person who, disqualified because of a conviction or injunction, has proved by his subsequent conduct that it is not against the public interest or protection of investors that he be permitted to serve in the capacities listed in this section. We conclude that under the circumstances disclosed by the record in these proceedings, it is consistent with the public interest and the protection of investors to grant each of the above-named applicants a permanent exemption from the disabilities imposed by Section 9 (a) insofar as such disabilities arise out of the injunction referred to in the several applications. The order to be entered in each of these cases shall provide for the revocation or modification thereof in the event that any court of competent jurisdiction shall find that the applicant has violated the terms of the injunction referred to herein. Appropriate orders will issue. By the Commission: (Chairman Purcell and Commissioners Healy, McConnaughey, and Caffrey). 22 S. E. C. IN THE MATTER OF CITIES SERVICE POWER & LIGHT COMPANY File No. 70-1216. Promulgated May 14, 1946 (Public Utility Holding Company Act of 1935-Sections 6 (a) and 6 (b)) EXEMPTION OF SECURITY ISSUE OF SUBSIDIARY OF REGISTERED HOLDING COMPANY. Application of public utility subsidiary of registered holding company pursuant to Section 6 (b) of the Act for exemption from Section 6 (a), of the issue and sale of $32,000,000 principal amount of its first mortgage bonds, 156,300 shares of preferred stock, and $6,000,000 principal amount of serial notes pursuant to the competitive bidding requirements of Rule U-50, the proceeds of such sale, together with other funds, to be used to redeem all its outstanding bonds and preferred stock and all outstanding publicly held securities of its two subsidiary companies, granted, subject to certain reservations of jurisdiction, the issuance of such securities being solely for the purpose of financing the business of the company and having been expressly authorized by the State commission of the State in which the applicant is organized and doing business, and the Commission finding it unnecessary to impose any terms or conditions. ACQUISITION BY REGISTERED HOLDING COMPANY OF ADDITIONAL COMMON STOCK OF PUBLIC UTILITY SUBSIDIARY. Proposed acquisition by registered holding company of $5,208,300 par value of additional common stock of its public utility subsidiary, for cash at par value ($5,000,000) and $208,300 par value of subsidiary's preferred stock, approved. APPEARANCES: M. Morton Weinstein, of the Public Utilities Division of the Commission. Clinton J. Ruch and Eugene R. Sullivan of Frueauff, Burns & Ruch and Joseph L. Weiner, for Cities Service Power & Light Company, The Ohio Public Service Company, The Marion-Reserve Power Company, and Ohio River Power, Inc. William D. Carr of Beekman & Bogue, independent counsel for prospective underwriters. 22 S. E. C. 35—6631 FINDINGS AND OPINION OF THE COMMISSION Cities Service Power & Light Company ("Power & Light”), a subsidiary of Cities Service Company, both registered holding companies, and its subsidiaries, The Ohio Public Service Company ("Public Service"), The Marion-Reserve Power Company ("Marion-Reserve"), and Ohio River Power, Inc. ("Power Company"), have filed applications and declarations and amendments thereto pursuant to the Public Utility Holding Company Act of 1935, particularly Sections 6 (b), 7, 9, 10 and 12 thereof, regarding the following transactions. Public Service proposes to issue and sell $32,000,000 principal amount of its first mortgage bonds percent series due 1976, and 156,300 shares of its $100 par value-percent cumulative preferred stock, pursuant to the competitive bidding provisions of Rule U-50. The prices to Public Service for the securities (to be not less than 100 percent and not in excess of 102.75 percent of the principal amount of bonds and of the par value of the preferred stock), the interest rate (to be a multiple of 1% percent and not to exceed 3 percent) on the bonds and the dividend rate (to be a multiple of 100 percent and not to exceed 4 percent) on the preferred stock are to be determined by competitive bidding. Public Service will also issue and sell $6,000,000 principal amount of its serial notes due 1947 through 1956, pursuant to the competitive bidding provisions of Rule U-50, the interest rate (to be a multiple of 5100 percent and not to exceed 3 percent) to be determined by competitive bidding and the price to Public Service to be the principal amount thereof. Public Service further proposes to issue and sell to Power & Light $5,208,300 aggregate par value of additional common stock for $5,000,000 in cash and $208,300 par value of its outstanding preferred stock which will be surrendered by Power & Light and retired. Proceeds of the aforementioned bonds, preferred stock and serial notes, together with such portion of the cash proceeds from the sale of the common stock as may be required, exclusive of accrued interest and dividends, and after allowance for total expenses payable by Public Service, will be applied to the redemption and retirement of the following securities: (a) To the redemption of $28,900,000 principal amount of the first mortgage bonds, 4 percent series due 1962, of Public Service (exclusive of interest) at 1044 percent of the principal amount____ (b) To the redemption of $320,000 principal amount of serial notes (4 percent due serially to August 1947), of Public Service (exclusive of interest) at 102 percent of principal amount--- $30, 128, 250.00 326, 400.00 (c) To the redemption of $614,000 principal amount of promissory notes (2% percent due serially to January 1948) of Public Service (exclusive of interest) at 101 percent of principal amount_. (d) To the payment of $6,836,441.36 principal amount (as at December 31, 1945) of 4 percent mortgage notes dated May 1942 of Power Company, due in installments to May 1957 at the redemption prices applicable thereto (exclusive of interest). (e) To the redemption of $15,161,400 aggregate par value of first preferred stock of Public Service and $3,230,600 stated value of preferred stock of Marion-Reserve at the redemption prices applicable thereto (exclusive of accrued dividends) __ Total $620, 140. 00 6, 944, 901. 22 20, 307, 715. 00 58,327,406. 22 • The redemption prices of the preferred stocks of Public Service are $115 for the 7 percent series, $110 for the 6 percent series, $108.50 for the 51⁄2 percent series, and $107 for the 5 percent series. The redemption price applicable to the preferred stock of MarionReserve is $105. In addition the net proceeds will be applied to the payment of the expenses incurred in connection with such redemption including overlapping interest and dividends, and the balance thereof will be held in the treasury of Public Service for general corporate purposes. Public Service proposes to authorize the new preferred stock and to change each share of its outstanding common stock and of its authorized common stock of $100 par value into 20 shares of common stock of $5 par value each by amending its articles of incorporation. Marion-Reserve and Power Company will join in the mortgage securing the bonds to be issued and sold as aforesaid and will then be liquidated. All of their assets will be acquired in liquidation by Public Service. Power & Light proposes to pledge the common stock of Public Service to be acquired as aforesaid with the Chase National Bank of the City of New York as custodian under the custodian's agreement dated March 15, 1944 as security for the bank loan notes of Power & Light in accordance with the terms of the said note and of the loan agreement dated January 5, 1944. Public Service proposes to make certain adjustments in its plant and property accounts, as hereinafter described. The record indicates that the transactions proposed have been authorized by the Public Utilities Commission of the State of Ohio, the State commission of the State in which Public Service, MarionReserve and Power Company are organized and doing business. After appropriate notice a public hearing was held. Having considered the record, we made the following findings. 22 S. E. C. General description of applicants-declarants.-Public Service, an Ohio corporation, is a public utility company operating wholly within the State of Ohio, engaged in the production, purchase, transmission, distribution and sale of electric energy. The territory served by the company is located in north central Ohio covering an area of approximately 3100 square miles. It supplies electric service at retail, sells power at wholesale to other companies for distribution as well as to municipally owned distribution systems. At December 31, 1945, the company served 143,724 electric consumers. During the same period, the company generated approximately 87.1 percent of its total energy requirements. It is interconnected with the properties of The Toledo Edison Company, also a subsidiary of Power & Light serving areas in the northwestern part of Ohio. Public Service owns all of the common stock of Marion-Reserve and Power Company. Marion-Reserve and Power Company are Ohio corporations and are electric utility companies operating wholly within the State of Ohio. Marion-Reserve is an operating utility company engaged in the production, transmission and distribution of electric energy centering about the city of Marion in the central part of the State.1 The property of Power Company consists of a power plant which is connected with the main transmission system of Public Service. Public Service leases and operates the property of Power Company. Balance sheet.-A consolidated balance sheet of Public Service and subsidiaries as of December 31, 1945, per books and pro forma reflecting the transactions proposed is attached hereto as Appendix A. The pro forma balance sheet is based on the company's assumption for illustrative purposes only, that the bonds and preferred stock will be sold at 1011⁄4 percent of principal amount and par value thereof and will bear a 24 percent interest rate and a 31⁄2 percent dividend rate and that the serial notes, to be sold at principal amount, will bear a 22 percent average interest rate. The utility plant account of Public Service, Marion-Reserve and Power Company and the related reserves for depreciation as of December 31, 1945, per books, and pro forma giving effect to the proposed write-off of inflationary items is shown below in Table I. 1 We authorized the acquisition of Marion-Reserve common stock by Public Service on January 7, 1944. See The Ohio Public Service Company, et al., 15 S. E. C. 228 (1944). Marion-Reserve sold its western division electric distribution properties pursuant to our order dated May 21, 1945. See Cities Service Power & Light Company, 19 S. E. C. 174 |