1940 Act

SULLWAN CROMWELL

NEW YORK TELEPHONE 212 5564000

TEL 62694 INTERNATIONAL 127615 IDOMEST1C

____ CASLE ADDRESS LADYCOUPT NEW YORK f2ai9id4faoJ/OOO4

250 PARK AVENUE NEW YORK 10177

L....C.9 1775 PENNSYLVANIA AVE. WASHINOTON 20005

PLACE VEND8ME 75001 PARIS

SOUTH F.OWEP STREET LOS ANGELES 9007

____________ IRONMONOER LANE LONDON EC2V SEY

STREET MCLROURNE 3000 ASSoCIATED P1RN

June 26 1987 Avai1Th11

Securities and Exchange Commission

Washington D.C 20549

Attention Office of Chief Counsel

Division of Investment Management

Re United Bankers Inc

Dear Sirs

On behalf of United Bankers Inc and Drexel

Burnham Lambert we are writing to request advice to the

effect that the Division of Investment Management will not

recommend that the Commission take any action if without

effecting registrations under the Investment Company Act of

1940 as amended the 1940 Act with respect to any person

in reliance upon Section 3c thereof in connection

with the transaction more fully described below United

Bankers Inc Texas bank holding company United Bank

ers acts as sponsor the Sponsor of business Trust

the Trust at least 80% of the assets of which based

upon book value as shown on the Trusts opening balance

sheet prepared in accordance with generally accepted

accounting principles GAAP would initially be comprised

of real estatesecured loans Real Estate Loans and real
Securities and Exchange Commission 2-

estate fee interests Real Estate acquired by the Trust

from bank subsidiaries the Subsidiaries of United Bank

ers Inc The Real Estate Loans and Real Estate are collec

tively herein called the Real Estate Assets and the Real

Estate Assets and their proceeds together with the other

assets of the Trust described below under Description of

the Pool are herein called the Assets or the Pool

Approximately onehalf of the Real Estate Assets and other

loan assets included in the Pool will be nonperforming

assets of the Subsidiaries originated by them in the

ordinary course of their banking business the remaining

Assets will be performing loans originated by them in the

ordinary course of their banking business

Description of the Transaction

The Trust will be formed pursuant to Trust

Agreement the Trust Agreement to be entered into between

the Sponsor and an unaffiliated bank the Owner Trustee

Pursuant to the Trust Agreement the Trust at its formation

will issue to the Sponsor certificates of beneficial

interest the Certificates representing fractional

undivided interests in the Pool Shortly after its

formation the Trust will issue one or more series of notes

the Notes pursuant to an indenture the Indenture

with trustee the Note Trustee unaffiliated with the
Securities and Exchange Commission 3--

Sponsor or the Owner Trustee and use the proceeds of the

Notes to buy the Assets to be included in the Pool from the

Subsidiaries The Assets will be pledged by the Trust to

the Note Trustee for the benefit of Noteholders under the

Indenture

The Notes will not be redeemable at the option of

the holders The Notes may be subject to prepayment but

only to the extent that the Trust has on hand moneys repre

senting payments and collections on the Real Estate Assets

and other assets in the Pool

The Notes will initially be issued in private

placement to institutional investors Under one or more

private placement purchase agreements the Sponsor and the

Owner Trustee will commit to cause to become effective as

promptly as possible registration statement on Form S-il

with respect to the Notes under the Securities Act of 1933

as amended the 1933 Act covering secondary sales of the

Notes by the initial investors Accordingly the Indenture

will comply with the provisions of the Trust Indenture Act

of 1939 as amended Other terms of the registration rights

in favor of the initial investors including the period for

which the registration statement will initially be kept in

effect will be negotiated with the initial investors
Securities and Exchange CommiSsion

4-

ConcurrentlY with or shortly after the issuance by

the Trust of the Notes the Sponsor will distribute the

Certificates as dividend to its approximatelY 2100 share

holders Consequently the Trust will be reporting

company under the Securities Exchange Act of 1934 as

amended the 1934 Act

Responsibility for managing the Trusts assets

including collecting on the Assets and making determinations

as to when Real Estate Loans should be foreclosed or Real

Estate sold will reside with an administrator the Admin

istrator anticipated to be either United Bankers or

subsidiary of United Bankers Prior to or contemporaneouslY

with the issuance by the Trust of the Notes and purchase of

the Assets with the proceeds thereof the Trust will enter

into an administration agreement the Administration Agree

ment with the Administrator Pursuant to that Agreement

the Administrator will have responsibility for liquidating

and collecting upOfl the Assets as aforesaid preparing

financial statements for the Trust and preparing on behalf

of the Trust other filings and reports required under the

Indenture or applicable law including the 1934 Act The

Trustee acting on behalf of holders of Certificates will

have authority to substitute another Administrator if the
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Administrator defaults in its obligations under the

Administration Agreement

Under the Administration Agreement the Trust will

irrevocably instruct the Administrator to remit all payments

and collections on the Assets directly to the Note Trustee

Under the Indenture cash collections so remitted to the

Note Trustee will be maintained by the Note Trustee in

collateral account the Collateral Account under the

Indenture and used from time to time to make payments of

principal and interest if any on the Notes

Under the Administration Agreement or other agree

ment the Sponsor or the Administrator will have the author

ity to make shortterni advances Advances to the Trust

The Sponsor or the Administrator may make such Advances only

where and to the extent that as of specified date shortly

prior to principal or interest payment date on the Notes

Note Payment Date the Administrator determines that

the Note Trustee will not have sufficient funds on such

Note Payment Date in the Collateral Account to make the

payment then due on the Notes and ii based upon contract

to sell or otherwise dispose of or collect upon an Asset

entered into by the Administrator on or prior to the related

Note Payment Date which the Administrator in its reasonable

judgment expects to be fully performed by the other party
Securities and Exchange CoTnmisSiOfl

thereto such Asset the Current Payment Asset will

generate sufficient funds within specified number of days

yet to be determined after such Note Payment Date to cover

any deficiency as of such Note Payment Date In the event

the Sponsor or the Administrator makes such Advances the

Trusts obligation to repay the Sponsor or the Administrator

will be with recourse only to the related Current Payment

Asset but the Sponsor or the Administrators claim to

proceeds generated by such Current Payment Asset will be

prior to the claim of the NoteholderS

Description of the Pool

Immediately after conveyance of the Pool to the

Trust at least 80% of the Trusts assets calculated on the

basis of book value as shown on an audited balance sheet for

the Trust prepared in accordance with GAAP as of the date of

such conveyance and after giving effect thereto will

consist of Real Estate Assets Because condition to

consummating the transaction is that the sale by the Subsid

iaries to the Trust of the Real Estate Assets be treated by

the Subsidiaries as sale for accounting purposes on the

opening balance sheet of the Trust the bookvalUe of the

ealEstateAS5etS will be theirarket-alUe
Securities and Exchange Commission

As further described below the Real Estate Loans

will be evidenced by promissory notes secured primarily by

first mortgages or deeds of trust wMortgagesR Each Real

Estate Loan will represent an entire issue of loan origi

nated by the Subsidiaries in an ordinary commercial banking

transaction and will not be of type for which secondary

markets exist at the present time The proceeds of each

Real Estate Loan are to have been used to acquire

construct carry or renovate the property subject to the

related Mortgage Tpon conveyance of the Pool to the rust

each Loan will be fully collateralized by the real estate

related thereto

At the closing for the issuance by the Trust of

the Notes the concurrent purchase by the Trust with the

proceeds of the Notes of the Assets from the Subsidiaries

and related transactions appropriate steps will be taken to

including the Real Estate

Assets from the Subsidiaries-tO--the Trust end ii

establish end perfect the pledge by the Trust of the Assets

including the Real Estate Assets tothe Note Trustee for

the enef it iotehclaerS he steps ecessary to

accomplish the toregoing ill4epend upon state Iaw

considerations but-are -likely to -at easttnclude in

addition to appropriate bills of sale assignments and other
Securities and Exchange Commission 8-

documents tjt1eand -trans fer--- tn .t.hecase -ofeal state

oans delivery of the original -mortgage note secured 9y

each Mortgage to the ote TrustØe or third party eustodian

for the Note Trustee which maybe serviceCOrPOrati0n

subsidiary of the Sponsor- and execution and -delivery by

the -Subsidiaries --to -the Trust -and -by -the Trust acting

through the Owner Trustee to the Note Trustee of assign

ments of Mortgagesinrec0rdable iforin ith recordation

the assignments being effected if necessary -under state law

in order to establish and perfect the ownership by the -Trust

of the Real Estate loans and their pledge to the Owner

Trustee It is anticipated that payment or discharge of the

Real Estate Loans secured by each Mortgage will be accom

plished through payments pn the Real Estate Loans and

through foreclosure of the related Mortgages

In addition to the Real Estate Assets at the time

the Pool is conveyed to the Trust the remaining 20% of the

Pool again based upon GAAP and shown on the Trusts opening

balance sheet will consist of selected performing and

non-performing loans purchased by the Trust from the Subsid

iaries which do not qualify as Real Estate Assets Other

Loan Assets or moneymarket instruments Investment

Assets and together with the Other Loan Assets Other

Assets The Other Loan Assets may be secured or unsecured
Securities and Exchange CommissiOn

and if secured may be secured by partial interests or

participations in real estate or by nonreal estate related

personal property The Investment Assets will consist of

shortterm obligations of the U.S Government and agencies

thereof bank deposits prime commercial paper and other

cash equivalents Although the Assets included in the Pool

will include the Trusts rights under the Administration

Agreement and the Equity Contract referred to and further

described below those contract rights will be reflected as

having either no or nominal value on the basis of GAAP on

the Trusts opening balance sheet

In addition to the Administration Agreement and

any agreement providing for the Advances the Trust will be

the beneficiary of an agreement the Equity Commitment of

United Bankers providing that if on any Note Payment Date

the funds in the Collateral Account after giving effect to

the proceeds of any Advances will not be sufficient to make

the payment then due United Bankers will provide to the

Trust either such number of its shares of common stock to

be sold by the Trust or the proceeds of the sale of such

number of its shares of common stock as would be sufficient

to enable the Trust to make the full payment due on such
Securities and Exchange CommiSSion 10-

Note Payment Date If shares instead of cash are

provided to the Trust the Trust will enter into sale

agreement pursuant to which immediately upon issuance of

shares to the Trust the shares are to be sold and proceeds

thereof delivered to the Trust The Trust will not have any

option to receive cash rather than shares that

determination will be made as an organizational matter prior

to the sale of the Notes

The transaction is structured and priced on the

premise that United Bankers will never have to issue any of

its shares pursuant to the Equity Commitment Accordingly

it will be condition to consummatiOn of the transaction

that on the basis of GAAP the opening balance sheet of the

Trust the Equity Commitment have nominal value

The Pool will be fixed at the time the Sponsor

conveys the Pool to the Trust No substitution or exchange

of the assets of the Pool will be permitted The Trust will

Alternatively the Equity Commitment may be pledged to

third-party guarantor or surety which will guarantee

payment of the deficiency in cash such obligation to

be secured by the Equity Commitment

Any guaranty or surety guaranteeing the payment of the

deficiency as described in the previous footnote will

also have nominal value at the opening balance sheet

of the Trust on the basis of GAAP
Securities and Exchange CouuniSSiOfl -11-

terminate automaticallY upon the discharge or other

disposition of all of its assets and fulfillment of all of

its obligations

The Trust will conduct only the business relating

tpJ.ts ownersh4p nd.UquidatiOfl0f the Assets and issuance

and theCerti1iVRteS The Trust will terminate

on date shortly after the later of payment in full of

the Notes or ii final liquidation of all the Real Estate

Assets and Other Assets Any assets remaining in the Pool

upon full satisfaction of the Notes will be liquidated into

cash with the proceeds of such liquidation then distributed

to such holders of Certificates

Investment Company Act Exemption

We believe that the entity to be created by the

Trust Agreement should be regarded as falling within the

exemption provided in Section 3c of the Investment

Company Act That section excludes from the definition of

an investment company any company not issuing redeemable

securities faceamount certificates of the installment type

or periodic payment plan certificates which is primarily

engaged in purchasing or otherwise acquiring mortgages

and other liens on and interests in real estate
Securities and Exchange Commission 12

In our view exemption of the Trust under

Section 3c is consistent with the positiOnS the

Staff has taken in the past In Merrill Lynch Pierce

Fenner Smith avail November 1981 the Staff took

no-action position under Section 3c with respect to

pool comprised of at least 65% whole loans secured by

first mortgages See also Hereth Orr Jones avail

October 25 1982 The Pool in the present case will

consist of at least 80% real estate and wholeloan real

estate interests secured by first mortgages In Salomon

Brothers Inc avail June 17 1985 the Staff took

no-action position under 3c Act provided that 55% of

pools assets were comprised of whole qualifying real

estate loan interests and .45% of the assets while real

estate related were comprised of nonqualifying real estate

interests See also Security Mortgage Acceptance Corp

avail March 24 1986 Ray Ellison Mortgage Acceptance

Corp avail May 1986 Bear Stearns Co Inc avail

Oc1ober 1986 In addition in American Commonwealth

Company avail May 14 1971 the Staff took no-action

position under 3c with respect to an issuer whose

assets were comprised of 93% qualifying real estate bonds

and of 7% nonqualifYiflg assets including preferred stock

We believe that Pool comprised of 80% qualifying real
Securities and Exchange Commission 13

estate interests and 20% other interests should be

considered to be primarily engaged in .. purchasing or

otherwise acquiring loans on and interests in real estate

No-Action Request

We therefore respectfully request the Staff to

indicate that it will not recommend action to the Commission

if registration under the 1940 Act is not effected with

respect to any person

We believe that none of the other aspects of the

proposed transaction give rise to concerns resulting in

regulation appropriate under the Investment Company

Act For example the Staff has taken no-action

positions under 3c in other instances in which

the Sponsor has acted as administrator in servicing

realestate loan pool See e.g CMO Mortgage Corp

avail July 22 1985 In addition the Staff has

taken no-action positions under 3c in cases

involving prepayment of Notes out of cash flow see

___ U.S Home Finance Corp avail May 30 1980

and the Sponsors commitment to provide the Pool with

funds through shortterm advances see e.g Premier

Mortgage Corp avail March 14 1983 CMO Mortgage

Corp supra Finally theexistence of the Equity

Commitment does not in our view affect the

applicability of the exemption provided by

Section 3c5C since at the time the Pool is

conveyed to the Trust the Equity Commitment will be of

nominal value will be included in the proposed 20%

non-real estate interests in the Pool and will not

affect the right of the Trust to direct access to the

Assets upon default
Securities and Exchange CommissiOn -14-

Because United Bankers and Drexel Burnhaiu Lainbert

are anxious to proceed with the formation of the Pool and

the distribution of the Notes and Certificates we would

appreciate response to the request made hereby as promptly

as practicable If for any reason the staff is disposed not

to grant the requested noaction positions we request an

opportunity to discuss this situation with the staff prior

to the issuance of any formal letter

We thank you for your attention to this matter

If you have any questions or if we may provide further

information please telephone John Baumgardner Jr

2125583866 Rodgin Cohen 2125583534 Mark

Welshimer 2125583669 or Ellen Porges 2125583849 of

this office

Very truly yours

Jcri Bawngardner Jr
SULLIVAN CROMWELL BECD S.E.C.J

AUG181987

NOpTELEpH0NE23S.4O00

250 PARI AVENUE NEW YORI 10177

775 PENNSYLVANIA AVE. WASHINGTON 20006

444 SOUTH PLOWER STREET LOS ANGELES 90017

PlACE VENDbME 75001 PARIS

IRONMONGER LANE LONDON EC2V SET

140 WiLLIAM STREET MELBOURNE 3000 ASSOCIATED FIRM

August 18 1987

Securities and Exchange Commission

450 Fifth Street N.W

Washington D.C 20549

Attention Elisabeth Tsai Esq

Ladies and Gentlemen

This letter supplements our letter of June 26

1987 on behalf of United Bankers Inc and Drexel Burnham

Lambert requesting your concurrence among other things in

our opinion that the Trust described therein at least 80%

of the assets of which based upon the Trusts opening

balance sheet prepared in accordance with generally accepted

accounting principles GAAP consist of qualifying real

estate loans Real Estate Loans and real estate together

Real Estate Assets is exempt from registration under the

Investment Company Act of 1940 the 1940 Act by reason of

Section 3c thereof Capitalized terms shall have

the same meanings herein as in our June 26 1987 letter

The staff has requested clarification with respect

to certain matters concerning certificates of beneficial

interest in the Trust Certificates the method of
Securities and Exchange CommissiOn 2-

valuing the Real Estate Loans and other loans collectively

Loans contained in the Trusts assets collateral for

repayment of the Loans and the terms of notes Notes

issued by the Trust The following is response to the

request for additional information

Certificates The Certificates evidence residual bene

ficial ownership interests in the Trust i.e the

equity ownership of the Trust The initial-equity

pftheTrus based upon the Trusts opening balance

sheet prepared in accordance with GAAP wilibebetween

.% and 2% of k.he Trusts totalassets Distributions

will be made to holders of the Certificates only if and

to the extent that the assets of the Trust produce more

proceeds than required for the operation of the Trust

and repayment of the Notes Except with respect to

mandatory redemption upon liquidation and termination

of the Trust the Certificates will not be redeemable

at any time either at the option of the holder or the

Trust

Value of Loans As stated in our letter dated June 26

1987 at least 80% of the Trusts assets Assets

based upon its opening balance sheet prepared in accor

dance with GAP will consist of Real Estate Assets

Because the acquisition by the Trust of the Assets will
Securities and Exchange Commission 3-

be accounted for as purchase with substantially all

of the cash raised by the Trust from the issuance of

the Notes being used to purchase the Assets in

accordance with GAAP the value eachssetQILe

7ust openingalance sheet w.iUbe baseUpoA

allocation by-the-Trustvf the total purchase price

among the ssetw1n

values again as determined by the Trust The conse

quence is that Loans are not necessarily valued in

accordancewith their ptincipal amountbutinstead have

value allocated to them based upon judgments as to

potential cash flow collectibility and the relation

ship of the 4nterest rate1orne by each Loan to the

interest rate borne -by other Loans having similar

co.lectibility characteristics Such GAAP accounting

will be required to be used by the Trust in connection

with financial reporting and filings by the Trust made

with the Securities and Exchange Commission

Collateral for the Real Estate Loans At page of our

letter dated June 26 1987 we stated that the Real

Estate Loans would be primarily secured by first

mortgages and deeds of trust Mortgages You

inquired as to what is meant by primarily with
Securities and Exchange Commission 4-

respect whether the collateral underlying the Mortgages

consists of real estate or other property

Each of the Real Estate Loans was made for the

purpose of acquiring constructing carrying or

renovating real estate Each is secured by Mortgage

representing lien on real estate improvements

thereon leases of real property and/or fixtures

constituting interests in real property under state law

together Real Estate Collateral as well as on

other incidental personal property and fixtures not

constituting interest in real property under state law

NonReal Estate Collateral The Real Estate

Collateral in each instance at the time the Assets are

transferred to the Trust will have value of at least

100% of the value of the related Real Estate Loan on

the books of the Trust on the basis of GAAP In no

case with respect to qualifying Real Estate Loans did

the originating subsidiary of the Sponsor look to

Non-Real Estate Collateral in originating Real Estate

Loan The word primarily insofar as it relates to

collateral under the Mortgages was included to take

note of the fact that for lending institutions

generally including the originating subsidiaries the

loan documentation for real estate loans often includes
Securities and Exchange Commission 5-

broad descriptions of liens on collateral which may be

broad enough to pick up some NonReal Estate

Collateral This is particularly true with respect to

commercial real estate loans such as those which will

be owned by the Trust as opposed to residential real

estate lending loans for which mortgages ordinarily do

not cover Non-Real Estate Collateral

The Real Estate Loans which are expected to be

purchased by the Trust were made in the ordinary course

of the originating subsidiarys real estate lending

business Many of the Real Estate Loans are neverthe

less secured by NonReal Estate Collateral pursuant to

broad standard security granting clauses included in

mortgages perfected by filings under the Uniform

Commercial Code The originating subsidiaries do not

look to Non-Real Estate Collateral for recourse on the

Notes except after foreclosure and sale on the Real

Estate Collateral It would not as practical matter

be possible either to identify such Non-Real Estate

Collateral or to separate the related Real Estate Loan

into two parts part secured by Real Estate

Collateral and part secured by Non-Real Estate

Collateral because the expense and time required to

prepare and implement appropriate documentation to
Securities and Exchange Commission

exclude NonReal Estate Collateral is disproportionate

to the significance of the Non-Real Estate Collateral

Although it might be possible for the Trust to simply

waive its rights to and release any NonReal Estate

Collateral that seems unwarranted and unnecessary in

view of the purely incidental nature of any NonReal

Estate Collateral Accordingly we submit that the

incidental presence of any NonReal Estate Collateral

which is no more likely to be present in the case of

the Real Estate Loan than in the case of many other

commercial mortgage loans originated by banks ought

not to affect the categorization of the Real Estate

Loans as qualifying real estate loans under Section

3c5C

Terms of Notes

Nature of Obligation The Notes will be

serial zero coupon obligations maturing in approx

imately one-year intervals

Security All Assets of the Trust

will be pledged by the Trust to the Note Trustee

as security for the repayment of the Notes under

an indenture complying with the Trust Indenture

Act of 1939 as amended Such security will

equally and ratably secure the payment of all
Securities and Exchange Commission 7-

Notes The Note Trustee will have the right to

collect and foreclose on the Assets until full

payment on the Notes After the full payment on

the Notes any collection on the Assets will be

for the benefit of the Certificate holders

Prepayment If the Sponsor determines

that the Notes should be prepayable they will be

prepayable only from excess cash flow at the

option of the Trust Holders of Notes will have

no redemption or prepayment rights

If you have any questions with respect to the

above please do not hesitate to call any of the persons

mentioned in our letter of June 26

Sincerely

Ellen rges
SULLIVAN CROMWELL

NEW YORK TLEPMONE 1212 555-4000 1ALZIL9L 4jy1g1OOo1/

TELECOPIER ZI2 555-3555

250 PARK AVENUE NEW YORK 10177

1775 PENNSYLVANIA AVE. WASIIINOTON 2000$

44 SOUTH fl.OWER STqEET LOS AN0EL 90071

P1-ACE VEND�NE 75001 PARIS

IRONMONOER LANE LONDON ECZV SET

ASS0CIAT OIYICES

140 WIUJAN STREET MELSOURNE 3000

2-I MARUNOUCHI I- CHOME CPIIY0DA-KU TOKYO tOO

November 1987

Securities and Exchange Commission

450 Fifth Street N.W

Washington D.C 20549

Attention Elisabeth Tsai Esq

Re United Bankers Inc

Ladies and Gentlemen

In accordance with the conversation between Ellen

Porges and Elisabeth Tsai on October 1987 regarding the

noaction reqtiest set forth in previous correspondence dated

June 26 1987 and August 18 1987 please be advised that

the assets of the trust created by United Bankers Inc in

connection with the proposed transaction will consist of

at least 55 valued as described in the

previous correspondence real estate fee

interests and/or loans secured exclusively by

real estate

at least 25% valued as described in the

previous correspondence loans secured

primarily by real estate subject to

reduction below 25% to the extent that the

value of assets described in above exceed

55% of the Trust and

up to 20% miscellaneous investments
Thank you for your attention to this matter If

you have any questions or can provide further information

please telephone any of the persons mentioned in the

previous correspondence

Sincerely

Joyce
\vd

Or Ref No 87354CC

RESE CFFICE CF CHI XJNSJ United Bankers Inc

DIVISION OF IN1ES1ENT MAN File No 132-3

We ou1d not recanmer any enforcement action to the Camniss ion if

without registration under the Invesent Oznpany ct of 1940 of any person

in reliance upon section 3c of the kt United Bankers Inc acts as

sponsor of prc�osed business trust Trusts that will issue certificates

and notes neither of which will be redenab1e at the option of the holders

air position is based on the representations in your letters of June 26

August 18 and Novfflnber 1987 particularly that at least 55% of the

assets of the Trust will consist of real estate fee interests or loans

secured exclusively by real estate or both at least 25% will consist

of loans secured primarily by real estate subject to reduction below 25%

to the extent that the value of the assets described in above exceed

55% and up to 20% will consist of miscellaneous investments

In responding to your request this Division has not reviewed or passed

upon the appropriateness of the accounting treatment for the transactions as

set forth in your letters

2ta

Mary Podesta

chief Counsel