[LETTERHEAD OF O'MELVENY & MYERS]
January
31st
1 9 9 7
(213) 669-6000
330,955-138
LA1-733364.V1
Great Western Financial Corporation
9200 Oakdale Avenue
Chatsworth, California 91311
Re: Great Western Financial Trust II
Ladies and Gentlemen:
You have requested our opinion as to whether Great
Western Financial Trust II (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 dated as
of January 22, 1997 (the "Declaration"), the Indenture dated as
of September 12, 1990, as amended and supplemented, between Great
Western Financial Corporation (the "Company") and Harris Trust
and Savings Bank, as the Indenture Trustee (the "Indenture
Trustee"), the Third Supplemental Indenture dated as of
January 22, 1997 between the Company and the Indenture Trustee,
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.
The facts as we understand them and on which this
opinion is based are as follows:
The Company will issue subordinated debt securities
(the "Subordinated Debt Securities"), which will be held by the
Trust. The Trust will initially have four trustees (the
"Trustees"), three of whom will be persons employed by or
affiliated with the Company. The fourth Trustee will be First
Chicago Delaware Inc., a Delaware corporation. The Declaration
will authorize the Trustees to have the Trust issue capital
securities (the "Capital Securities") and common securities (the
"Common Securities" and together with the Capital 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, The First National Bank
of Chicago (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 $1000 per
Security, accruing from the date of original issuance and payable
semi-annually in arrears on February 1 and August 1 of each year
commencing August 1, 1997. 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 Capital 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 Capital
Securities. In addition, in the event that the Trust does not
have sufficient funds to pay Distributions to the holders of the
Capital Securities, such holders will be entitled 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").
The Subordinated Debt Securities will have a maturity
of up to 30 years. The Company may defer interest payments on
the Subordinated Debt Securities for up to 10 consecutive semi-
annual periods, at which time all deferred interest would be
payable. The Subordinated Debt Securities will be rated
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
Capital 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 Capital 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 January 31, 1997 which is
incorporated by reference in the Registration Statement on Form
S-3, File No. 333-19711, as amended by Amendment No. 1 filed by
the Company and the Trust with the Securities and Exchange
Commission on January 13, 1997 and January 21, 1997,
respectively, the Prospectus dated January 21, 1997 and the
Prospectus Supplement dated January 22, 1997 relating to the
registration of the Capital Securities.
Respectfully submitted,
/s/ O'MELVENY & MYERS