[Federal Register Volume 62, Number 232 (Wednesday, December 3, 1997)]
[Notices]
[Pages 63989-63990]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31686]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 22912; 812-10348]


AFC (USA) I, Inc.; Notice of Application

November 26, 1997.
AGENCY: Securities and Exchange Commission (``SEC'').

ACTION: Notice of application for exemption under section 6(c) of the 
Investment Company Act of 1940 (the ``Act'') from all provisions of the 
Act.

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SUMMARY OF THE APPLICATION: Applicant, AFC (USA) I, Inc., requests an 
order that would permit it to sell certain debt securities and use the 
proceeds to finance the business activities of its parent company, 
Airbus Finance Company Limited.

FILING DATES: The application was filed on November 13, 1996, and 
amended on July 17, 1997 and November 24, 1997.

HEARING OR NOTIFICATION OF HEARING: An order granting the application 
will be issued unless the SEC orders a hearing. Interested persons may 
request a hearing by writing to the SEC's Secretary and serving 
applicant with a copy of the request, personally or by mail. Hearing 
requests should be received by the SEC by 5:30 p.m. on December 22, 
1997, and should be accompanied by proof of service on applicants, in 
the form of an affidavit or, for lawyers, a certificate of service. 
Hearing requests should state the nature of the writer's interest, the 
reason for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request notification by writing to the 
SEC's Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth Street, N.W., Washington, D.C. 
20549. Applicant, c/o Catharine Ennis, George's Dock House, 2nd Floor, 
International Financial Services Center, Dublin 1, Ireland.

FOR FURTHER INFORMATION CONTACT: Kathleen L. Knisely, Staff Attorney, 
at (202) 942-0517, or Mary Kay Frech, Branch Chief, at (202) 942-0564 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained for a fee at the 
SEC's Public Reference Branch, 450 Fifth Street, N.W., Washington, DC 
20549, (tel. 202-942-8090).

Applicant's Representations

    1. Applicant is a Delaware corporation formed in July, 1996. All of 
applicant's outstanding voting securities are owned by Airbus Finance 
Company Limited (``AFC''). AFC, a limited liability company 
incorporated under the laws of Ireland, provides sales financing 
support to the customers of Airbus Industrie G.I.E. (``Airbus 
Industrie'').\1\ AFC and Airbus Industrie are each owned indirectly by 
Aerospatiale S.N.I., Daimler-Benz A.G. (``Daimler-Benz''), British 
Aerospace plc (``BAe''), and Construcciones Aeronauticas S.A. 
(``CASA'').
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    \1\ Applicant represents that AFC does not constitute a 
``partnership'' or ``joint venture'' within the meaning of rule 3a-
5(a)(4) under the Act and is substantially equivalent to a U.S. 
corporation for the purposes of rule 3a-5(b)(2) under the Act.
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    2. Applicant was organized to engage in financing activities to 
provide funds for use in the operations of AFC. Applicant proposes to 
obtain funds through the offer and sale of its debt securities in the 
United States and European or other overseas markets, and to lend the 
proceeds to AFC.
    3. Due to the nature of capital markets, applicant may, from time 
to time, issue securities in amounts in excess of the amounts required 
by AFC at any given time. However, at least 85% of the cash or cash 
equivalents raised by applicant will be loaned to AFC as soon as 
practicable, but in no event later than six months after applicant's 
receipt of the cash or cash equivalents. Amounts that are not loaned to 
AFC will be invested in government securities, securities of AFC or a 
company controlled by AFC (or, in the case of a partnership or joint 
venture, the securities of the partners or participants in the joint 
venture), or debt securities which are exempted from the provisions of 
the Securities Act of 1933 by section 3(a)(3) of that Act.
    4. Any issuance of debt securities by applicant to the public in 
the United States will be unconditionally guaranteed by AFC as to the 
timely payment of principal, interest, and premium, if any (a 
``Guarantee''). Guarantee will provide each holder of debt securities 
issued by applicant a direct right of action against AFC to enforce 
AFC's obligations under the Guarantee without first proceeding against 
applicant.
    5. Until AFC has achieved a specified long-term debt rating at or 
above investment grade (the ``AFC Rating''), any debt securities issued 
by applicant to the public in the United States also will be 
unconditionally guaranteed on a separate basis by each of Aerospatiale 
S.N.I., Daimler-Benz, BAe, and CASA, or any additional or substitute 
indirect owner of AFC as to the timely payment of principal of, 
interest, and premium, if any, on the debt securities.
    6. In the future applicant may obtain funds through the offer and 
sale of non-voting preferred stock. Applicant will guarantee such stock 
with a guarantee complying with rule 3a-5(a)(2) under the Act.

Applicant's Legal Analysis

    1. Rule 3a-5 under the Act provides an Exemption from the 
definition of investment company for certain companies organized 
primarily to finance the business operations of their parent companies 
or companies controlled by their parent companies. Rule 3a-5 is 
premised on the notion that it is appropriate to exempt a finance 
subsidiary from all provisions of the Act when the primary purpose of 
the finance subsidiary is to finance the business operations of its 
parent

[[Page 63990]]

company or other subdiaries of its parent and when the purchaser of the 
finance subsidiary's securities ultimately looks to the parent and not 
to the finance subsidiary for repayment.\2\ Rule 3a-5(b)(2)(i) defines 
``parent company'' to be a corporation, partnership, or joint venture 
that is not considered an investment company under section 3(a) or that 
is exempted by order from the definition of investment company by 
section 3(b) or by the rules or regulations under section 3(a) of Act.
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    \2\ See Investment Company Act Release No. 14275 (Dec. 14, 1984) 
(release adopting rule 3a-5 under the Act).
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    2. AFC is not a ``parent company'' within the definition in rule 
3a-5(b)(2)(i) because AFC meets the definition of investment company in 
section 3(a) of the Act and is excepted from that definition by section 
3(c)(6) of the Act. Applicant, therefore, is unable to rely on rule 3a-
5 and seeks an exemption from all provisions of the Act.
    3. In the release adopting rule 3a-5, the Commission stated that it 
may be appropriate to grant exemptive relief to the finance subsidiary 
of an issuer exempted from the definition of investment company under 
section 3(c) of the Act, but only on a case-by-case basis upon an 
examination of all relevant facts.\3\ According to the adopting 
release, the concern was that a company could be considered not an 
investment company under section 3(c) of the Act and still be engaged 
primarily in investment company activities.\4\
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    \3\ Id. at 49443.
    \4\ Id.
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    4. Section 6(c) of the Act provides, in pertinent part, that the 
SEC may, conditionally or unconditionally, exempt any person or class 
of persons from any provision or provisions of the Act to the extent 
that the exemption is necessary or appropriate in the public interest 
and consistent with the protection of investors and the purposes fairly 
intended by the policy and provisions of the Act. Applicant states that 
AFC is not engaged primarily in investment company activities, but that 
its principal activity is the provision of sales financing for Airbus 
Industrie customers. In addition, if AFC were itself to issue the 
securities that are to be issued by applicant and use the proceeds for 
its own purposes or advance them to its subsidiaries, AFC would not be 
subject to regulation under the Act. While AFC has chosen instead to 
use applicant as a financing vehicle, the Guarantee ensures that 
holders of applicant's securities will have direct recourse against 
AFC. Accordingly, applicant submits that the relief requested satisfies 
the section 6(c) standard.

Applicant's Condition

    Applicant agrees that the order granting the requested relief shall 
be subject to the condition that:
    Applicant will comply with all of the provisions of rule 3a-5 under 
the Act, except that AFC will not meet the portion of the definition of 
``parent company'' in rule 3a-5(b)(2)(i) solely because it is excluded 
from the definition of investment company under section 3(c)(6) of the 
Act and is engaged primarily, directly or through majority owned 
subsidiaries, in one or more of the businesses described in section 
3(c)(5)(A) and/or section 3(c)(5)(B) of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-31686 Filed 12-2-97; 8:45 am]
BILLING CODE 8010-01-M