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Date
Rule
802.1; 802.50(b); 802.63
Staff
John M.Sipple, Jr., Esq.
File Number
9008007
Response/Comments
Confirmed that based on the facts presented the transaction appeared to be exempt per802.50(b). We also discussed the possible application of 802.63 - the exemption for the initial establishment of a lease financing arrangement by a creditor in a bona fide credittransaction in the ordinary course of business. Here, a lease financing company had beenapproved by the Bd. of the airline carrier and that company decided it didnt want to financethe purchase of the plane. For a fee, it arranged w/ another lease financing company to assume its position.

Question

August 21, 1990

BY MESSENGER
 

John M. Sipple, Jr., Esq.
Senior Attorney
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washing ton, D.C. 20580


Dear John:


We recently had a conversation in which you indicated your staff was currently working on an H-S-R exemption for certain lease financing arrangements. As I understand it, that exemption would entail an interpretation of Rule 802.1 for the acquisition of goods in the ordinary course of business. I describe below a transaction that I believe is identical in substance to the sort of lease financing arrangement that you wish to exempt, but has some structural peculiarities that implicate other exemptions.


In substance, a foreign airline will lease an aircraft from a wholly-owned foreign subsidiary of a United States leasing company. The structure or form of the transaction follows the following steps, all of which occur simultaneously:

1. A foreign airline will purchase an aircraft from a U.S. manufacturer for $130 million.

2. U.S. Leasing Corporation A has a wholly-owned subsidiary which is a single purpose foreign sales corporation (FSC), the only asset of which is the single aircraft that is the subject of this transaction. FSC is a foreign issuer.

3. FSC will purchase the aircraft from and lease back to the foreign airline.

4. U.S. Leasing Corporation B will acquire from U.S. Leasing Corporation A, 100% of the beneficial interest in the assets of a trust established by Leasing Company A at a United States bank (U.S. Trust). The Trust is a single purpose entity with no assets other than the stock of FSC.
 

As a result of the transaction, U.S. Leasing Company B will control 100% of the voting securities of FSC, which shall receive the lease income on the 12.5-year lease of the aircraft as paid by the foreign airline lessee. The total value of the transaction is approximately $130 million.


The transaction constitutes a bona fide lease financing arrangement which for tax and financial reasons is passed through a foreign sales corporation. The acquiring person is U.S. Leasing Company B and the acquired person is FSC, the foreign sales corporation, which is a wholly-owned subsidiary of Leasing Company A.


I believe the transaction should be exempt under Rule 802.50(b) as the acquisition of voting securities of a foreign issuer by a U.S. person. The foreign issuer holds no assets located in the United States and, although the transaction involves a new aircraft, will not make aggregate sales in the United States of $10 million or more.


If you agree that the transaction is exempt under 802.50(b), my client would not intend to make a Hart-Scott-Rodino filing for the transaction.


Sincerely yours,


(redacted)

(redacted)

(redacted)

cc: (redacted)

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