Opinion ID: 376668
Heading Depth: 4
Heading Rank: 3

Heading: Internally Generated Funds.

Text: 37 Appellant cites as improper the inclusion of the AFDC sum in the $446 million of internally generated funds which Detroit Edison asserted would constitute 25% of the total funding of the utility's construction program for the next two years. Set forth on page three of the prospectus, this estimate was intended to underscore the fact that substantial external financing was necessary. 38 Since AFDC income is merely a balancing entry, an offset to expenses not chargeable to the present period, it does seem that the inclusion of it in an amount representing currently available cash funds was erroneous. However, such a misstep does not render the entire prospectus misleading. First, the entry did not on its face indicate that AFDC was included in the sum of money which was expected to come from the utility's own coffers, and therefore did not compound any possible misperception on the part of potential investors that AFDC was a cash item. 39 Second, appellant has not advanced any persuasive evidence to indicate that this error was material. Although a revised computation would indicate that Detroit Edison would require approximately 82% rather than 75% of its construction funds from external sources, and although in absolute terms this represented a substantial amount of money, there is nothing in the record to indicate that this additional increment would make it more difficult for Detroit Edison to obtain the necessary financing. The testimony of the utility's investment bankers, the only direct evidence on point, was to the contrary. 40 Moreover, the thrust of the passage was that the utility was in the midst of a massive construction program and that an extremely large proportion of the funds required for this expansion was coming from external sources. That statement is not made materially misleading because in fact a slightly higher percentage of funds than indicated would have to be raised in the capital markets. 41