Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices 5261

1APCo, I&M and OPCo are sometimes referred to

herein individually as a ‘‘Subsidiary’’ or

collectively as ‘‘Subsidiaries.’’

2The five series of APCo Preferred Stock consist

of a 41⁄2% series, of which 298,150 shares are

outstanding (‘‘41⁄2% Series’’); a 5.90% series, of

which 500,000 shares are outstanding (‘‘5.90%

Series’’); a 5.92% series, of which 600,000 shares

are outstanding (‘‘5.92% Series’’); a 6.85% series, of

which 300,000 shares are outstanding (‘‘6.85%

Series); and a 7.80% series, of which 500,000 shares

are outstanding (‘‘7.80% Series).

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 35–26656]

Filing Under the Public Utility Holding

Company Act of 1935, as amended

(‘‘Act’’)

January 29, 1997.

Notice is hereby given that the

following filing(s) has/have been made

with the Commission pursuant to

provisions of the Act and rules

promulgated thereunder. All interested

persons are referred to the application(s)

and/or declaration(s) for complete

statements of the proposed

transaction(s) summarized below. The

application(s) and/or declaration(s) and

any amendments thereto is/are available

for public inspection through the

Commission’s Office of Public

Reference.

Interested persons wishing to

comment or request a hearing on the

application(s) and/or declaration(s)

should submit their views in writing by

February 24, 1997, to the Secretary,

Securities and Exchange Commission,

Washington, D.C. 20549, and serve a

copy on the relevant applicant(s) and/or

declarant(s) at the address(es) specified

below. Proof of service (by affidavit or,

in case of an attorney at law, by

certificate) should be filed with the

request. Any request for hearing shall

identify specifically the issues of fact or

law that are disputed. A person who so

requests will be notified of any hearing,

if ordered, and will receive a copy of

any notice or order issued in the matter.

After said date, the application(s) and/

or declaration(s), as filed or as amended,

may be granted and/or permitted to

become effective.

American Electric Power Company,

Inc, et al. (70–8991)

Notice of Proposal to Amend Articles of

Incorporation and Authorize Registered

Holding Company to Acquire Preferred

Stock of Utility Subsidiaries; Order

Authorizing Solicitation of Proxies

American Electric Power Company,

Inc. (‘‘AEP’’), 1 Riverside Plaza,

Columbus, Ohio 43215, a registered

holding company, and its wholly-owned

public utility subsidiaries, Appalachian

Power Company (‘‘APCo’’), 40 Franklin

Road, Roanoke, Virginia 24022, Indiana

Michigan Power Company (‘‘I&M’’), One

Summit Square, Fort Wayne, Indiana

46801, and Ohio Power Company

(‘‘OPCo’’), 301 Cleveland Avenue, S.W.,

Canton, Ohio 44702, have filed an

application-declaration under sections

6(a), 7, 9(a), 10 and 12(b)–(e) of the Act

and rules 43, 44, 51, 54, 62 and 65

thereunder.1

APCo

APCo has outstanding 13,499,500

shares of common stock, no par value

per share (‘‘APCo Common Stock’’), all

of which are held by AEP. APCo’s

outstanding preferred stock consists of

2,198,150 shares of cumulative

preferred stock, no par value per share

(‘‘APCo Preferred Stock’’), issued in five

series 2 (each, an ‘‘APCo Series’’), all of

which are publicly held. APCo Common

Stock and APCo Preferred Stock of each

APCo Series are entitled to one vote per

share. No other class of APCo equity

securities is outstanding.

APCo’s restated articles of

incorporation (‘‘APCo Articles’’)

currently provide that, so long as any

shares of APCo’s cumulative preferred

stock in any series are outstanding,

without the consent of the holders of a

majority of the total number of votes

which holders of the outstanding shares

of APCo Preferred Stock of all APCo

Series are entitled to cast, APCo shall

not issue or assume any evidence of

indebtedness, secured or unsecured

(other than for purposes of refunding or

renewing outstanding evidences of

indebtedness or redeeming or otherwise

retiring all outstanding shares of APCo

Preferred Stock and other than first

mortgage bonds and certain secured

indebtedness) if, immediately after such

issue or assumption, (a) the total

principal amount of all such

indebtedness issued or assumed by

APCo and then outstanding would

exceed 20% of the aggregate of (1) the

total principal amount of all thenoutstanding bonds or other secured debt

of APCo (other than certain bonds

issued under a mortgage) and (2) the

stated capital and surplus of APCo as

stated in APCo’s books, or (b) the total

principal amount of all unsecured debt

would exceed 20% of the aggregate of

(1) the total principal amount of all

then-outstanding bonds or other secured

debt of APCo and (2) the stated capital

and surplus of APCo as stated on

APCo’s books, or (c) the total

outstanding principal amount of all

secured debt of maturities of less than

ten years would exceed 10% of the

aggregate of (1) the total principal

amount of all then-outstanding bonds or

other secured debt of APCo and (2) the

stated capital and surplus of APCo as

stated on APCo’s books (‘‘APCo

Restricted Provisions’’).

APCo proposes to solicit proxies from

the holders of outstanding shares of

APCo Common Stock and APCo

Preferred Stock (‘‘APCo Proxy

Solicitation’’) for use at a special

meeting of its stockholders (‘‘APCo

Special Meeting’’) to consider a

proposed amendment to APCo’s Articles

that would eliminate in its entirety the

APCo Restriction Provision (‘‘APCo

Proposed Amendment’’) from the APCo

Articles. Approval of the APCo

Proposed Amendment requires the

affirmative vote at the APCo Special

Meeting of the holders of not less than

two-thirds of the total number of the

then-outstanding shares of (1) the APCo

Preferred Stock of all APCo Series,

voting together as one class, and (2) the

APCo Common Stock. AEP will vote its

shares of APCo Common Stock in favor

of the APCo Proposed Amendment.

If the APCo Proposed Amendment is

adopted, APCo would make a special

cash payment of $1.00 per share (‘‘APCo

Cash Payment’’) to each holder of APCo

Preferred Stock who voted (in person by

ballot or by proxy) his shares of APCo

Preferred Stock (each, an ‘‘APCo Share’’)

in favor of the APCo Proposed

Amendment at the APCo Special

Meeting (except that no APCo Cash

Payment will be made with respect to

any APCo Share validity tendered

pursuant to the concurrent tender offer

described below). APCo will disburse

APCo Cash Payments out of its general

funds following adoption of the APCo

Proposed Amendment.

Concurrently with the APCo Proxy

Solicitation, and subject to the terms

and conditions stated in an Offer to

Purchase and Proxy Statement and

accompanying Letter of Transmittal

(together, ‘‘APCo Offer Documents’’),

AEP proposes to make a cash tender

offer (‘‘APCo Tender Offer’’) to acquire

any and all outstanding shares of APCo

Preferred Stock and each APCo Series,

at cash purchase prices which AEP

anticipates will include a market

premium for each APCo Series (each, an

‘‘APCo Purchase Price’’). The APCo

Tender Offer consists of separate offers

for each of the five APCo Series, with

the offer for each APCo Series being

independent of the offer for any other

APCo Series. The applicable APCo

Purchase Price and the other terms and

conditions of the APCo Tender Offer

apply equally to all holders of APCo

Preferred Stock of each APCo Series

(‘‘APCo Preferred Stockholders’’).
5262 Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices

3The seven Series of I&M Preferred Stock consist

of a 41⁄8% series, of which 119, 767 shares are

outstanding (‘‘41⁄8% Series’’); a 4.12% series, of

which 40,000 shares are outstanding (‘‘4.12%

Series’’); a 4.56% series, of which 60,000 shares are

outstanding (‘‘4.56% Series’’); a 5.90% series, of

which 400,000 shares are outstanding (‘‘5.90

Series’’), 61⁄4% series, of which 300,000 shares are

outstanding (‘‘61⁄4% Series’’); a 67⁄8% series, of

which 300,000 shares are outstanding (‘‘67⁄8%

Series’’); and a 6.30% series, of which 350,000

shares are outstanding (‘‘6.30% Series’’).

4 ‘‘Capitalization’’ means an amount equal to the

sum of (i) the total principal amount of all bonds

or other secured debt securities issued or assumed

by I&M outstanding at the time of determination

and (ii) the aggregate of the stated capital of all

classes of I&M stock outstanding at the time of

determination and surplus of I&M at such time.

5The seven series of OPCo Preferred Stock

consist of a 41⁄2% series, of which 202,403 shares

are outstanding (‘‘41⁄2% Series’’); a 4.08% series, of

which 42,575 shares are outstanding (‘‘4.08%

Series’’); a 4.20% series, of which 51,975 shares are

outstanding (‘‘4.20% Series’’); a 4.40% series, of

which 88,363 shares are outstanding (‘‘4.40%

Series’’); a 5.90% series, of which 404,000 shares

are outstanding (‘‘5.90% Series’’); a 6.02% series, of

which 395,000 shares are outstanding (‘‘6.02%

Series’’); and a 6.35% series, of which 300,000

shares are outstanding (‘‘6.35% Series’’).

AEP anticipates that the APCo Tender

Offer will expire on February 28, 1997,

the date of the APCo Special Meeting

(‘‘APCo Expiration Date’’), unless

otherwise extended. The APCo Tender

Offer is not conditioned upon any

minimum number of shares of APCo

Preferred Stock being tendered. APCo

Preferred Stockholders who wish to

tender their APCo Preferred Stock

pursuant to the APCo Tender Offer are

not required to vote in favor of the APCo

Proposed Amendment; however, one of

the conditions of the APCo Tender Offer

requires that the APCo Amendment be

approved and adopted at the APCo

Special Meeting.

I&M

I&M has outstanding 1,400,000 shares

of common stock, par value $100 per

share (‘‘I&M Common Stock’’), all of

which are held by AEP. I&M’s

outstanding preferred stock consists of

1,569,767 shares of cumulative

preferred stock, par value $100 per

share (‘‘I&M Preferred Stock’’), issued in

seven series 3 (each, an ‘‘I&M Series’’),

all of which are publicly held. I&M

Common Stock and I&M Preferred Stock

of each I&M Series are entitled to one

vote per share. No other class of I&M

equity securities is outstanding.

I&M’s amended articles of acceptance

(‘‘I&M Articles’’) currently provide that,

so long as any shares of I&M’s

cumulative preferred stock of any series

are outstanding, without the consent of

the holders entitled to cast a majority of

the total number of votes which holders

of the outstanding shares of I&M

Preferred Stock of all I&M Series are

entitled to cast, I&M shall not issue or

assume any unsecured debt securities

(other than for purposes of the

reacquisition, redemption or other

retirement of any evidences of

indebtedness previously issued or

assumed by I&M or the reacquisition,

redemption or other retirement of all

outstanding shares of I&M Preferred

Stock) if, immediately after such issue

or assumption, the total principal

amount of all unsecured debt securities

(other than the principal amount of all

long-term unsecured debt securities not

in excess of 10% of the capitalization of

I&M 4) issued or assumed by I&M and

then outstanding would exceed 10% of

the capitalization of I&M (‘‘I&M

Restriction Provision’’).

I&M proposes to solicit proxies from

the holders of outstanding shares of I&M

Common Stock and I&M Preferred Stock

(‘‘I&M Proxy Solicitation’’) for use at a

special meeting of its stockholders

(‘‘I&M Special Meeting’’) to consider a

proposed amendment to I&M Articles

that would eliminate in its entirely the

I&M Restriction Provision (‘‘I&M

Proposed Amendment’’) from the I&M

Articles. Approval of the I&M Proposed

Amendment requires the affirmative

vote at the I&M Special Meeting of the

holders of not less than two-thirds of the

total number of the then-outstanding

shares of (1) the I&M Preferred Stock of

all I&M Series, voting together as one

class, and (2) the I&M Common Stock.

AEP will vote its shares of I&M

Common Stock in favor of the I&M

Proposed Amendment.

If the I&M Proposed Amendment is

adopted, I&M would make a special

cash payment of $1.00 per share (‘‘I&M

Cash Payment’’) to each holder of I&M

Preferred Stock who voted (in person by

ballot or by proxy) his shares of I&M

Preferred Stock (each, an ‘‘I&M Share’’)

in favor of the I&M Proposed

Amendment at the I&M Special Meeting

(except that no I&M Cash Payment will

be made with respect to any I&M Share

validly tendered pursuant to the

concurrent tender offer described

below). I&M will disburses I&M Cash

Payments out of its general funds

following adoption of the I&M Proposed

Amendment.

Concurrently with the I&M Proxy

Solicitation, and subject to the terms

and conditions stated in an Offer to

Purchase and Proxy Statement and

accompanying letter of Transmittal

(together, ‘‘I&M Offer Documents’’), AEP

proposes to make a cash tender offer

(‘‘I&M Tender Offer’’) to acquire any and

all outstanding shares of I&M Preferred

Stock of each I&M Series, at cash

purchase prices which AEP anticipates

will include a market premium for each

I&M Series (each, an ‘‘I&M Purchase

Price’’). The I&M Tender Offer consists

of separate offers for each of the seven

I&M Series, with the offer for each I&M

Series being independent of the offer for

any other I&M Series. The applicable

I&M Purchase Price and the other terms

and conditions of the I&M Tender Offer

apply equally to all holders of I&M

Preferred Stock of each I&M Series (I&M

Preferred Stockholders’’).

AEP anticipates that the I&M Tender

Offer will expire on February 28, 1997,

the date of the I&M Special Meeting

(‘‘I&M Expiration Date’’), unless

otherwise extended. The I&M Tender

Offer is not conditioned upon any

minimum number of shares of I&M

Preferred Stock being tendered. I&M

Preferred Stockholders who wish to

tender their I&M Preferred Stock

pursuant to the I&M Tender Offer are

not required to vote in favor of the I&M

Proposed Amendment; however, one of

the conditions of the I&M Tender Offer

requires that the I&M Proposed

Amendment be approved and adopted

at the I&M Special Meeting.

OPCo

OPCo has outstanding 27,952,473

shares of common stock, no par value

per share (‘‘OPCo Common Stock’’), all

of which are held by AEP. OPCo’s

outstanding preferred stock consists of

1,484,316 shares of cumulative

preferred stock, par value $100 per

share (‘‘OPCo Preferred Stock’’), issued

in seven series 5 (each, an ‘‘OPCo

Series’’), all of which are publicly held.

OPCo Common Stock and OPCo

Preferred Stock of each OPCo Series are

entitled to one vote per share. No other

class of OPCo equity securities is

outstanding.

OPCo’s amended articles of

incorporation (‘‘OPCo Articles’’)

currently provide that, so long as any

shares of OPCo’s cumulative preferred

stock are outstanding, without the

consent of the holders of a majority of

the total number of votes which holders

of the outstanding shares of OPCo

Preferred Stock of all series are entitled

to cash, OPCo shall not issue or assume

any unsecured debt securities (other

than for purposes of the reacquisition,

redemption or other retirement of any

evidences of indebtedness previously

issued or assumed by OPCo or the

reacquisition, redemption or other

retirement of all outstanding shares of

OPCo Preferred Stock) if, immediately

after such issue or assumption, the total

principal amount of all unsecured debt

securities (other than the principal
Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices 5263

6 ‘‘Capitalization’’ means an amount equal to the

sum of (i) the total principal amount of all bonds

or other secured debt securities issued or assumed

by OPCo outstanding at the time of determination

and (ii) the aggregate of the stated capital of all

classes of OPCo stock outstanding at the time of

determination and surplus of OPCo at such time.

7AEP has agreed to pay the dealer managers a fee

of $.50 per share for any Shares tendered, accepted

for payment and paid for pursuant to the Tender

Offers, the Subsidiaries have agreed to pay the

dealer managers a fee of $.50 per share for any

Shares that are not tendered pursuant to the Tender

Offers but which vote in favor of the Proposed

Amendment, and AEP has agreed to reimburse the

dealer managers for their reasonable out-of-pocket

expenses, including attorneys’ fees.

In addition, AEP has agreed to pay soliciting

brokers and dealers a separate fee of (i) $1.50 per

share for any Shares of the APCo 41⁄2% Series, the

I&M 41⁄8% Series, 4.12% Series and 4.56% Series,

and the OPCo 41⁄2% Series, 4.08% Series, 4.20%

Series and 4.40% Series, tendered, accepted for

payment and paid for pursuant to the Tender Offers

(except that for transactions with beneficial owners

equal to or exceeding 5,000 Shares, AEP will pay

a solicitation fee of $1.00 per share for Shares of

such Series), and (ii) $.50 per share for the

remaining Shares of the APCo Series, I&M Series

and OPCo Series. The Subsidiaries will pay a

separate fee of $.50 per share for any of their Shares

of the APCo 41⁄2% Series, the I&M 41⁄8% Series,

4.12% Series and 4.56% Series, and the OPCo 41⁄2%

Series, 4.08% Series, 4.20% Series and 4.40%

Continued

amount of all long-term unsecured debt

securities not in excess of 10% of the

capitalization of OPCo 6) issued or

assumed by OPCo and then outstanding

would exceed 10% of the capitalization

of OPCo (‘‘OPCo Restriction Provision’’).

OPCo proposes to solicit proxies from

the holders of outstanding shares of

OPCo Common Stock and OPCo

Preferred Stock (‘‘OPCo Proxy

Solicitation’’) for use at a special

meeting of its stockholders (‘‘OPCo

Special Meeting’’) to consider a

proposed amendment to OPCo’s Articles

that would eliminate in its entirety the

OPCo Restriction Provision (‘‘OPCo

Proposed Amendment’’) from the OPCo

Articles. Approval of the OPCo

Proposed Amendment requires the

affirmative vote at the OPCo Special

Meeting of the holders of not less than

two-thirds of the total number of the

then-outstanding shares of (1) the OPCo

Preferred Stock of all OPCo Series,

voting together as one class, and (2) the

OPCo Common Stock. AEP will vote its

shares of OPCo Common Stock in favor

of the OPCo Proposed Amendment.

If the OPCo Proposed Amendment is

adopted, OPCo would make a special

cash payment of $1.00 per share (‘‘OPCo

Cash Payment’’) to each holder of OPCo

Preferred Stock who voted (in person by

ballot or by proxy) his shares of OPCo

Preferred Stock (each, an ‘‘OPCo Share’’)

in favor of the OPCo Proposed

Amendment at the OPCo Special

Meeting (except that no OPCo Cash

Payment will be made with respect to

any OPCo Share validly tendered

pursuant to the concurrent tender offer

described below). OPCo will disburse

OPCo Cash Payments out of its general

funds following adoption of the OPCo

Proposed Amendment.

Concurrently with the OPCo Proxy

Solicitation, and subject to the terms

and conditions stated in an Offer to

Purchase and Proxy Statement and

accompanying Letter of Transmittal

(together, ‘‘OPCo Offer Documents’’),

AEP proposes to make a cash tender

offer (‘‘OPCo Tender Offer’’) to acquire

any and all outstanding shares of OPCo

Preferred Stock of each OPCo Series, at

cash purchase prices which AEP

anticipates will include a market

premium for each OPCo Series (each, an

‘‘OPCo Purchase Price’’). The OPCo

Tender Offer consists of separate offers

for each of the seven OPCo Series, with

the offer for each OPCo Series being

independent of the offer for any other

OPCo Series. The applicable OPCo

Purchase Price and the other terms and

conditions of the OPCo Tender Offer

apply equally to all holders of OPCo

Preferred Stock of each OPCo Series

(‘‘OPCo Preferred Stockholders’’).

AEP anticipates that the OPCo Tender

Offer will expire on February 28, 1997,

the date of the OPCo Special meeting

(‘‘OPCo Expiration Date’’), unless

otherwise extended. The OPCo Tender

Offer is not conditioned upon any

minimum number of shares of OPCo

Preferred Stock being tendered. OPCo

Preferred Stockholders who wish to

tender their OPCo Preferred Stock

pursuant to the OPCo Tender Offer are

not required to vote in favor of the OPCo

Proposed Amendment; however, one of

the conditions of the OPCo Tender Offer

requires that the OPCo Proposed

Amendment be approved and adopted

at the OPCo Special Meeting.

In addition, OPCo proposes to solicit

proxies to amend the OPCo Articles to

clarify the authority of the OPCo Board

of Directors to purchase or acquire

cumulative preferred stock of OPCo

(‘‘OPCo Second Proposed

Amendment’’). The affirmative vote of

the holders of at least a majority of the

outstanding shares of OPCo’s common

stock and cumulative preferred stock,

the common stock and preferred stock

voting together as one class, is required

to approve the OPCo Second Proposed

Amendment.

Tenders of APCo Shares, I&M Shares

and OPCo Shares (collectively,

‘‘Shares’’) made pursuant to the APCo

Tender Offer, I&M Tender Offer and

OPCo Tender Offer, respectively

(individually, ‘‘Tender Offer’’ and

collectively, ‘‘Tender Offers’’), may be

withdrawn at any time prior to the

APCo Expiration Date, I&M Expiration

Date and the OPCo Expiration Date,

respectively (individually and

collectively, ‘‘Expiration Date’’).

Thereafter, such tenders are irrevocable,

subject to certain exceptions identified

in the APCo Offer Documents, I&M

Offer Documents and OPCo Offer

Documents (individually and

collectively, ‘‘Offer Documents’’). AEP

states that its obligations to proceed

with the Tender Offers and to accept for

payment and to pay for any Shares

tendered will be made in accordance

with rule 51 under the Act and are

subject to various conditions

enumerated in the Offer Documents,

including the receipt of a Commission

order under the Act authorizing the

proposed transactions and the adoption

of the APCo Proposed Amendment, I&M

Proposed Amendment and the OPCo

Proposed Amendment (individually,

‘‘Proposed Amendment’’ and

collectively, ‘‘Proposed Amendments’’)

at the APCo Special Meeting, I&M

Special Meeting and OPCo Special

Meeting, respectively (individually and

collectively, ‘‘Special Meeting’’).

Applicants undertake to comply with

all requirements of the Securities

Exchange Act of 1934 (‘‘Exchange Act’’)

and rules and regulations thereunder in

connection with the APCo Proxy

Solicitation I&M Proxy Solicitation and

OPCo Proxy Solicitation, as applicable

(individually, ‘‘Proxy Solicitation’’ and

collectively, ‘‘Proxy Solicitations’’), the

proxy solicitation in connection with

the OPCo Second Proposed Amendment

and the Tender Offers, except to the

extent applicants rely on exemptions

from the requirements of Rule 13e–3

and Regulation 14A of the Exchange

Act, and acknowledge that any

authorization granted under the Act is

conditioned upon such compliance.

Shares validly tendered will be held by

AEP until the Expiration Date (or

returned in the event a Tender Offer is

terminated). Subject to the terms and

conditions of the Tender Offers, as

promptly as practicable after the

Expiration Date, AEP will accept for

payment (and thereby purchase) and

pay for Shares validly tendered and not

withdrawn. AEP intends to use its

general funds and/or incur short-term

indebtedness in an amount sufficient to

pay the APCo Purchase Price, I&M

Purchase Price and OPCo Purchase

Price (individually and collectively,

‘‘Purchase Price’’) for all tendered

Shares. Merrill Lynch, Pierce, Fenner &

Smith Incorporated and Salomon

Brothers Inc. will act as dealer managers

for AEP in connection with the Tender

Offers.7
5264 Federal Register / Vol. 62, No. 23 / Tuesday, February 4, 1997 / Notices

Series that are not tendered pursuant to the Tender

Offers but which are voted in favor of the Proposed

Amendment.

AEP proposes to pay First Chicago Trust

Company of New York, in its capacity as a

depositary for the Tender Offers, a fee estimated at

approximately $50,000.

8Following the Expiration Date and the

completion of the purchase of Shares pursuant to

a Tender Offer, AEP may determine to purchase

additional Shares on the open market, in privately

negotiated transactions, through one or more tender

offers or otherwise. AEP states that it will not

undertake any such transactions without receipt of

any required Commission authorizations under the

Act. Likewise, in the event the additional special

meeting is necessary, the affected Subsidiary would

not undertake any proxy solicitation to amend its

Articles prior to receipt of any required

Commission authorizations under the Act.

9The Subsidiaries have engaged Morrow & Co.,

Inc. to act as information agent in connection with

the Proxy Solicitations and the solicitation of

proxies in connection with the OPCo Second

Proposed Amendment for a fee and reimbursement

of reasonable out-of-pocket expenses expected not

to exceed approximately $27,500.

10The applicants state that the proposed

acquisition by AEP of Shares pursuant to the

Tender Offers will benefit AEP’s utility system

customers and shareholders through the lowering of

the Subsidiaries’ cost of capital through the

anticipated reduction in the aggregate amount

payable of APCo Preferred Stock, I&M Preferred

Stock and OPCo Preferred Stock (collectively,

‘‘Preferred Stock’’) dividends and additional cost

savings associated with the redemption and

replacement of a portion of the Subsidiaries’ highcoupon debt with lower cost short-term debt.

Moreover, the applicants maintain that tendering

APCo Preferred Stockholders, I&M Preferred

Stockholders and OPCo Preferred Stockholders,

who do not vote in favor of adopting the Proposed

Amendments, will benefit by having the option to

sell their Preferred Stock at prices that AEP expects

will be a premium to the market price and without

the usual transaction costs associated with a sale.

11The Subsidiaries state that they will be at a

competitive disadvantage if the Restriction

Provisions are not eliminated, citing the industry’s

new competitors (i.e., power marketers, exempt

wholesale generators, independent power

producers and owners of cogeneration facilities)

that generally are not subject to the type of

financing restrictions the Articles impose upon the

Subsidiaries. The applicants also point out that

some potential utility competitors and other AEP

public utility subsidiaries have no comparable

provision restricting the use of unsecured debt.

Under the Restriction Provisions, APCo, I&M and

OPCo have available only approximately $230

million, $172 million and $212 million,

respectively, of unsecured debt capacity, based on

capitalization as of September 30, 1996.

12 In connection with its proposed purchase of the

Shares, AEP anticipates that it also may use existing

financing authorization. See Holding Co. Act

Release No. 26424 (Dec. 8, 1995) (authorizing AEP

to issue short-term debt up to $150 million for

general corporate purposes through December 31,

2000).

If a Proposed Amendment is adopted

at a Subsidiary’s Special Meeting,

promptly after consummation of the

Tender Offer the Subsidiary will

purchase the Shares sold to AEP

pursuant to the Tender offer at the

relevant Purchase Price plus expenses

incurred in the Tender Offer, and the

Subsidiary will retire and cancel such

Shares.

If a Proposed Amendment is adopted

not at the Special Meeting, AEP may

elect, but is not obligated, to waive

adoption of the Proposed Amendment

as a condition to its obligation to

proceed with the Tender Offer, subject

to applicable law. In that case, as

promptly as practicable after AEP’s

waiver of such condition and its

purchase of Shares validly tendered

pursuant to the Tender Offers, the

affected Subsidiary anticipates that it

would call another special meeting of its

common and preferred stockholders to

solicit proxies (to secure the requisite

two-thirds affirmative vote of

stockholders to amend the APCo

Articles, I&M Articles and OPCo

Articles (individually and collectively,

‘‘Articles’’), as the case may be, to

eliminate the APCo Restriction

Provision, I&M Restriction Provision

and OPCo Restriction Provision

(collectively, ‘‘Restriction Provisions’’),

as the case may be. At each such

meeting, AEP would vote any Shares

acquired by it pursuant to the Tender

Offer or otherwise 8 (as well as all of its

shares of Common Stock of the affected

Subsidiaries) in favor of the Proposed

Amendment. If a Proposed Amendment

is adopted at that meeting and in any

event within one year from the

Expiration Date (including any potential

extension thereto pursuant to a Tender

Offer), AEP will promptly after such

meeting or at the expiration of such oneyear period, as applicable, sell the

Shares to the Subsidiary at the

applicable Purchase Price plus expenses

paid therefor pursuant to the Tender

Offer, and the Subsidiary will retire and

cancel such Shares.

The applicants believe that regulatory,

legislative, technological and market

developments are likely to lead to a

more competitive environment within

the extremely capital-intensive electric

utility industry. The applicants further

content that elimination of the

Restrictions Provisions will produce

competitive advantages, financing

flexibility and cost benefits that

outweigh the one-time costs of the

Tender Offers and the Proxy

Solicitations,9 and will be in the best

long-term competitive interests of their

customers and shareholders.10

Moreover, the applicants represent that

the Proposed Amendments will allow

the Subsidiaries to issue a greater

amount of unsecured debt and also

allow the Subsidiaries to issue a greater

amount of total debt.11

To finance its proposed purchase of

Shares pursuant to the Tender Offers,

AEP plans to use general funds and/or

incur short-term debt in an amount

sufficient to pay the Purchase Price for

all tendered Shares, an amount not

expected to exceed $540 million.

Specifically, AEP requests authorization

to issue up to $400 million in short-term

debt through the issuance and sale of

notes to banks and commercial paper.12

The additional $400 million of shortterm borrowing authority shall decrease

by the amount paid to AEP by the

Subsidiaries for the repurchase of

Shares therefrom, and would expire no

later than February 28, 1998.

AEP proposes to issue and sell notes

with maturities not in excess of 270

days from date of issuance and bearing

a maximum effective annual interest

cost not to exceed 125% of the prime

commercial rate in effect from time to

time. Commercial paper issued by AEP

will be in the form of promissory notes

in denominations of not less than

$50,000 with maturities not in excess of

270 days from date of issuance.

The applicants also request

authorization to deviate from the

preferred stock provisions of the

Statement of Policy Regarding Preferred

Stock Subject to the Public Utility

Holding Company Act of 1935, HCAR

No. 13106 (Feb. 16, 1956), to the extent

applicable with respect to the Proposed

Amendments.

It appears to the Commission that the

application-declaration, to the extent

that it relates to the proposed Proxy

Solicitations and the solicitation of

proxies in connection with the OPCo

Second Proposed Amendment should

be granted and permitted to become

effective forthwith pursuant to rule

62(d).

It is ordered, that the applicationdeclaration, to the extent that it relates

to the proposed Proxy Solicitations and

the solicitation of proxies in connection

with the OPCo Second Proposed

Amendment be, and it hereby is,

permitted to become effective forthwith,

pursuant to rule 62 and subject to the

terms and conditions prescribed in rule

24 under the Act.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97–2628 Filed 2–3–97; 8:45 am]

BILLING CODE 8010–01–M