File No. _______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION/DECLARATION WITH RESPECT TO THE ORGANIZATION
OF A WHOLLY OWNED SUBSIDIARY RELATED TO AN ACCOUNTS RECEIVABLE PURCHASE
AND SALE PROGRAM AND RELATED TRANSACTIONS
under
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
THE CONNECTICUT LIGHT & POWER COMPANY
107 Selden Street
Berlin, CT 06037-5457
(Name of companies filing this statement and address of principal
executive office)
NORTHEAST UTILITIES
(Name of top registered holding company parent of declarant)
Robert P. Wax, Esq.
Vice President, Secretary and General Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
(Name and address of agent for service)
The Commission is requested to mail signed copies of all orders,
notices, and communications to
David R. McHale Jeffrey C. Miller, Esq.
Assistant Treasurer - Finance The Connecticut Light &
Assistant General Counsel Power Company
Northeast Utilities Service Northeast Utilities Service
Company Company
P. O. Box 270 P. O. Box 270
Hartford, CT 06141-0270 Hartford, CT 06141-0270
Thomas R. Wildman, Esq.
Day, Berry & Howard
CityPlace
Hartford, CT 06103-3499
-1-
<PAGE>
ITEM I
DESCRIPTION OF PROPOSED TRANSACTIONS
1. The Connecticut Light & Power Company ("CL&P" or the "Company"),
a wholly owned electric utility subsidiary of Northeast Utilities ("NU"), a
registered holding company, hereby submits this Application/Declaration
pursuant to the Public Utility Holding Company Act of 1935, as amended (the
"Act"), with respect to proposed transactions relating to the formation by the
Company of a wholly owned special purpose subsidiary related to an accounts
receivable purchase and sale program and related transactions. As set forth in
paragraphs 15 and 16 below, the Company will use the proposed transactions to
accelerate its receipt of anticipated cash collections from certain accounts
receivable.
2. CL&P proposes to organize a wholly owned special purpose
corporation to be called CL&P Receivables Corporation ("CRC") for the sole
purpose of acquiring certain categories of CL&P's accounts receivable and
related assets, as described below. A draft of CRC's Certificate of
Incorporation will be filed by amendment as Exhibit A.1, and a draft of the
Bylaws of CRC will be filed by amendment as Exhibit A.2. CL&P will subscribe
to and purchase all of CRC's Common Stock at a price yet to be determined which
will be at least sufficient to meet CRC's initial equity capital requirements,
including the organizational expenses of CRC. All or part of such purchase
price may be paid by the transfer by CL&P to CRC of accounts receivable of
CL&P. A copy of CL&P's authorizing resolution for this purchase will be filed
by amendment as Exhibit A.3.
3. The Company entered into a Receivables Purchase and Sale
Agreement dated July 11, 1996 (as amended, the "Existing Agreement") with
Corporate Asset Funding Company, Inc. ("CAFCO"), Citicorp North America, Inc.
(the "Agent") and Citibank, N.A. (together with its assignees, the "Banks")
under which the Company may sell (from time to time in its discretion and
subject to the satisfaction of certain conditions precedent) fractional,
undivided ownership interests expressed as a percentage ("Receivable
Interests") in (i) billed and unbilled indebtedness of customers as booked to
Accounts 142.01 and 173 under the Federal Energy Regulatory Commission Chart of
Accounts ("Receivables") and (ii) certain related assets, including any
security or guaranty for any Receivables, all collections thereon, and related
records and software (the "Related Assets"). The purchaser(s) of the
Receivable Interests (collectively, the "Purchaser") will be either CAFCO or
the Banks or their respective successors or assigns. CAFCO is a special
purpose Delaware corporation which acquires receivables and other assets
and issues commercial paper to finance these acquisitions. The Agent will act
as agent for the Purchaser for transactions under the Existing Agreement.
4. When originally executed, the Existing Agreement contemplated
that any sales made thereunder would be accounted for as sales under generally
accepted accounting principles, and CL&P desires to continue this accounting
treatment for its financial reporting. In order for such sales made after
January 1, 1997 to be so treated, they must comply with the requirements of the
Statement of Financial Accounting Standards No. 125, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, No. 162-
C, issued in June 1996 by the Financial Accounting Standards Board ("FAS 125").
The formation of CRC is intended to satisfy one of the requirements of FAS 125:
the requirement that the transferred assets be isolated from the Company and
its creditors, even in bankruptcy or receivership of the Company.
5. The restructured purchase and sale arrangements are on
essentially the same terms to CL&P as, and are intended to accomplish the
ultimate sales to the Purchaser in a manner substantially similar to, those
under the Existing Agreement; the addition of CRC serves merely as a vehicle to
isolate the Receivables as required by FAS 125 and as desired by the parties.
Compared to the costs and terms of the program under the Existing Agreement,
when viewed on an overall basis, the restructured arrangements add only
relatively minor costs of the formation and maintenance of CRC as a separate
entity and do not increase the liability of and risk to CL&P in any material
respect.
6. The restructured accounts receivable purchase and sale program
will consist of two agreements which will replace the Existing Agreement.
Under the first agreement (the "Company Agreement"), the Company will sell or
transfer as equity contributions from time to time all of its Receivables and
Related Assets to CRC. The purchase price to be paid by CRC for any
Receivables and the Related Assets with respect thereto will take into account
historical loss statistics on the Company's receivables pool. Under the second
agreement (the "CRC Agreement"), CRC will sell Receivable Interests to the
Purchaser from time to time. Such Receivable Interests may be funded and
repaid on a revolving basis. The size of such Receivable Interests will be
calculated according to a formula. Such formula will include reserves based on
a multiple of historical losses, customer concentrations that exceed specified
levels and carrying costs and other costs associated with the agreements. Such
formula will also take into account the cost of servicing, but this portion of
the price will be returned to CL&P in the form of a collection agent fee.
7. The restructured accounts receivable program will be structured
so as to meet the specific requirements of FAS 125. The most significant of
these include the following: (i) the transfers of Receivables from the Company
to CRC will be in terms that the Company believes will result in such transfers
being labeled as "true sales" in the unlikely event of a bankruptcy proceeding
involving the Company; (ii) CRC, as the purchaser and transferee, will be a
special purpose corporation within the meaning of FAS 125 (i.e. a legally
separate entity engaged only in activities related to the program); (iii) CRC,
together with subsequent purchasers, will have the right to pledge or exchange
the assets and/or interests in them; and (iv) the Company will not maintain
effective control over the Receivables and Related Assets it transfers through
a repurchase or similar arrangement.
8. Primarily because of the reserves referred to in paragraph 6
above that are included in the calculation of Receivable Interests sold to the
Purchaser, the purchase price paid by the Purchaser for Receivable Interests
will be lower than the purchase price paid by CRC to the Company for
Receivables and Related Assets. However, it is expected that CRC will have
available sufficient assets to pay to CL&P the full purchase price for
Receivables purchased from CL&P. One such asset is the collections allocable
to that portion of a Receivable which is not allocable to the Undivided
Interest in the Receivable sold to the Purchaser (i.e., if the Undivided
Interest is 90% at a given point in time, CRC is entitled to cash equal to 10%
of the collections). A second asset potentially available to CRC to pay the
purchase price for Receivables purchased from CL&P is that portion of the
Receivable Interests which represents loss reserves since that portion is only
retained by the Purchaser to the extent necessary to cover actual losses.
Since loss reserves are multiples of historical loss (as described in paragraph
6), it is expected that a significant portion of loss reserves will return to
CRC.
9. CL&P anticipates that the availability of Receivables and
Related Assets will vary from time to time in accordance with electric energy
use by its customers. As a result of this and the factors described in the
preceding paragraph, the funds CRC has available to make a purchase at any
time{1} may not match the cost of Receivables and Related Assets available.
The proposed program includes certain mechanisms to accommodate this mismatch.
When the amount of Receivables and Related Assets originated by CL&P exceeds
the amount of cash CRC has available, either CRC will make the purchase and owe
the balance of the purchase price to CL&P on a deferred basis (the unpaid
portion will accrue interest or the purchase price will involve a discount to
reflect the deferral), or CL&P will make a capital contribution to CRC in the
form of the Receivables and Related Assets for which CRC lacks purchase price
funds at that time. Conversely, if CRC develops a substantial cash balance
(due to collections of previously transferred Receivables exceeding the balance
of newly created Receivables available for purchase), CRC will likely dividend
the excess cash to CL&P. Such dividends may represent a return of previous
capital contributions by CL&P to CRC. Through these mechanisms, it is expected
that CRC will not itself retain substantial cash balances at any time and that
substantially all cash realized from the collection of the Receivables (net of
the costs of the program and any reductions in the outstanding balance of
Receivable Interests) will be made available to CL&P. Although the actual
funding cost will vary depending on, inter alia, the Purchaser's own funding
costs, it is expected that the all-in credit spread to CL&P of the program will
be approximately one-half of the all-in credit spread to CL&P for the revolving
credit facility described in the Commission's File No. 70-8875 (the "Revolving
Credit Facility"). All fees, commissions and expenses expected to be paid or
incurred by CL&P in connection with the creation of CRC will be provided in
Exhibit H.1; those by CRC in Exhibit H.2.
10. Under the CRC Agreement, purchases may be funded by the
Purchaser's issuance of commercial paper. Initially, the aggregate purchase
price paid by the Purchaser for Receivable Interests is not intended to exceed
$200,000,000. The minimum purchase price for an Undivided Interest which may
be sold in a single transaction will be $5,000,000.
11. The Agent will have the right to appoint a collection agent on
behalf of the Purchaser and CRC, to administer and collect receivables and to
notify the obligors of the sale of their receivables, at the Agent's option.
CL&P will be appointed as the initial collection agent, and only under certain
adverse conditions can the Agent appoint a successor collection agent. CL&P
will continue to utilize the services of its affiliate, Northeast Utilities
Service Company, in performing CL&P's obligations as collection agent.
Therefore, CL&P's customers are not expected to experience any change in
current servicing and collection procedures.
12. Certain obligations under the Company Agreement create limited
recourse against the Company. Such recourse claims include liability for (i)
failure to transfer to CRC a first priority ownership interest in the
Receivables and Related Assets; (ii) the Company's breach of its
representations, warranties and covenants; and (iii) certain indemnity
obligations. In order to secure these obligations, the Company will grant to
CRC a lien on, and security interest in, any rights which the Company may have
in respect of Receivables and Related Assets. The CRC Agreement creates
comparable recourse obligations against CRC, and CRC will grant a security
interest to the Purchaser in all rights in the Receivables retained by CRC, the
Related Assets and certain other rights and remedies (including its rights and
remedies under the Company Agreement) to secure such recourse obligations.
Neither CRC's nor the Purchaser's recourse to CL&P will include any rights
against CL&P should customer defaults on the Receivables result in collections
attributable to the Receivable Interests sold to the Purchaser being
insufficient to reimburse the Purchaser for the purchase price paid by it for
the Receivable Interests and its anticipated yield. The Purchaser will bear
the risk for any credit losses on the Receivables which exceed the reserves for
such losses included in the Receivable Interests.
13. The Company and CRC will be obligated to reimburse the Purchaser
and the Agent for various costs and expenses associated with the Company
Agreement and the CRC Agreement. CRC will also be required to pay to the Agent
certain fees for services in connection with such agreements. See Exhibits H.1
and H.2 (to be filed by amendment).
14. The arrangements under the Company Agreement and the CRC
Agreement are scheduled to terminate on July 11, 2001. CRC may, following
written notice to the Agent, terminate in whole or reduce in part the unused
portion of its purchase limit in accordance with the terms and conditions of
the CRC Agreement. The CRC Agreement allows the Purchaser to assign all of its
rights and obligations under the CRC Agreement (including its Receivable
Interests and the obligation to fund Receivable Interests) to other persons.
However, any such assignment will not change the nature of the obligations of
CL&P or CRC under the Company Agreement and the CRC Agreement. All references
herein to the Purchaser include reference to its assignees.
15. CL&P intends that the above-described transactions will permit
it in effect, through this intermediary device, to accelerate its receipt of
cash collections from accounts receivable and thereby meet its short term cash
needs. CL&P believes that the planned purchase and sale transactions will
provide it with needed financial flexibility at a time when the Company expects
to incur substantial costs as a result of the outages of the Millstone nuclear
plants. As the Commission is aware, the NU companies are engaging in a series
of financial transactions to permit them to meet their financial needs in the
near future. See, e.g., Revolving Credit Facility (File No. 70-8875).
16. CL&P believes that, based on indicative pricing, funding under
the proposed transactions will be more advantageous than other sources of funds
that CL&P and other NU companies are seeking such as the Revolving Credit
Facility.
17. Except in accordance with the Act, neither NU nor any subsidiary
thereof (a) has acquired an ownership interest in an exempt wholesale generator
("EWG") or a foreign utility company ("FUCO") as defined in Sections 32 and 33
of the Act, or (b) now is or as a consequence of the transactions proposed
herein will become a party to, or has or will as a consequence of the
transactions proposed herein have a right under, a service, sales, or
construction contract with an exempt wholesale generator or a foreign utility
company. None of the proceeds from the transactions proposed herein will be
used by the Company to acquire any securities of, or any interest in, an exempt
wholesale generator or a foreign utility company.
The NU system is in compliance with Rule 53(a), (b) and (c), as
demonstrated by the following determinations:
(i) NU's aggregate investment in EWGs and FUCOs (i.e. amounts
invested in or committed to be invested in EWGs and FUCOs, for which
there is recourse to NU) does not exceed 50 percent of the NU system's
consolidated retained earnings as reported for the four most recent
quarterly periods on NU's Form 10-K and 10-Qs. At December 31, 1996,
the ratio of such investment ($93.0 million) to such consolidated
retained earnings ($832.5 million) was 11.2 percent.
(ii) Encoe Partners, Central Termica San Miguel de Tucuman, S.A., Ave
Fenix Energia S.A. and Plantas Eolicas, S.A. (N.U.'s only EWGs or FUCOs
at this time) (collectively, "EWGs/FUCOs") maintain books and records
and prepare financial statements in accordance with Rule 53(a)(2).
Furthermore, NU has undertaken to provide the Commission access to such
books and records and financial statements, as it may request.
(iii) No employees of the NU system's public utility companies have
rendered services to the EWGs/FUCOs.
(iv) NU has submitted (a) a copy of each Form U-1 and Rule 24
certificates that have been filed with the Commission under Rule 53 and
(b) a copy of Item 9 of Form U5S and Exhibits G and H thereof to each
state regulator having jurisdiction over the retail rates of the NU
system public utility companies.
(v) Neither NU nor any NU subsidiary has been subject of a
bankruptcy or similar proceeding unless a plan of reorganization has
been confirmed in such proceeding. In addition, although NU's average
consolidated retained earnings ("CREs") for the four most recent
quarterly periods has decreased by 10 percent or more from the average
for the previous four quarterly periods (at 12/31/95, NU's CREs were
$1,007,000,000: at 12/31/96, NU's CREs were $833,000,000), NU's
aggregate investment in EWGs/FUCOs at such date ($93,000,000) did not
exceed two percent of NU's consolidated capital invested in utility
operations ($135,000,000).
(vi) In the previous fiscal year, NU's operating losses attributable
to its investment in the EWGs/FUCOs did not exceed 5 percent of NU's
consolidated retained earnings.
ITEM II
FEES, COMMISSIONS, AND EXPENDITURES
18. The estimated fees, commissions, and expenses paid or incurred,
or to be paid or incurred, directly or indirectly, in connection with the
proposed transactions by the Company or any associate company thereof will be
specified in Exhibits H.1 and H.2 (to be filed by amendment).
19. None of such fees, commissions, or expenses are to be paid to
any associate company or affiliate of the Companies or any affiliate of any
such associate company except for financial, legal, and other services to be
performed at cost by NUSCO, an affiliated service company.
ITEM III
APPLICABLE STATUTORY PROVISIONS
20. The formation of CRC; the issuance of shares by CRC; the
making, directly and indirectly, of the initial equity contributions to CRC;
the acquisition by CL&P of shares of Common Stock of CRC; and the
payment of dividends by CRC to CL&P, to the extent such dividends may be
considered to be paid out of capital or unearned surplus, are subject to
Sections 6(a), 7, 9(a), 10 and 12(c) of the Act and Rules 46 and 54 thereunder.
21. The Company believes that all other aspects of the transactions
described herein are not subject to the Commission's jurisdiction. The Company
believes that its sales of Receivables to CRC are not sales of a "security" as
defined in Section 2(a)(16) of the Act or "utility assets" as defined Section
2(a)(18). Furthermore, the Company believes that any capital contributions to
CRC in the form of Receivables and Related Assets subsequent to its initial
capitalization will be exempt from regulation under Rule 45(b)(4), and that
CRC's sales of Receivable Interests, to the extent such may be considered the
issuance of a debt security, are exempt from regulation under Rule 52(b).
ITEM IV
REGULATORY APPROVAL
22. In a supplemental application to be filed with the Connecticut
Department of Public Utility Control ("DPUC"), the Company will seek approval
for the transactions described herein. A copy of this filing will be filed by
amendment as Exhibit D.1 hereto. A copy of the order of the DPUC will be filed
by amendment as Exhibit D.2 hereto upon issuance. The DPUC previously approved
proposed sales by CL&P under the Existing Agreement.
23. No other state commission has jurisdiction with respect to any
aspect of the proposed transaction, and no Federal commission other than the
Securities and Exchange Commission has jurisdiction with respect to any aspect
thereof.
ITEM V
PROCEDURE
24. The Company respectfully requests the Commission's approval,
pursuant to this Application/Declaration, of the formation of CRC, the issuance
of shares by CRC, the making of initial equity contributions to CRC, the
acquisition by CL&P of shares of Common Stock of CRC and CRC's payment of
dividends to CL&P as described herein, whether under the sections of the Act
and rules thereunder enumerated in Item III or otherwise. The Company also
requests the Commission's approval as may be necessary of any other aspect of
the transactions described in this Application/Declaration under the
appropriate provisions of the Act or rules thereunder.
25. The Company hereby waives any recommended decision by a hearing
officer or by any other responsible officer of the Commission and waives the
30-day waiting period between the issuance of the Commission's order and the
date on which it is to become effective, since it is desired that the
Commission's order, when issued, become effective forthwith. The Company
consents that the Office of Public Utility Regulation within the Division of
Investment Management may assist in the preparation of the Commission's
decision and/or order unless the Office opposes the transactions covered by
this Application. It is requested that the Commission issue an order
authorizing the jurisdictional transactions proposed herein at the earliest
practicable date but in any event not later than 40 days from filing date. It
is further requested that (i) there not be a recommended decision by an
Administrative Law Judge or other responsible officer of the Commission, (ii)
the Office of Public Utility Regulation be permitted to assist in the
preparation of the Commission's decision, and (iii) the Commission's order
become effective forthwith upon issuance.
ITEM VI
EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
A.1 Draft of the Certificate of Incorporation of CRC. (To be filed
by amendment.)
A.2 Draft of the Bylaws of CRC. (To be filed by amendment.)
A.3 CL&P's authorizing resolution for purchase of CRC Common Stock.
(To be filed by amendment.)
B. Not applicable.
C. Not applicable.
D.1 Application to the DPUC for approval of the transactions described
herein. (To be filed by amendment.)
D.2 Copy of the Order of the DPUC with respect to CL&P's proposed
transactions. (To be filed by amendment.)
E. Not applicable.
F. Opinion of Counsel to CL&P. (To be filed by amendment.)
G.1 CL&P Financial Data Schedule. (To be filed by amendment.)
G.2 NU Financial Data Schedule. (To be filed by amendment.)
H.1 Estimated Expenses--CL&P. (To be filed by amendment.)
H.2 Estimated Expenses--CRC. (To be filed by amendment.)
I. Proposed notice of the proceeding initiated by the filing of
this Application/Declaration.
(b) Financial Statements (To be filed by amendment.)
1. The Connecticut Light & Power Company
1.1 Balance Sheet, per books and pro forma, as of December
31, 1997.
1.2 Income Statement, per books and pro forma, twelve months
ended December 31, 1997.
1.3 Statement of Retained Earnings, per books and pro forma,
twelve months ended December 31, 1997 and Statement of
Capital Structure, per books and pro forma, as of
December 31, 1997.
1.4 Explanation of Pro Forma Adjustments.
2. Northeast Utilities and Subsidiaries
2.1 Consolidated Balance Sheet, per books and pro forma, as
of December 31, 1997.
2.2 Consolidated Income Statement, per books and pro forma,
twelve months ended December 31, 1997.
2.3 Consolidated Statement of Retained Earnings, per books
and pro forma, twelve months ended December 31, 1997,
and Consolidated Statement of Capital Structure, per
books and pro forma, as of December 31, 1997.
2.4 Explanation of Pro Forma Adjustments.
VII
INFORMATION AS TO ENVIRONMENTAL EFFECTS
(a) The issuance of an order with respect to this Application/
Declaration is not a major federal action significantly affecting the quality
of the human environment.
(b) No Federal agency has prepared or is preparing an environmental
impact statement with respect to the subject transactions.
**FOOTNOTES**
{1}The only funds available to CRC will be those
resulting from its participation in the program and CL&P's capital contributions
to it.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned has duly caused this statement to be
signed on its behalf by the undersigned thereunto duly authorized.
Dated: April 25, 1997.
THE CONNECTICUT LIGHT & POWER COMPANY
By___/s/John B. Keane_______________
John B. Keane
Vice President and Treasurer
<PAGE>
File No. _________
INDEX TO EXHIBITS FILED WITH
FORM U-1
of
THE CONNECTICUT LIGHT & POWER COMPANY
(a) Exhibits
I. Proposed notice of the proceeding initiated by the filing of
this Application/Declaration.
EXHIBIT I
PROPOSED FORM OF NOTICE
(Release No. 35-____; ______)
APPLICATION/DECLARATION WITH RESPECT TO THE ORGANIZATION
OF A WHOLLY OWNED SUBSIDIARY RELATED TO AN ACCOUNTS RECEIVABLE
PURCHASE AND SALE PROGRAM AND
RELATED TRANSACTIONS
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
_____________, 1997
The Connecticut Light and Power Company ("CL&P") or the "Company"), a
wholly owned electric utility subsidiary of Northeast Utilities ("NU"), a
public utility holding company, has filed an Application/Declaration pursuant
to Sections 6(a), 7, 9(a), 10 and 12(c) and Rules 46 and 54 of the Public
Utility Holding Company Act of 1935, as amended (the "Act"). CL&P is located
at 107 Selden Street, Berlin, CT 06037-5457. The Company's affiliate, Western
Massachusetts Electric Company, is in the process of obtaining authority for a
similar transaction (See File No. 35-8959).
Authorization is requested for (i) CL&P to form a wholly owned special
purpose corporation ("CRC") for the sole purpose of purchasing certain of
CL&P's accounts receivable; (ii) CRC to issue shares of Common Stock; (iii)
CL&P to make, directly and indirectly, initial equity contributions to CRC;
(iv) CL&P to acquire shares of Common Stock of CRC; (v) CRC to pay dividends to
CL&P; and (vi) any other aspect of the proposed transactions for which approval
may be necessary.
In the Application/Declaration the Company indicates its belief that
certain aspects of the transactions described therein do not require Commission
approval: Sales of Receivables (defined below) to CRC are not sales of a
"security" as defined in Section 2(a)(16) of the Act or "utility assets" as
defined Section 2(a)(18). Furthermore, anticipated capital contributions to
CRC subsequent to its initial capitalization will be exempt from regulation
under Rule 45(b)(4), and CRC's sales of interests in Receivables, to the extent
such may be considered the issuance of a debt security, are exempt from
regulation under Rule 52(b).
The Company has entered into a Receivables Purchase and Sale Agreement
(as amended, the "Existing Agreement") under which the Company may sell (from
time to time in its discretion and subject to the satisfaction of certain
conditions precedent) fractional, undivided ownership interests expressed as a
percentage ("Receivable Interests") in (i) billed and unbilled indebtedness of
customers ("Receivables") and (ii) certain related assets, including any
security or guaranty for any Receivables, all collections thereon, and related
records and software (the "Related Assets"). The purchaser(s) of the
Receivable Interests (collectively, the "Purchaser") is either a special
purpose Delaware corporation which acquires receivables and other assets and
issues commercial paper to finance these acquisitions or certain banks and
their respective successors or assigns. The Agent acts as agent for the
Purchaser for transactions under the Existing Agreement.
The Company contemplated that any sales under the Existing Agreement
would be accounted for as sales. In order for such sales made after January 1,
1997 to be so treated, they must comply with the requirements of the Statement
of Financial Accounting Standards No. 125 ("FAS 125") issued in June 1996. The
formation of CRC is intended to satisfy one of the requirements of FAS 125: the
requirement that the transferred assets be isolated from the Company and its
creditors, even in bankruptcy or receivership of the Company.
The restructured accounts receivable sales program will consist of two
agreements which will replace the Existing Agreement. Under the first
agreement (the "Company Agreement"), the Company will sell Receivables and
Related Assets to CRC. Under the second agreement (the "CRC Agreement"), CRC
will sell Receivable Interests to the Purchaser from time to time. The
restructured purchase and sale arrangements are intended to accomplish the
ultimate sales to the Purchaser in a manner substantially similar to those
under the Existing Agreement.
The Agent will have the right to appoint a collection agent on behalf
of it and CRC, to administer and collect Receivables and to notify the obligors
of the sale of their Receivables, at the Agent's option. CL&P will be
appointed as the initial collection agent. Thus, CL&P's customers are not
expected to experience any change in current servicing and collection
procedures.
Certain obligations under the Company Agreement create limited recourse
against the Company. In order to secure these obligations, the Company will
grant to CRC a lien on, and security interest in, any rights which the Company
may have in respect of Receivables and Related Assets. The CRC Agreement
creates comparable recourse obligations against CRC, and CRC will grant a
security interest to the Purchaser in all rights in the Receivables retained by
CRC, the Related Assets and certain other rights and remedies (including its
rights and remedies under the Company Agreement) to secure such recourse
obligations.
The Company and CRC will be obligated to reimburse the Purchaser and
the Agent for various costs and expenses associated with the Company Agreement
and the CRC Agreement. They will also be required to pay to the Agent certain
fees for services in connection with such agreements.
The arrangements under the Company Agreement and the CRC Agreement are
scheduled to terminate on September 4, 2001. CRC may, upon at least five
business days' notice to the Agent, terminate in whole or reduce in part the
unused portion of its purchase limit in accordance with the terms and
conditions of the CRC Agreement. The CRC Agreement allows the Purchaser to
assign all of its rights and obligations under the CRC Agreement (including its
Receivable Interests and the obligation to fund Receivable Interests) to other
persons, including the providers of its bank facilities.
As described in the Application/Declaration, CL&P intends that the
above-described transactions will permit it to accelerate its receipt of cash
collections from accounts receivable and thereby meet its short term cash
needs.
The Application/Declaration and any amendments thereto are available
for public inspection through the Commission's Office of Public Reference. Any
interested persons wishing to comment or request a hearing on the Application
should submit their views in writing by ________, 1997, to the Secretary,
Securities and Exchange Commission, Washington, D.C. 20549, and serve a copy on
the Company at the address specified above. Proof of service (by affidavit or,
in the case of an attorney at law, by certificate) should be filed with the
request. Any request for 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/Declaration, as filed or as
it may be further amended, may be granted.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
__________________________
Secretary
