1
Form 8-K October 2, 1998
Exhibit 99(b)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
October 2, 1998
Mr. Dennis V. Osimitz
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Re: Newcourt Credit Group, Inc.
Dear Mr. Osimitz:
In regard to your letter of October 2, 1998, our response thereto is
attached to the enclosed photocopy of your correspondence. By doing this, we
avoid having to recite or summarize the facts set forth in your letter.
Sincerely,
Catherine T. Dixon
Chief Counsel
2
Form 8-K October 2, 1998
Exhibit 99(b)
[SIDLEY & AUSTIN LETTERHEAD]
1933 Act/Section 5
1934 Act/Sections 13 and 15(d)
October 2, 1998
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Office of the Chief Counsel
Division of Corporation Finance
Re: Newcourt Credit Group Inc./AT&T Capital Corporation
Ladies/Gentlemen:
This letter is submitted on behalf of Newcourt Credit Group Inc., an
Ontario corporation ("Newcourt"), and AT&T Capital Corporation, a Delaware
corporation ("Capital").
I. BACKGROUND.
A. Newcourt Acquisition of Capital; Newcourt Securities. On January 12,
1998, all the outstanding common stock of Capital was acquired by Newcourt.
Shortly thereafter, Newcourt transferred all the outstanding common stock of
Capital to a wholly-owned subsidiary of Newcourt.
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Form 8-K October 2, 1998
Exhibit 99(b)
In November 1997, Newcourt registered rights to acquire Newcourt common
shares under the Securities Act of 1933, as amended (the "Securities Act"), on
Form F-10 (No. 333-07974) as a "foreign private issuer" pursuant to the
multi-jurisdictional disclosure system with Canada ("MJDS"). In addition, in
April 1997, Newcourt registered its common shares on Form 40-F pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and became a reporting company under the Exchange Act. Newcourt has
advised us that it has thereafter filed, and will continue to file, reports on
Form 40-F and Form 6-K pursuant to the MJDS requirements. Accordingly, effective
May 1, 1998, Newcourt has been subject to the reporting requirements of Section
13 of the Exchange Act and filed all reports required to be filed thereunder for
a period of at least 12 months. Newcourt has advised us that it has issued debt
securities to the public in Canada, but has not issued any debt securities to
the public in the United States.
B. Existing Debt Securities. In recent years, Capital has issued debt
securities through public offerings in the United States (the "Existing Debt
Securities"). The Existing Debt Securities were registered by Capital under the
Securities Act using registration statements on Form S-3 (the most recent being
No. 333-18367) and the "shelf" procedures of Rule 415 under the Securities Act.
Capital files periodic reports pursuant to Sections 13 and 15(d) of the Exchange
Act.
C. Support Agreement. Following the acquisition of Capital by Newcourt, on
February 9, 1998, Newcourt and Capital entered into a support agreement (the
"Support Agreement") under which Newcourt has agreed to own (directly or
indirectly) a majority of the voting stock of Capital, maintain the net worth of
Capital at $1 or more and provide liquidity to Capital. Under the terms of the
Support Agreement, the holders of Capital's outstanding debt for borrowed money
are entitled to demand that Capital enforce its rights thereunder and to proceed
against Newcourt on behalf of Capital to enforce the rights of Capital
thereunder if Capital refuses to do so. However, the Support Agreement, by its
terms, provides that it is not a guaranty and that no holder of any such debt
shall have any right to proceed directly against Newcourt to obtain any amount
due with respect thereto. Thereafter, on February 20, 1998, Capital guaranteed
(the "Up-Stream Guaranty") certain outstanding indebtedness and bank liquidity
facilities of Newcourt (the "Newcourt Debt"). We have been advised by Newcourt
that the Up-Stream Guaranty was issued in order for Newcourt to continue in
compliance with Newcourt's indentures and loan agreements and to satisfy certain
rating agency requirements.
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Form 8-K October 2, 1998
Exhibit 99(b)
D. Additional Registration Statements. On March 20, 1998, Capital filed a
registration statement on Form S-3 (No. 333-48415) under the Securities Act (the
"March 1998 Registration Statement") with respect to additional debt securities
of Capital (the "Additional Debt Securities"). The March 1998 Registration
Statement was declared effective on May 5, 1998. Newcourt filed a registration
statement on Form F-9 under the Securities Act relating to a full and
unconditional guaranty of the Additional Debt Securities by Newcourt (the
"Additional Debt Securities Guaranty"), which registration statement has also
become effective. An indenture was qualified under the Trust Indenture Act of
1939, as amended (the "TIA"), with respect to the Additional Debt Securities and
the related Additional Debt Securities Guaranty. Pursuant to Rule 4d-9 under the
TIA, the indenture relating to the Additional Debt Securities Guaranty will be
exempt from certain provisions of the TIA.
It is also contemplated that (i) Capital from time to time will file
additional registration statements on Form F-3 under the Securities Act (the
"Future Registration Statements") with respect to additional debt securities
(the "Future Debt Securities"), (ii) Newcourt from time to time will file
additional registration statements on Form F-9 (or, at Newcourt's election, Form
F-3), under the Securities Act relating to full and unconditional guaranties of
the Future Debt Securities by Newcourt (the "Future Debt Securities Guaranties")
and (iii) indentures will be qualified under the TIA with respect to the Future
Debt Securities and the related Future Debt Securities Guaranties. Pursuant to
Rule 4d-9 under the TIA, the indenture relating to the Future Debt Securities
Guaranties will be exempt from certain provisions of the TIA.
E. Existing Securities Guaranties. Newcourt is planning to issue a separate
guaranty (the "Existing Securities Guaranty") under which Newcourt would fully
and unconditionally guarantee the Existing Debt Securities and certain other
indebtedness of Capital. After issuance of the Existing Securities Guaranty, it
is contemplated that Newcourt and Capital would terminate the Support Agreement
in accordance with the terms thereof which permit termination under certain
conditions.
II. REQUESTED ACTIONS.
Newcourt and Capital respectfully request (i) the Securities and Exchange
Commission (the "Commission") to grant an order pursuant to Section 12(h) of the
Exchange Act exempting Capital from the reporting obligations under the Exchange
Act or (ii) in the alternative, the Staff of the Division of Corporation Finance
of the Commission (the "Staff") to confirm that, under the circumstances
described in this letter, it will not
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Form 8-K October 2, 1998
Exhibit 99(b)
recommend any enforcement action to the Commission if Capital ceases to file
periodic reports pursuant to Sections 13 and 15(d) of the Exchange Act. The
foregoing request is predicated on the conditions that (a) the Existing
Securities Guaranty will be issued by Newcourt as contemplated hereby, (b) the
Additional Debt Securities will be guaranteed by the Additional Debt Securities
Guaranty and the Future Debt Securities will be guaranteed by the Future Debt
Securities Guaranties as contemplated hereby and (c) Newcourt will comply with
its periodic reporting requirements under the Exchange Act and include in such
periodic reports summarized financial information (as defined in Rule
1-02(bb)(1) of Regulation S-X) with respect to Capital.
Also, Newcourt and Capital respectfully request the Staff to confirm that
(x) Capital will remain eligible to issue Additional Debt Securities under the
March 1998 Registration Statement (or, if the Staff should conclude otherwise,
confirm that the March 1998 Registration Statement may be converted to a
Registration Statement on Form F-3 by post-effective amendment if General
Instruction I.A.5(ii) or I.A.5(iii) to Form F-3 is satisfied at the time of the
filing of such post-effective amendment) and (y) so long as General Instruction
I.A.5(ii) or I.A.5(iii) to Form F-3 is satisfied at the time a registration
statement on Form F-3 is filed by Capital, Capital will remain eligible to use
Form F-3 as a form of registration statement for registering Future Debt
Securities, in each case notwithstanding Capital's ceasing to file reports under
the Exchange Act pursuant to the requested exemptive order or no-action letter.
Lastly, Newcourt and Capital respectfully request the Staff to confirm that
it will not recommend enforcement action to the Commission, under the
circumstances described in this letter, if: (i) Newcourt does not register the
Existing Securities Guaranty under the Securities Act; and (ii) a supplemental
indenture is not qualified under the TIA with respect to the Existing Securities
Guaranty.
III. DISCUSSION.
A. NO REQUIREMENT FOR CAPITAL TO CONTINUE
TO FILE REPORTS WITH THE COMMISSION SUBSEQUENT TO THE
EFFECTIVENESS OF THE EXISTING SECURITIES GUARANTY AND
THE EXISTING SECURITIES SUBORDINATED GUARANTY.
Capital is a reporting company subject to the periodic reporting
requirements of Section 13 of the Exchange Act by virtue of Section 15(d)
thereof, and we have been advised by Capital that the Future Debt Securities,
the Additional Debt Securities and the Existing Debt Securities are or will be
the only outstanding securities of Capital with respect to
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Form 8-K October 2, 1998
Exhibit 99(b)
which Capital is or will be subject to such reporting requirements.
In Staff Accounting Bulletin No. 53 ("SAB 53"), the Staff expressed the
view that in situations where the issuer of a guaranteed security is
wholly-owned by the guarantor, the guaranty is full and unconditional, the
guarantor is itself a reporting company under the Exchange Act and the issuer
has more than minimal independent operations of its own, upon application, the
issuer "would be conditionally exempted pursuant to Section 12(h) of the
Exchange Act from reporting obligations under such act." SAB 53, Paragraph G,
note 2. In implementing SAB 53, the Staff has routinely expressed no objection
to the cessation of such reporting by such subsidiaries, provided the parent
guarantor includes in the notes to its consolidated financial statements
"summarized financial information" on the subsidiary as defined in Rule
1-02(bb)(1) of Regulation S-X. See, e.g., Forest Oil Corporation (available
December 19, 1997); Cadbury Schweppes plc (available March 21, 1996); IntelCom
Group, Inc. (available December 28, 1995); CSR Limited (available October 25,
1995); Data Documents Holdings, Inc. (available March 31, 1995); Union Oil
Company of California (available September 2, 1994); Greystone Homes, Inc.
(available August 22, 1994); Time Warner Entertainment Company, L.P. (available
November 5, 1993); First Union Corporation (available July 30, 1993);
BankAmerica Corporation (available March 20, 1992); Union Carbide Corporation
(available April 12, 1991); Norfolk and Western Railway Company (available
December 24, 1990); and Time Warner Inc. (available January 9, 1990).
The same conclusion has been reached in situations where the guarantor is a
foreign corporation, including where (i) the guarantor is a Canadian corporation
and a foreign private issuer which satisfies its reporting obligations under the
Exchange Act through periodic filings using the MJDS provisions and the domestic
subsidiary registered its securities using Form F-3 (see, e.g., The Loewen
Group, Inc. (available November 18, 1994)), (ii) the guarantor is a Canadian
corporation (but not a foreign private issuer) which satisfies its reporting
obligations under the Exchange Act through periodic filings using the forms of
reports filed by domestic companies (see, e.g., The Loewen Group, Inc.
(available October 20, 1997; available March 13, 1997; and available December
13, 1996)), (iii) the guarantor is an Australian corporation which satisfies its
reporting obligations through periodic filings on Forms 20-F and 6-K and the
domestic subsidiary registered its securities using Form F-1 (see, e.g., CSR
Limited (available October 25, 1995)) and (iv) the guarantor is a Mexican
corporation which satisfies its reporting obligations through periodic filings
on Forms 20-F and 6-K (see, e.g., Dine, S.A. de C.V. (available October 24,
1997)).
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Form 8-K October 2, 1998
Exhibit 99(b)
In addition, the same conclusion has been reached where the subsidiaries
continue to issue debt securities (guaranteed by the parent) registered under
the Securities Act pursuant to a shelf or other registration statement or where
a filing on Form S-3 was pending or planned. See, e.g., The Loewen Group Inc.
(available October 20, 1997); Data Documents Holdings, Inc. (available March 31,
1995); Union Oil Company of California (available September 2, 1994); Alcan
Aluminum Corp. (available March 1, 1993); Bell Atlantic Corporation (available
December 21, 1992); Joseph E. Seagram & Sons, Inc. (available March 25, 1992);
Southwestern Bell Capital Corporation (available October 16, 1986); and Pacific
Telesis Group (available July 25, 1986). In both Union Oil and Data Documents
Holdings, the Staff expressly stated, in the context of Form S-3, that "assuming
that General Instruction C.2. or C.3. is satisfied at the time a registration
statement is filed, the Division will not object if [the subsidiary ceasing to
file reports under the Exchange Act] uses Form S-3 to register future offerings
of securities". Based on the foregoing, so long as General Instruction C.2 or
C.3 to Form S-3 or General Instruction I.A.5(ii) or I.A.5(iii) to Form F-3
(which correspond to General Instruction C.2 and C.3 to Form S-3) is satisfied
at the time a registration statement on Form S-3 or Form F-3, as the case may
be, is filed (or, in the case of conversion of a registration statement on Form
S-3 to a registration statement on Form F-3 by post-effective amendment, General
Instruction I.A.5(ii) or I.A.5(iii) to Form F-3 is satisfied at the time of the
filing of such post-effective amendment), Capital should remain eligible to
continue to issue Additional Debt Securities pursuant to the March 1998
Registration Statement and should remain eligible to use Form F-3 as a form of
registration statement for registering Future Debt Securities (or, in the case
of such a conversion, Additional Debt Securities).
The existence of the Up-Stream Guaranty provides an even stronger factual case
for the requested relief than was present in the above-referenced no-action
letters granting relief where no corresponding up-stream guaranty existed. This
is so because the combination of the Up-Stream Guaranty, the Existing Securities
Guaranty, the Existing Securities Subordinated Guaranty, the Additional Debt
Securities Guaranty and the Future Debt Securities Guaranty permit or will
permit the holders of the Newcourt Debt, the Existing Debt Securities, the
Additional Debt Securities and the Future Debt Securities to seek payment from
both Capital and Newcourt with respect to such securities (subject to any
applicable subordination provisions and, in the case of the Newcourt Debt
guaranteed by the Up-Stream Guaranty, to any potential challenge as to the
Up-Stream Guaranty under fraudulent conveyance principles, in which event the
existing case would still be similar to the facts present in such no-action
letters). Thus, the consolidated statements of Newcourt (which would include
Capital as a consolidated subsidiary) would
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Form 8-K October 2, 1998
Exhibit 99(b)
be the most relevant financial statements for the holders of each of such
securities.
Rule 1-02(bb) of Regulation S-X defines "wholly-owned subsidiary" to mean a
subsidiary substantially all of whose outstanding voting shares are owned by its
parent and/or its parent's other wholly-owned subsidiaries. Thus, Capital is a
wholly-owned subsidiary of Newcourt within the meaning of such definition.
Capital has more than minimal independent operations of its own. Newcourt is a
reporting company under the Exchange Act by virtue of Section 13 thereof.
Newcourt expects to be current in its reporting obligations thereunder and is
prepared to provide summarized financial information (as defined in Rule
1-02(bb)(1) of Regulation S-X) as to Capital in Newcourt's periodic reports
under the Exchange Act (for so long as the Future Debt Securities, the
Additional Debt Securities or the Existing Debt Securities remain outstanding,
unless the filing of periodic reports would not otherwise be required).
The Staff has expressed its view, in previous no-action letters, that a
guarantee is unconditional unless there is a condition precedent to the
guarantor's liability, or unless a creditor must proceed against the principal
obligor before attempting to collect from the guarantor. See, e.g., Southwestern
Bell Corporation (available October 16, 1986); Pacific Telesis Group (available
July 25, 1986). The Future Debt Securities Guaranty, the Additional Debt
Securities Guaranty and the Existing Securities Guaranty by their terms do not
or will not require satisfaction of any condition precedent to Newcourt's
liability, and the holders of the Future Debt Securities, the Additional Debt
Securities and the Existing Debt Securities (upon execution of the Future Debt
Securities Guaranties, the Additional Debt Securities Guaranty and the Existing
Securities Guaranty, as the case may be) will (by the terms of such guaranties)
be entitled to proceed directly against Newcourt without proceeding first
against Capital. Thus, based upon the foregoing, upon execution of such
guaranties, Newcourt will have fully and unconditionally guaranteed the Future
Debt Securities, the Additional Debt Securities and the Existing Debt
Securities.
Under the circumstances described above and based upon the historical
position of the Staff expressed in SAB 53 and the letters referred to above, it
is consistent with the public interest and protection of investors to allow the
reports and other documents to be filed by Newcourt pursuant to Section 13 of
the Exchange Act to satisfy the reporting obligations of Capital with respect to
the Future Debt Securities, the Additional Debt Securities and the Existing Debt
Securities and for Capital to be relieved of its reporting obligations under
Sections 13 and 15(d) of the Exchange Act.
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Form 8-K October 2, 1998
Exhibit 99(b)
B. NO REQUIREMENT FOR NEWCOURT TO REGISTER
THE EXISTING SECURITIES GUARANTY OR THE EXISTING SECURITIES
SUBORDINATED GUARANTY UNDER THE SECURITIES ACT OR TO
QUALIFY A SUPPLEMENTAL INDENTURE RELATING THERETO UNDER THE TIA .
Section 2(3) of the Securities Act states that the "sale" of a security
must involve some disposition "for value". We have been advised by Capital that,
under the terms of the indentures or other instruments relating to the Existing
Debt Securities, the holders thereof do not have any right to vote upon or
contest the Existing Securities Guaranty. As a result, such holders would not be
making an investment decision with respect to a "new" security. Furthermore,
such holders will not pay any consideration or give up any rights to obtain the
benefits of the Existing Securities Guaranty, and Newcourt has advised us that
it is not obligated to provide the Existing Securities Guaranty by any indenture
or other agreement. Accordingly, there should be no "sale" within the meaning of
Section 2(3) of the Securities Act and therefore no requirement to register the
Existing Securities Guaranty under the Securities Act. The Staff has previously
reached the same conclusion in similar situations. See, e.g., Time Warner
Entertainment Company, L.P. (available November 5, 1993); BankAmerica
Corporation (available March 20, 1992); Union Carbide Corporation (available
April 12, 1991); Norfolk and Western Railway Company (available December 24,
1990); Time Warner Inc. (available January 9, 1990); FHC-CompCare, Inc.
(available October 12, 1989); Daisy Systems Corporation (available April 10,
1989); Newell Co. (available July 22, 1987); McKesson Corp. (available September
12, 1985); and American General Corp. (available September 19, 1980).
For the same reasons discussed above, issuance of the Existing Securities
Guaranty should not constitute a "sale" within the meaning of Section 303(a) of
the TIA, which adopts the definition of "sale" contained in Section 2(3) of the
Securities Act. Accordingly, qualification of a supplemental indenture should
not be required under the TIA. The Staff has previously reached the same
conclusion in similar situations. See, e.g., BankAmerica Corporation (available
March 20, 1992); Union Carbide Corporation (available April 12, 1991); Norfolk
and Western Railway Company (available December 24, 1990); Time Warner Inc.
(available January 9, 1990); FHC-CompCare, Inc. (available October 12, 1989);
Daisy Systems Corporation (available April 10, 1989); Newell Co. (available July
22, 1987); McKesson Corp. (available September 12, 1985); and American General
Corp. (available September 19, 1980).
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Form 8-K October 2, 1998
Exhibit 99(b)
IV. SUMMARY AND CONCLUSION.
Based upon the foregoing, on behalf of Newcourt and Capital, we
respectfully request the Commission to grant, pursuant to Section 12(h) of the
Exchange Act, an order exempting Capital from the periodic reporting
requirements of Sections 13 and 15(d) of the Exchange Act or, in the
alternative, the Staff to confirm that, under the circumstances described above,
it will not recommend to the Commission any enforcement action if Capital does
not comply with the periodic reporting requirements of Sections 13 and 15(d) of
the Exchange Act provided that Newcourt continues to comply with its periodic
reporting requirements under the Exchange Act pursuant to MJDS or otherwise, and
includes in its reports summarized financial information (as defined in Rule
1-02(bb)(1) of Regulation S-X) with respect to Capital.
Also, we respectfully request the Staff to confirm that (a) Capital will
remain eligible to issue Additional Debt Securities under the March 1998
Registration Statement (or, if the Staff should conclude otherwise, confirm that
the March 1998 Registration Statement may be converted to a Registration
Statement on Form F-3 by post-effective amendment if General Instruction
I.A.5(ii) or I.A.5(iii) to Form F-3 is satisfied at the time of the filing of
such post-effective amendment) and (b) so long as General Instruction I.A.5(ii)
or I.A.5(iii) to Form F-3 is satisfied at the time a registration statement on
Form F-3 is filed by Capital, Capital will remain eligible to use Form F-3 as a
form of registration statement for registering Future Debt Securities, in each
case notwithstanding Capital's ceasing to file reports under the Exchange Act
pursuant to the requested exemptive order or no-action letter.
Lastly, we respectfully request the Staff to confirm that it will not
recommend enforcement action to the Commission, under the circumstances
described above, if: (i) Newcourt does not register the Existing Securities
Guaranty under the Securities Act; and (ii) a supplemental indenture is not
qualified under the TIA with respect to the Existing Securities Guaranty.
As required by Securities Act Release No. 33-6269, seven additional copies
of this letter are submitted herewith. If you have any questions concerning this
letter or if you require any additional information, please contact either
Dennis V. Osimitz (312/853-7748) or James D. Johnson (212/906-2350).
Additionally, if you do not agree with any of the views expressed herein, we
respectfully request an opportunity to discuss the matter with you prior to any
written response to this letter.
Very truly yours,
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Form 8-K October 2, 1998
Exhibit 99(b)
October 2, 1998
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE
Re: Newcourt Credit Group, Inc. ("Newcourt")
AT&T Capital Corporation ("Capital")
Incoming letter dated October 2, 1998
Based on the facts presented, the Division will not object if Capital does
not file reports under Sections 13 and 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act") with respect to the Existing Debt Securities and the
Additional Debt securities (each as defined in your letter). In reaching this
position, we note that : (1) Newcourt is subject to the reporting requirements
of the Exchange Act; (2) Newcourt owns 100 percent of Capital's outstanding
common stock, and (3) Newcourt has fully and unconditionally guaranteed the
Additional Debt Securities, and will fully and unconditionally guarantee the
Existing Debt Securities.
As a condition to the position, Newcourt must, in a footnote to the
financial statements in its Exchange Act reports:
include summarized financial information concerning Capital which includes at
least the information described in Rule 1-02(bb) of Regulation S-X; and
state that Capital has not presented separate financial statements and other
disclosures concerning Capital because management has determined that such
information is not material to holders of the Existing Debt Securities and
the Additional Debt Securities, respectively.
Further, assuming that General Instruction C.2. or C.3. to Form S-3 was
satisfied at the time the March 1998 Registration Statement (as defined in your
letter) was filed, and a post-effective amendment is filed to convert such Form
S-3 to a Form F-3, the Division will not object if Capital uses Form F-3 to
register the Additional Debt Securities; provided, however, that General
Instruction I.A.5(ii) or (iii) to Form F-3 is satisfied when this post-effective
amendment is filed. Also, assuming that General Instruction I.A.5(ii) or
I.A.5(iii) to Form F-3 is satisfied at the time a registration statement is
filed on such Form (along with all other applicable prerequisites to use of
Form F-3), the Division will not object if Capital uses Form F-3 to register the
Future Debt Securities (as defined in your letter).
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Form 8-K October 2, 1998
Exhibit 99(b)
Finally, no enforcement action will be recommended if (a) Newcourt does not
register the Existing Debt Securities Guaranty (as defined in your letter) under
the Securities Act of 1933, and (b) neither Newcourt nor Capital qualifies a
supplemental indenture under the Trust Indenture Act of 1939 in respect of the
Existing Debt Securities Guaranty. In reaching this position, we note your
representation that none of the holders of the outstanding securities of
Newcourt, Capital, or any other entity has the right to, or will, vote upon or
consent to the creation of the Existing Debt Security Guaranty.
These positions are based on the representations made to the Division in
your letter. Any different facts or conditions might require the Division to
reach a different conclusion. Further, this response expresses the Division's
position on enforcement action only and does not express any legal conclusion on
the questions presented.
Sincerely,
Mark Schwartz
Attorney-Adviser