Question
From: (redacted)
Sent: Friday, February 17, 2006 5:08 PM
To: Verne, B. Michael
Subject:leveraged lease structure
Hi Mike,
Facts
I have a question about acomplex transaction that involves a leveraged lease structure that was set up anumber of years ago. A trust (the "Trust") was created to purchaseand hold title to a facility (the "Facility") in the Trust for thebenefit of an institutional investor (the "Beneficiary"). The Trustissues units that entitle the Beneficiary to economic interest in the Trust.The Facility is leased by the Trust (lessor) to a lessee limited liabilitycompany ("Lessee") with two members (the "Members"). TheLessee maintains and operates the Facility, and makes lease payments to theTrust for the Facility.
Acquisitions
I believe that Acquisition Aand Acquisition B will happen at the same time.
AcquisitionA: In Acquisition A, our client (buyer) proposes to acquire 100% of thebeneficial interests (the "Beneficial Interests") in the Trust fromthe Beneficiary. My understanding is that previously this type of anacquisition would not have been subject to the HSR Act (regardless of the sizeof transaction and size of person) as the sale of the beneficial interests isin substance only the transfer of an income stream, which is neither a votingsecurity nor an asset under the HSR Act. However, at this time, I believe thatthe acquisition of the Beneficial Interests would be considered the acquisitionof non-corporate interests under Section 801.1(f)(1)(ii). In Acquisition A, theacquisition price is below the size of transaction threshold and accordinglyAcquisition A is not a reportable transaction. Can you confirm that theacquisition of interests in a trust is valued the same as an acquisition ofnon-publicly traded voting securities and accordingly we do not need to includeany debt that is being assumed by the buyer in the size of transaction for AcquisitionA.
AcquisitionB: In Acquisition B, our same client (buyer) proposes to acquire 100% of themembership interests ("Membership Interests") in the Lessee. Theacquisition price for 100% of the Membership Interests is below the size oftransaction threshold and accordingly Acquisition B is not a reportabletransaction under the HSR Act. I understand that the acquisition of membershipinterests is valued the same as an acquisition of non-publicly traded votingsecurities and accordingly we do not need to include any debt that is beingassumed by the buyer in the size of transaction for Acquisition B.
I believe that Acquisition Aand Acquisition B would be treated as separate acquisitions but I want toconfirm that the acquisition price for the Beneficial Interests does not getaggregated with acquisition Price for the Membership Interests. The Beneficiaryand the Members are separate unrelated parties. My understanding is that thereare no reportable events because the size of transaction threshold is not metin Acquisition A, nor is the size of transaction threshold met in AcquisitionB.
Transaction Expenses
Finally, can you alsoconfirm my understanding that transaction expenses of target/seller that arebeing paid by buyer do not need to be included in the size of transaction in anacquisition of non-corporate interests.