to limited
groups of investors (the "Funds"). FMTC serves as trustee or
investment manager for various private investment accounts,
primarily employee benefit plans (the "Accounts").
Fidelity is principally engaged in the business of
investment management. Fidelity affiliates are also involved in
various other lines of business including, but not limited to,
venture capital asset management, securities brokerage, transfer
and shareholder servicing, and real estate development. As of
August 31, 1995, the Applicant had assets under management of
approximately $373.6 billion.
Neither the Applicant nor any of its affiliates is presently
a "public utility company" or a "holding company" under the Act.
B. Description of El Paso Electric Company
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(1) General
_______
According to the Disclosure Statement, El Paso is a public
utility company which generates and distributes electricity in El
Paso, Texas and in an area of the Rio Grande Valley in western
Texas and southern New Mexico, and sells electricity to wholesale
customers in southern California, New Mexico, Texas, and Mexico.
Its interconnected system serves approximately 271,000 customers
and covers an estimated population of 818,000. El Paso had
revenues of approximately $550 million in 1994. El Paso's size,
based on the areas it services and its earnings, is small
relative to other public utility companies in the United States.
(2) El Paso's Bankruptcy
____________________
On January 8, 1992, El Paso filed a petition for relief
under Chapter 11 of the United States Bankruptcy Code. During
the year following the Chapter 11 filing, El Paso negotiated with
creditors and equity holders to structure two different plans of
reorganization. The plans were unsuccessful.
Also during this period, Southwestern Public Service Company
and Central and South West Corporation ("CSW") separately entered
into negotiations to acquire El Paso. On May 5, 1993, El Paso
filed a third plan of reorganization under which El Paso would
have become a wholly-owned subsidiary of CSW. Pursuant to the
merger agreement between CSW and El Paso, and the third plan of
reorganization, Fidelity and other holders of El Paso debt
securities would have received a combination of debt and equity
of the reorganized El Paso, in exchange for the existing El Paso
debt securities.
As part of its distressed investment business, Fidelity had
purchased certain of El Paso's outstanding lease obligation bonds
and secured lease obligation bonds and unsecured debt prior to
this time.1 During the two-year period following the filing of
the third plan of reorganization, various Funds and Accounts
continued to buy and sell El Paso securities. At present,
approximately fifteen Funds and Accounts managed by the Applicant
now hold, in the aggregate, outstanding lease obligation bonds
and secured lease obligation bonds with face value of
approximately $224 million and approximately $83 million of
unsecured debt.2
These debt securities were acquired for
investment purposes, continue to be held exclusively for such
purposes and, at current market value, represent approximately
six one hundredths of a percent (0.06%) of the assets under the
Applicant's management and have produced a comparable percentage
of the Applicant's income since their acquisition.
According to the Disclosure Statement, on June 9, 1995, CSW
terminated the merger agreement. The negotiations thereafter
between El Paso and its debt and equity holders have focused on a
stand-alone reorganization involving, among other things, the
distribution of cash, as well as first mortgage bonds, preferred
stock, and common stock of reorganized El Paso, to holders of the
lease obligation bonds and the secured lease obligation bonds and
unsecured debt. The Fourth Plan of Reorganization provides for
the distribution of eighty-five percent (85%) of the common stock
of reorganized El Paso to these creditors.3
Fidelity thus has found itself in the position of expecting
to receive up to thirty percent (30%) of the common stock of
reorganized El Paso.
As a member of the Official Committee of Unsecured Creditors
(the "Creditors' Committee") in the El Paso Chapter 11
proceeding, Fidelity has participated in the negotiation of the
Fourth Plan of Reorganization. As one of three co-chairs of the
Creditors' Committee, Fidelity serves on a five-member committee
that will nominate nine new members of the Board of Directors of
the reorganized El Paso, and recommend one of those new members
for the position of Chief Executive Officer of the reorganized El
Paso.4 The other four members will be existing members of the
current Board. All of these selections will be subject to the
approval of the current Board of Directors of El Paso.
The Creditors' Committee will be dissolved at the close of
business on the effective date of the Fourth Plan of
Reorganization. Thereafter, Fidelity will not be represented on
___
the Board by any of its directors, officers, or other employees.
As a large shareholder, Fidelity may be invited to attend
meetings of reorganized El Paso's Board of Directors as an
observer, on a nonvoting basis.
A hearing on the Disclosure Statement is set for November 7,
1995, and confirmation of the Fourth Amended Plan of
Reorganization is anticipated on January 9, 1996. It is a
condition precedent to confirmation that Fidelity not be required
to register as a holding company under the Act, and that the
reorganized El Paso not be a subsidiary company of a registered
holding company. Accordingly, Fidelity requests expedited
consideration of its application, and asks the Commission to
issue an order in this matter no later than December 31, 1995.
Item II. Argument
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A. Fidelity will not be a holding company within the
_________________________________________________
meaning of the Act.
__________________
The voting securities of reorganized El Paso will be held by
approximately fifteen separate entities, none of which will hold
ten percent (10%) or more of such voting securities. Unless
these interests are aggregated, Fidelity is not a holding company
within the meaning of section 2(a)(7) of the Act.
The Commission has not yet addressed the circumstances in
which utility interests owned or managed by a company such as
Fidelity should be aggregated. The facts of this matter
demonstrate that Fidelity will not exercise such a controlling
influence over the management or policies of the reorganized El
Paso as to make it necessary or appropriate to aggregate and so
subject Fidelity to regulation as a holding company. Although
Fidelity has acted to protect its rights as a creditor in
bankruptcy, its role will substantially diminish following the
effective date of the reorganization.5 Thereafter, Fidelity will
vote to protect its interests as a shareholder, but it will not
___
be represented on the Board by any of its
directors, officers, or other employees. Further, although as a
large shareholder Fidelity may be invited to attend meetings of
reorganized El Paso's Board of Directors, it will participate as
an observer only, on a nonvoting basis.
In addition, Fidelity will continue to be extensively
regulated by the Commission under the Investment Advisers Act of
1940, as amended, and the other federal securities laws, in its
primary investment management business.
Accordingly, Fidelity asserts that it will not be a holding
company within the meaning of the Act, with respect to the
reorganized El Paso.
B. In the alternative, Fidelity would be entitled to an
exemption from regulation as a holding company.
____________________________________________________
Positing solely for purposes of this application that the
voting interests should be aggregated, Fidelity would nonetheless
be entitled to an exemption under section 3(a)(4) or section
3(a)(3) of the Act.
(1) Section 3(a)(4) provides an exemption for a company
such as Fidelity that is temporarily a holding company,
having acquired utility securities in liquidation of a
previously contracted bona fide debt.
______________________________________________________
Section 3(a)(4) of the Act provides an exemption from
regulation under the Act when holding company status is
"temporary" in nature:
such holding company is temporarily a holding company
solely by reason of the acquisition of securities for
purposes of liquidation or distribution in connection with
a bona fide debt previously contracted or in connection with
a bona fide arrangement for the underwriting or
distribution of securities.
The Commission in Manufacturers Trust Co., 9 S.E.C. 283 (1941),
_______________________
explained that the language of section 3(a)(4) "clearly denotes a
desire to give an applicant thereunder a reasonable time in which
it might dispose of its public utility or holding company securities
without being subject to the Act." Id. at 288.
__
Cases under section 3(a)(4) generally involve companies that
have acquired utility securities in connection with litigation,
see, e.g., Manufacturers Trust Co., 3 S.E.C. 845
___ ____ _______________________
(1939); reorganization proceedings, see, e.g., National Supply
___ ____ _______________
Co. of Delaware, 1 S.E.C. 742 (Oct. 1, 1936) and American Community
_______________ __________________
Power Co., 1 S.E.C. 527 (June 26, 1936); or proceedings under
_________
section 11 of the Act, see, e.g., Massachusetts Mutual Life
___ ____ _________________________
Insurance Co., 9 S.E.C. 642 (June 17, 1942)). The Commission has
_____________
used section 3(a)(4) to grant these types of companies a reasonable
period of time in which to reduce their utility holdings to less than
ten percent (10%) of a public utility's voting securities, without
becoming subject to regulation as a holding company under the
Act.
There is little discussion in the cases under section
3(a)(4). It appears, however, that the Commission has focused on
two issues: first, whether the company is "temporarily" a holding
company, and second, whether its acquisitions were made for the
purpose of liquidating debts contracted in its favor. See, e.g.,
___ ____
Manufacturers Trust Co., 4 S.E.C. 845, 855-56 (1939).
_______________________
With respect to the first issue, the cases reflect alternate
approaches to the question of whether a company is temporarily a
holding company within the meaning of section 3(a)(4). The
majority of decisions address this issue by limiting the duration
of the exemption. See, e.g., Coastal States -- Lo-Vaca Settlement
___ ____ ____________________________________
Trust Mercantile National Bank at Dallas, Holding
________________________________________
Co. Act Release No. 21104 (April 23, 1979) (seven-year period).
See also Massachusetts Mutual Life Insurance Co., 9 S.E.C. 542
________________________________________________
(1941) and Holding Co. Act Release Nos. 3218
(Dec. 26, 1941) and 3617 (June 17, 1942) (initial grant of six-
month exemption, and extensions).
Some early decisions, however, are silent in this regard.
Instead, these decisions look to the intention of the applicant.
In Halsey, Stuart & Co., for example, the Commission
____________________
cited a variety of factors, including "the present intention of
applicant not to take an active role in the management of the
[utility] companies nor to hold these securities permanently," in
support of its determination that applicant was entitled to an
exemption under section 3(a)(4), 1 S.E.C. at 325. See also
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National Supply Co. of Delaware, 1 S.E.C. 742 (1936),
_______________________________
and Stone & Webster and Blodget, 3 S.E.C. 234 (1938) (noting that
___________________________
active control over management was not exercised). Compare
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Manufacturers Trust Co., 4 S.E.C. at 854-55
_______________________
(exemption denied company organized solely to act as holding
company for bank's equity interests in public utility securities
where such securities were not acquired in liquidation of debt
and company exercised active control "of the same character as
that exercised by other utility holding companies").
A fair reading of these decisions would be that where the
exemption was not expressly time-limited, the Commission
___
believed it necessary to consider indices of control to ensure
that the exemption would not lead to a recurrence of the evils
that the Act was intended to address. See Southern Co.,
___ ____________
Holding Co. Act Release No. 25639 n. 41 (Sept. 23, 1992).
The contrary reading, that an applicant cannot exercise
control over the utility, would be relevant if this were an
application for an order under section 2(a)(7) declaring Fidelity
not to be a holding company. Fidelity, however, has conceded for
purposes of this application that will be a holding company with
respect to the reorganized El Paso.
In this matter, Fidelity is seeking an exemption under
section 3(a)(4) for a period of up to three years. The exemption
is needed to enable Fidelity to reduce its holdings in the
reorganized El Paso in an orderly fashion, consistent with market
conditions and Fidelity's fiduciary obligations to its investors.
We note that the Commission has granted exemptions under section
3(a)(4) for periods as long as seven years. See Coastal States -
____________________
- Lo-Vaca Settlement Trust Mercantile National Bank at Dallas,
_____________________________________________________________
Holding Co. Act Release No. 21104 (April 23, 1979). Fidelity
believes, however, that three years would be a reasonable period
in which the reorganization of El Paso would have "an opportunity
to be reflected in increased earnings and improved market prices."
Massachusetts Mutual Life Insurance Co., 9 S.E.C. 642, 644 (1941).
_______________________________________
The grant of a three-year temporary exemption would be consistent
with the Commission's practice in other matters under the Act.
See Kansas Power & Light Co., Holding Co. Act Release No. 25465
________________________
(Feb. 5, 1992)(granting a three-year temporary exemption), and
CINergy Corp., Holding Co. Act Release No. 26146 (Oct. 21,
_____________
1994) (reserving jurisdiction for three years over issues related
to gas operations and nonutility businesses of new registered
holding company).
The other objective requirement of section 3(a)(4) is
clearly met. The need for exemption arises solely because
Fidelity will receive the voting securities of the reorganized El
Paso in exchange for previously contracted bona fide debt. The
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fact that Fidelity acquired the debt as part of its distressed
investments business does not affect Fidelity's right to an
exemption. If El Paso had been acquired by Central and South West
Corporation pursuant to the executed merger agreement, the debt
acquired by Fidelity would have been converted into a combination
of cash and securities. Fidelity, in the aggregate, would not
have owned, controlled, or held, with power to vote ten percent
or more of the voting securities of the resulting company and,
so there would not have been an issue for Fidelity under the 1935 Act.
CSW's termination of the merger agreement necessitated a
fourth "stand-alone" plan of reorganization which is the subject
of this filing. Pursuant to the Fourth Plan, Fidelity will
receive common stock of the reorganized El Paso in exchange for
the debt it now holds of the existing El Paso. The exchange of
equity for existing debt securities is mandated by the debtor's
financial problems; it is necessary to effect the reorganization
that will enable El Paso to emerge from bankruptcy as a viable
entity.
After the Fourth Plan of Reorganization becomes effective,
Fidelity will, of course, continue to vote its shares consistent
with its fiduciary duty to its investors. In addition, as a
large shareholder, Fidelity may be invited to attend meetings of
reorganized El Paso's Board of Directors as an observer, on a
nonvoting basis. Fidelity does not intend to hold reorganized El
Paso's voting securities permanently in order to exercise
control; rather, Fidelity intends to retain these voting
securities only temporarily, for investment purposes only, with
the intention to liquidate all or a significant portion thereof
as soon as reasonably practicable, consistent, of course with
market conditions and Fidelity's fiduciary obligations to its
investors.
Because of the limited duration of the exemption and
extensive regulatory oversight to which El Paso is otherwise
subject, the exemption will not result in detriment to the public
interest or the interest of investors or consumers. Investors
will be protected under the federal securities laws and the
Bankruptcy Code. El Paso will be subject to regulation by the
Federal Energy Regulatory Commission, the Texas Public Utility
Commission and the New Mexico Public Utility Commission. As the
SEC has recognized, these other regulators are primarily
responsible for the protection of consumers.6 Indeed,
confirmation of the Fourth Plan of Reorganization is conditioned
upon receipt of certain approvals and determinations from these
regulators.
Accordingly, Fidelity asks the Commission to issue an order
granting it an exemption from regulation as a holding company
under the Act for a period of up to three (3) years from the date
of acquisition of such voting securities. During this period,
Fidelity will seek to reduce its holdings such that its
aggregated ownership is less than 10% of the outstanding voting
securities of the reorganized El Paso. Any sale of Fidelity's
holdings of reorganized El Paso's common stock will comply with
the applicable requirements of the Securities Act of 1933, as
amended. If, despite its good faith efforts, Fidelity is unable
to reduce its holdings in a manner consistent with its fiduciary
obligations, it will seek an order extending the period of
exemption.
(2) Section 3(a)(3) provides an exemption for a company
such as Fidelity that is only incidentally a holding
company.
____________________________________________________
Fidelity is also entitled to an exemption under the plain
meaning of section 3(a)(3):
such holding company is only incidentally a holding company,
being primarily engaged or interested in one or more
businesses other than the business of a public-utility company
and (A) not deriving, directly or indirectly, any material part
of its income from any one or more subsidiary companies, the
principal business of which is that of a public-utility
company, or (B) deriving a material part of its income from
any one or more such subsidiary companies, if substantially
all the outstanding securities of such companies are owned,
directly or indirectly, by such holding company.
Fidelity satisfies the objective criteria for the exemption. The
Applicant is primarily engaged in the business of investment
management, and it will derive an immaterial part of its income
from the reorganized El Paso.
Fidelity recognizes that the Commission has traditionally
interpreted this section to require that the utility operations
be "functionally related" to the holding company's primary
nonutility business (see Cities Service Co., 8 S.E.C. 318, 328-29
__________________
(Dec. 23, 1940)); and small in an absolute sense (see Standard Oil
____________
Co., 10 S.E.C. 1122, 1128-29 (Feb. 5, 1942), citing Cities Service).
___ ______________
This restrictive interpretation was intended to prevent the
widespread evasion of regulation that could occur if companies
were able to avoid regulation as holding companies under the Act
simply "by acquiring and holding the stocks of companies doing
some business other than that of a retail utility business."
Electric Bond and Share Co., 33 S.E.C. 21, 43 (Feb. 6, 1952).
___________________________
At that time, companies that controlled a significant part of the
country's utility operations were attempting, by one device or
another, to defeat the purposes of the Act.
Fidelity is not a company that is attempting to escape
regulation under the Act by posturing itself as a company only
incidentally investing in utility operations. Rather, the
Applicant is in the business of investment management, and its
anticipated holdings of the voting securities of El Paso are
merely derived from its primary business of investment
management. As noted above, the debt securities in this matter
represent, at current market value, approximately six one
hundredths of a percent (0.06%) of the assets under Fidelity's
management and have produced a comparable percentage of
Fidelity's income since their acquisition.
It is appropriate for the Commission to liberalize its
interpretation of section 3(a)(3) in these circumstances. The
Applicant's relationship with El Paso is within the plain meaning
of section 3(a)(3) and, as explained above, the proposed
exemption will not result in harm to utility consumers. For
these reasons, Fidelity should be granted an exemption from
regulation as a holding company under section 3(a)(3) of the Act.
See Gaz Metropolitan, Inc. and Gaz Metropolitain and Company,
_____________________________________________________________
Limited Partnership, Holding Co. Act Release No. 26170
___________________
(Nov. 23, 1994) (exemption granted under section 3(a)(5) of the
Act where the literal terms of the statute were satisfied, and
it appeared that the exemption would not be detrimental to
consumers).
C. Conclusion
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For the reasons set forth above, should the Applicant be
classified as a "holding company" under the Act upon the
conversion of its El Paso debt securities into voting securities
of reorganized El Paso, the Applicant requests an exemption from
regulation as a holding company under the Act pursuant to section
3(a)(4), or in the alternative, section 3(a)(3).
As noted above, a hearing on the Disclosure Statement is set
for November 7, 1995, and confirmation of the Fourth Amended Plan
of Reorganization is anticipated on January 9, 1996. It is a
condition precedent to confirmation that Fidelity not be required
to register as a holding company under the Act, and that the
reorganized El Paso not be a subsidiary company of a registered
holding company. Accordingly, Fidelity requests expedited
consideration of its application, and asks the Commission to
issue an order in this matter no later than December 31, 1995.
Item III. Applicable Statutory Provisions.
________________________________
FMR Co. and FMTC consider sections 2(a)(7), 3(a)(3) and
3(a)(4) of the Act, and rule 10(a)(2) thereunder, to be
applicable to the proposed transaction. To the extent that the
proposed transaction is considered by the Commission to require
authorization, approval or exemption under any section of the Act
or rules thereunder, other than those specifically referred to
above, request for such authorization, approval or exemption is
hereby made.
Item IV. New Mexico Regulatory Approval.
_______________________________
As a result of the debt/equity exchange contemplated by the
Fourth Plan of Reorganization, Fidelity may be deemed to be a
public utility holding company or an affiliated interest of the
reorganized El Paso, within the meaning of the New Mexico Public
Utility Act. To the extent that the approval of the New Mexico
Public Utility Commission may be required, Fidelity will either
file for such approval or else request a variance from the
requirements of the New Mexico law. It is Fidelity's
understanding that the relevant New Mexico laws and regulations
were not intended to reach a situation such as this (in which
Fidelity's equity interest results from its position as a major
unsecured creditor of a utility in bankruptcy reorganization
proceedings), and where Fidelity does not have a specific intent
to create a holding company under New Mexico law or otherwise
have El Paso diversify into nonregulated business activities.
Item V. Procedure.
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FMR Co. and FMTC request that the Commission issue its order
as soon as practicable but in any event no later than December
31, 1995. FMR Co. and FMTC hereby (1) waive a recommended
decision by a hearing officer or other responsible officer of the
Commission, (2) consent that the Division of Investment
Management may assist in the preparation of the Commission's
decision in this proceeding, and (3) request that there be no
waiting period between the issuance of the Commission's order and
the date on which it is to become effective.
Item VI. Exhibits.
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A - Form of Notice of Proposed Transactions
B - Disclosure Statement (including, as an exhibit,
the Fourth Plan of Reorganization)
C - Application to the New Mexico Public Utility
Commission
Item VII. Information as to Environmental Effects.
________________________________________
(a) The Commission's action in this matter will not
constitute any major federal action significantly affecting the
quality of the human environment.
(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed
transaction.
<PAGE>
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.
FIDELITY MANAGEMENT &
RESEARCH COMPANY,
on its own behalf and
on behalf of certain funds and
accounts managed by it
By:/S/ DANIEL G. HARMETZ
______________________
DANIEL G. HARMETZ
VICE PRESIDENT
FIDELITY MANAGEMENT
TRUST COMPANY,
on its own behalf and
on behalf of certain funds and
accounts managed by it
Date: NOVEMBER 6, 1995 By:/S/ DANIEL G. HARMETZ
______________________
DANIEL G. HARMETZ
SENIOR VICE PRESIDENT
ENDNOTES
1. A portion of Fidelity's investment activities include
investments in financially troubled companies. These
investments, which may include investments in debt or equity
securities, as well as bank debt or trade claims, involve
companies that appear to possess sound management or strong
market franchises but nonetheless, for various reasons, are
experiencing financial difficulty.
2. In addition, the Funds and Accounts hold El Paso secured debt
with face value of approximately $27 million and $33 million,
respectively, of the Rio Grande Resources Nuclear Fuel Facility.
Under the Fourth Plan of Reorganization, none of the secured debt
will be exchanged for common stock of the reorganized El Paso.
3. This percentage could increase to as much as ninety-nine and
one-half percent (99.5%) in the case that certain classes of El
Paso stockholders and persons with options to purchase El Paso
stock reject the plan.
4. The five member committee is made up of two members of the
existing Board of Directors and the three co-chairs of the
Creditors' Committee.
5. The fact that Fidelity has actively participated in the
negotiation of the Fourth Plan of Reorganization does not alter
the conclusion that the company is entitled to an exemption under
section 3(a). The Bankruptcy Code requires creditors such as
Fidelity to take affirmative action to protect their claims.
See, e.g., section 1141 of the Bankruptcy Code
___ ____
(confirmation of a plan of reorganization generally discharges
debtor from all claims that have not been provided for in the
plan). The Commission has implicitly sanctioned such actions as
a necessary part of the reorganization process. Northeast
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Utilities, Holding Co. Act Release No. 25221 (Dec. 21, 1990),
_________
supplemented, Holding Co. Act Release No. 25273 (March 15, 1991),
____________
aff'd sub nom. City of Holyoke v. SEC, 972 F.2d 358 (D.C. Cir.
______________________
1992), and Eastern Utilities Associates, Holding Co. Act Release
____________________________
No. 25719 (Dec. 29, 1992), in which creditors actively negotiated
plans of reorganization in Seabrook-related bankruptcies.
Further, as noted above, the Creditors' Committee will be
dissolved at the close of business on the effective date of the
Fourth Plan of Reorganization. Thereafter, Fidelity will not be
___
represented on the Board by any of its directors, officers, or
other employees.
6. The legislative history, for example, indicates that the Act
was intended "simply to provide a mechanism to create conditions
under which effective Federal and State regulation will be
possible." S. Rep. No. 621, 74th Cong., 1st Sess. 11 (1935)
(discussing section 11, "the very heart of the title").
<PAGE>
EXHIBIT INDEX
Exhibit
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A Form of Notice of Proposed Transactions
B Disclosure Statement (including, as an exhibit, P
the Fourth Plan of Reorganization)
C Application to the New Mexico Public Utility P
Commission
Exhibit A
Form of Notice of Proposed Transaction
Fidelity Management & Research Company ("FMR Co.") and
Fidelity Management Trust Company ("FMTC") (collectively
"Fidelity") have filed an application for an order of exemption
under section 3(a)(4) or, in the alternative, section 3(a)(3) of
the Act. It is anticipated that the funds and accounts managed
by Fidelity will receive, in the aggregate, more than ten percent
(10%) of the voting securities of the public utility company El
Paso Electric Company ("El Paso") pursuant to El Paso's Fourth
Amended Plan of Reorganization, dated October 27, 1995 ("Fourth
Plan of Reorganization"). Fidelity asserts that the ownership
of such securities by the various funds or accounts managed by
Fidelity should not result in Fidelity becoming a holding company
under the Act. However, positing solely for purposes of this
application that the voting interests of the various funds or
accounts managed by Fidelity should be aggregated, Fidelity
requests an order under section 3(a)(4), or in the alternative,
section 3(a)(3) of the Act, exempting it from regulation as a
holding company.
The Disclosure Statement dated October 27, 1995, filed in
connection with the Fourth Plan of Reorganization ("Disclosure
Statement"), indicates that by operation of the Fourth Plan of
Reorganization, Fidelity will receive, in addition to cash and
debt securities, voting securities of the reorganized El Paso, in
exchange for previously contracted bona fide debt of
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El Paso. Fidelity represents that it plans to hold the voting
securities for investment purposes only, and will liquidate such
interests as soon as financially reasonable, consistent with its
fiduciary obligations to its investors. Accordingly, Fidelity
asserts that it will be "temporarily a holding company" within
the meaning of section 3(a)(4), and entitled to exemption under
that section.
In the alternative, Fidelity seeks an exemption under
section 3(a)(3). Fidelity represents that it is primarily
engaged in investment management, and that it is only
incidentally a holding company by reason of its ownership of the
El Paso voting securities pursuant to the operation of the Fourth
Plan of Reorganization. Fidelity further represents that it will
not derive a material amount of income from its holdings of El
Paso voting securities and that the proposed exemption will not
result in detriment to the public interest of investors or
consumers.
If an exemption is granted, Fidelity's parent FMR Corp. and
its controlling shareholders will claim exemption from regulation
pursuant to rule 10(a)(2).
A hearing on the Disclosure Statement is set for November 7,
1995, and confirmation of the Fourth Amended Plan of
Reorganization is anticipated on January 9, 1996. It is a
condition precedent to confirmation that Fidelity not be required
to register as a holding company under the Act, and that the
reorganized El Paso not be a subsidiary company of a registered
holding company. Accordingly, Fidelity requests expedited
consideration of its application, and asks the Commission to
issue an order in this matter no later than December 31, 1995.
