May 26, 1983
Dana Abrahamsen, Esq.
Federal Trade Commission
Premerger Notification Office
6th Street and Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Dear Mr. Abrahamsen:
This is to confirm our conversation of May 23. You indicated
that (1) the formation of joint venture partnerships is not reportable
under the Hart-Scott-Rodino Act (the Act) or the Federal Trade Commis-
sions Premerger Notification Rules (the Rules) thereunder, and (2) the
formation of a joint venture partnership by a debtor and certain of its
creditors where the debtor contributes its property and the creditors
reduce the debtors loan obligations is a bona fide debt work-out exempt
from the Act and the Rules if undertaken in the ordinary course of the
The facts of the transaction to which the foregoing principles
apply are as follows: A is a limited partnership. A is indebted to
lenders B, C, D, E and F, which indebtedness is secured by non-recourse
mortgages encumbering substantially all of As property and assets (the
property). A is in default with respect to such indebtedness as follows. A new
partnership, G, will be formed by B, C, D, E and F. This partnership
will then itself from a new partnership, N, with A. A and G will be the
partners in H. a will contribute the property to H. H will service As
indebtedness to B through of out of the cash flows of the property, and B,
C, D, E and f will also grant certain concession with regard to such
indebtedness. H will also assume certain other debts of A.
Under the principles discussed above, the foregoing would not be
reportable under the Act, without regard to the size of the parties involved
or the size of the transaction, for two reasons. First, this transaction
involves the formation of a joint venture partnership. The Act only requires
reporting the formation of a joint venture partnerships. Rule 801.40.
Second, this transaction amounts to a bona fide debt work-out between
A, B, C, D, E and F. Bona fide debt work-outs are exempt under the Act if
undertaken in the ordinary course if business. Rule 802.63. Thus, if this
transaction is in the ordinary course of business for B, C, D, E and F, it
is exempt from the Acts reporting requirements for that reason, as well.
If the foregoing analysis and conclusion is not an accurate reflect-
tion of the Federal Trade Commission staffs interpretation of the Act and
Rules, please inform me in writing no later than June 3, 1983. If I do not
hear from you prior to that date, I will assume that the foregoing analysis
is accurate and will proceed accordingly.
Thank you very much for you time.