1404006 Informal Interpretation



15 USC 18a(c)(1) - 7A(c)(1) – NOT 802.1
Michael Verne

Although we are comfortable with exiting one type of business, but remaining in another related line, in the context of financial instruments like loans and leases, we are not with other types of activities. We recently nixed the use of 7A(c)(1) for a company that was selling all of its contracts to supply natural gas, but was retaining its contracts to supply electricity in the same geographical area. We think your transaction is more similar to the latter, so the exemption would not be available.
UPDATE: October 27, 2015.  See Informal Interpretation 1505005 for additional clarification.


From: (Redacted)
Sent: Monday, April 07, 2014 4:06 PM
To: Verne, B. Michael Walsh, Kathryn
Cc: (Redacted)

Subject: Question Re: 802.1

Mike and Kate,

Hope all is well. We have a scenario where we think 802..1may apply, but as always, would appreciate your guidance. Company A is acquiring a portfolio of commodity trading contracts and related inventory from Company B. Both Company A and Company Bare currently engaged in physical commodities trading, and the transaction does not involve the acquisition of an operating unit or employees. Company B is not exiting physical commodities trading with this transaction. However, this transaction will cause Company B to exit trading of the specific physical commodity involved, and Company B plans-over time- to exit most but not all of its physical commodities trading altogether. It will continue to trade certain commodity derivatives.

We believe that because the transaction (1) simply involves a portfolio of contracts and related inventory and (2) does not involve an operating unit, and because both parties will still be in the business of commodities trading, that 802.1 would apply here and the transaction would be exempt. I recall some prior guidance that although the seller may have been exiting a particular kind of trading, because they were not exiting all trading, 802.1still applied. Please let us know if this is consistent with the PNO's position on 802.1.

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