0408009 Informal Interpretation

From:(redacted)
Sent:Friday, August 13, 2004 11:00 AM
To:Verne, B. Michael
Subject: HSR Question:Acquisition of When Issued Stock

Mike-

Does the staffhave a position on the acquisition date of "when issued stock" forHSR purposes?

In a bankruptcyreorganization, holders of debt (bank debt, notes or debentures) will often beentitled to receive stock of the reorganized issuer. Once the plan isconfirmed, the stock begins trading on a "when issued" basis, that isa holder of debt sells the stock that it is entitled to receive when the planis consummated. There are actually two questions here:

1) Is the sellerof the "when issued" stock ever deemed to hold it for HSR purposes?
(Staff Comment: No)

2) When is thebuyer of the "when issued" stock deemed to acquire it for HSRpurposes? (Staff Comment: Upon Issue)

The answer tothese questions could be of relevance for determining HSR filing requirementsin the following scenario (an actual situation with which I may be confronted):

Holder has noteswhich entitle it to receive $40MM worth of stock of the reorganized issuer onconsummation of the bankruptcy plan. Holder purchases $20MM worth of issuerstock on a "when issued" basis. Because of the mechanics ofsettlement procedures, Holder will not receive its "when issued"stock until several weeks after consummation of the plan. It is Holder'sintention to--and Holder actually does--sell $15MM dollars of stock on a"when issued" basis after acquiring the $20MM on a "whenissued" basis, but prior to consummation of the plan. Would Holder bedeemed to be holding in excess of $50MM of issuer stock at the time ofconsummation of the plan?

I am aware ofInterp 25 of the Practice Manual regarding regular way settlement, but I thinkthis is sufficiently different.

Assume for thesepurposes that the stock is voting stock and that 802.63 is unavailable.