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EXHIBIT 8.01
[O'MELVENY & MYERS LETTERHEAD]
October
30th
1 9 9 5
(213) 669-6000
815,040-023
LA3-693294.V3
Southwest Gas Corporation
5241 Spring Mountain Road
Las Vegas, Nevada 89102
Re: Southwest Gas Capital I
Ladies and Gentlemen:
You have requested our opinion as to whether Southwest Gas
Capital I (the "Trust") will qualify as a grantor trust for United States
federal income tax purposes as of the date the Trust is formed. The Trust will
be a business trust formed in accordance with the provisions of the Delaware
Code, title 12, chapter 38.
In connection with rendering this opinion, we have examined
the Amended and Restated Declaration of Trust (the "Declaration"), the
Indenture, the First Supplemental Indenture, and such other documents as we
have deemed necessary or appropriate for purposes of this opinion. For
purposes of such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, and the authenticity of all
documents submitted to us as relevant to this opinion and, as to matters of
fact, we have relied upon the agreements, instruments, certificates and
documents referred to above. We have assumed that all parties have the
corporate power and authority to enter into and perform all obligations
thereunder, and we have also assumed the due authorization by all requisite
corporate actions, the due execution and delivery and the validity, binding
effect and enforceability of such documents.
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Page 2 - Southwest Gas Corporation - October 30, 1995
The facts as we understand them and on which this opinion is
based are as follows:
Southwest Gas Corporation, a California corporation (the
"Company"), will issue subordinated debt securities (the "Subordinated Debt
Securities"), which will be held by the Trust. The Trust will initially have
three trustees (the "Trustees"), two of whom will be persons employed by or
affiliated with the Company. The third Trustee will be Wilmington Trust
Company, a Delaware corporation. The Declaration will authorize the Trustees
to have the Trust issue preferred securities (the "Preferred Securities") and
common securities (the "Common Securities" and together with the Preferred
Securities, the "Securities") representing beneficial undivided interests in
the Trust. All of the Common Securities will be held by the Company. The
Declaration will not permit the issuance by the Trust of any securities or
other beneficial interests other than the Securities. Pursuant to the
Declaration, Harris Trust and Savings Bank (the "Property Trustee"), who will
not be a Trustee, will be appointed to hold the Subordinated Debt Securities
owned by the Trust for the benefit of the holders of the Securities. The
Property Trustee will also receive all interest and principal paid in respect
of the Subordinated Debt Securities and will maintain such funds in a
segregated account pending distribution of such funds to the holders of the
Securities.
Holders of the Securities will be entitled to receive
cumulative cash distributions (the "Distributions") at a specified annual rate
of the liquidation preference of $25 per Security, accruing from the date of
original issuance and payable monthly in arrears on the last day of each
calendar month of each year. The timing and rate of payments on the Securities
and the total outstanding liquidation preference of the Securities shall be
identical to, respectively, the timing and rate of payments on and total
outstanding principal amount of the Subordinated Debt Securities. The
Preferred Securities will rank pari passu with the Common Securities, except
that in the event of a default under the Declaration the rights of the holders
of the Common Securities to payments of Distributions and to payments upon
liquidation, redemption or otherwise will be subordinated to the rights of the
holders of the Preferred Securities. In addition, in the event that the Trust
does not have sufficient funds to pay Distributions to the holders of the
Preferred Securities, such holders will be entitled to elect a special trustee
(the "Special Trustee") who will be a Trustee of the Trust and who will have
the authority to bring legal action to compel the Property Trustee to enforce
the rights of the Trust under the indenture executed in connection with the
issuance of the Subordinated Debt Securities (the "Indenture").
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Page 3 - Southwest Gas Corporation - October 30, 1995
The Subordinated Debt Securities will have a maturity of up to
30 years. In addition, the Company may also be given an option (the "Extension
Option") to extend the maturity date of the Subordinated Debt Securities for an
additional period not to exceed 19 years, provided however, that the Company
may only exercise the Extension Option if it satisfies certain financial
conditions at the end of the initial 30-year term. Furthermore, the Company
may defer interest payments on the Subordinated Debt Securities for up to 20
consecutive quarters, at which time all deferred interest would be payable.
The Subordinated Debt Securities will be rated just below investment grade.
Under Treasury Regulation Section 301.7701-4, in order for a
trust to be classified as a fixed investment trust rather than as an
association taxable as a corporation or as a partnership, there must be no
power, on the part of the trustee or any other person, to vary the investment
of the holders of interests in the trust in order to take advantage of market
fluctuations. Furthermore, the trust cannot have multiple classes of
ownership, unless the trust is formed for purposes of facilitating direct
investment in the trust assets and the existence of multiple classes is merely
incidental to such purposes.
The Declaration prohibits the Trustees from causing the Trust
to acquire any assets other than the Subordinated Debt Securities. In
particular, neither the Trustees nor the Trust may vary the assets of the Trust
or the terms of the Securities. In addition, payments of interest and
principal received with respect to the Subordinated Debt Securities may not be
invested, but rather must be distributed to the holders of the Securities.
Furthermore, as stated and with the exception noted above, the Preferred
Securities will rank pari passu with the Common Securities.
Based on the foregoing, and assuming compliance with the
provisions of the Declaration, it is our opinion that the Trust will be treated
as a grantor trust under subpart E, part I of subchapter J of the Internal
Revenue Code for United States federal income tax purposes rather than as an
association taxable as a corporation or as a partnership and, accordingly, each
beneficial owner of a Preferred Security will be treated for United States
federal income tax purposes as the owner of an undivided interest in the
Subordinated Debt Securities held by the Trust.
We consent to the inclusion of this opinion in the Current
Report on Form 8-K dated October 26, 1995 which is incorporated by reference
in the Registration Statement on Form S-3, File No. 33-62143, as amended by
Amendment No. 1 filed by the Company and the Trust with the Securities and
Exchange Commission on August 25, 1995 and October 6, 1995, respectively, the
Prospectus dated October 24, 1995 and the Prospectus Supplement dated October
26, 1995 relating to the registration of the Preferred Securities.
Respectfully submitted,
O'MELVENY & MYERS