[Federal Register Volume 75, Number 55 (Tuesday, March 23, 2010)]
[Notices]
[Pages 13803-13805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-6303]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 29176; File No. 812-13753]
SeaCo Ltd.; Notice of Application
March 17, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of application under section 3(b)(2) of the Investment
Company Act of 1940 (``Act'').
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SUMMARY: Summary of Application: SeaCo Ltd. (``SeaCo'') seeks an order
under section 3(b)(2) of the Act declaring it to be primarily engaged
in a business other than that of investing, reinvesting, owning,
holding or trading in securities. SeaCo is primarily engaged in the
shipping container business.
Applicant: SeaCo.
DATES: Filing Dates: The application was filed on Feb 9, 2009 and
amended on March 4, 2010 and March 16, 2010.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicant with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on April 8, 2010, and should be accompanied by proof of
service on applicant, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.
ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090; Applicant: Jonathan Adams,
SeaCo Ltd., 22 Victoria Street, P.O. Box HM 1179, Hamilton HM EX,
Bermuda.
FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, at
(202) 551-6826, or Julia Kim Gilmer, Branch Chief, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicant's Representations
1. SeaCo, a Bermuda company, was formed on August 22, 2008, to own,
operate and manage a shipping container business throughout the world.
SeaCo acquired its businesses from Sea Containers Limited (``SCL'')
through a chapter 11 bankruptcy proceeding.\1\ SeaCo states that in
addition to directly owning a fleet of shipping containers (and, to a
lesser degree, land containers), it also conducts its business through
its wholly-owned subsidiaries and through a controlled company, GE
SeaCo SRL (``GE SeaCo''), in a joint venture with General Electric
Capital Corporation (``GECC'').\2\
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\1\ United States Bankruptcy Court for the District of Delaware,
Case No. 06-11156 (KJC).
\2\ As described more fully in the application, SeaCo finances
the activities of, and collects revenues from, its other
subsidiaries through its direct, wholly-owned subsidiary, SeaCo
Finance Ltd. (``SC Finance''). While SeaCo owns its voting interest
in GE SeaCo directly, it owns its economic interest in GE SeaCo
indirectly through SC Finance and certain other intermediate,
wholly-owned subsidiaries.
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2. GE SeaCo is an operating company engaged in the business of
leasing marine containers to ocean carriers and shippers, leasing land
containers, and disposing of containers at the end of their useful
economic life. SeaCo directly owns approximately 50% of the outstanding
voting securities of GE SeaCo, which entitles it to appoint four
members of GE SeaCo's board of managers (``GE SeaCo Board''). Since
April 2006, GECC, which owns the remaining 50% of the outstanding
voting securities of GE SeaCo, has held the right to appoint five of
the nine members of the GE SeaCo Board. SeaCo states that by virtue of
its ownership stake, SeaCo controls GE SeaCo as defined in section
2(a)(9) of the Act.\3\
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\3\ Section 2(a)(9) of the Act defines ``control'' as the power
to exercise a controlling influence over the management or policies
of a company, and creates a presumption that an owner of more than
25% of the outstanding voting securities of a company controls the
company.
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3. SeaCo represents that it actively participates in the management
and affairs of GE SeaCo. SeaCo states that it conducts its shipping
container business through GE SeaCo by making decisions with GE SeaCo
about the repair, positioning, re-leasing or sale of
[[Page 13804]]
its containers. SeaCo also states that, working in partnership with
GECC, it provides strategic direction to management; provides policies
for retaining, recruiting and incentivizing GE SeaCo management; makes
container asset purchase decisions; reviews and sets marketing and
credit review policies; oversees information technology development and
corporate restructuring; and reviews internal control systems and
reviews and approves financial statements. SeaCo further states that
its representation on the GE SeaCo Board permits SeaCo to block certain
actions that require the approval of seven out of the nine managers
(such as the selection of auditors, the seconding of employees to GE
SeaCo from GECC and its affiliates and the conversion of GE SeaCo to a
new corporate form). Finally, SeaCo states that it has maintained
strong shareholder rights, which include the power to block various
transactions that require a super-majority vote of shareholders
(including certain sales transactions, amending the articles of
organization and increasing or decreasing the number of managers or the
maximum or minimum number of managers).
Applicant's Legal Analysis
1. SeaCo requests an order under section 3(b)(2) of the Act
declaring that it is primarily engaged in a business other than that of
investing, reinvesting, owning, holding or trading in securities, and
therefore not an investment company as defined in the Act.
2. Under section 3(a)(1)(C) of the Act, an issuer is an investment
company if it is engaged or proposes to engage in the business of
investing, reinvesting, owning, holding or trading in securities, and
owns or proposes to acquire investment securities having a value in
excess of 40% of the value of the issuer's total assets (exclusive of
Government securities and cash items) on an unconsolidated basis. Under
section 3(a)(2) of the Act, investment securities include all
securities except Government securities, securities issued by
employees' securities companies, and securities issued by majority-
owned subsidiaries of the owner which (a) are not investment companies,
and (b) are not relying on the exclusions from the definition of
investment company in section 3(c)(1) or 3(c)(7) of the Act
(``Investment Securities'').
3. SeaCo states that its only assets on an unconsolidated basis are
its investment in its direct, wholly-owned subsidiary, SC Finance, and
its holdings of the outstanding voting securities of GE SeaCo and
another operating company, GE SeaCo America.\4\ SC Finance may rely on
section 3(c)(1) of the Act because it indirectly holds the economic
interest in GE SeaCo, and such interest may be deemed to be Investment
Securities. Therefore, SeaCo's assets on an unconsolidated basis could
be deemed to consist almost entirely of Investment Securities. Because
more than 40% of SeaCo's total unconsolidated assets may consist of
Investment Securities, SeaCo may be deemed an investment company within
the meaning of section 3(a)(1)(C) of the Act.
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\4\ GE SeaCo America employs United States staff that handle
operations, leasing and end-of-useful-life disposal of certain
United States based containers for GE SeaCo. SeaCo directly holds
40% of GE SeaCo America's outstanding voting securities and operates
less than 3% of its shipping container business through GE SeaCo
America.
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4. Rule 3a-1 under the Act provides an exemption from the
definition of investment company if, on a consolidated basis with
wholly-owned subsidiaries, no more than 45% of an issuer's total assets
(exclusive of Government securities and cash items) consist of, and no
more than 45% of its net income after taxes over the last four fiscal
quarters combined is derived from, securities other than: Government
securities, securities issued by employees' securities companies, and
securities of certain majority-owned subsidiaries and companies
controlled primarily by the issuer. SeaCo states that due to GECC's
right to appoint an additional manager to the GE SeaCo Board, SeaCo is
unable to rely on rule 3a-1 because it does not primarily control GE
SeaCo.
5. Section 3(b)(2) of the Act provides that, notwithstanding
section 3(a)(1)(C), the Commission may issue an order declaring an
issuer to be primarily engaged in a business other than that of
investing, reinvesting, owning, holding or trading in securities
directly, through majority-owned subsidiaries, or controlled companies
conducting similar types of businesses. SeaCo submits that it qualifies
for an order under section 3(b)(2) of the Act because it is primarily
engaged in the shipping container business through its wholly-owned
subsidiaries and through its controlled company, GE SeaCo. In
determining whether an issuer is ``primarily engaged'' in a non-
investment company business under section 3(b)(2), the Commission
considers the following factors: (a) The company's historical
development, (b) its public representation of policy, (c) the
activities of its officers and directors, (d) the nature of its present
assets, and (e) the sources of its present income.\5\
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\5\ Tonopah Mining Company of Nevada, 26 SEC 426, 427 (1947).
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a. Historical Development. SeaCo states that it is a Bermuda
company formed on August 22, 2008 specifically for the primary purpose
of engaging in the shipping container business through GE SeaCo. SeaCo
states that it does not treat its ownership of GE SeaCo's outstanding
voting securities as investment assets but as the mechanism through
which SeaCo operates, conducts and controls its shipping container
business. SeaCo's interest in GE SeaCo arose from SCL's historical
interest in GE SeaCo, which was transferred to SeaCo as part of a
chapter 11 plan of reorganization. SeaCo does not intend to invest in
any entity as a passive investment or in portfolio securities for
short-term profits and will not be a ``special situation investment
company.'' \6\
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\6\ SCL also is not and was not a ``special situation investment
company.''
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b. Public Representations of Policy. SeaCo states that it has never
held itself out as an investment company within the meaning of the Act,
and has not made any public representations that would indicate that it
is in any business other than that of operating a shipping container
business. With respect to GE SeaCo, SeaCo has and intends to
consistently report its strategy as participating actively in its
operations through its GE SeaCo Board representatives, shareholder
rights, and substantial information rights.
c. Activities of Officers and Directors. SeaCo states that the
majority of its board of directors and executive management team has
significant experience in the shipping container industry and/or
managing turnarounds in the operations of companies emerging from
bankruptcy. SeaCo states that none of these individuals spends, or
proposes to spend, any material amount of time on behalf of SeaCo or GE
SeaCo in activities which involve investing, reinvesting, owning,
holding, or trading in securities, directly or indirectly through
others. SeaCo anticipates that any time spent on such activities by
these individuals would be de minimis. SeaCo further states that the
members of its board of directors (which include four directors who
also serve on the GE SeaCo Board), spend between 20-40% of their time
on monitoring the performance of GE SeaCo operations, 7-10% of their
time making decisions regarding the owned container fleet, 20-30% of
their time on investor communications, 13-15% of their time
[[Page 13805]]
on management oversight and 20-25% of their time providing strategic
direction. SeaCo states that its only executive officer, the Chief
Executive Officer, does not spend his time on activities which involve
investing, reinvesting, owning, holding or trading in securities, and
its three employees split their time between accountancy, contract
management, billing and collections, investor communications and office
administration. SeaCo does not, directly or indirectly, employ
securities analysts or engage in the trading of securities for
speculative or other purposes.
d. Nature of Assets. As a holding company, SeaCo asserts that its
financial data consolidated with its wholly-owned subsidiaries provides
a more accurate picture of its business. SeaCo states that, as of June
30, 2009, its interests in GE SeaCo represented 50% of its total
assets, consolidated with its wholly-owned subsidiaries. Of SeaCo's
remaining total assets, consolidated with its wholly-owned
subsidiaries, SeaCo's owned container fleet represented 26%, amounts
receivable from container leasing represented 7%, and other assets
consisting mainly of deferred finance charges represented 2%. Treating
the interests in GE SeaCo as an operating asset, SeaCo's remaining
Investment Securities constituted less than 15% of SeaCo's total
assets, consolidated with its wholly-owned subsidiaries.\7\
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\7\ Of SeaCo's remaining Investment Securities, consolidated
with its wholly-owned subsidiaries, restricted cash to service the
SeaCo Group's loan facilities represented 10%, cash and cash
equivalents for operational purposes represented 2%, securities
issued by GE SeaCo America represented 2%, and the amount due from
SCL arising out of bankruptcy process represented 1%.
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e. Sources of Income. SeaCo states that on an unconsolidated basis
it has no or minimal income from its ownership of SC Finance, which
receives revenues from SeaCo's other subsidiaries. Applicant states
that revenues constitute the primary source of its income. On a
consolidated basis with its wholly-owned subsidiaries, SeaCo states
that, for the period ending June 30, 2009, its proportionate share of
the revenues of GE SeaCo represented 32%, revenues on the owned
container fleet managed by GE SeaCo represented 67%, and interest
income represented 1%, of its total income.
6. SeaCo thus submits that it qualifies for an order under section
3(b)(2) of the Act.
For the Commission, by the Division of Investment Management,
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6303 Filed 3-22-10; 8:45 am]
BILLING CODE 8011-01-P