Question
November 7, 2002
Mr. Patrick Sharpe
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
Re:Section 7(A)(c)(2) Exemption Under the Hart-Scott Rodino Antitrust ImprovementsAct of 1976, as amended (the "Act")
Dear Mr. Sharpe:
We represent a companyengaged in power project development and the trading of electric power andnatural gas. The company has also engaged in the exploration and productionfinance business through a subsidiary. The company now seeks to divest the subsidiary'sloan portfolio. This divestiture will result in the exit by the company of theexploration and production finance business. The loan portfolio consists of (i)mortgages and related credit agreements, (ii) warrants and (iii) royaltyinterests. {Staff comment - For carbon-based reserve}
The purpose of thisletter is to confirm our telephone conversation on August 26, 2002, in which we discussed theapplication of Section 7(A)(c)(2) of the Act to this transaction. During thiscall, we discussed the electronic correspondence from me to you outlining thefacts of the transaction, a copy of which is attached for your convenience.
You confirmed that rules801.21 and 801.15 exclude. from the size of the transaction analysis themortgages (obligations which are not voting securities pursuant to Section7(A)(c)(2)) and the warrants, respectively. Thus, for purposes of determiningthe applicability of the Act to this transaction, the size of the transactionwould be limited to the value of the royalty interests. Unless the royaltyinterests were valued in excess of $500 million, such acquisition would not besubject to the Act pursuant to Section 802.3. Finally, you indicated that thesale of all assets limitation applies to Section 7(A)(c)(1) and would not applyto Section 7(AXcx2) as relies upon under these facts despite the transactionconstituting the sale of substantially all of the assets of the acquiredentity. Therefore, you agreed that no filing under the Act would be requiredunder these circumstances.
If I have omitted ormisstated any material portion of our conversation, please advise me as theparties are relying on this interpretation to proceed with the transaction.
Thank youfor your prompt and courteous assistance in helping assure the parties thatthey are in full compliance with all applicable pre-merger reportingobligations.