Question
From: (redacted)
Sent: Thursday,July 22, 2004 4:25 PM
To: Verne,B. Michael
Cc: Peay,Sandra M.
Subject: HSR question
Michael:
I have a coupleof questions relating to Section 802.63 of the HSRRegulations.
The situationinvolves a bond fund that purchased certain debt securities of an issuer in thesecondary market. After the issuer made an announcement that implied abankruptcy was imminent, the bond fund purchased additional debt securities ofthat issuer. The issuer ultimately went into bankruptcy and a plan ofreorganization was approved whereby those debt securities will be exchanged forvoting securities of the issuer. Since all claims have not been finalized, nocreditor knows exactly how many shares it will receive. It is possible thatthis bond fund will receive in excess of $50,000,000 in voting securities, butit is equally possible that it will not.
1. Will the bondfund, by virtue of purchasing the debt securities on the open market, and thusbecoming a creditor at such time, be able to avail itself of the 802.63exemption? (Staff Comment: Yes)
2. Are debtsecurities purchased after the announcement of the proposed restructuring notincluded in the exemption of 802.63? (Staff Comment: Not Included)
3. Assuming debtsecurities purchased after the announcement are not exempt, would thosepurchased before the announcement be aggregated with those purchased after? Forexample, if those purchased after the announcement will only be exchanged for$40,000,000 of voting securities, but together with those purchased before theannouncement, the aggregate will exceed $50,000,000, is a filing required?
(Staff Comment: No Aggregation)
4. Assuming afiling is required, at what point would a filing be required or advisable?Immediately,
just in case ittops $50,000,000? Or, once there is more certainty? (Staff Comment: Up toyou.)
If you could letme know your thoughts on this it would be much appreciated. If you'd rather notrespond by e-mail, you can call me at (redacted). Thank you for your attentionto this matter.