65356 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Notices

Southern California Edison Company, et

al., Docket Nos. 50–361 and 50–362,

San Onofre Nuclear Generating Station,

Units 2 and 3, San Diego County,

California

Date of application for amendments:

February 23, 2000, as supplemented

July 7, 2000.

Brief description of amendments: The

amendments revise the licensing basis

for San Onofre Nuclear Generating

Station (SONGS) Units 2 and 3

regarding the methodology for

measuring the reactivity worth of

control element assembly (CEA) groups

during low power physics testing

following a refueling. The amendments

allow measuring the worth of

approximately three-fourths of the fulllength CEA groups each refueling cycle

rather than the present methodology,

which measures the worth of all fulllength CEA groups each refueling cycle.

Date of issuance: October 10, 2000.

Effective date: October 10, 2000.

Implementation includes incorporation

of the changes into the Updated Final

Safety Analysis Report (UFSAR) at the

next update of the UFSAR in

accordance with the schedule in 10 CFR

50.71(e).

Amendment Nos.: Unit 2–173; Unit

3–164.

Facility Operating License Nos. NPF–

10 and NPF–15: The amendments

authorized revision of the UFSAR

Section 4.2.1.5.2, CEA Performance

Testing.

Date of initial notice in Federal

Register: March 22, 2000 (65 FR 15385).

The Commission’s related evaluation

of the amendments is contained in a

Safety Evaluation dated October 10,

2000.

No significant hazards consideration

comments received: No.

Union Electric Company, Docket No.

50–483, Callaway Plant, Unit 1,

Callaway County, Missouri

Date of application for amendment:

September 8, 2000.

Brief description of amendment: The

amendment revises the Callaway

Technical Specifications (TS) to

annotate the frequency for Surveillance

Requirement (SR) 3.5.2.5 that

verification of the automatic closure

function of the residual heat removal

pump suction Valve BNHV8812A shall

be performed prior to startup from the

first shutdown to Mode 5 (cold

shutdown) occurring after September 8,

2000, but no later than June 1, 2001. The

next refueling outage is scheduled for

April 2001. This amendment defers the

test of the automatic closure function

until the next plant shut down to cold

shutdown.

Date of issuance: October 6, 2000.

Effective date: October 6, 2000, to be

implemented within 30 days from the

date of issuance.

Amendment No.: 140.

Facility Operating License No. NPF–

30: The amendment revised the

Technical Specifications.

Public comments requested as to

proposed no significant hazards

consideration: Yes (65 FR 56943 dated

September 20, 2000). The notice

provided an opportunity to submit

comments on the Commission’s

proposed no significant hazards

consideration determination. No

comments have been received. The

notice also provided for an opportunity

to request a hearing by October 20,

2000, but indicated that if the

Commission makes a final no significant

hazards consideration determination

any such hearing would take place after

issuance of the amendment.

The Commission’s related evaluation

of the amendment, finding of exigent

circumstances, and final determination

of no significant hazards consideration

are contained in a Safety Evaluation

dated October 6, 2000.

Attorney for licensee: John O’Neill,

Esq., Shaw, Pittman, Potts &

Trowbridge, 2300 N Street, NW.,

Washington, DC 20037.

NRC Section Chief: Stephen Dembek.

Dated at Rockville, Maryland, this 25th day

of October 2000.

For the Nuclear Regulatory Commission.

John A. Zwolinski,

Director, Division of Licensing Project

Management, Office of Nuclear Reactor

Regulation.

[FR Doc. 00–27938 Filed 10–31–00; 8:45 am]

BILLING CODE 7590–01–P

SECURITIES AND EXCHANGE

COMMISSION

[Rel. No. IC–24697; 812–11786]

PMC Capital, Inc., et al.; Notice of

Application

October 25, 2000.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’ or ‘‘SEC’’).

ACTION: Notice of application for an

order under sections 6(c) and 57(c) of

the Investment Company Act of 1940

(the ‘‘Act’’) for an exemption from

sections 57(a)(1) and 57(a)(2) of the Act,

and under section 57(i) of the Act and

rule 17d–1 under the Act authorizing

certain joint transactions otherwise

prohibited by section 57(a)(4) of the Act.

SUMMARY OF APPLICATION: Applicants

request an order that would permit (1)

a business development company

(‘‘BDC’’) to engage in a loan origination

agreement with an affiliated real estate

investment trust, (2) investment

management agreements between

subsidiaries of the BDC and the real

estate investment trust, and (3) the

establishment of special purpose

entities owned by the BDC and the real

estate investment trust to engage in joint

loan securitizations. The requested

order would supersede an existing

order.

APPLICANTS: PMC Capital, Inc. (‘‘PMC’’),

PMC Commercial Trust (the ‘‘REIT’’),

PMC Advisers, Ltd. (‘‘Advisers’’), and

PMC Asset Management, Inc.

(‘‘Managers’’).

FILING DATES: The application was filed

on September 9, 1999 and amended on

March 29, 2000 and October 24, 2000.

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 applicants with a

copy of the request, personally or by

mail. Hearing requests should be

received by the SEC by 5:30 p.m. on

November 20, 2000, 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 may request notification of a

hearing by writing to the SEC’s

Secretary.

ADDRESSES: Secretary, SEC, 450 Fifth

Street, N.W., Washington, D.C. 20549.

Applicants, 18111 Preston Road, Suite

600, Dallas, Texas 75252.

FOR FURTHER INFORMATION CONTACT:

Marilyn Mann, Senior Counsel, at (202)

942–0582, 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 from the SEC’s

Public Reference Branch, 450 5th Street,

N.W., Washington D.C. 20549–0102

(telephone (202) 942–8090).

Applicants’ Representations

1. PMC, a Florida corporation, is a

closed-end diversified management

investment company. On June 7, 1994,

PMC filed notification of its election to

operate as a BDC. PMC provides early

stage financing and makes available

significant managerial assistance to

small businesses and receives interest

income, loan servicing and other fees

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Notices 65357

1PMC Capital, Inc., Investment Company Act

Release Nos. 19823 (Oct. 29, 1993) (notice) and

19895 (Nov. 23, 1993) (order). The other parties to

the order were PMC Advisers, Inc., the REIT,

Andrew S. Rosemore and Lance B. Rosemore. Lance

B. Rosemore and Andrew S. Rosemore were

applicants because at the time the 1993 Order was

issued, they owned all of the issued and

outstanding beneficial interests in the REIT. The

REIT is now a publicly traded company.

generated by loans that it originates.

PMC makes loans to small businesses

either directly or through three

subsidiaries, each of which is licensed

and regulated by the Small Business

Administration (‘‘SBA’’) and each of

which is registered under the Act as a

closed-end, diversified management

investment company (the ‘‘SBA

Subsidiaries’’). PMC currently has a

seven-member board of directors, four of

whom are not interested persons of PMC

(‘‘Independent Directors’’). The four

Independent Directors of PMC have no

financial interest in the REIT. PMC and

its SBA Subsidiaries do not have

external investment advisers.

2. The REIT, formed in June 1993, is

a Texas real estate investment trust

whose common shares of beneficial

interest are traded on the American

Stock Exchange. The REIT was formed

to take advantage of certain loan

origination opportunities that PMC was

unable to pursue because, among other

things, many of its customers grew to

exceed the limitations applicable to the

SBA program or potential new

borrowers were interested in loans of a

size or type that did not meet the SBA

criteria, and leverage restrictions

applicable to PMC precluded it from

borrowing enough additional capital to

satisfy loan demand.

3. To mitigate against potential

conflicts of interest between PMC and

the REIT, PMC and the REIT entered

into a loan origination agreement to set

forth specific objective criteria to be

used to allocate loan origination

opportunities between them. The

agreement provides that PMC will

continue to make loans through its

investment company subsidiaries in

accordance with the eligibility

requirements of the SBA programs used

by the subsidiaries. Pursuant to the loan

origination agreement, the REIT makes

loans primarily (a) to borrowers that

exceed the eligibility requirements of

the SBA programs used by PMC, (b) in

excess of $1,100,000, or (c) that do not

conform to PMC’s fundamental policies.

In 1993, PMC obtained an order under

the Act (the ‘‘1993 Order’’)1 that

permitted (a) PMC to own PMC

Advisers, Inc., an investment adviser

registered under the Investment

Advisers Act of 1940 (the ‘‘Advisers

Act’’); (b) PMC Advisers, Inc. to enter

into an investment management

agreement with the REIT; and (c) PMC

and the REIT to enter into the loan

origination agreement.

4. Advisers is the successor-in-interest

by merger to PMC Advisers, Inc.

Advisers is an indirect, wholly owned

subsidiary of PMC, and Managers is a

direct, wholly owned subsidiary of

Advisers. Advisers presently provides

services to the REIT with respect to the

REIT’s ownership of commercial real

estate properties. Managers presently

provides services to the REIT with

respect to the REIT’s loan origination

activities. Advisers and Managers pay

all of their net income to PMC in the

form of dividends or partnership

distributions. The executive

management teams of the REIT, PMC,

Advisers and Managers are comprised of

the same individuals.

5. PMC and the REIT propose to enter

into arrangements to generate working

capital from time to time by jointly

selling through securitization

transactions portions of their respective

loan portfolios. At such time as PMC

and the REIT have originated a

sufficient amount of loans to securitize

on a cost-effective basis, PMC and the

REIT propose to form a jointly owned

special purpose entity (‘‘SPE’’). PMC

and the REIT will each transfer

ownership of the loans to the SPE in

exchange for cash and an equity interest

in the SPE based upon the relative

outstanding principal balance of the

loans that each contributes to the SPE.

As the equity owners of the SPE, each

of PMC and the REIT will retain the

residual interest in the specific loans it

transfers to the SPE to the extent any

loans remain following repayment in

full of the securities issued by the SPE.

6. Each SPE will be a limited

partnership, limited liability company,

trust or some other type of entity the

form of which will be determined at the

time of each transaction. Each SPE will

be a passive, special purpose

bankruptcy-remote entity and its

organizational documents will expressly

limit its activities to owning and

holding the loans, issuing debt

securities and other activities that are

reasonably related thereto. Each SPE

will rely on rule 3a–7 under the Act for

an exemption from regulation under the

Act. Each of PMC and the REIT will

continue to service the loans that it

transfers to the SPE pursuant to a

servicing agreement that will govern the

servicing of the loans and any other loan

related property owned by the SPE. The

SPE will pay PMC and the REIT a

servicing fee for servicing the loans

transferred to the SPE, which will be

equal to the servicing fee that each

would receive in a transaction in which

the other was not a participant.

7. PMC and the REIT do not anticipate

that they will necessarily transfer the

same amount of loans to the SPE in

connection with any particular

transaction. However, the rights and

obligations (other than any rights or

obligations based solely on each entity’s

percentage ownership interest in the

SPE) of each of PMC and the REIT under

the transaction documents will be

identical. To ensure that neither PMC

nor the REIT is disadvantaged relative to

the other with respect to the purchase

price it receives upon the transfer of the

loans to the SPE, the relative ownership

interests of PMC and the REIT in the

SPE and the amount of net proceeds

each receives for the loans it transfers to

the SPE will be based on the aggregate

outstanding principal balance of the

loans each such party transfers to the

SPE without regard to the interest rates

on such loans. Thereafter, to ensure that

PMC and the REIT each benefit from the

value of the loans it transfers to the SPE,

all subsequent distributions to be made

to PMC and the REIT under the

securitization documents will be

allocated proportionately based upon

the relationship that the amount of the

funds available for distribution to PMC

and the REIT that is attributable to the

loans (including the interest earned

thereon) that were transferred to the SPE

by such party bears to the total amount

of funds then available for distribution

to PMC and the REIT. Accordingly, the

distributions each of PMC and the REIT

receives will be based upon the

performance of the loans that it transfers

to the SPE.

8. PMC and the REIT will be required

to pay certain expenses (including

accounting, legal, investment banking,

rating agency, printing, filing, recording

and other expenses) incurred in

connection with the issuance of

securities by the SPE. They will each

pay their portion of such expenses in

accordance with their respective

ownership interests in the SPE.

9. The SPEs will issue debt securities

(the ‘‘SPE Debt Securities’’) to investors

in private placement transactions

exempt from registration under section

4(2) of the Securities Act of 1933 (the

‘‘Securities Act’’). The senior class of

the SPE Debt Securities will be rated by

a nationally recognized rating agency in

one of its two highest rating categories.

The indebtedness evidenced by the SPE

Debt Securities will be secured by a

security interest in the loans and will be

over-collateralized as the aggregate

outstanding principal balance of the

loans securing the SPE Debt Securities

will exceed the principal amount of the

65358 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Notices

SPE Debt Securities that will be issued

by the SPE. The indebtedness evidenced

by the SPE Debt Securities will also be

secured by certain amounts that the SPE

will be required to deposit in a reserve

account maintained with the trustee

under the indenture pursuant to which

the SPE Debt Securities will be issued.

The SPE will issue the SPE Debt

Securities on a non-recourse basis and

accordingly, neither PMC nor the REIT

will have any liability or obligation for

repayment of the SPE Debt Securities.

The SPE will make payments of

principal and interest on the SPE Debt

Securities issued by the SPE from the

payments of principal and interest

received by the SPE on the loans

securing the SPE Debt Securities. In the

event that on any payment date the

payments of principal and interest

received by the SPE are insufficient to

make the payments required to be paid

to the holders of SPE Debt Securities on

such date, amounts on deposit in the

reserve account will be utilized to make

the payments to the holders of SPE Debt

Securities. To the extent amounts on

deposit in the reserve account are

insufficient to make the payments

required to be paid to the holders of SPE

Debt Securities on such date, the loans

comprising the over-collateralization

amount will provide excess collateral

that will be available to the holders of

SPE Debt Securities.

10. Applicants state that, historically,

PMC’s primary sources of capital and

liquidity have been debentures issued

through programs of the SBA, private

and public issuances of common stock,

the private issuance of senior unsecured

medium term notes and the utilization

of its short-term, unsecured revolving

credit facility. Due to changes in certain

SBA programs during the past three

years that have increased the cost of

SBA debentures, PMC has utilized other

more cost-effective sources of funds to

finance and expand its loan portfolio.

PMC has been able to generate costeffective growth in its investment

portfolio through the sale from time to

time of a portion of its loan portfolio

through securitization transactions.

These loan sales accomplished through

securitization transactions have enabled

PMC to generate working capital at rates

generally better than available through

the issuance of SBA debentures under

the terms recently in existence. From

time to time during the past four years

the REIT has also raised working capital

through the sale of portions of its loan

portfolio through securitization

transactions. Applicants contend that

PMC and the REIT could each utilize

the securitization process more

effectively on a combined basis.

11. Applicants state that the proposed

transactions would enable PMC and the

REIT to accumulate larger, more

diversified loan portfolios and thereby

achieve larger asset-backed securities

offerings. Geographic and borrower

diversity in the loan portfolio reduces

the risk associated with the securities to

be issued by the SPE and is therefore

fundamental to and may benefit the

rating process. Applicants state that

more widely diversified loan portfolios

will improve their ability to obtain a

rating in one of the two highest ratings

categories from a nationally recognized

rating agency, which will result in a

lower interest rate on the SPE Debt

Securities. Applicants state that

increasing the size of the securitization

transaction should not increase

substantially the associated transaction

costs and should therefore significantly

reduce the transaction costs that would

otherwise be paid by each of PMC and

the REIT in connection with a

securitization transaction conducted on

an individual basis.

Applicants’ Legal Analysis

1. Applicants request an order under

sections 6(c) and 57(c) of the Act

granting an exemption from sections

57(a)(1) and 57(a)(2) of the Act, and

under section 57(i) of the Act and rule

17d–1 under the Act authorizing certain

joint transactions otherwise prohibited

by section 57(a)(4) of the Act. The

requested order will supercede the 1993

Order.

Section 57(a)(1) and 57(a)(2)

2. Section 57(a)(1) of the Act provides

that it shall be unlawful for any person

related to a BDC in the manner specified

in section 57(b) of the Act, acting as

principal, knowingly to sell any security

or other property to the BDC or to any

company controlled by the BDC, unless

the sale involves solely (a) securities of

which the buyer is the issuer, or (b)

securities of which the seller is the

issuer and which are part of a general

offering to the holders of a class of its

securities. Section 57(a)(2) provides that

it shall be unlawful for any person

related to a BDC in the manner specified

in section 57(b), acting as principal,

knowingly to purchase from the BDC or

from any company controlled by the

BDC, any security or other property

(except securities of which the seller is

the issuer).

3. Section 57(b) provides, among

other things, that section 57(a) shall

apply to any person directly or

indirectly controlling, controlled by, or

under common control with, a BDC.

Under section 2(a)(9) of the Act, a

control relationship is presumed to exist

if a person, either directly or through

one or more controlled companies, is

the beneficial owner of more than 25%

of a company’s outstanding voting

securities. Section 57(c) of the Act

provides that a person may file with the

Commission an application for an order

exempting a proposed transaction from

sections 57(a)(1) or 57(a)(2). The

Commission shall grant the application

if (a) the terms of the proposed

transaction, including the consideration

to be paid or received, are reasonable

and fair and do not involve

overreaching of the BDC or its

shareholders on the part of any person

concerned, (b) the proposed transaction

is consistent with the policy of the BDC

as recited in the filings made by the

company under the Securities Act, its

registration statement and reports filed

under the Securities Exchange Act of

1934 (the ‘‘Exchange Act’’), and its

reports to shareholders, and (c) the

proposed transaction is consistent with

the general purposes of the Act.

4. Section 6(c) of the Act provides that

the Commission may exempt any

person, security, or transaction, or any

class of persons, securities, or

transactions, if and to the extent that

such 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.

5. PMC will own more than 25% of

the outstanding voting securities of an

SPE and thus will be deemed to control

the SPE. Section 57(a) thus applies to

transactions between PMC and an SPE.

The proposed securitization

transactions contemplate that PMC and

the REIT will each transfer loans to the

SPE in exchange for cash and an equity

interest in the SPE. The transfer of the

equity interests by the SPE to PMC

constitutes the sale of a security to a

BDC and is therefore prohibited by

section 57(a)(1). In addition, the

acquisition of loans by an SPE from

PMC will constitute the purchase of

property from a BDC and is therefore

prohibited by section 57(a)(2).

6. Applicants believe that the

proposed transactions satisfy the

standards for relief set forth in sections

57(c) and 6(c). Applicants state that

conditions 8 and 9 to the requested

relief would assure that the

consideration to be paid or received is

reasonable and fair and would not

involved overreaching of the BDC or its

shareholders on the part of any person

concerned.

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Notices 65359

7. Applicants state that the proposed

transactions are consistent with the

policies of PMC as set forth in its public

filings and reports to shareholders.

Applicants therefore believe that the

requested relief is appropriate in the

public interest and consistent with the

protection of investors and the policies

and provisions of the Act.

Section 57(a)(4)

8. Section 57(a)(4) provides that it

shall be unlawful for any person related

to a BDC in the manner specified in

section 57(b) of the Act, acting as

principal, knowingly to effect any

transaction in which the BDC or a

company controlled by the BDC is a

joint or a joint and several participant

with such person in contravention of

Commission rules adopted for the

purpose of limiting or preventing

participation by the BDC or controlled

company on a basis less advantageous

than that of such person.

9. Section 57(i) of the Act provides

that, until the Commission prescribes

rules under sections 57(a) and 57(d), the

Commission’s rules under sections 17(a)

and 17(d) of the Act applicable to

registered closed-end investment

companies shall be deemed to apply to

sections 57(a) and 57(d) of the Act.

Because the Commission has not

adopted any rules under section

57(a)(4), rule 17d–1 applies.

10. Rule 17d–1 under the Act

generally prohibits affiliated persons of

an investment company from entering

into joint transactions with the company

without prior Commission

authorization. In passing upon

applications under rule 17d–1, the

Commission considers whether the

participation by the BDC in the joint

transaction is consistent with the

provisions, policies, and purposes of the

Act and the extent to which such

participation is on a basis different from

or less advantageous than that of other

participants.

11. The REIT is advised by Advisers

and Managers and thus could be

deemed to be controlled by Advisers

and Managers. Advisers and Managers

are wholly owned subsidiaries of PMC

and thus are persons controlled by PMC.

The REIT is thus indirectly controlled

by PMC. The REIT is prohibited from

entering into joint transactions with

PMC absent an exemptive order.

12. The proposed joint securitizations

will be joint transactions involving PMC

and the REIT. Applicants believe that

the proposed transactions are consistent

with the provisions, policies and

purposes of the Act and that

participation of PMC in the proposed

transactions will not be on a basis less

advantageous than that on the REIT. The

directors of PMC, including a ‘‘required

majority’’ of the directors as defined in

section 57(o), will determine that the

terms of the transactions, including the

consideration to be paid, are reasonable

and fair. The terms of each joint

securitization will be the same for PMC

and the REIT. Applicants contend that

sufficient safeguards are in place

through the underwriting and ratings

processes to prevent the REIT or PMC

from transferring disproportionately

inferior credit quality loans to an SPE.

In addition, the REIT will make certain

representations relating to the credit

quality of the loans it transfers as

described in condition B.3.

13. A ‘‘required majority,’’ as defined

in section 57(o) of the Act, of the

directors of PMC will be required to

make a determination in connection

with any proposed securitization

transaction that the loans transferred to

the SPE by PMC could not have

obtained a higher credit rating in a

transaction not involving the

participation of the REIT. To assist the

directors of PMC in making this

determinations, the directors will be

provided with the same extensive an

detailed loan and credit information

that is provided to a rating agency,

including information about the loan

origination operations of PMC and REIT,

the credit underwriting criteria utilized

in originating the loans, historical

delinquency and collection information,

and loan loss and recovery histories.

This information will provide a detailed

analysis of the loan portfolio

characteristics, including loan

concentration by state, franchisor, and

other pertinent characteristics of the

loan portfolio. The board of directors

will also be provided sample marketing

information, delinquency and problem

loan reports and such other due

diligence reports and information as the

rating agencies utilize in rating any such

transaction. Information provided to

PMC’s board of directors will also

include an analysis comparing the PMC

loan pool to the loan pool to be

transferred to the SPE by the REIT.

Finally, PMC will provide its board of

directors with an executive summary of

each loan included in the PMC pool and

each loan included in the REIT pool on

an individual pool basis, which will

contain detailed information about each

loan, including the property type, date

of loan origination, original loan

principal amount, outstanding principal

balance, current interest rate, maturity

date, delinquency history, amortization

period, original and current loan-tovalue ratios, debt-service-coverage ratio

and property location.

14. Applicants state that, in the

unlikely event that the credit quality of

the loans conveyed by the REIT or PMC

is significantly disproportionately lower

than the credit quality of the loans

conveyed by the other party, the

residual interest of the party

contributing the higher quality loans

could be disproportionately impacted.

To protect the party transferring a

higher quality loan portfolio against this

possibility, each transaction will be

structured so that all distributions to

PMC and the REIT under the documents

will be based on the performance of the

loans transferred by PMC or the REIT,

as the case may be. Either the

organizational documents of the SPE

and/or a separate agreement between

PMC and the REIT will provide that any

and all amounts distributable to PMC

and the REIT in respect of each party’s

residual interest in its loans will be

determined pursuant to a percentage

allocation, the numerator of which is

the amount of funds available for

distribution that is attributable to the

loans transferred by such party to the

SPE and the denominator of which is

the total funds then available for

distribution to PMC and/or the REIT.

Each party will also agree to reimburse

the other in the unlikely event such

other party’s residual interest in the

loans it transferred to the SPE is

disproportionately impacted as a result

of the non-performance of the loans

transferred to the SPE by such party.

15. Applicants state that a particular

securitization transaction could also

potentially be less advantageous to PMC

or the REIT if one of the parties commits

an act or omission that subjects that

other to liability. PMC and the REIT will

each execute a cross-indemnity

agreement to protect the other party

against the risk.

16. Applicants also seek an order

under section 57(i) and rule 17d–1

superseding the 1993 Order which

permits the loan origination agreement

between PMC and the REIT and

investment management agreements

between Advisers and the REIT and

Managers and the REIT.

Applicants’ Conditions

Applicants agree that any order

granting the requested relief will be

subject to the following conditions:

A. Investment Advisory and

Management Arrangements

1. PMC’s board of directors, including

a ‘‘required majority’’ or the directors as

defined in section 57(o) of the Act, will

review at least annually the relationship

65360 Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Notices

among (a) Advisers, the REIT and their

affiliated persons and (b) Managers, the

REIT and their affiliated persons, to

determine whether the benefits derived

by PMC and its shareholders warrant

the continuation of the advisory

relationships, including, but not limited

to, the advisory agreement between

Managers and the REIT and the

management agreement between

Advisers and the REIT and, if

appropriate, will approve (by a vote of

a majority of the directors of PMC,

including the ‘‘required majority’’) at

least annually such continuation.

2. A loan origination agreement has

been entered into between PMC and the

REIT to set forth specific objective

criteria, as described in the application,

which is utilized by Managers to

allocate loan origination opportunities.

Any amendments or modifications to

the loan origination agreement will be

approved by PMC’s board of directors,

including the ‘‘required majority.’’

3. The minutes of the meetings of

PMC’s board regarding the relationships

among Managers, the REIT and their

affiliated persons, including

consideration of the advisory agreement

between Managers and the REIT, and

among Advisers, the REIT and their

affiliated persons, including

consideration of the management

agreement between Advisers and the

REIT, and the loan origination

agreement or any amendments or

modifications thereto, will reflect in

detail a description of the board’s

deliberations, its findings, the

information or materials upon which its

findings were based, and the reasons for

the directors’ determination (a) that the

relationships among Managers, the REIT

and their affiliated persons, including

the investment advisory agreement

between Managers and the REIT, (b) that

the relationship among Advisers, the

REIT and their affiliated persons,

including the management agreement

between Advisers and the REIT, or (c)

the loan origination agreement and any

amendments or modifications thereto,

as the case may be, is in the best

interests of both PMC and its

shareholders.

4. PMC will, without prejudice to the

rights of its board of directors to dispose

of PMC’s interests in Advisers or

Managers in their respective entireties,

at all times own directly or indirectly

beneficially and of record all of the

issued and outstanding shares of capital

stock or partnership interests of

Advisers and Managers, as the case may

be, and will cause Advisers and

Managers not to issue any authorized

but unissued shares of its capital stock

or partnership interests to any person

other than PMC or a wholly-owned

subsidiary of PMC.

5. A majority of the directors of PMC,

Advisers and Managers will not have

any financial interest in or be

‘‘interested persons’’ of the REIT, as if

the REIT were an investment company

under section 2(a)(19)(A).

B. Joint Securitization Transactions

1. (a) The directors of PMC will

receive written information concerning

all joint securitization opportunities.

The directors may request such

additional information as they deem

necessary to the exercise of their

reasonable business judgment, and they

will also employ such experts,

including lawyers and accountants, as

they deem appropriate to the reasonable

exercise of this oversight function. PMC

will engage in a joint securitization with

the REIT only if a ‘‘required majority’’

of the directors of PMC conclude, prior

to the transaction, that:

(i) The terms of the transaction,

including the consideration to be paid,

are reasonable and fair to the

shareholders of PMC and do not involve

overreaching of PMC on the part of any

person concerned;

(ii) The transaction is consistent with

the interests of the shareholders of PMC

and is consistent with PMC’s

investment objectives and policies as

recited in filings made by PMC under

the Securities Act, as amended, its

registration statement and reports filed

under the Exchange Act and its reports

to shareholders; and

(iii) Participation in the transaction by

the REIT would not disadvantage PMC,

and that participation by PMC would

not be on a basis different from or less

advantageous than that of the REIT.

(b) PMC has the right to decline to

participate in any joint securitization

opportunity.

2. The directors of PMC will be

provided with a detailed credit rating

analysis of each pool of loans to be

contributed by PMC and the REIT in

connection with any proposed joint

securitization transaction and the

investment bankers of PMC will provide

a detailed presentation to PMC’s

directors analyzing each pool of loans

on an individual pool basis. If the

‘‘required majority’’ of directors of PMC

determine that the loans contributed by

the REIT are of an inferior credit quality

and would cause the transaction to

receive a credit rating lower than the

credit rating PMC’s loans could

otherwise obtain in a transaction not

involving the REIT, PMC will not

participate in the joint transaction.

3. The loans transferred by the REIT

to the SPE will satisfy the following

conditions: (a) Such loans will have a

weighted average loan-to-value ratio at

the time of loan origination that is less

than the weighted average loan-to-value

ratio at the time of loan origination of

the loans that PMC transfers to the SPE;

(b) such loans will have a weighted

average loan-to-value ratio at the time of

transfer that is less than the weighted

average loan-to-value ratio of the loans

that PMC transfers to the SPE; (c) no

loan transferred by the REIT will be 30

days delinquent at the time of transfer;

and (d) an environmental site

assessment shall have been performed

in connection with the origination of

each such loan and to the REIT’s

knowledge, at the time of origination,

the property securing each such loan

was in material compliance with all

applicable federal, state and local

environmental laws and regulations.

4. Records required by section 57(f)(3)

of the Act will be maintained as if each

of the transactions permitted under

these conditions were approved by the

‘‘required majority’’ of PMC’s directors

under section 57(f).

5. The senior class of each assetbacked securities offering issued by an

SPE jointly owned by PMC and the REIT

will be rated in one of the two highest

ratings categories by a NRSRO, as

defined in rule 2a–7 under the Act.

6. Loans originated by the REIT will

not be eligible to participate in any joint

transaction unless they were

underwritten by the REIT utilizing the

same credit quality and underwriting

criteria as that utilized by PMC with

respect to any loans it originates and

transfers to an SPE.

7. Neither PMC nor the REIT will

utilize any selection criteria with

respect to the loans it selects to transfer

to any SPE that would result in such

loans being of a quality generally

inferior to that of all of its loans taken

as a whole.

8. On the date of the transfer, each of

PMC and the REIT will receive net

proceeds in respect of the loans it

transfers to the SPE in an amount equal

to the aggregate outstanding principal

balance of the loans it transferred to the

SPE less its pro rata portion (based on

the ratio of the aggregate principal

balance of the loans its transfers to the

total aggregate principal balance of all

loans transferred by PMC and the REIT

to the SPE) of any trustee fees, rating

agency fees, other transaction costs and

any initial reserve account deposits and

required over-collateralization amounts.

9. Following the initial distribution of

net proceeds to PMC and the REIT, all

subsequent distributions to PMC and/or

the REIT made in respect of their

respective residual interests in the loans

Federal Register / Vol. 65, No. 212 / Wednesday, November 1, 2000 / Notices 65361

will be made pro rata to PMC and/or the

REIT based on the percentage of the

total amount available for distribution to

PMC and/or the REIT that is attributable

to the loans each such party transferred

to the SPE.

10. PMC and the REIT will agree

pursuant to the organizational

documents of the SPE or a separate

agreement to reimburse the other party

to the extent that such other party’s

residual interest in the loans it

transferred to the SPE is

disproportionately impacted as a result

of the non-performance of the loans

transferred to the SPE by PMC or the

REIT, as the case may be.

11. Each of PMC and the REIT will

continue to service the loans it transfers

to the SPE and shall receive the

servicing fee payable in respect thereof

for so long as PMC and the REIT service

the loans in accordance with the terms

of the securitization documents.

12. PMC and the REIT will provide

quarterly servicing reports to the board

of directors of PMC and the trust

managers of the REIT. Such reports shall

show in reasonable detail all collections

received from the loans transferred by

each of PMC and the REIT as well as all

deposits, payments and distributions

made from the collection amounts and

the reserve account. Such servicing

reports shall also provide information

on the status of any delinquent loans

and any loan that becomes a charged-off

loan.

13. PMC and the REIT will provide to

the board of directors of PMC and the

trust managers of the REIT notice of the

occurrence of any event, non-payment

or loan loss with respect to any loan

transferred to the SPE by one party that

reduces the reserve account or increases

the minimum amount required to be on

deposit in the reserve account or causes

the other party not to receive the

distribution amount that it would have

otherwise been entitled to receive if

such event or loss had not occurred

(each a ‘‘Reimbursement Trigger

Event’’).

14. PMC and the REIT will provide

the board of directors of PMC and the

trust managers of the REIT with notice

when all amounts owing to PMC or the

REIT, as the case may be, in respect of

a Reimbursement Trigger Event have

been paid in full by the other party.

15. The expenses associated with each

joint securitization transaction will be

shared by PMC and the REIT in

proportion to their ownership interests

in the SPE.

16. The terms and conditions of each

joint securitization will be the same for

PMC and the REIT.

17. The Independent Directors will

review quarterly all relevant

information concerning joint

securitization transactions created

during the preceding quarter to

determine whether the conditions set

forth in the application were compiled

with.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–27976 Filed 10–31–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 35–27261]

Filings Under the Public Utility Holding

Company Act of 1935, as Amended

(‘‘Act’’)

October 25, 2000.

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 under the Act. All

interested persons are referred to the

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

complete statement of the proposed

transaction(s) summarized below. The

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

any amendment(s) is/are available for

public inspection through the

Commission’s Branch 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

November 20, 2000, to the Secretary,

Securities and Exchange Commission,

Washington, DC 20549–0609, 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 the case of an attorney at

law, by certificate) should be filed with

the request. Any request for hearing

should identify specifically the issues of

facts 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 November 20, 2000, the

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

filed or as amended, may be granted

and/or permitted to become effective.

Appalachian Power Company

[70–5503]

Appalachian Power Company

(‘‘Appalachian’’), 40 Franklin Road, SW,

Roanoke, Virginia 24011, an electric

public-utility subsidiary company of

American Electric Power Company, Inc.,

a registered holding company, has filed

a post-effective amendment to its

application-declaration under sections

9(a), 10 and 12(d) of the Act and rules

44 and 54 under the Act.

By order dated December 10, 1974

(HCAR No. 18703), the Commission

authorized Appalachian, among other

things, to enter into an agreement of sale

(‘‘Agreement’’) with the Industrial

Development Authority of Russell

County, Virginia (‘‘Authority’’),

concerning the financing of pollution

control facilities (‘‘Facilities’’) at

Appalachian’s Glen Lyn and Clinch

River plants. Under the Agreement, the

Authority may issue and sell its

pollution control revenue bonds

(‘‘Revenue Bonds’’) or pollution control

refunding bonds (‘‘Refunding Bonds’’

and, together with Revenue Bonds,

‘‘Bonds’’), in one or more series, and

deposit the proceeds with the trustee

(‘‘Trustee’’) under an indenture

(‘‘Indenture’’) entered into between the

Authority and the Trustee. The Trustee

applies the proceeds to the payment of

the costs of construction of the Facilities

or, in the case of proceeds from the sale

of the Refunding Bonds, to the payment

of principal, premium (if any) and/or

interest on Bonds to be refunded.

The same order also authorized

Appalachian to convey an undivided

interest in a portion of the Facilities to

the Authority, and to reacquire that

interest under an installment sales

arrangement (‘‘Sales Agreement’’)

requiring Appalachian to pay as the

purchase price semi-annual installments

in an amount that, together with other

funds held by the Trustee under the

Indenture for that purpose, will enable

the Authority to pay, when due, the

interest and principal on the Bonds. The

Authority has issued and sold eight

series of Bonds in an aggregate principal

amount of $116.24 million of which

$37.0 million presently are outstanding.

The Authority now intends to issue

and sell an additional series of bonds in

the aggregate principal amount of up to

$17.5 million (‘‘Series I Refunding

Bonds)’’ the proceeds of which will be

used to provide for the redemption on

or prior to maturity of $17.5 million

principal amount of the Series G Bonds

of the Authority. It is contemplated that

the Series I Refunding Bonds will be

issued and secured under a

supplemental indenture between the

Authority and the Trustee. Appalachian

proposes to enter into an amended Sales

Agreement in connection with the

Series I Refunding Bonds under

essentially the same terms and