Question
October 6, 2004
VIA FACSIMILE
MichaelVerne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
7th & Pennsylvania Avenue, NW
Washington.DC 20580
DearMike:
1 am writing toconfirm my understanding of telephone conversations we had, the most recentbeing on August 27, 2004, concerning the potential reportability under theHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), of aproposed transaction discussed below.
Proposedtransaction.
Our client is a limited liability corporation that holds a minority ownershipinterest of voting securities in a publicly traded company. While our clientonly owns a minority interest, it is the largest shareholder of the publiclytraded company and intends to increase its holdings at some point in thefuture. The publicly traded company is a holding company and the holding company'ssole ownership interest is of a subsidiary that operates a business. Thatsubsidiary is currently in bankruptcy. The publicly traded holding company isnot in bankruptcy.
Our client intends to buy the creditor claims of some of the creditors of thebankrupt entity. Our client will acquire claims that exceed $50 million intotal value from several creditors. Further, in one or two instances, the claimpurchased from a single creditor will alone exceed $50 million in value. Forthe creditors from whom claims are purchased, our client will purchase 100% ofeach creditor's claim against the bankrupt entity. Our client does not in theordinary course of its business buy creditor claims out of bankruptcy, but weunderstand that there are entities that purchase such interests in the ordinarycourse of their business.
Conclusions
You agreed that the acquisition of creditor claims against a bankrupt entity,regardless of the percent of the creditor claims purchased or the value of theclaims, would be exempt from reportability under the HSR Act. Specifically,you confirmed that the acquisition of the creditor claims would qualify forexemption under the "ordinary course of business" exemption. See 15U.S.C. l8a(c)(1) (exempting "acquisitions of goods or realtytransferred in the ordinary course of business."). Further, you confirmedthat the ordinary course of business exemption applies to ourclient's purchase of creditor claims in a bankruptcy even though ourclient does not make such purchases in the ordinary course of its own business.
Please let me know as soon as possible if you disagree with any of theconclusions discussed above, or if I have misunderstood any aspect of youradvice. Thank you for your assistance in this matter.