[Federal Register Volume 62, Number 232 (Wednesday, December 3, 1997)]
[Notices]
[Pages 63989-63990]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31686]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 22912; 812-10348]
AFC (USA) I, Inc.; Notice of Application
November 26, 1997.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of application for exemption under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') from all provisions of the
Act.
-----------------------------------------------------------------------
SUMMARY OF THE APPLICATION: Applicant, AFC (USA) I, Inc., requests an
order that would permit it to sell certain debt securities and use the
proceeds to finance the business activities of its parent company,
Airbus Finance Company Limited.
FILING DATES: The application was filed on November 13, 1996, and
amended on July 17, 1997 and November 24, 1997.
HEARING OR NOTIFICATION OF HEARING: An order granting the application
will be issued unless the SEC orders a hearing. Interested persons may
request a hearing by writing to the SEC's Secretary and serving
applicant with a copy of the request, personally or by mail. Hearing
requests should be received by the SEC by 5:30 p.m. on December 22,
1997, and should be accompanied by proof of service on applicants, in
the form of an affidavit or, for lawyers, a certificate of service.
Hearing requests should state the nature of the writer's interest, the
reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request notification by writing to the
SEC's Secretary.
ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. Applicant, c/o Catharine Ennis, George's Dock House, 2nd Floor,
International Financial Services Center, Dublin 1, Ireland.
FOR FURTHER INFORMATION CONTACT: Kathleen L. Knisely, Staff Attorney,
at (202) 942-0517, or Mary Kay Frech, Branch Chief, at (202) 942-0564
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, DC
20549, (tel. 202-942-8090).
Applicant's Representations
1. Applicant is a Delaware corporation formed in July, 1996. All of
applicant's outstanding voting securities are owned by Airbus Finance
Company Limited (``AFC''). AFC, a limited liability company
incorporated under the laws of Ireland, provides sales financing
support to the customers of Airbus Industrie G.I.E. (``Airbus
Industrie'').\1\ AFC and Airbus Industrie are each owned indirectly by
Aerospatiale S.N.I., Daimler-Benz A.G. (``Daimler-Benz''), British
Aerospace plc (``BAe''), and Construcciones Aeronauticas S.A.
(``CASA'').
---------------------------------------------------------------------------
\1\ Applicant represents that AFC does not constitute a
``partnership'' or ``joint venture'' within the meaning of rule 3a-
5(a)(4) under the Act and is substantially equivalent to a U.S.
corporation for the purposes of rule 3a-5(b)(2) under the Act.
---------------------------------------------------------------------------
2. Applicant was organized to engage in financing activities to
provide funds for use in the operations of AFC. Applicant proposes to
obtain funds through the offer and sale of its debt securities in the
United States and European or other overseas markets, and to lend the
proceeds to AFC.
3. Due to the nature of capital markets, applicant may, from time
to time, issue securities in amounts in excess of the amounts required
by AFC at any given time. However, at least 85% of the cash or cash
equivalents raised by applicant will be loaned to AFC as soon as
practicable, but in no event later than six months after applicant's
receipt of the cash or cash equivalents. Amounts that are not loaned to
AFC will be invested in government securities, securities of AFC or a
company controlled by AFC (or, in the case of a partnership or joint
venture, the securities of the partners or participants in the joint
venture), or debt securities which are exempted from the provisions of
the Securities Act of 1933 by section 3(a)(3) of that Act.
4. Any issuance of debt securities by applicant to the public in
the United States will be unconditionally guaranteed by AFC as to the
timely payment of principal, interest, and premium, if any (a
``Guarantee''). Guarantee will provide each holder of debt securities
issued by applicant a direct right of action against AFC to enforce
AFC's obligations under the Guarantee without first proceeding against
applicant.
5. Until AFC has achieved a specified long-term debt rating at or
above investment grade (the ``AFC Rating''), any debt securities issued
by applicant to the public in the United States also will be
unconditionally guaranteed on a separate basis by each of Aerospatiale
S.N.I., Daimler-Benz, BAe, and CASA, or any additional or substitute
indirect owner of AFC as to the timely payment of principal of,
interest, and premium, if any, on the debt securities.
6. In the future applicant may obtain funds through the offer and
sale of non-voting preferred stock. Applicant will guarantee such stock
with a guarantee complying with rule 3a-5(a)(2) under the Act.
Applicant's Legal Analysis
1. Rule 3a-5 under the Act provides an Exemption from the
definition of investment company for certain companies organized
primarily to finance the business operations of their parent companies
or companies controlled by their parent companies. Rule 3a-5 is
premised on the notion that it is appropriate to exempt a finance
subsidiary from all provisions of the Act when the primary purpose of
the finance subsidiary is to finance the business operations of its
parent
[[Page 63990]]
company or other subdiaries of its parent and when the purchaser of the
finance subsidiary's securities ultimately looks to the parent and not
to the finance subsidiary for repayment.\2\ Rule 3a-5(b)(2)(i) defines
``parent company'' to be a corporation, partnership, or joint venture
that is not considered an investment company under section 3(a) or that
is exempted by order from the definition of investment company by
section 3(b) or by the rules or regulations under section 3(a) of Act.
---------------------------------------------------------------------------
\2\ See Investment Company Act Release No. 14275 (Dec. 14, 1984)
(release adopting rule 3a-5 under the Act).
---------------------------------------------------------------------------
2. AFC is not a ``parent company'' within the definition in rule
3a-5(b)(2)(i) because AFC meets the definition of investment company in
section 3(a) of the Act and is excepted from that definition by section
3(c)(6) of the Act. Applicant, therefore, is unable to rely on rule 3a-
5 and seeks an exemption from all provisions of the Act.
3. In the release adopting rule 3a-5, the Commission stated that it
may be appropriate to grant exemptive relief to the finance subsidiary
of an issuer exempted from the definition of investment company under
section 3(c) of the Act, but only on a case-by-case basis upon an
examination of all relevant facts.\3\ According to the adopting
release, the concern was that a company could be considered not an
investment company under section 3(c) of the Act and still be engaged
primarily in investment company activities.\4\
---------------------------------------------------------------------------
\3\ Id. at 49443.
\4\ Id.
---------------------------------------------------------------------------
4. Section 6(c) of the Act provides, in pertinent part, that the
SEC may, conditionally or unconditionally, exempt any person or class
of persons from any provision or provisions of the Act to the extent
that the exemption is necessary or appropriate in the public interest
and consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Act. Applicant states that
AFC is not engaged primarily in investment company activities, but that
its principal activity is the provision of sales financing for Airbus
Industrie customers. In addition, if AFC were itself to issue the
securities that are to be issued by applicant and use the proceeds for
its own purposes or advance them to its subsidiaries, AFC would not be
subject to regulation under the Act. While AFC has chosen instead to
use applicant as a financing vehicle, the Guarantee ensures that
holders of applicant's securities will have direct recourse against
AFC. Accordingly, applicant submits that the relief requested satisfies
the section 6(c) standard.
Applicant's Condition
Applicant agrees that the order granting the requested relief shall
be subject to the condition that:
Applicant will comply with all of the provisions of rule 3a-5 under
the Act, except that AFC will not meet the portion of the definition of
``parent company'' in rule 3a-5(b)(2)(i) solely because it is excluded
from the definition of investment company under section 3(c)(6) of the
Act and is engaged primarily, directly or through majority owned
subsidiaries, in one or more of the businesses described in section
3(c)(5)(A) and/or section 3(c)(5)(B) of the Act.
For the Commission, by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-31686 Filed 12-2-97; 8:45 am]
BILLING CODE 8010-01-M
