Question
From: (redacted)
Sent: Monday, April 28, 2008 11:43 AM
To: Verne, B. Michael
Subject: Scope ofMortgage Exemption
I would appreciateyour assistance in properly applying the $63.1 million filing threshold in thefollowing situation.
Company A holds allof the membership interests in LLC, a mortgage loan company. Company A hasagreed to sell all of the membership interests in LLC to Company B for a pricein excess of $63.1 million. The persons of which Company A and Company B are apart have assets in excess of $10 million and $100 million respectively, andtheir operations affect interstate commerce. The assets of the LLC includemortgages.
Pursuant tosection 7A(c)(2) of the Hart Scott Rodino Act (the "Act"), themortgages held by LLC are exempt from the requirements of the Act. Further,section 802.4 of the regulations provides that an acquisition of noncorporateinterests whose assets (together with those of all entities it controls)consists of assets the acquisition of which is exempt under section 7A(c) ofthe Act is exempt if the acquired unincorporated entity (together with those ofall the entities it controls) does not hold non-exempt assets with a fairmarket value in excess of $50 million (as adjusted).
Informal StaffOpinion 0406002 of the Premerger Notification Office, dated June 2, 2004,stated in connection with a similar sale of a mortgage loan company that indetermining the fair market value of the nonexempt assets of the mortgage loancompany the acquirer "should exclude the mortgage loans, mortgageservicing rights associated with those loans and any other assets of [themortgage company] that are associated with the mortgage loans." Further,"[f]or example, cash and goodwill associated with the mortgage loans andthe mortgage loan business would be excluded."
Accordingly, inthe situation described above, it is my understanding that in determining thefair market value of the non-exempt assets of the LLC, Company B should excludenot only the mortgage loans held by LLC but also the servicing rightsassociated with those loans and good will associated with the loans and themortgage loan business. Please advise whether the foregoing understanding incorrect.