[Federal Register Volume 65, Number 3 (Wednesday, January 5, 2000)]
[Notices]
[Pages 526-532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-221]
[[Page 526]]
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DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
[Application No. D-10763, et al.]
Proposed Exemptions; The FINA, Inc. Capital Accumulation Plan
(the Plan)
AGENCY: Pension and Welfare Benefits Administration, Labor.
ACTION: Notice of proposed exemptions.
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SUMMARY: This document contains notices of pendency before the
Department of Labor (the Department) of proposed exemptions from
certain of the prohibited transaction restrictions of the Employee
Retirement Income Security Act of 1974 (the Act) and/or the Internal
Revenue Code of 1986 (the Code).
Written Comments and Hearing Requests
Unless otherwise stated in the Notice of Proposed Exemption, all
interested persons are invited to submit written comments, and with
respect to exemptions involving the fiduciary prohibitions of section
406(b) of the Act, requests for hearing within 45 days from the date of
publication of this Federal Register Notice. Comments and requests for
a hearing should state: (1) The name, address, and telephone number of
the person making the comment or request, and (2) the nature of the
person's interest in the exemption and the manner in which the person
would be adversely affected by the exemption. A request for a hearing
must also state the issues to be addressed and include a general
description of the evidence to be presented at the hearing.
ADDRESSES: All written comments and request for a hearing (at least
three copies) should be sent to the Pension and Welfare Benefits
Administration, Office of Exemption Determinations, Room N-5649, U.S.
Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C.
20210. Attention: Application No. stated in each Notice of Proposed
Exemption. The applications for exemption and the comments received
will be available for public inspection in the Public Documents Room of
Pension and Welfare Benefits Administration, U.S. Department of Labor,
Room N-5507, 200 Constitution Avenue, N.W., Washington, D.C. 20210.
Notice to Interested Persons
Notice of the proposed exemptions will be provided to all
interested persons in the manner agreed upon by the applicant and the
Department within 15 days of the date of publication in the Federal
Register. Such notice shall include a copy of the notice of proposed
exemption as published in the Federal Register and shall inform
interested persons of their right to comment and to request a hearing
(where appropriate).
SUPPLEMENTARY INFORMATION: The proposed exemptions were requested in
applications filed pursuant to section 408(a) of the Act and/or section
4975(c)(2) of the Code, and in accordance with procedures set forth in
29 CFR Part 2570, Subpart B (55 FR 32836, 32847, August 10, 1990).
Effective December 31, 1978, section 102 of Reorganization Plan No. 4
of 1978 (43 FR 47713, October 17, 1978) transferred the authority of
the Secretary of the Treasury to issue exemptions of the type requested
to the Secretary of Labor. Therefore, these notices of proposed
exemption are issued solely by the Department.
The applications contain representations with regard to the
proposed exemptions which are summarized below. Interested persons are
referred to the applications on file with the Department for a complete
statement of the facts and representations.
The FINA, Inc. Capital Accumulation Plan (the Plan) Located in
Dallas, Texas
[Application No. D-10763]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the procedures set forth in 29 CFR Part
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption
is granted, the restrictions of sections 406(a), 406(b)(2), and 407(a)
of the Act and the sanctions resulting from the application of section
4975 of the Code, by reason of section 4975(c)(1)(A) through (D) of the
Code, shall not apply, as of June 4, 1999, to the acquisition, holding,
and exercise by the Plan of certain warrants that were issued by Total,
S.A. (Total),1 pursuant to a tender offer (the Exchange
Offer) made on May 6, 1999 to all shareholders of PetroFina S.A.
(PetroFina), including the Plan, provided that the following conditions
were satisfied:
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\1\ The applicant states that the warrants issued by Total do
not constitute ``qualifying employer securities,'' as defined in
section 407(d)(5) of the Act.
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(a) The Plan's acquisition and holding of the warrants issued by
Total (the Total Warrants) in connection with the Exchange Offer
occurred as a result of an independent act of Total as a corporate
entity;
(b) All shareholders of PetroFina, including the Plan, were treated
in a like manner with respect to all aspects of the Exchange Offer; and
(c) An independent fiduciary made the determination whether, and to
what extent, the Plan should participate in the Exchange Offer.
EFFECTIVE DATE: This exemption, if granted, will be effective as of
June 4, 1999.
Summary of Facts and Representations
1. The Plan is a defined contribution plan sponsored by Fina, Inc.
(Fina). Fina is a Delaware corporation with its principal headquarters
in Dallas, Texas. Fina is a wholly owned, indirect subsidiary of
PetroFina, a societe anonyme/naamloze vennootschap organized under the
laws of the Kingdom of Belgium. Fina and its subsidiaries were
organized in 1956 as American PetroFina, Incorporated and are part of
an international group of companies that are affiliated with PetroFina.
Fina, through its subsidiaries, is engaged in crude oil and natural gas
exploration and production; petroleum products refining, supply and
transportation and marketing; chemical manufacturing and marketing; and
natural gas marketing. As of March 31, 1999, the Plan had total assets
of approximately $246,215,000. As of March 31, 1999, the Plan had 2,534
participants and beneficiaries.
2. In connection with an earlier merger in which Fina became a
subsidiary of PetroFina in August, 1998, PetroFina issued certain
warrants (the PetroFina Warrants) to all shareholders of Fina,
including the Plan.2 One PetroFina Warrant entitled the
holder to purchase nine-tenths (0.9) of one PetroFina American
Depositary Share (a PetroFina ADS), each PetroFina ADS representing
one-tenth (0.1) of one ordinary voting share of PetroFina (a
[[Page 527]]
PetroFina Share). The PetroFina Warrants are exercisable any time prior
to August 5, 2003. PetroFina ADSs and PetroFina Warrants are listed for
trading on the New York Stock Exchange, Inc. (the NYSE).
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\2\ The applicant states that the PetroFina Warrants were
``employer securities,'' as defined in section 407(d)(1) of the Act
but were not ``qualifying employer securities,'' as defined in
section 407(d)(5) of the Act. Section 407(a)(1)(A) of the Act
prohibits a plan from acquiring or holding any employer security
which is not a qualifying employer security. However, the Plan
obtained authorization from the Department to acquire, hold, and
exercise the PetroFina Warrants, pursuant to an authorization made
under Prohibited Transaction Class Exemption 96-62 (61 FR 39988,
July 31, 1996). Interested persons may review the information
submitted to the Department by Fina in Submission E-00080, which is
available for public inspection in the Public Documents Room of the
Pension and Welfare Benefits Administration, U.S. Department of
Labor, Room N-5638, 200 Constitution Avenue, N.W., Washington, D.C.
20210.
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3. The Plan allows participants to contribute up to 10% of their
pre-tax income to their respective individual accounts in the Plan and
6% of their after-tax earnings to another individual account, or a
combination of pre-tax and after-tax contributions to each such
account, not exceeding 10%. Each year, Fina contributes to a third
account in the Plan, known as the Matching Contributions Account, an
amount equal to 100% of the employee's contributions to the Plan, up to
a total of 6% of the employee's gross annual income, for all employees
who have completed at least one year of service.
Plan assets may be invested in various mutual funds, i.e., a money
market fund, U.S. debt index fund, balanced fund, equity index fund,
equity growth fund, and a global equity fund. In addition, the Plan has
two other investment funds (which are not mutual funds) that hold
PetroFina ADSs and PetroFina Warrants, respectively. Prior to the date
of the Exchange Offer, all assets in the Matching Contributions Account
could be invested only in PetroFina ADSs or PetroFina Warrants. As of
March 31, 1999, the Plan held 2,954,328 PetroFina ADSs with a fair
market value of approximately $162,457,394, or approximately 66% of the
Plan's total assets. As of the same date, the Plan held 720,461
PetroFina Warrants with a fair market value of approximately
$10,034,226, or approximately 4% of the Plan's total assets.
4. Effective January 14, 1999, Total, a major international
integrated oil and gas company based in France, acquired approximately
41% of the outstanding PetroFina Shares. Consequently, as required by
Belgian law, Total made an exchange offer in Belgium for all PetroFina
Shares not held by persons in the United States. On May 6, 1999,
concurrently with that offer, Total initiated the Exchange Offer in the
United States to exchange: (1) Total American Depositary Shares (Total
ADSs) for PetroFina ADSs; (2) Total Warrants for PetroFina Warrants;
and (3) shares of common stock of Total (the Total Shares) for
PetroFina Shares. Pursuant to the Exchange offer: (1) holders of
PetroFina Shares could exchange two such shares for nine Total Shares;
(2) holders of PetroFina ADSs could exchange 10 such ADSs for nine
Total ADSs; and (3) holders of PetroFina Warrants could exchange 100
such warrants for 81 Total Warrants. It is represented that the
Exchange Offer was an independent act of Total as a corporate entity
and that all shareholders of PetroFina, including the Plan, were
treated in a like manner with respect to all aspects of the Exchange
Offer.
The Total Warrants will expire concurrently with the PetroFina
Warrants and otherwise have terms and conditions similar to the
PetroFina Warrants, after giving effect to the exchange ratio for the
underlying shares. Each Total Warrant entitles the holder to acquire
one Total ADS at a price of $46.94. The terms of the Exchange Offer
were set forth in Total's Exchange Offer Prospectus, dated May 6, 1999,
that was part of the Total registration statement on file with the
Securities and Exchange Commission. Total ADSs and Total Warrants are
listed for trading on the NYSE.
5. The PetroFina Board of Directors instructed Paribas, a European-
based investment advisor, to evaluate, from a financial perspective,
the fairness of the consideration to be received by the shareholders of
PetroFina in the Exchange Offer. On April 7, 1999, Paribas delivered
its opinion to the PetroFina Board of Directors to the effect that, as
of such date, the terms and conditions of the Exchange Offer proposed
by Total to PetroFina shareholders were fair from a financial
perspective. A similar fairness opinion was provided by the Morgan
Guaranty Trust Company of New York (Morgan) on the same date. The
PetroFina Board of Directors concluded that the terms and conditions of
the Exchange Offer proposed by Total were fair and recommended that
PetroFina shareholders accept the offer and tender their PetroFina
Shares, ADSs, and Warrants, pursuant to the Exchange Offer.
6. The Plan was amended to grant to the the Plan Committee, the
named fiduciary of the Plan, broad discretionary authority to establish
procedures to facilitate and/or implement the decision to participate
in the Exchange Offer. The Plan was also amended to provide that U.S.
Trust Company, N.A. (U.S. Trust) would be appointed as an independent
fiduciary for the Plan to determine whether, and to what extent, the
Plan should participate in the Exchange Offer. It is represented that,
with assets under management totalling approximately $56 billion, U.S.
Trust is an experienced and qualified fiduciary with extensive trust
and management capabilities, including discretionary asset management,
asset allocation and diversification, investment advice, securities
trading, and independent fiduciary assignments under the Act.
7. U.S. Trust determined that the Plan should participate fully in
the Exchange Offer and instructed Boston Safe Deposit and Trust Company
(Boston Safe), the Plan trustee, accordingly. U.S. Trust represents
that its decision was based upon the following considerations. First,
the Exchange Offer clearly represented a significant premium to
PetroFina's trading price at the same time of the offer, as well as
historically, and the markets had maintained that premium to date based
upon the proposed exchange ratio. Second, the Exchange Offer translated
into valuation multiples that were above PetroFina's historical
valuation levels and above the median levels for its peer group. Third,
on a pro forma basis, Total Shares were trading in a reasonable range
of valuation multiples relative to comparable companies, and,
therefore, represented a fairly valued investment into which to
exchange. Finally, U.S. Trust determined that the fairness opinion
provided to PetroFina by its financial advisers, Paribas and Morgan,
indicated that the Exchange Offer was fair and reasonable, and a review
of the accompanying analysis by such advisers supported that
conclusion.
8. The applicant represents that the following is a summary of the
Exchange Offer. On June 4, 1999, the expiration date of the Exchange
Offer, the Plan, pursuant to the determination by U.S. Trust, tendered
2,977,144 PetroFina ADSs, each with a fair market value of $54.75, the
closing price on the NYSE as of that date. The Plan received nine Total
ADSs in exchange for each ten PetroFina ADSs tendered. Also on June 4,
1999, the Plan tendered 614,212 PetroFina Warrants, each with a fair
market value of $13.88, the closing price on the NYSE as of that date.
The Plan received 81 Total Warrants for each 100 PetroFina Warrants
tendered. Each participant in the Plan received his or her allocable
share of Total ADSs and Total Warrants in exchange for the PetroFina
ADSs and PetroFina Warrants held by his or her individual account, as
of June 4, 1999. Following the exchange, participants exercise control
over the Total Warrants and Total ADSs acquired in the exchange,
through their individual accounts in the Plan, in the same manner as
they did over the comparable PetroFina securities.3 The
[[Page 528]]
applicant represents that the Exchange Offer was successful, and Total
subsequently changed its name to Total Fina, S.A.
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\3\ In connection with the Plan's earlier acquisition of the
PetroFina Warrants, pursuant to an authorization made by the
Department under PTE 96-62 (see Footnote 2), Plan participants were
provided by Fina with instructional material explaining the value of
the warrants and how that value could be realized, i.e., either by
selling or exercising the warrants prior to their expiration date.
As noted in the second paragraph of Item 4, above, the Total
Warrants will expire concurrently with the PetroFina Warrants and
otherwise have terms and conditions similar to the PetroFina
Warrants. The applicant represents that it will continue to provide
Plan participants with pertinent information regarding the Total
Warrants, including periodic reminders of the deadline to sell or
exercise them.
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9. In summary, the applicant represents that the subject
transactions satisfied the criteria for an exemption under section
408(a) of the Act because, among other things: (a) The Plan's
acquisition and holding of the Total Warrants in connection with the
Exchange Offer occurred as a result of an independent act of Total as a
corporate entity; (b) all shareholders of PetroFina, including the
Plan, were treated in a like manner with respect to all aspects of the
Exchange Offer; (c) U.S. Trust, acting as an independent fiduciary for
the Plan, made the determination whether, and to what extent, the Plan
should participate in the Exchange Offer; and (d) Boston Safe, as the
Plan trustee, ensured that each Plan participant received his or her
allocable share of Total ADSs and Total Warrants in exchange for the
PetroFina ADSs and PetroFina Warrants held by his or her individual
account, as of June 4, 1999.
FOR FURTHER INFORMATION CONTACT: Ms. Karin Weng of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
Bankers Trust Company (BTC), Located in New York, New York
[Application No. D-10837]
Proposed Exemption
The Department is considering granting an exemption under the
authority of section 408(a) of the Act and section 4975(c)(2) of the
Code and in accordance with the procedures set forth in 29 CFR Part
2570, Subpart B (55 FR 32836, 32847, August 10, 1990). If the exemption
is granted, the restrictions of section 406(a) of the Act and the
sanctions resulting from the application of section 4975 of the Code,
by reason of section 4975(c)(1)(A) through (D) of the Code, shall not
apply to: (1) The proposed granting to BTC (a) by Aslan Realty
Partners, L.P. (the LP), and by Aslan GP, LLC (the General Partner) of
security interests in the capital commitments of certain employee
benefit plans (the Plans) investing in the LP, (b) by the LP of a
borrower account funded by the Plans' capital contributions (Borrower
Collateral Account), and (c) by the LP and the General Partner of the
right to make capital calls (Capital Calls), and provide notice thereof
(Capital Call Notices) under the agreement under which the LP is
organized and operated (the Agreement), where BTC is the representative
of certain lenders (the Lenders) that will fund a so-called ``credit
facility'' providing loans to the LP and where the Lenders are parties
in interest with respect to the Plans; and (2) the execution of an
agreement and estoppel (the Estoppel) under which the Plans agree to
honor Capital Calls made to the Plans by BTC, provided that (i) the
proposed grants and agreements are on terms no less favorable to the
Plans than those which the Plans could obtain in arm's-length
transactions with unrelated parties; (ii) the decisions on behalf of
each Plan to invest in the LP, and to execute such grants and
agreements in favor of BTC, are made by a fiduciary which is not
included among, and is independent of and unaffiliated with, the
Lenders and BTC; (iii) with respect to Plans that have invested or may
invest in the LP in the future, such Plans have or will have assets of
not less than $100 million and not more than 5% of the assets of any
such Plan are or will be invested in the LP. For purposes of this
condition (iii), in the case of multiple plans maintained by a single
employer or single controlled group of employers, the assets of which
are invested on a commingled basis, (e.g., through a master trust),
this $100 million threshold will be applied to the aggregate assets of
all such plans; and (iv) the general partner of the LP must be
independent of BTC, the Lenders and the Plans.
Summary of Facts and Representations
1. The LP is an Illinois limited partnership, the sole general
partner of which is the General Partner, which is a Delaware limited
liability company. The General Partner is a separate affiliate of
Transwestern Investment Company, L.L.C. (TWIC), a Delaware limited
liability company. The General Partner is an entity unrelated to BTC,
the Lenders and the Plans. The LP will dissolve no later than
September, 2007, and will be self-liquidating. The LP was formed by the
General Partner (as sole General Partner), with the intent of seeking
capital commitments from a limited number of prospective investors who
would become limited partners (the Partners) of the LP. There are 19
current and prospective Partners having, in the aggregate, irrevocable,
unconditional capital commitments of at least $236,000,000.
2. The LP has been organized to establish an integrated, self-
administered and self-managed real estate operating company (see
paragraph 11, below). The LP will make investments in real estate
including, but not limited to: (i) The acquisition or development of
office, retail, industrial, multi-family, parking garage, corporate
real estate assets and other types of real estate assets, (ii) the
acquisition of an interest in real estate or the acquisition of
interests in public or private real estate investment trusts and
corporations, limited partnerships and limited liability companies
whose primary assets are commercial real estate, and (iii) the
acquisition of publicly-traded or privately-traded debt or equity
securities of issuers whose primary assets are real estate. The LP
believes that significant opportunities exist to achieve superior risk-
adjusted returns on its investments in excess of 20% per annum over a
three- to five-year period. Proceeds from the sale or refinancing of
properties generally will not be reinvested by the LP. Such proceeds
generally will be distributed to the Partners on a quarterly basis or
after a sale or financing, so that the LP will be self-liquidated.
3. It is contemplated that the LP will incur short-term
indebtedness for the acquisition of particular investments and for
working capital purposes (with the expectation that such acquisition
indebtedness will be repaid from the Partners' capital commitments and/
or from mortgage debt). This indebtedness will take the form of a
revolving credit agreement (described in paragraph 5, below) secured
by, among other things, a first, exclusive, and prior security interest
and lien in and to (1) the Partners' capital commitments, (2) the
Borrower Collateral Account, and (3) the Capital Calls, i.e., the
rights to call capital under the Agreement. The Borrower Collateral
Account is an account established by the General Partner with BTC to
hold the Partners' capital contributions.
4. The Agreement requires each Partner to execute a subscription
agreement that obligates the Partner to make contributions of capital
up to a specified maximum. The Agreement requires Partners to make
capital contributions to fulfill this obligation upon receipt of notice
from the General Partner. Under the Agreement, the General Partner may
make Capital Calls up to the total amount of a Partner's capital
commitment upon 15 business days' notice, subject to certain
[[Page 529]]
limitations. The Partners' capital commitments are structured as
unconditional, binding commitments to contribute capital when Capital
Calls are made by the General Partner. All such monies to be paid by
the Partners pursuant to Capital Calls are to be deposited to the
Borrower Collateral Account. In the event of a default by a Partner,
the LP may exercise any of a number of specific remedies.
The Partners constituting over 90% of the equity interests and
their investments in the LP are:
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Name of partner Capital commitment
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Bell South Master Pension Trust................... $72,956,877
Ameritech Pension Trust........................... 25,000,000
Burgundy, Inc..................................... 10,000,000
Allstate Insurance Company........................ 25,000,000
The Bell South Corporation Representable Employees 9,119,610
Health Care Trust--Retirees......................
The Bell South Corporation RFA VEBA Trust......... 9,119,610
Joshua Arnow and Elyse Arnow Bril................. 225,000
JWA Investment Company............................ 700,000
New York Life Insurance Company................... 20,000,000
Pew Memorial Trust................................ 9,990,000
J.H. Pew Freedom Trust............................ 2,100,000
J.N. Pew, Jr. Trust............................... 1,050,000
Mabel Pew Myrin Trust............................. 1,350,000
Northwestern Memorial Hospital.................... 3,000,000
Massachusetts Bay Transportation Authority 15,000,000
Retirement Fund Employees' Pension Plan Trust....
The Medical Trust................................. 600,000
Northwestern University........................... 15,000,000
Private Syndicate Pty Ltd. As Trustee of 10,000,000
Alternative Investment Private Syndicate.........
RHA Investment Company............................ 700,000
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5. The applicant states that the LP will incur indebtedness in
connection with many of its investments. In addition to mortgage
indebtedness, the LP will incur short-term indebtedness for the
acquisition of particular investments. This indebtedness will take the
form of a credit facility (the Credit Facility), described in
representation 6, below, secured by, among other things, a pledge and
assignment of each Partner's capital commitment. This type of facility
will allow the LP to consummate investments quickly without having to
finalize the debt/equity structure for an investment or having to
arrange for interim or permanent financing prior to making an
investment, and will have additional advantages to the Partners and the
LP. Under the Agreement, the General Partner may encumber Partners'
capital commitments, including the right to call for capital
contributions, to one or more financial institutions as security for
the Credit Facility. Each of the Partners has appointed the General
Partner as its attorney-in-fact to execute all documents and
instruments of transfer necessary to implement the provisions of the
Agreement. In connection with this Credit Facility, each of the
Partners is required to execute documents customarily required in
secured financings, including an agreement to honor Capital Calls
unconditionally.
6. BTC will become agent for a group of Lenders providing a $175
million revolving Credit Facility to the LP. BTC will also be a
participating Lender. Some of the Lenders may be parties in interest
with respect to some of the Plans that invest in the LP by virtue of
such Lenders' (or their affiliates') provision of fiduciary or other
services to such Plans with respect to assets other than the Plans'
interests in the LP. BTC is requesting an exemption to permit the Plans
to enter into security agreements with BTC, as the representative of
the Lenders, whereby such Plans' capital commitments to the LP will be
used as collateral for loans made under the Credit Facility to the LP,
when such loans are funded by Lenders who are parties in interest to
one or more of the Plans. However, BTC represents that neither it nor
any Lender will act in any fiduciary capacity for the decision made by
any of the Plans to invest in the LP (as discussed in Paragraph 13,
below).
The Credit Facility will be used to provide immediate funds for
real estate acquisitions made by the LP, as well as for the payment of
LP expenses. Repayments will be secured generally by the LP from the
Partners' capital contributions, the Borrower Collateral Account and
Capital Calls on the Partners' capital commitments. The Credit Facility
is intended to be available until February 3, 2002. The LP can use its
credit under the Credit Facility either by direct or indirect
borrowings, by Lender guaranties, or by requesting that letters of
credit be issued. All Lenders will participate on a pro rata basis with
respect to all cash loans, guaranties or letters of credit up to the
maximum of the Lenders' respective commitments. All such loans,
guaranties and letters of credit will be issued to the LP or an entity
in which the LP owns a direct or indirect interest (a Qualified
Borrower), and not to any individual Partner. All payments of principal
and interest made by the LP or a Qualified Borrower will be allocated
pro rata among all Lenders.
7. The Credit Facility will be a recourse obligation of the LP, the
repayment of which is secured primarily by the grant of a security
interest to BTC, as agent under the Credit Facility for the benefit of
the Lenders, from the LP, in both: (a) The Partners' capital
commitments and (b) the Borrower Collateral Account. In addition, the
LP and the General Partner will grant BTC, as agent under the Credit
Facility for the benefit of the Lenders, a security interest in the
Capital Calls and Capital Call Notices. The Borrower Collateral Account
will be assigned to BTC to secure repayment of the indebtedness
incurred under the Credit Facility. BTC has the right to apply any or
all funds in the Borrower Collateral Account toward payment of the
indebtedness in any manner it may elect. The capital commitments are
fully recourse to all the Partners and to the General Partner. In the
event of default under the Credit Facility, the agent (i.e., BTC) has
the right to make Capital Calls unilaterally on the Partners to pay
their unfunded capital commitments, and will apply cash received from
such Capital Calls to any outstanding debt.
8. Under the Credit Facility, each Partner that is a Plan will
execute an
[[Page 530]]
acknowledgment (the Estoppel) pursuant to which it acknowledges that
the LP and the General Partner have pledged and assigned to BTC, for
the benefit of each Lender which may be a party in interest (as defined
in Act section 3(14)) of such Partner, all of their rights under the
Agreement relating to capital commitments and Capital Call Notices. The
Estoppel will include an acknowledgment and covenant by the Plan that,
if an event of default exists, such Plan will unconditionally honor any
Capital Call made by BTC in accordance with the Agreement up to the
unfunded capital commitment of such Plan to the LP.
9. The applicant represents that at the present time the following
Plans are partners in the LP:
(a) The Ameritech Pension Trust (the Ameritech Trust) holds the
assets of three defined benefit plans (the Ameritech Plans) which own
interests in the LP. The Ameritech Trust has made a capital commitment
of $25 million to the LP. The applicant states that some of the Lenders
may be parties in interest with respect to some of the Ameritech Plans
in the Ameritech Trust by virtue of such Lenders' (or their
affiliates') provisions of fiduciary services to such Ameritech Plans
with respect to Ameritech Trust assets other than their limited
partnership interests in the LP. The total number of participants in
the three Ameritech Plans is approximately 118,000, and the approximate
fair market value of the total assets of the Ameritech Plans held in
the Ameritech Trust as of December 31, 1997 is $13.7 billion.
The applicant represents that the fiduciary of the Ameritech Plans
generally responsible for investment decisions in the real estate area
for internally managed assets is the Ameritech Corporation Asset
Management Committee, the Chief Investment Officer of Ameritech
Corporation, and/or the Ameritech Corporation Investment Management
Department's Real Estate Committee (comprised of the staff real estate
professionals and another Investment Management Department Director),
depending on the size and type of investment. The fiduciary responsible
for reviewing and authorizing the Ameritech Pension Trust's investment
in the LP under this proposed exemption was collectively the Chief
Investment Officer of Ameritech Corporation, along with the members of
the Ameritech Corporation Investment Management Department's Real
Estate Committee.
(b) The BellSouth Master Pension Trust (the BellSouth Pension
Trust), holds the assets of two defined benefit plans (the BellSouth
Pension Plans), which own interests in the LP. The BellSouth Pension
Trust has made a capital commitment of approximately $73 million to the
LP. The applicant states that some of the Lenders may be parties in
interest with respect to some of the BellSouth Pension Plans in the
BellSouth Pension Trust by virtue of such Lenders' (or their
affiliates') provisions of fiduciary services to such BellSouth Pension
Trust assets other than their membership interests in the LP. The total
number of participants in the two BellSouth Pension Plans is
approximately 137,703, and the approximate fair market value of the
total assets of the BellSouth Pension Plans held in the BellSouth
Pension Trust as of December 31, 1997 is $17.3 billion.
The applicant represents that the fiduciary generally responsible
for investment decisions in real estate matters on behalf of both
BellSouth Pension Plans is the BellSouth Corporation Treasurer, who was
the fiduciary responsible for reviewing and authorizing the investment
in the LP.
(c) The BellSouth Corporation Representable Employees Health Care
Trust--Retirees (BellSouth Health Care Trust) holds the assets of two
welfare benefit plans (the BellSouth Health Care Plans) which own
interests in the LP. The BellSouth Health Care Trust has made a capital
commitment of approximately $9 million to the LP. The applicant states
that some of the Lenders may be parties in interest with respect to
some of the BellSouth Health Care Plans in the BellSouth Health Care
Trust by virtue of such Lenders' (or their affiliates') provisions of
fiduciary services to such BellSouth Health Care Trust assets other
than their membership interests in the LP. The total number of
participants in the two BellSouth Health Care Plans is approximately
30,000, and the approximate fair market value of the total assets of
the BellSouth Health Care Plans held in the BellSouth Health Care Trust
as of December 31, 1997 is $1 billion. The applicant represents that
the fiduciary generally responsible for investment decisions in real
estate matters on behalf of both BellSouth Health Care Plans is the
BellSouth Corporation Treasurer, who was responsible for reviewing and
authorizing the investment in the LP.
(d) The BellSouth Corporation RFA VEBA Trust (BellSouth VEBA Trust)
holds the assets of one welfare benefit plan, the BellSouth Group Life
Plan which owns interests in the LP. The BellSouth VEBA Trust has made
a capital commitment of approximately $9 million to the LP. The
applicant states that some of the Lenders may be parties in interest
with respect to the BellSouth Group Life Plan in the BellSouth VEBA
Trust by virtue of such Lenders' (or their affiliates') provisions of
fiduciary services to such BellSouth VEBA Trust assets other than its
membership interests in the LP. The total number of participants in the
BellSouth Group Life Plan is approximately 133,560, and the approximate
fair market value of the total assets of the BellSouth Group Life Plan
held in the BellSouth VEBA Trust as of December 31, 1997 is $937
million. The applicant represents that the fiduciary generally
responsible for investment decisions in real estate matters on behalf
of the BellSouth Group Life Plan is the BellSouth Corporation
Treasurer, who was responsible for reviewing and authorizing the
investment in the LP.
10. The applicant represents that the Plans listed in paragraph 9
are currently the only employee benefit plans subject to the Act that
are Partners of the LP. However, the applicant states that it is
possible that one or more other Plans will become Partners of the LP in
the future. Thus, the applicant requests relief for any such Plan under
this proposed exemption, provided the Plan meets the standards and
conditions set forth herein. In this regard, such Plan must be
represented by a fiduciary independent of the General Partner, the
Lenders and BTC. Furthermore, the General Partner, who also must be
independent of the Lenders and BTC, must receive from the Plan one of
the following:
(1) A representation letter from the applicable fiduciary with
respect to such Plan substantially identical to the representation
letter submitted by the fiduciaries of the other Plans, in which case
this proposed exemption, if granted, will apply to the investments made
by such Plan if the conditions required herein are met; or
(2) Evidence that such Plan is eligible for a class exemption
4 or has obtained an individual exemption from the
Department covering the potential prohibited transactions which are the
subject of this proposed exemption.
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\4\ For example, PTE 84-14 (49 FR 9497, March 13, 1984) permits,
under certain conditions, parties in interest to engage in various
transactions with plans whose assets are managed by a ``qualified
professional asset manager'' (QPAM) who is independent of the
parties in interest (with certain limited exceptions) and meets
specified financial standards.
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11. BTC represents that the LP has obtained an opinion of counsel
that the
[[Page 531]]
LP will constitute an ``operating company'' under the Department's plan
asset regulations [see 29 CFR 2510.3-101(c)] if the LP is operated in
accordance with the Agreement and the private placement memorandum
distributed in connection with the private placement of the LP
Partnership interests.5
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\5\ The Department notes that the term ``operating company'' as
used in the Department's plan asset regulation cited above includes
an entity that is considered a ``real estate operating company'' as
described therein (see 29 CFR 2510.3-101(e)). However, the
Department expresses no opinion in this proposed exemption regarding
whether the LP would be considered either an operating company or a
real estate operating company under such regulations. In this
regard, the Department notes that it is providing no relief for
either internal transactions involving the operation of the LP or
for transactions involving third parties other than the specific
relief proposed herein. In addition, the Department encourages
potential Plan investors and their independent fiduciaries to
carefully examine all aspects of the LP's proposed real estate
investment program in order to determine whether the requirements of
the Department's regulations will be met.
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12. BTC represents that the Estoppel constitutes a form of credit
security which is customary among financing arrangements for real
estate limited partnerships or limited liability companies, wherein the
financing institutions do not obtain security interests in the real
property assets of the partnership or limited liability companies. BTC
also represents that the obligatory execution of the Estoppel by the
Partners for the benefit of the Lenders was fully disclosed in the
Private Placement Memorandum as a requisite condition of investment in
the LP during the private placement of the Partnership interests. BTC
represents that the only direct relationship with respect to the LP
between any of the Partners and any of the Lenders is the execution of
the Estoppel. All other aspects of the transaction, including the
negotiation of all terms of the Credit Facility, are exclusively
between the Lenders and the LP. BTC represents that the proposed
execution of the Estoppel will not affect the ability of a Plan to
withdraw from investment and participation in the LP.6 The
only Plan assets to be affected by the proposed transactions are any
funds which must be contributed to the LP in accordance with
requirements under the Agreement to make Capital Calls to honor a
Partner's capital commitments.
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\6\ In this regard, the Department cautions Plan fiduciaries to
fully understand all aspects of the Agreement, including the terms
of the Estoppel, prior to making any capital commitments to the LP.
The Department notes that section 404(a) of the Act requires, among
other things, that a fiduciary of a plan act prudently when making
investment decisions for the plan.
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13. BTC represents that neither it nor any Lender acts or has acted
in any fiduciary capacity with respect to any of the Plans' investments
in the LP and that BTC is independent of and unrelated to those
fiduciaries (the Fiduciaries) responsible for authorizing and
overseeing the Plans' investments in the LP. Each of the Fiduciaries
represents independently that its authorization of Plan investments in
the LP was free of any influence, authority or control by the Lenders,
including BTC. Each of the Fiduciaries represents that the Plan's
investments in and capital commitments to the LP were made with the
knowledge that each Partner would be required subsequently to grant a
security interest in Capital Calls and capital commitments to the
Lenders and to honor requests for cash contributions, also known as
``drawdowns'', made on behalf of the Lenders without recourse to any
defenses against the General Partner. Each of the Fiduciaries
individually represents that it is independent of and unrelated to BTC
and the Lenders and that the investment by the Plan for which that
Fiduciary is responsible continues to constitute a favorable investment
for the Plan and that the execution of the Estoppel is in the best
interests and protective of the participants and beneficiaries of such
Plan. In the event another Plan proposes to become a Partner, the
applicant represents that it will require similar representations to be
made by such Plan's independent fiduciary. Any Plan proposing to become
a Partner in the future and needing to avail itself of the exemption
proposed herein will have assets of not less than $100
million,7 and not more than 5% of the assets of such Plan
will be invested in the LP. As noted in paragraph 9 above, the Plans
currently investing in the LP all have total assets which exceed $100
million and have committed amounts to the LP which are less than 5% of
their total assets.
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\7\ In the case of multiple plans maintained by a single
employer or single controlled group of employers, the assets of
which are invested on a commingled basis (e.g., through a master
trust), this $100 million threshold will be applied to the aggregate
assets of all such plans.
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14. In summary, the applicant represents that the proposed
transactions satisfy the criteria of section 408(a) of the Act for the
following reasons: (1) The Plans' investments in the LP were authorized
and are overseen by the Fiduciaries, which are independent of the
Lenders and BTC, and other Plan investments in the LP from other
employee benefit plans subject to the Act will be authorized and
monitored by independent Plan fiduciaries; (2) None of the Lenders
(including BTC) has any influence, authority or control with respect to
any of the Plans' investment in the LP or the Plans' execution of the
Estoppel; (3) Each Fiduciary invested in the LP on behalf of a Plan
with the knowledge that the Estoppel is required of all Partners
investing in the LP, and all other Plan fiduciaries that invest their
Plan's assets in the LP will be treated the same as other Partners are
currently treated with regard to the Estoppel; (4) Any Plan which has
invested or may invest in the LP in the future, which needs to avail
itself of the exemption proposed herein, has or will have assets of not
less than $100 million,8 and not more than 5% of the assets
of any such Plan are or will be invested in the LP; and (5) the General
Partner of the LP is independent of BTC, the Lenders and the Plans.
\8\ See footnote 4, ibid.
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FOR FURTHER INFORMATION CONTACT: Gary H. Lefkowitz of the Department,
telephone (202) 219-8881. (This is not a toll-free number.)
General Information
The attention of interested persons is directed to the following:
(1) The fact that a transaction is the subject of an exemption
under section 408(a) of the Act and/or section 4975(c)(2) of the Code
does not relieve a fiduciary or other party in interest of disqualified
person from certain other provisions of the Act and/or the Code,
including any prohibited transaction provisions to which the exemption
does not apply and the general fiduciary responsibility provisions of
section 404 of the Act, which among other things require a fiduciary to
discharge his duties respecting the plan solely in the interest of the
participants and beneficiaries of the plan and in a prudent fashion in
accordance with section 404(a)(1)(b) of the act; nor does it affect the
requirement of section 401(a) of the Code that the plan must operate
for the exclusive benefit of the employees of the employer maintaining
the plan and their beneficiaries;
(2) Before an exemption may be granted under section 408(a) of the
Act and/or section 4975(c)(2) of the Code, the Department must find
that the exemption is administratively feasible, in the interests of
the plan and of its participants and beneficiaries and protective of
the rights of participants and beneficiaries of the plan;
(3) The proposed exemptions, if granted, will be supplemental to,
and not in derogation of, any other
[[Page 532]]
provisions of the Act and/or the Code, including statutory or
administrative exemptions and transitional rules. Furthermore, the fact
that a transaction is subject to an administrative or statutory
exemption is not dispositive of whether the transaction is in fact a
prohibited transaction; and
(4) The proposed exemptions, if granted, will be subject to the
express condition that the material facts and representations contained
in each application are true and complete and accurately describe all
material terms of the transaction which is the subject of the
exemption. In the case of continuing exemption transactions, if any of
the material facts or representations described in the application
change after the exemption is granted, the exemption will cease to
apply as of the date of such change. In the event of any such change,
application for a new exemption may be made to the Department.
Signed at Washington, DC, this 30th day of December, 1999.
Ivan Strasfeld,
Director of Exemption Determinations, Pension and Welfare Benefits
Administration, Department of Labor.
[FR Doc. 00-221 Filed 1-4-00; 8:45 am]
BILLING CODE 4510-29-P
