01-22858. BHF Finance (Delaware) Inc.; Notice of Application

September 6, 2001

AGENCY:

Securities and Exchange Commission (“Commission”).

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 Application:

Applicant, BHF Finance (Delaware) Inc. (“BHF Finance”), seeks an order to permit BHF Finance to sell securities and use the proceeds to finance the business activities of its prospective parent company, Deutsche Postbank (“Postbank”), and certain companies controlled by Postbank.

Filing Dates:

The application was filed on July 30, 2001. 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 application 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 September 27, 2001, and should be accompanied by proof of service on applicant 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 Commission's Secretary.

Addresses:

Secretary, Commission, 450 Fifth Street, NW., Washington, DC 20549-0609, Applicant, 590 Madison Avenue, New York, NY 10022.

FOR FURTHER INFORMATION CONTACT:

John L. Sullivan, Senior Counsel, at [phone], or Janet M. Grossnickle, Branch Chief, at [phone] (Office of Investment Company Regulation, Division of Investment Management).

SUPPLEMENTARY 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 (tel. [phone]).

Applicant's Representations

1. Postbank is a commercial bank organized under the laws of the Federal Republic of Germany (“Germany”). Postbank provides, directly or through its subsidiaries, a broad spectrum of financial services to corporations and private clients. Postbank has established itself as one of Germany's leading retail banks with consolidated total assets, as of December 31, 2000, of approximately DM 134 billion.

2. BHF Finance, a Delaware corporation, is the wholly-owned subsidiary of BHF (USA) Holdings, Inc. (“BHF Holdings”), a Delaware corporation, which is the wholly-owned subsidiary of BHF-Bank Aktiengesellschaft (“BHF-Bank”), BHF (USA) Capital Corporation (“BHF Capital”), a Delaware corporation that extends commercial credit to third parties, is also a wholly-owned subsidiary of BHF Holdings. Pursuant to a stock purchase agreement between BHF-Bank and Postbank, dated June 29, 2001, BHF-Bank will sell all of the issued and outstanding shares of common stock of BHF Holdings to Postbank. Upon the closing of this stock purchase agreement (“Closing”), Postbank will own all of the outstanding shares of common stock of BHF Holdings, and BHF Finance and BHF Capital will be indirect wholly-owned subsidiaries of Postbank.^[1] Applicant anticipates the Closing to occur on September 30, 2001.

3. BHF Finance proposes to issue commercial paper in the United States pursuant to the exemption contained in section 3(a)(3) of the Securities Act of 1933 (“1933 Act”). BHF Finance may also offer debt securities other than commercial paper or non-voting preferred stock in the United States. After the Closing, BHF Finance intends to lend the proceeds to or invest the proceeds in Postbank, BHF Capital, and other companies controlled by Postbank within the meaning of rule 3a-5(b)(3) under the Act (“Controlled Companies”). Rule 3a-5 generally exempts finance subsidiaries of operating companies from the definition of investment company.

4. Any issuance of debt securities or non-voting preferred stock by BHF Finance will be guaranteed unconditionally by Postbank with a guarantee that meets the requirements of rule 3a-5(a)(1) or (2), respectively (“Guarantee”). In accordance with rule 3a-5(a)(5), at least 85% of any cash or cash equivalents raised by BHF Finance will be invested in or loaned to Postbank, Controlled Companies, and after the order requested by the application has been issued, BHF Capital, as soon as practicable, but in no event later than six months after BHF Finance's receipt of such cash or cash equivalents. In accordance with rule 3a-5(a)(6), all investments by BHF Finance, including temporary investments, will be made in Government Securities (as defined in the Act), securities of Postbank or of Controlled Companies and, after the order requested by the application has been issued, BHF Capital, or debt securities that are exempted from the provisions of the 1933 Act by section 3(a)(3) of the 1993 Act.

5. In connection with BHF Finance's offering of securities guaranteed by Postbank, Postbank will submit to the jurisdiction of the Supreme Court of New York or the Federal court located in the County of New York, State of New York and will appoint an agent to accept any process which may be served in any action based upon Postbank's obligations to BHF Finance as described in the application. Such consent to jurisdiction and such appointment of an authorized agent to accept service of process will be irrevocable until all accounts due and to become due with respect to securities issued by BHF Finance as described in the application have been paid.

Applicant's Legal Analysis

1. BHF Finance requests relief 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)(3)(i) in relevant part defines a “company controlled by the parent company” to be a 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). Certain of Postbank's subsidiaries, after the Closing, will not fit within the definition of “companies controlled by the parent company” because they derive their non-investment company status from section 3(c) of the Act. In addition, after the Closing, Postbank will engage in certain activities (including certain investment activities) through BHF Capital. BHF Capital has no outstanding securities other than those owned indirectly by Postbank (excluding short-term paper, directors' qualifying shares, and debt securities owned by the Small Business Administration). BHF Capital would be eligible for exemption under rule 3a-3 under the Act, except that Postbank is a foreign bank.^[2] Accordingly, BHF Finance requests exemptive relief to permit it to lend the proceeds of its debt offerings to certain subsidiaries of Postbank that are excluded from the definition of investment company by virtue of section 3(c) and subsidiaries that would be excluded by virtue of rule 3a-3, but for Postbank's status as their parent company. BHF Finance states that, after the Closing, neither itself, nor Postbank, nor BHF Capital will engage primarily in investment company activities.

3. 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. BHF Finance submits that its exemptive request meets the standards set out in section 6(c).

Applicant's Condition

BHF Finance agrees that the order granting the requested relief will be subject to the following condition:

BHF Finance will comply with all of the provisions of rule 3a-5 under the Act, except paragraph (b)(3)(i) to the extent that BHF finance will be permitted to invest in or make loans to entities that do not meet the portion of the definition of “company controlled by the parent company” solely because they are:

(1) subsidiaries of Postbank that would be excluded from the definition of investment company by virtue of rule 3a-3 under the Act, but for Postbank's status as their parent company; or

(2) corporations, partnerships, and joint ventures that are excluded from the definition of investment company by section 3(c)(1), (2), (4), (6) or (7) of the Act, provided that any such entity:

(a) if excluded from the definition of investment company pursuant to section 3(c)(1) or section 3(c)(7) of the Act, will be engaged solely in lending, leasing or related activities (such as entering into credit derivatives to manage the credit risk exposures of its lending and leasing activities) and will not be structured as means of avoiding regulation under the Act; and

(b) if excluded from the definition of investment company pursuant to section 3(c)(6) of the Act, will not be engaged primarily, directly or indirectly, in one or more of the businesses described in section 3(c)(5) of the Act.

For the Commission, by the Division of Investment Management, pursuant to delegated authority.

Margaret H. McFarland,

Deputy Secretary.

Footnotes

1.  After the Closing, BHF Finance and BHF Capital will change their names to PB Finance (Delaware) Inc. and PB (USA) Capital Corporation, respectively.

2.  Rule 3a-3 generally exempts an issuer from the definition of investment company if all of its outstanding securities (other than short-term paper, directors' qualifying shares, and debt securities owned by the Small Business Administration) are owned by an eligible parent company. A parent company generally is eligible if it meets certain asset and income tests and it is (i) not an investment company as defined in section 3(a) of the Act; (ii) excluded from the definition of investment company by section 3(b) of the Act; or (iii) deemed not to be an investment company under rule 3a-1 of the Act.