[No. 833]

IN THE MATTER OF

WASHINGTON GAS LIGHT COMPANY

WASHINGTON AND SUBURBAN COMPANIES

File Nos. 46-88, 32-78, 46-89, 56-47, and 56-48. Promulgated August 2, 1939 EXEMPTION OF SECURITY ISSUE OF REGISTERED HOLDING COMPANY OR SUBSIDIARY.

Issue Solely for Purpose of Financing Business of Applicant.

Application, having been filed by a subsidiary of a registered holding company pursuant to Section 6 (b) of the Public Utility Holding Company Act of 1935 for exemption from the provisions of Section 6 (a) of the Act of the issue and sale of 35,000 shares of common stock in consideration of the transfer to it by the registered holding company of certain stock and debt obligations of two associate companies, exemption granted, subject to certain conditions, the Commission finding that the issue and sale are solely for the purpose of financing the business of the applicant and have been expressly authorized by the state commission.

ACQUISITION OF SECURITIES BY REGISTERED HOLDING COMPANY OR SUBSIDIARY.

Approval.

Application, having been filed by a subsidiary of a registered holding company, pursuant to Section 10 (a) (1) of the Act, for approval of the acquisition by it of certain stock and debt obligations of two associate companies, to be acquired from the registered holding company in consideration of the issue to the registered holding company of 35,000 shares of common stock of applicant, approved subject to certain conditions, the Commission finding that the acquisition will serve the public interest by tending toward the economical and efficient development of an integrated public utility system.

Application, having been filed by a registered holding company pursuant to Section 10 (a) (1) of the Public Utility Holding Company Act of 1935, for approval of the acquisition of 35,000 shares of the common stock of a subsidiary company, approved, subject to certain conditions, the Commission finding that the acquisition will not be detrimental to the carrying out of the provisions of Section 11 of the Act and that it will tend toward the economical and efficient development of an integrated public utility system.

SALE OF PUBLIC UTILITY SECURITIES BY REGISTERED HOLDING COMPANIES.

Approval.

Application, having been filed by a registered holding company, pursuant to Rule U-12D-1 promulgated under Section 12 of the Act, for approval of the sale of substantially all of the outstanding securities and debt obligations of

5 S. E. C.- -35-1670

two subsidiary companies to another subsidiary for a consideration of 35,000 shares of common stock of the acquiring subsidiary, the stock having an assigned value of $30 per share, the consideration being less than the aggregate carrying value of the securities to be sold, the Commission taking no exception to the fairness of the consideration, approval granted, subject to certain conditions, the Commission basing its conclusions on the fact that although the sale, being between a parent holding company and its subsidiary cannot be said to be at arm's length, the price had, in effect, been fixed by the state public utilities commission.

Application, filed by a registered holding company, pursuant to Rule U-12D-1, for approval of the sale of 362,588 shares of the common stock of a subsidiary company to underwriters for redistribution to the public, approved subject to certain conditions, the Commission finding that the proposed allocation of expenses incidental to the registration of the stock is inequitable to the subsidiary company, but order conditioned on the applicant's complying with the method of allocation of expenses found to be fair by the Commission.

FINDINGS AND OPINION OF THE COMMISSION

Washington and Suburban Companies is a registered holding company. Washington Gas Light Company is its principal subsidiary. Washington and Suburban Companies has filed three applications as follows: An application pursuant to Section 10 (a) (1) of the Public Utility Holding Company Act of 1935 (File 46-89) for approval of the acquisition of 35,000 shares of the common stock of Washington Gas Light Company; an application pursuant to Rule U-12D-1, promulgated under Section 12 (d) of said Act (File No. 56-47), for the approval of the sale of substantially all of the outstanding securities and debt of Alexandria Gas Company and Washington Suburban Gas Company; and an application pursuant to the same rule (File 56-48) for approval of the sale of the 362,588 shares of the common stock of Washington Gas Light Company to underwriters, who are to redistribute shares of common stock to the public.

Washington Gas Light Company has filed an application pursuant to Section 10 (a) (1) of the Act for approval of the acquisition of substantially all of the outstanding securities and debt of Alexandria Gas Company and Washington Suburban Gas Company (File 46–88) and an application (File No. 32-78) pursuant to the third sentence of Section 6 (b) of the Act for exemption from the provisions of Section 6 (a) thereof of the issue and sale by it of 35,000 shares of common stock, which will be the consideration for the securities and debt of Alexandria Gas Company and Washington Suburban Gas Company.

As all five applications were related they were set down for hearing on the same date and for purposes of the hearing were consolidated. Public notice of the hearing was given. Prior to the entry of the

Commission's findings, opinion and order herein, each of the two companies waived its right to a trial examiner's report, submission of proposed findings of fact, the filing of briefs and oral argument. The Commission has considered the record in these matters and makes the following findings:

Washington and Suburban Companies is a Massachusetts trust. It presently owns 327,588 shares of the common stock of Washington Gas Light Company. If it receives, as contemplated by the instant applications, an additional 35,000 shares of Washington Gas Light Company common stock, it will hold 362,588 shares of such common stock. At the present time there are 390,000 shares of this stock outstanding. The balance of 62,412 shares are outstanding in the hands of the public.

Due to the foreclosure of collateral securing loans made in the past, the entire beneficial interest in the trust has passed to four banks and the Reconstruction Finance Corporation. The banks are The Chase National Bank of the City of New York, The Public National Bank & Trust Company of New York, Continental Illinois Bank & Trust Company of Chicago and Harris Trust & Savings Bank. The Reconstruction Finance Corporation's interest arises by reason of an assignment of the interest of Central Republic Trust Company.1

1 The respective interests of the banks and the Reconstruction Finance Corporation are as follows:

Of the 6,000 common shares of beneficial interest, 1,300 shares, are owned by The Chase National Bank of New York, and 1,000 shares are owned by the Continental Illinois National Bank & Trust Company of Chicago, leaving the balance of 3,700 shares, which are held by the following in the percentages shown opposite their respective names:

Washington and Suburban Companies has, in addition to Washington Gas Light Company, other subsidiaries. These are Alexandria Gas Company, which serves the city of Alexandria, Va., Washington Suburban Gas Company, which serves the city of Hyattsville, Md., and vicinity, New York and Richmond Gas Company (the stock of which is held through 11 intermediate holding companies known as the "Tree Companies"), which serves various communities in the borough of Richmond, city of New York, and a very small gas utility company, the Patuxent Gas Company, which operates in Maryland. Since 1936, Washington and Suburban Companies, acting at the instance of the banks and the Reconstruction Finance Corporation, has made attempts to sell the securities and certain open account indebtedness of Alexandria Gas Company and Washington Suburban Gas Company to Washington Gas Light Company. Each time until July 26, 1939, the Public Utilities Commission of the District of Columbia has refused to approve the sale primarily on the ground that the consideration to be paid by Washington Gas Light Company was too high. On the date last mentioned (Formal Case No. 286, Order No. 1807), the Public Utilities Commission of the District approved the sale of the securities and certain open account indebtedness of Alexandria Gas Company and Washington Suburban Gas Company to Washington Gas Light Company for a consideration of 35,000 shares of Washington Gas Light Company common stock, each share of stock "for purpose of effecting such acquisition only, to have an assigned value of $30 per share."

Washington Gas Light Company is a gas utility company serving gas consumers in the District of Columbia. It was organized by special act of Congress in 1848. It now has three subsidiaries, Washington Gas Light Company of Montgomery County, Maryland, Rosslyn Gas Company (Virginia), and Prince Georges Gas Corporation (Maryland), which operate in territory adjacent to the District of Columbia. Executive officers, in general, hold similar positions

Footnote 1 continued:

Additionally, Washington Suburban Companies had outstanding as of December 31, 1938, $6,500,000 4%% bank loans.

Bank:

Chase National Bank of N. Y----

Continental Ill. N/B & Tr. Co., Chicago-
Harris Trust & Savings Bk., Chicago--

Public N/B & Trust Co., New York--

Reconstruction Finance Corp. (assigned over from C. H. Albers
as receiver for Central Republic Trust Co.)–

$2,876, 106. 33

1, 495, 575. 14 1, 150, 442. 50 690, 265, 44

287, 610. 59

6, 500, 000. 00

5 S. E. C.

in these subsidiaries, as they do also in Alexandria Gas Company and Washington Suburban Gas Company, which latter two companies, according to the present plan, will become additional subsidiaries. Washington Gas Light Company transmits and receives natural and manufactured gas across state lines.

The capitalization (including surplus) of the company, actual and pro forma, corporate and consolidated, as of May 31, 1939, is shown by the following tabulation, prepared from figures submitted by said applicant:

• Represents the aggregate minimum liquidating value of $100 per share on 35,600 shares.
▸ Includes the 35,000 shares proposed to be issued which are to be recorded at $30 per share.

The following tabulation, prepared from figures submitted by the company, shows earnings for 12 months ended May 31, 1939, corporate and consolidated, actual and pro forma, giving effect to the acquisition of Washington Suburban Gas Company and Alexandria Gas Company: