Question
(redacted)
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW, Room 303
Washington, D.C. 20580
Re: Advice Concerning Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the Act)
Dear Mr. Sharpe :
This letter is to confirm the advice you gave me during our telephone conversation on December 4 regarding the position of the Federal Trade Commission (FTC) with respect to the acquisition of a beneficiarys interest in a trust established in connection with a leveraged sale-leaseback transaction.
As I explained to you, our client, is the lessee of an 80% interest in a power plant (the Power Plant). (Redacted) which is not controlled by (redacted) is the lessee of a 20% interest in the Power Plant. As leases, (redacted) and (redacted) are in operating control of the Power Plant. The Power Plant is owned by a trustee (the Trustee), which holds the Power Plant in a trust (the Trust) for the benefit of several financial institutions (the Beneficiaries). The Trust purchased the Power Plant from a corporation controlled by (redacted) and (redacted) in connection with a leveraged sale-leaseback transaction. The Beneficiaries receive an income stream generated by the lease payments to the Trust.
The terms of the Trust are typical of those in a standard leveraged sale-leaseback transaction. In particular, the Trustee holds legal title to the Power Plant and performs certain functions with respect to the duties to the Beneficiaries, but the Trustee is not responsible for managing the Power Plant and does not serve a policy-supermajority of the Beneficiaries may remove the Trustee, the Trustee is not elected annually or at any other periodic interval. Risk of casualty loss of the Power Plant during the term of the lease rest with (redacted) and (redacted).
(Redacted) and (Redacted) now propose to acquire from the Beneficiaries all or substantially all of the beneficial interests in the Trust. As a result of the proposed transaction, assuming all the beneficial interests are acquired, and (redacted) would hold an 80% beneficial interest and a 20% beneficial interest in the Trust, respectively and would continue to lease from the Trust an 80% interest and a 20% interest in the Power Plant, respectively. The question I asked you was whether the FTC takes the position that the beneficial interest in the Trust are voting securities or assets, the acquisitions of which would be subject to the reporting requirements of the Act.
You advised me that you agreed with out analysis that the acquisition of the beneficial interests in the Trust would not be subject to the reporting requirements of the Act. You indicated that the analysis conforms with that of a standard leveraged sale-leaseback transaction in which the sale of the beneficial interest is in substance only the transfer of an income stream, which is neither a voting security nor asset under the Act.
I understand that the advice of the Justice Departments Antitrust Division need not be sought regarding the matters described above since it follows the FTCs advice on such matters.
The parties would like to consummate the transaction described above in the near future. Accordingly, if you are unable to concur with any part of the foregoing summary of our telephone conversation, or if you have any questions or further comments, I would appreciate it is you would contact me immediately. Thank you for your assistance.
Very truly yours,
cc: (redacted)