[Federal Register Volume 62, Number 44 (Thursday, March 6, 1997)]
[Notices]
[Pages 10301-10303]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-5525]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26679]
Filings Under the Public Utility Holding Company Act of 1935, as
amended (``Act'')
February 28, 1997.
Notice is hereby given that the following filing(s) has/have been
made with the Commission pursuant to provisions of the Act and rules
promulgated thereunder. All interested persons are referred to the
application(s) and/or declaration(s) for complete statements of the
proposed transaction(s) summarized below. The application(s) and/or
declaration(s) and any amendments thereto is/are available
[[Page 10302]]
for public inspection through the Commission's Office of Public
Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in
writing by March 24, 1997, to the Secretary, Securities and Exchange
Commission, Washington, D.C. 20549, and serve a copy on the relevant
applicant(s) and/or declarant(s) at the address(es) specified below.
Proof of service (by affidavit or, in 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 the
matter. After said date, the application(s) and/or declaration(s), as
filed or as amended, may be granted and/or permitted to become
effective.
Western Massachusetts Electric Company (70-8959)
Western Massachusetts Electric Company (``WMECO'' or the
``Applicant''), a wholly owned electric utility subsidiary of Northeast
Utilities, a registered holding company, located at 174 Brush Hill
Avenue, West Springfield, Massachusetts 01089, has filed an
application-declaration under sections 6(a), 7, 9(a) and 10 of the Act
and rule 54 thereunder.
WMECO requests that: (i) WMECO be allowed to organize a wholly-
owned special purpose corporation to be called WMECO Receivables
Corporation (``WRC'') for the sole purpose of acquiring certain of
WMECO's eligible accounts receivable; (ii) WRC be allowed to issue
shares of Common Stock; (iii) WMECO be allowed to acquire shares of
capital stock of WRC; and (iv) WMECO be allowed to make, directly and
indirectly, general and initial equity contributions to WRC.
WMECO has entered into a Receivables Purchase and Sale Agreement
dated as of September 11, 1996, as amended (``Existing Agreement'')
under which WMECO 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
(``Undivided 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, and collections thereon, and related records and software
(``Related Assets''). The purchaser (``Purchaser'') is a special
purpose Delaware corporation which acquires receivables and other
assets and issues commercial paper to finance these acquisitions. A
Swiss bank will act as agent (``Agent'') for the Purchaser for
transactions under the Existing Agreement.
The Existing Agreement is structured so that any sales made
thereunder would be accounted for as sales under generally accepted
accounting principles. In order for such sales made on or 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 WRC is intended to satisfy
certain of the requirements of FAS 125: (i) WRC, as purchaser and
transferee, will be a ``qualifying special purpose entity'' within the
meaning of FAS 125, and (ii) once transferred, WMECO will no longer
have effective control over the assets, so that such transfers should
be labeled ``true sales'' in the event of WMECO's bankruptcy or
receivership. The Existing Agreement contemplates that a restructured
purchase and sales program involving WRC will be in place by March 31,
1997, at which date the Existing Agreement will terminate.
The restructured accounts receivable purchase and sales program
will consist of two agreements which will replace the Existing
Agreement, and is intended to accomplish sales to the Purchaser in a
manner substantially similar to that under the Existing Agreement.
Applicant states that the addition or WRC serves merely as a vehicle to
isolate the Receivables as required by FAS 125, and that restructured
purchase and sales arrangements are on essentially the same terms to
WMECO as the Existing Agreement. Under the first agreement (``Company
Agreement''), WMECO will sell or transfer as equity contributions from
time to time all of its receivables and related assets to WRC. The
purchase price will take into account historical loss statistics in
WMECO's receivables pool. Under the second agreement (``WRC
Agreement''), WRC will sell Undivided Interests to the Purchaser from
time to time. Such Undivided Interests may be funded and repaid on a
revolving basis. The purchase price for an Undivided Interest will be
calculated according to a formula. Such formula will include reserves
based on, among other things, a multiple of historical losses, a
multiple of historical dilution (such as, e.g., adjustments due to
billing errors), customer concentrations that exceed specified levels
and carrying costs and other costs associated with the agreements. The
formula will also take into account the cost of servicing, which will
be returned to WMECO in the form of a servicing fee.
Primarily because of the reserves, the purchase price paid by the
Purchaser for Undivided Interests will be lower than the purchase price
paid by WRC to WMECO for Receivables and Related Assets. WMECO states
that it expects WRC to have sufficient assets to pay WMECO the full
purchase price for Receivables purchased from WMECO.
WMECO anticipates that the availability of Receivables and Related
Assets will vary from time to time in accordance with the Energy use of
its customers. Therefore, since WRC's only source of funds are its
participation in the program and WMECO's capital contributions, it may
not have funds available at a particular time to purchase the
Receivables and Related Assets available to it. WMECO proposes to
accommodate this situation by (i) allowing WRC to make the purchase and
owe the balance to WMECO on a deferred basis, or (ii) by making a
capital contribution to WRC in the form of the Receivables and Related
Assets for which WRC lacks the purchase price funds at the time.\1\
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\1\ WMECO also states that if WRC develops a substantial cash
balance, it will likely dividend the excess cash to WMECO, so that
WRC will not itself retain substantial cash balances at any one
time, and substantially all of the net cash realized from the
collection of Receivables will be made available to WMECO.
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Under the WRC Agreement, purchases may be funded by the Purchaser's
issuance of commercial paper or drawing under its bank facilities.
Initially, the aggregate purchase price paid by the Purchaser for
Undivided Interests is not intended to exceed $50,000,000.
The Agent will have the right to appoint a servicer on behalf of it
and WRC, to administer and collect receivables and to notify the
obligors of the sale of their receivables, at the Agent's option. WMECO
will be appointed as the initial servicer.
Certain obligations under the Company Agreement create limited
recourse against WMECO. In order to secure these obligations, WMECO
will grant to WRC a lien on, and security interest in, any rights which
WMECO may have in respect of Receivables and Related Assets. The WRC
Agreement creates comparable recourse obligations against WRC, and
WMECO states that WRC will grant a security interest to the Purchaser
in all rights in the Receivables retained by WRC, the Related Assets
and certain other rights
[[Page 10303]]
and remedies (including its rights and remedies under the Company
Agreement) to secure such recourse obligations.\2\
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\2\ WMECO states that neither WRC's nor the Purchaser's recourse
to WMECO will include any rights against WMECO should customer
defaults on the Receivables result in collections attributable to
the Undivided Interests sold to the Purchaser being insufficient to
reimburse the Purchaser for the purchase price paid by it for the
Undivided 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 Undivided Interests.
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WMECO and WRC will be obligated to reimburse the Purchaser and the
Agent for various costs and expenses associated with the Company
Agreement and the WRC Agreement. WRC 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 WRC Agreement
are scheduled to terminate on September 4, 2001. WRC 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 WRC Agreement. The WRC Agreement allows the
Purchaser to assign all of its rights and obligations under the WRC
Agreement (including its Undivided Interests and the obligation to fund
Undivided Interests) to other persons, including the providers of its
bank facilities.
WMECO 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.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-5525 Filed 3-5-97; 8:45 am]
BILLING CODE 8010-01-M
