File No. 70-8993
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________________
AMENDMENT NO. 2 TO
FORM U-1 DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
Cinergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
(Name of company filing this statement
and address of principal executive office)
Cinergy Corp.
(Name of top registered holding company parent)
William L. Sheafer
Treasurer
Cinergy Corp.
(address above)
(Name and address of agent of service)
Applicant requests that the Commission send copies of all notices, orders
and communications in connection herewith to:
Jerome A. Vennemann James R. Lance
Associate General Counsel Manager - Corporate Finance &
Cinergy Corp. Financial Risk Management
(address above) Cinergy Corp. (address above)
William T. Baker, Jr.
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
The declaration as previously amended in this proceeding is further
amended as follows:
1. The text of Item 1.A ("Summary of Requested Authorization") is
restated completely to read as follows:
"Cinergy Corp. ("Cinergy"), a registered holding company under the
Public Utility Holding Company Act of 1935, as amended (the "Act"),
requests authorization to issue and sell from time to time through December
31, 2002 unsecured debt securities (the "Debentures") in an aggregate
principal amount not to exceed $400 million at any time outstanding.
Cinergy proposes to apply the net proceeds from the issue and sale of the
Debentures to repay short-term indebtedness - namely, short-term
indebtedness incurred to finance Cinergy's investment in Midlands
Electricity plc ("Midlands"), a U.K. regional electricity company and
"foreign utility company" within the meaning of section 33 of the Act in
which Cinergy acquired a 50% equity interest in 1996 - and to refinance
Debentures outstanding from time to time. Cinergy proposes to use various
interest rate risk management instruments in connection with the issuance
and sale of the Debentures."
2. The first sentence of Item 1.B ("Terms of Debentures") is
replaced by the following:
"Cinergy proposes to issue and sell from time to time through December
31, 2002 up to $400 million principal amount of Debentures in one or more
series."
3. Item 1.C ("Applicability of Debt Limitation") is deleted in its
entirety.
4. Item 1.D ("Use of Proceeds/Source of Funds") is redesignated Item
1.C and the text thereunder restated completely to read as follows:
"Cinergy proposes to use the proceeds from the issue and sale of the
Debentures, after deduction of any applicable fees, commissions and
expenses, to repay outstanding short-term indebtedness incurred to finance
Cinergy's investment in Midlands and to refinance Debentures outstanding
from time to time.
Cinergy anticipates that all or a significant portion of the interest
due on the Debentures would be paid from internally generated funds,
including dividends from subsidiaries. Cinergy expects that the principal
of and premium, if any, on the Debentures would be paid from the proceeds
of additional series of Debentures or shares of Cinergy common stock or, on
a bridge basis, from the proceeds of short-term debt issued by Cinergy./1/"
5. Item 1.E ("Interest Rate Risk Management") is redesignated Item
1.D but otherwise remains unchanged.
6. Item 1.F ("Benefits of Proposed Transactions") is redesignated
Item 1.E and the second paragraph thereof is restated completely to read as
follows:
"Cinergy intends to issue and sell the proposed Debentures for the
purpose of refinancing a like principal amount of short-term debt issued by
Cinergy to finance its Midlands investment. Thus, the proposed
transactions would result in Cinergy merely substituting short-term
unsecured bank debt with longer term unsecured debt; Cinergy's total
principal amount of outstanding debt would not increase by a single dollar
as a result of the proposed transactions. Because Cinergy considers the
Midlands investment to be a long-term investment, Cinergy considers it
appropriate to fund at least a portion of this long-term asset with long-term
securities, thereby locking in long-term capital at known fixed
rates./2/"
7. The last paragraph of Item 1.E ("Benefits of Proposed
Transactions") is deleted in its entirety.
8. Item 1.G ("Rule 53 Analysis") is restated completely to read as
follows:
"F. Rule 54 Analysis
Under Rule 54, in determining whether to approve the issue or sale of
a security by a registered holding company for purposes other than the
acquisition of an exempt wholesale generator ("EWG")or a foreign utility
company ("FUCO") other transactions by such registered holding company or
its subsidiaries other than with respect to EWGs and FUCOs, the Commission
shall not consider the effect of the capitalization or earnings of any
subsidiary which is an EWG or a FUCO if the conditions in Rule 53(a), (b)
and (c) are satisfied.
As set forth below, all applicable conditions of Rule 53(a) are and,
upon consummation of the proposed transactions, will be satisfied, and none
of the conditions specified in Rule 53(b) exists or, as a result of the
proposed transactions, will exist.
Rule 53(a)(1): At December 31, 1996, Cinergy had invested, directly
or indirectly, an aggregate of approximately $487 million in EWGs and
FUCOs. The average of the consolidated retained earnings of Cinergy
reported on Form 10-K or Form 10-Q, as applicable, for the four consecutive
quarters ended December 31, 1996 was $990 million. Accordingly, based on
Cinergy's "consolidated retained earnings" at December 31, 1996, and taking
into account EWG /FUCO investments as of that date, the current Rule 53
aggregate investment limitation is approximately $8 million (i.e., 50% of
"consolidated retained earnings" - $495 million - minus "aggregate
investment" at December 31, 1996 - $487 million).
Rule 53(a)(2): Cinergy maintains books and records enabling it to
identify investments in and earnings from each EWG and FUCO in which it
directly or indirectly holds an interest. At present, Cinergy does not
hold any interest in a domestic EWG; Rule 53(a)(2)(i) is therefore
inapplicable.
In accordance with Rule 53(a)(2)(ii), the books and records and
financial statements of each foreign EWG and FUCO which is a "majority-owned
subsidiary company" of Cinergy are kept in conformity with and
prepared according to U.S. generally accepted accounting principles
("GAAP"). Cinergy will provide the Commission access to such books and
records and financial statements, or copies thereof, in English, as the
Commission may request.
In accordance with Rule 53(a)(2)(iii), for each foreign EWG and FUCO
in which Cinergy directly or indirectly owns 50% or less of the voting
securities, Cinergy will proceed in good faith, to the extent reasonable
under the circumstances, to cause each such entity's books and records to
be kept in conformity with, and the financial statements of each such
entity to be prepared according to, GAAP. If such books and records are
maintained, or such financial statements are prepared, according to a
comprehensive body of accounting principles other than GAAP, Cinergy will,
upon request of the Commission, describe and quantify each material
variation from GAAP in the accounting principles, practices and methods
used to maintain such books and records and each material variation from
GAAP in the balance sheet line items and net income reported in such
financial statements, as the case may be. In addition, Cinergy will
proceed in good faith, to the extent reasonable under the circumstances, to
cause access by the Commission to such books and records and financial
statements, or copies thereof, in English, as the Commission may request,
and in any event will make available to the Commission any such books and
records that are available to Cinergy.
Rule 53(a)(3): No more than 2% of the employees of Cinergy's
operating utility subsidiaries will, at any one time, directly or
indirectly, render services to EWGs and FUCOs.
Rule 53(a)(4): Cinergy will simultaneously submit a copy of this
statement and of any Rule 24 certificate hereunder, as well as a copy of
Cinergy's Form U5S and Exhibits H and I thereto, to each public utility
commission having jurisdiction over the retail rates of any Cinergy utility
subsidiary.
Rule 53(b): The provisions of Rule 53(a) are not made inapplicable to
the authorization herein requested by reason of the provisions of Rule
53(b).
Rule 53(b)(1): Neither Cinergy nor any subsidiary thereof is the
subject of any pending bankruptcy or similar proceeding.
Rule 53(b)(2): Cinergy's average consolidated retained earnings for
the four quarters ended December 31, 1996 are $990 million, versus $926
million for the four quarters ended December 31, 1995, a difference of
approximately $64 million (representing an increase of 6.9%).
Rule 53(b)(3): For the twelve months ended December 31, 1996, Cinergy
did not report operating losses attributable to its direct and indirect
investments in EWGs and FUCOs aggregating in excess of 5% of consolidated
retained earnings."
9. Item 3 ("Applicable Statutory Provisions") is restated completely
to read as follows:
"The proposed issuance and sale of the Debentures and application of
the proceeds thereof is subject to sections 6(a) and 7 of the Act and rule
54."
10. The following exhibit is filed herewith:
G-2 Further revised form of notice of proposed transactions for
publication in Federal Register
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the undersigned company has
duly caused this statement to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: May 2, 1997
CINERGY CORP.
By: /s/ William L. Sheafer
Treasurer
ENDNOTES
/1/ Cinergy's outstanding short-term debt was incurred pursuant to the
Commission's March 12, 1996 order in File No. 70-8521 (Release No. 35-26488),
which authorized Cinergy to issue short-term debt, commercial paper
and incur reimbursement obligations under letters of credit from time to
time through December 31, 1999, subject to a $1 billion ceiling ("Cinergy
Corp. Debt Cap"). Pursuant to prior Commission orders (Release Nos. 35-26477,
February 23, 1996; 35-26159, November 18, 1994), Cinergy may
currently issue and sell less than one million shares of common stock
(apart from common stock issued in connection with Cinergy stock-based
benefit plans), representing the balance of authorized shares originally
totaling eight million. Cinergy intends to file an application with the
Commission in the near future requesting authority to increase the Cinergy
Corp. Debt Cap and to issue additional shares of common stock.
/2/ As noted above, Cinergy has limited common stock issuance authority
under prior Commission orders and expects to file an application soon
seeking authority to issue additional shares of common stock (among other
securities), the proceeds of which Cinergy would apply to (among other
uses) refinancing indebtedness. Although Cinergy may thus seek to issue
common stock to finance or refinance in part its interest in Midlands or in
other FUCOs or EWGs, common stock is a more expensive long-term financing
alternative than debentures and accordingly Cinergy would not seek to rely
solely on common stock as a long-term vehicle for financing such
investments.
Exhibit G-2
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- _____________)
Cinergy Corp., a registered holding company ("Cinergy"), with
headquarters at 139 East Fourth Street, Cincinnati Ohio 45202, has filed a
declaration under sections 6(a) and 7 of the Act and rule 54 thereunder.
Cinergy proposes to issue and sell from time to time through December
31, 2002 up to $400 million principal amount of unsecured debt securities
("Debentures") in one or more series. The Debentures (a) will not be
convertible into any other securities of Cinergy, (b) will have maturities
ranging from one to 40 years, (c) may be subject to optional and/or
mandatory redemption, in whole or in part, at par or at various premiums
above the principal amount thereof, and (d) may be entitled to mandatory or
optional sinking fund provisions. In addition, Cinergy may have the right
from time to time to defer the payment of interest on the Debentures of one
or more series (which may be fixed or floating or "multi-modal" debentures,
i.e., debentures where the interest is periodically reset, alternating
between fixed and floating interest rates for each reset period), with all
accrued and unpaid interest (together with interest thereon) becoming due
and payable at the end of each such extension period. The Debentures will
be issued under an indenture (the "Indenture") to be entered into between
Cinergy and The Fifth Third Bank, an Ohio banking corporation, as trustee
(the "Trustee," including any successor trustee appointed pursuant to the
Indenture), with a supplemental indenture to be executed in respect of each
separate offering of one or more series of Debentures (each, a
"Supplemental Indenture").
Cinergy contemplates that the initial series of Debentures would be
issued and sold directly to one or more purchasers in privately negotiated
transactions or to one or more investment banking or underwriting firms or
other entities who would resell the Debentures without registration under
the Securities Act in reliance upon one or more applicable exemptions from
registration thereunder. From time to time Cinergy may also issue and sell
the Debentures of one or more series to the public either (i) through
underwriters selected by negotiation or competitive bidding or (ii) through
selling agents acting either as agent or as principal for resale to the
public either directly or through dealers.
The maturity dates, interest rates, redemption and sinking fund
provisions, if any, with respect to the Debentures of a particular series,
as well as any associated placement, underwriting or selling agent fees,
commissions and discounts, if any, will be established by negotiation or
competitive bidding and reflected in the applicable Supplemental Indenture
and Purchase Agreement or underwriting agreement setting forth such terms;
provided, however, that (1) Cinergy will not issue and sell any Debentures
(a) at a price higher than 102% or lower than 98% of the applicable
principal amount thereof or (b) at interest rates in excess of those
generally obtainable at the time of pricing or repricing of such Debentures
for securities having the same or reasonably similar maturities and having
reasonably similar terms, conditions and features issued by utility
companies or utility holding companies of the same or reasonably comparable
credit quality; and (2) any placement, underwriting and selling agent fees,
commissions and discounts to be paid by Cinergy in connection with the
issue and sale of any series of Debentures will not exceed 3.5% of the
aggregate principal amount thereof.
Cinergy proposes to use the net proceeds from the issue and sale of
the Debentures to repay outstanding short-term indebtedness incurred to
finance Cinergy's investment in Midlands Electricity plc, a foreign utility
company in which Cinergy acquired an indirect 50% ownership interest in
1996 through in a joint venture transaction with GPU, Inc., and to
refinance Debentures outstanding from time to time.
Cinergy states that all or a significant portion of the interest due
on the Debentures would be paid from internally generated funds, including
dividends from subsidiaries. Cinergy expects that the principal of and
premium, if any, on the Debentures would be paid from the proceeds of
additional series of Debentures or shares of Cinergy common stock or, on a
bridge basis, from the proceeds of short-term debt issued by Cinergy.
In connection with the issuance and sale of the Debentures, Cinergy
proposes to mitigate interest rate risk through the use of interest rate
management instruments commonly used in today's capital markets, consisting
of interest rate swaps, caps, collars, floors, options, forwards, futures
and similar products designed to manage and minimize interest costs.
Cinergy expects to enter into these agreements with counterparties that are
highly rated financial institutions. The transactions will be for fixed
periods and stated notional amounts.
Fees, commissions and annual margins in connection with any interest
rate management agreements will not exceed 100 basis points in respect of
the principal or notional amount of the related Debentures or interest rate
management agreement. In addition, with respect to options (such as caps
and collars), Cinergy may pay an option fee which would not exceed 10% of
the principal amount of the Debentures covered by the option.
In addition to those previously described, Cinergy estimates total
fees, expenses and commissions of approximately $356,000 in connection with
the proposed transactions.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
