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Start Preamble
February 8, 2005.
AGENCY:
Securities and Exchange Commission (“Commission”).
ACTION:
Notice of an application under section 6(c) of the Investment Company Act of 1940 (the “Act”) for an exemption from all provisions of the Act.
Summary of Application:
MBIA Global Funding, LLC (“Applicant”) requests an order that would permit it to sell debt securities and non-voting preferred stock and use the proceeds to finance the business operations of its parent company, MBIA Inc., (“MBIA”) and certain companies controlled by MBIA.
Filing Dates:
The application was filed on July 3, 2003, and amended on November 2, 2004. Applicant has agreed to file an amendment during the notice period, the substance of which is reflected in this notice.
Hearing or Notification of Hearing:
An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicant with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on March 7, 2005, and should be accompanied by proof of service on applicant, in the form of an affidavit, or for lawyers, a certificate of Start Printed Page 7529service. 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 Commission's Secretary.
ADDRESSES:
Secretary, Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Applicant: 113 King Street, Armonk, NY 10504.
Start Further InfoFOR FURTHER INFORMATION CONTACT:
Laura J. Riegel, Senior Counsel, at 202-942-0567, or Todd F. Kuehl, Branch Chief, at 202-942-0564 (Division of Investment Management, Office of Investment Company Regulation).
End Further Info End Preamble Start Supplemental InformationSUPPLEMENTARY INFORMATION:
The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, 450 Fifth Street, NW., Washington, DC 20549-0102 (telephone 202-942-8090).
Applicant's Representations
1. Applicant is a Delaware limited liability company and a direct wholly-owned subsidiary of MBIA.[1] MBIA, a Connecticut corporation, is an insurance holding company that, through its subsidiaries, is engaged primarily in providing financial guarantee insurance and investment management and financial services to public finance clients and financial institutions on a global basis.
2. Applicant was formed for the purpose of financing the operations of MBIA through the issuance of debt securities and non-voting preferred stock. Applicant presently has not issued any securities other than shares of its common stock, all of which MBIA owns, and medium term notes, which Applicant has offered and sold in private placement transactions in reliance on the exemption from the registration requirements of the Securities Act of 1933 (the “Securities Act”) provided in section 4(2) of the Securities Act and pursuant to Regulations S under the Securities Act.
3. Applicant currently intends to offer debt securities and non-voting preferred stock in private placement transactions in reliance on the exemption from the registration requirements of the Securities Act provided in section 4(2) of the Securities Act or in transactions pursuant to Regulation S under the Securities Act. Applicant also seeks the flexibility to offer debt securities and non-voting preferred stock to the public in the United States pursuant to a registration statement under the Securities Act (such securities that are issued to or held by the public are referred to hereafter as “Public Securities”). Applicant proposes to use the proceeds from any of the above offerings to make loans to or invest in MBIA and certain companies controlled by MBIA (the “Controlled Companies”). Certain of the Controlled Companies may be excepted from the definition of investment company pursuant to certain provisions of section 3(c) of the Act (the “Subject Controlled Companies”). Any other Controlled Company whose activities Applicant finances will meet the definition of “company controlled by the parent company” in rule 3a-5 under the Act.
4. All Public Securities will be unconditionally guaranteed by MBIA as to the payment of, as applicable, principal, interest, premium, dividends, liquidation preference and sinking fund payments. MBIA's guarantee of the Public Securities will provide that, in the event of any default in payment of any such amount, the holders of Public Securities may institute legal proceedings directly against MBIA to enforce the guarantee without first proceeding against Applicant.
5. Any convertible or exchangeable security issued by Applicant will be convertible or exchangeable only for securities issued by MBIA or for debt securities or non-voting preferred stock of Applicant meeting the applicable requirements of rule 3a-5(a)(1) through (a)(3). In addition, Applicant will invest in or loan at least 85% of any cash or cash equivalents it raises to either MBIA or one or more Controlled Companies as soon as practicable, but in no event later than six months after Applicant receives the cash or cash equivalents. Further, if Applicant borrows amounts in excess of the amounts required by MBIA or the Controlled Companies, Applicant will invest this excess in certain temporary investments pursuant to rule 3a-5 under the Act.
Applicant's Legal Analysis
1. Applicant requests an order under section 6(c) of the Act for an exemption from all provisions of the Act. 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.
2. Rule 3a-5(b)(2) (i) in relevant part defines a “parent company” to be any corporation, partnership, or joint venture that is not considered an investment company under section 3(a) of the Act or that is excepted or exempted by order from the definition of investment company by section 3(b) of the Act or by the rules or regulations under section 3(a) of the Act. Applicant states that while MBIA is not an investment company within the definition of section 3(a) of the Act (and/or is excepted from such definition by section 3(b)(1) of the Act), MBIA may rely on the exception from investment company status provided by section 3(c)(6). Applicant states that to the extent MBIA derives its non-investment company status from section 3(c)(6) of the Act, MBIA would not qualify as an eligible parent company under rule 3a-5(b)(2).
3. Rule 3a-5(b)(3)(i) in relevant part defines a “company controlled by the parent company” to be any corporation, partnership, or joint venture that is not considered an investment company under section 3(a) of the Act or that is excepted or exempted by order from the definition of investment company by section 3(b) of the Act or by the rules and regulations under section 3(a) of the Act. Applicant proposes that it be allowed to provide financing to any Subject Controlled Company that will not satisfy the definition of “company controlled by the parent company” under rule 3a-5(b)(3) solely because it is excluded from the definition of investment company under section 3(c)(2), 3(c)(3), 3(c)(4), 3(c)(5)(A), 3(c)(5)(B) or 3(c)(6) of the Act.
4. Applicant states that its primary business purpose is to engage in financing activities that will provide funds for MBIA, the Controlled Companies and the Subject Controlled Companies. Applicant also states that neither MBIA nor any of the Subject Controlled Companies is engaged primarily in investment company activities.
5. Section 6(c) of the Act, in pertinent part, provides that the Commission, by order upon application, may conditionally or unconditionally exempt any person, security or transaction, or any class or classes of persons, securities or transactions, from any provision or provisions of the Act to the extent that such 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 submits that its exemptive request meets the standards set out in section 6(c).Start Printed Page 7530
Applicant's Condition
Applicant agrees that any order granting the requested relief will be subject to the following condition:
Applicant will comply with all of the provisions of rule 3a-5 under the Act, except that:
(1) MBIA will not meet the portion of the definition of “parent company” under 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
(2) The Subject Controlled Companies will not meet the portion of the definition of “company controlled by the parent company” in rule 3a-5(b)(3)(i) solely because they are excluded from the definition of investment company under section 3(c)(2), 3(c)(3), 3(c)(4), 3(c)(5) or 3(c)(6) of the Act;
provided that:
(a) Any Subject Controlled Company excluded from the definition of investment company under section 3(c)(5) of the Act will fall within section 3(c)(5)(A) or section 3(c)(5)(B) solely by reason of its holdings of accounts receivable of either its own customers or of the customers of other Controlled Companies, or by reason of loans made by it to such Controlled Companies or customers, and
(b) MBIA and any Subject Controlled Company excluded from the definition of investment company under section 3(c)(6) of the Act will not be engaged primarily, directly, or through majority-owned subsidiaries in one or more of the businesses described in section 3(c)(5) of the Act (except as permitted in (a) above).
Start SignatureFor the Commission, by the Division of Investment Management, under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
Footnotes
1. Applicant also requests that the requested order apply to any other wholly-owned finance subsidiary of MBIA that MBIA establishes in the future provided that any such future finance subsidiary relying on the order will comply with the terms and condition stated in the application. Applicant is the only wholly-owned finance subsidiary of MBIA that presently intends to rely on the requested order.
Back to Citation[FR Doc. E5-591 Filed 2-11-05; 8:45 am]
BILLING CODE 8010-01-P
Document Information
- Published:
- 02/14/2005
- Department:
- Securities and Exchange Commission
- Entry Type:
- Notice
- Action:
- Notice of an application under section 6(c) of the Investment Company Act of 1940 (the ``Act'') for an exemption from all provisions of the Act.
- Document Number:
- E5-591
- Dates:
- The application was filed on July 3, 2003, and amended on November 2, 2004. Applicant has agreed to file an amendment during the notice period, the substance of which is reflected in this notice.
- Pages:
- 7528-7530 (3 pages)
- Docket Numbers:
- Release No. IC-26751, 812-12987
- EOCitation:
- of 2005-02-08
- PDF File:
- e5-591.pdf