Exhibit 8 to Registration Statement
July 3, 1996
Equitable of Iowa Companies
P. O. Box 1635
Dear Moines, Iowa 50306-1635
Re: Subordinated Debentures and Preferred Securities
Gentlemen:
We have acted as counsel to Equitable of Iowa Companies (the "Company")
and Equitable of Iowa Companies Capital Trust ("Equitable Trust") in
connection with the issuance of securities by the Company, and by Equitable
Trust, as described in the Registration Statement on Form S-3 (Registration
No. 333-1909) filed with the Securities and Exchange Commission on March 22,
1996, as amended, ("Registration Statement"), and the Prospectus Supplement
incorporated therein (the "Prospectus Supplement").
We understand that the transaction will consist of the following:
The Company, a domestic corporation, will issue subordinated debt
securities (the "Subordinated Debentures") which will be held by Equitable
Trust, a Delaware business trust. Equitable Trust will initially have five
trustees (the "Trustees"), three of whom will be persons employed by or
affiliated with the Company. The fourth trustee, First Chicago Delaware, Inc.,
is a Delaware corporation, unaffiliated with the Company, whose principal
place of business is in Delaware. The fifth trustee, The First National Bank
of Chicago, a financial institution unaffiliated with the Company is the
indenture trustee ("Property Trustee"). The Declaration of Trust, as amended,
establishing Equitable Trust (the "Declaration") authorizes the Trustees to
have Equitable Trust issue (a) preferred securities (the "Preferred Secur-
ities") representing beneficial undivided interests in Equitable Trust and (b)
common securities (the "Common Securities") representing all residual
beneficial undivided interests in Equitable Trust. All of the Common
Securities will be acquired and owned by the Company. The Declaration will
not permit the issuance by Equitable Trust of any securities or other
beneficial interests other than the Preferred Securities and the Common
Securities. The Property Trustee will receive all interest and principal
paid in respect of the Subordinated Debentures and will maintain such funds
in a segregated account pending distribution.
Holders of the Preferred Securities will be entitled to receive
cumulative cash distributions ("Distributions") at a fixed specified annual
rate of the liquidation preference of $25 per Preferred Security, accruing
from the date of original issuance and payable quarterly in arrears on the
last day of March, June, September and December of each year. The Preferred
Securities are expected to be rated at least investment grade by one of
Standard and Poors, Moody's or Duff & Phelps. The fixed annual rate will be
determined immediately prior to sale of the Preferred Securities and will be
a market rate. The Company will guarantee (the "Guarantee") the payment of
distributions by Equitable Trust if and to the extent Equitable Trust has
funds available for such purpose. In the event Equitable Trust does not have
sufficient funds to pay such distributions, the holders of Preferred
Securities will be entitled to direct the Property Trustee to enforce the
Property Trustee's rights under the indenture relating to the Subordinated
Debentures.
The Subordinated Debentures will have a maturity of 30 years and will pay
interest accruing from the date of original issuance and payable quarterly in
arrears on the last day of March, June, September and December of each year,
at an annual rate equal to the annual rate of interest on the Preferred
Securities. The Company has the right to defer payments of interest on the
Subordinated Debentures by extending the interest payment period on the
Subordinated Debentures at any time for up to 20 consecutive quarters (each
an "Extension"). If interest payments are so deferred, Distributions will
also be deferred. During such extension period, Distributions will continue
to accrue with interest thereon at the same annual rate. In addition, the
Company will also have an option (the "Extension Option") to extend the
maturity of the Subordinated Debentures for a period of up to the earlier to
occur of the Interest Deduction Date or 19 years from the original maturity
date, provided however that the Company may only exercise the Extension
Option if it satisfies certain financial covenants at the time of the
extension and at the end of the initial 30 year term. Among these covenants
is a requirement that the Preferred Securities be rated at least investment
grade at the time of the Extension. The Subordinated Debentures will be
subordinate to all indebtedness of the Company, except trade accounts payable
arising in the ordinary course of business, and will be senior to all classes
of equity. The Company reasonably expects that, as of the date of issuance
and throughout the term of the Subordinated Debentures, it will have assets
and cash flow sufficient to service the Subordinated Debentures pursuant to
their terms.
In rendering our opinion, we have reviewed and relied upon (i) the
Registration Statement, (ii) the Prospectus Supplement, (iii) certificates of
officers of the Company and (iv) such other documents, and have made such
further investigations as we have deemed necessary to render the opinion set
forth below. In performing our examination, as to any facts material to our
opinion, we have, when relevant facts were not independently established by
us, relied upon representations to us by representatives of the Company and
Equitable Trust, and have assumed the truth and accuracy of the
representations in the documents and instruments described herein.
Based upon the foregoing, and subject to the assumptions and
qualifications set forth herein, we are of the opinion that:
1. Equitable Trust will be classified as a grantor trust for United
States Federal income tax purposes rather than as an association taxed as a
corporation or as a partnership. Accordingly, each beneficial owner of the
Preferred Securities will be treated for United States Federal income tax
purposes as the owner of an undivided interest in the Subordinated
Debentures.
2. The Subordinated Debentures will constitute indebtedness of the
Company for United States Federal income tax purposes. Accordingly, interest
on the Subordinated Debentures will be deductible by the Company on an
economic accrual basis, regardless of when such interest is actually paid.
3. Because the Company has the right to defer payments of interest on
the Subordinated Debentures, the Subordinated Debentures will, for United
States Federal income tax purposes, be considered issued with original issue
discount. Accordingly, holders will be required to include interest income
in gross income currently on an economic accrual basis, regardless of when
such interest is actually paid.
4. The discussion set forth in the Prospectus Supplement under the
headings "United States Federal Income Taxation", "Risk Factors-Tax
Consequences of Extension of Interest Payment Period", and "Risk Factors-
Proposed Tax Law Changes" are fair and accurate summaries of the matters
addressed therein, based upon current law and the assumptions stated or
referred to therein.
The above opinions are based upon provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), its legislative history, the Treasury
Regulations thereunder, and published rulings and court decisions in effect
as of the date hereof, all of which are subject to change, possibly
retroactively, and no assurance can be given that the Internal Revenue
Service will not take contrary positions. In particular, we direct your
attention to the provisions of the Revenue Reconciliation Bill of 1996 which,
if enacted and applicable to the Subordinated Debentures by reason of its
effective date, may make the Company unable to deduct interest on the
Subordinated Debentures under certain circumstances described in the
Prospectus Supplement. We are admitted to the practice of law in the State
of Iowa, and we express no opinion herein as to any laws other than the
Federal tax laws of the United States of America.
We hereby consent to the inclusion of this opinion as Exhibit 8 to the
Registration Statement and to all references to this law firm in the
Registration Statement or the Prospectus or Prospectus Supplement included
therein.
Very truly yours,
Nyemaster, Goode, McLaughlin, Voigts,
West, Hansell & O'Brien, P.C.
By /s/ Steven J. Roy
_______________________________
Steven J. Roy