Question
February 2, 1993
Richard B. Smith, Esq.
Premerger Notification Office - Room 303
Federal Trade Commission
6th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Dear Mr. Smith:
This is to confirm our recent conversation concerning Rule 802.63.
As I understand your advice, you stated that there is a bright line test whereby debt acquired prior to the issuers going into bankruptcy is deemed to have been acquired in the ordinary course of the creditors business, while debt acquired subsequent to bankruptcy is not. As a footnote, you suggested that debt acquired within a few hours or perhaps days of bankruptcy, either with actual knowledge of the imminent filing or on the basis of widespread rumors, would likely not be deemed to be in the ordinary course. The rationale for the bright line rule, as you expressed it, is to avoid factual inquiry into the financial health of the issuer in assessing whether the debt was acquired in a bona fide credit transaction entered into in the ordinary course of the creditors business.
Please let me know if I have not accurately stated your advice.
Sincerely,
(redacted)