the Act relating to new security issues.25 We are satisfied that the issuance of new preferred stock by Seattle would be incompatible with accepted reorganization standards and the applicable provisions of the Act. Moreover, we feel that such issuance would be repugnant to the standards of Section 7 (d) in that, among other things, the new preferred stock would not be reasonably adapted to the earning power of Seattle. Under the circumstances of this case, including particularly the failure of the company to meet the dividend requirements on the first and second preferred stocks issued pursuant to the earlier reorganization, we conclude that the issuance of preferred stock by Seattle is precluded. The contentions of the proponents of the Shea Plan must be rejected. Fees and expenses.-The plan provides that subject to our approval, Seattle will pay all reasonable fees and expenses incurred in connection with the recapitalization. As no estimate of the fees and expenses have been submitted as yet for our approval, our order will reserve jurisdiction to consider the reasonableness of all fees and expenses in connection with this proceeding. Internal Revenue Code.-Seattle has requested that the Commission's order herein contain appropriate recitals necessary to meet the requirements of Section 371 and subsection (f) of Section 1808 of the Internal Revenue Code, as amended. In view of our findings herein, such recitals are clearly appropriate and will be contained in our order. - Enforcement. The plan provides for enforcement of its terms and provisions in an appropriate United States District Court. Our order approving the plan will contain the condition that our approval shall not be effective until such Court enters an appropriate order enforcing the plan. CONCLUSION In view of our discussion above, we find the plan fair and equitable to the persons affected. As we have also found the plan necessary to effectuate the provisions of Section 11 (b) of the Act, an appropriate order will issue approving the plan, as amended, subject, however, to the condition that the Department of Public Utilities of the State of Washington shall have approved the issuance of the new common stock of Seattle. By the Commission (Chairman Caffrey and Commissioners McConnaughey, McEntire and Hanrahan). Derby Gas & Electric Co. 9 S. E. C. 686 (1941); The Middle West Corp. 11 S. E. C. 533 (1942). APPENDIX A SEATTLE GAS COMPANY Condensed balance sheets as at Dec. 31, 1945, actual, adjusted to give estimated effect to bond refinancing, and pro forma to give estimated effect to the proposed plan • In January 1946, $4,800,000 principal amount of first mortgage bonds, 35%% series, due 1976 were sold at 100.29% and the bonds then outstanding were called at their redemption price of 102.5%. Condensed balance sheets as at Dec. 31, 1945, actual, adjusted to give estimated effect to bond refinancing," and pro forma to give estimated effect to the proposed plan-Continued NOTES.-Dividend arrearages on the $5 first preferred stock amounted to $2,367,026 as at Dec. 31, 1945. Under the terms of the indenture securing the new bonds the company shall not pay cash dividends except out ofnet income (as defined in the indenture) earned after Dec. 31, 1945. Under the proposed plan, capital surplus arising in the instant reorganization shall not be available for the payment of dividends. 25 S. E. C. Condensed statements of income for 12-month periods ended as noted a The above statements of income for the years 1939 to 1944, inclusive, have been restated to reflect retroactively certain adjustments of Federal income taxes and interest expense recorded in 1945 but applicable to those years. The provision of $89,068 for Federal income taxes in 1942 includes an additional tax assessment of $61,420 (the final amount being subject to controversy) recorded in 1945, but applicable to the year 1942. IN THE MATTER OF CONSUMERS POWER COMPANY MICHIGAN GAS STORAGE COMPANY File No. 70-1318. Promulgated January 13, 1947 (Public Utility Holding Company Act of 1935) ACQUISITION OF INTEREST IN OTHER BUSINESS Application-declaration by a public utility company which is a subsidiary of a registered holding company to acquire interest in a nonutility company, granted and permitted to become effective, the Commission finding the proposed acquisition meets the standards of Sections 9 (a), and 10 and 12 (f) of the Act. ISSUE AND SALE OF SECURITIES OF SUBSIDIARY Issuance and sale of common stock by a nonutility subsidiary of a registered holding company, for cash and property, granted exemption pursuant to Section 6 (b) of the Act. ACQUISITION OF UTILITY ASSETS BY SUBSIDIARY Application-declaration pursuant to Sections 10 and 12 (f) of the Act and Rule U-43 thereunder regarding acquisition by subsidiary of registered holding company, from its parent, of utility assets, granted and permitted to become effective. APPEARANCES: Arthur E. Palmer, Jr., of Winthrop, Stimson, Putnam & Roberts, New York City, for Consumers Power Company and Michigan Gas Storage Company. Harry S. Littman, of Boyle & Scott, Washington, D. C., for Panhandle Eastern Pipe Line Company. Sidney Shemel, for the Public Utilities Division of the Commission. FINDINGS AND OPINION OF THE COMMISSION Consumers Power Company ("Consumers"), a subsidiary of The Commonwealth & Southern Corporation ("Commonwealth"), a registered holding company, and Michigan Gas Storage Company ("Storage Company"), a Michigan corporation newly organized by Consumers, have filed an application-declaration and amendments thereto, pursuant to the applicable provisions of the Public Utility Holding Company Act of 1935. 25 S. E. C.-35- -7129 |