The application provides that, in the event New England's application for an exemption from the competitive bidding requirement of Rule U-50 is denied, Cape & Vineyard and New Bedford will issue and sell unsecured promissory notes to The First National Bank of Boston ("First National") in the amount of $1,750,000 and $3,250,000, respectively, which will be employed to redeem the respective companies' bonds and notes as noted above. Each note will bear interest at 21%% per annum and will mature December 31, 1952, with the right to anticipate payment. The notes, if issued, will be repaid from the proceeds of the issue and sale of such company's common stock to New England after New England issues and sells its Series B Bonds at competitive bidding.

The issue and sale of additional shares of their common stock by Cape & Vineyard, New Bedford and Worcester, and of the 22% promissory notes by Cape & Vineyard and New Bedford have been expressly authorized by the Department of Public Utilities of Massachusetts ("Massachusetts Commission").

BALANCE SHEET AND CAPITALIZATION TABLE
OF SUBSIDIARY COMPANIES

There are attached hereto as Appendices A, B, and C, condensed balance sheets of Cape & Vineyard, New Bedford, and Worcester as at September 30, 1947 (a) per books, (b) as adjusted to reflect the full effect of loan agreements entered into between each of the companies and the First National and approved by the Massachusetts Commission and this Commission

whereby Cape & Vineyard, New Bedford and Worcester may borrow $950,000, $4,500,000 and $750,000, respectively, at any time up to December 31, 1949,1 and (c) pro forma to reflect the proposed issue and sale by each company of the additional shares of its common stock and the retirement of approximately the equivalent amount of its debt. No effect has been given, in either the appendices or the following discussion, to the interim financing by means of bank loans in view of the fact that such financing will be employed as an expediency only if New England's application for exemption from the competitive bidding requirements of Rule U-50 is denied and, in that event, will be outstanding only until New England issues and sells its bonds at competitive bidding.

There appears below, as Table I, a capitalization table, including surplus, of Cape & Vineyard, New Bedford, and Worcester as at September 30, 1947 (a) per books as adjusted to reflect the full effect of the loan agreements entered into by each of the companies and the Bank as noted above, and (b) pro forma to reflect the issue and sale by each company of the additional shares of its common stock and the retirement of its debt.

The plant accounts of each of the companies is carried at cost to the company. These accounts have been approved by the Massachusetts Commission and, in the opinion of the company, is the same as original cost.

As indicated in the capitalization table, the proposed transactions will reduce the ratio of long-term debt to total capitalization of Cape & Vineyard and New Bedford from 45.04% and 41.59%, respectively, to 16.03% and 27.39%, respectively. The reduction in such ratios is the primary object of the proposed program. Under the indenture pursuant to which New England's existing $22,425,000 principal amount of Series A bonds due 1967 were issued, none of its subsidiaries may have outstanding an amount

1 Cape & Vineyard has entered into an agreement with the First National whereby it may from time to time prior to December 31, 1949, borrow an aggregate amount not exceeding $950,000 on notes which will mature on December 31, 1952, and which will bear interest at the rate of 2% per annum if issued in 1947 or 1948 and at 22% if issued in 1949. New Bedford has entered into an agreement with the First National whereby it may from time to time prior to December 31, 1949 borrow an aggregate amount of $6,250,000 on notes which will mature on December 31, 1952, and which will bear interest at the rate of 2% per annum if issued in 1947 or 1948 (except as to $1,750,000 which is to be employed to refund an existing bank note in such amount and which will bear interest at 2% per annum) and at 2% if issued in 1949. See Cambridge Electric Light Company et al., Holding Company Act Release No. 7941 (1947).

Worcester has entered into an agreement with the First National whereby it may from time to time prior to December 31, 1949 borrow an aggregate amount of $750,000 on notes which will mature on December 31, 1952 and which will bear interest at the rate of 24% per annum if issued in 1947 or 1948 and at 22% if issued in 1949. See Worcester Gas Light Company et al., Holding Company Act Release No. 7890 (1947).

of long-term debt which is greater than the aggregate amount of its capital stock plus cash premiums thereon. By reducing the ratio of long-term debt to total capitalization, Cape & Vineyard and New Bedford will be free to issue additional notes to banks for the purpose of financing future construction. According to the companies, the issuance of notes to banks to obtain funds for construction is the only method by which they may finance new construction in view of the fact that the Massachusetts Commission will not permit a public-utility to issue equity or long-term debt securities against anything other than property already in use in the public service.

The $310,000 note of Worcester to be retired is carried by it as a current liability. Accordingly, the effect of the payment of that note is not reflected in the above capitalization table. However, the issue and sale by Worcester of $310,000 par value of its common stock has the effect of slightly reducing the ratio of long-term debt to total capitalization.

INCOME STATEMENTS OF SUBSIDIARY COMPANIES

There appears below as Table II a condensed income statement, as prepared by the companies, of Cape & Vineyard, New Bedford, and Worcester for the twelve months ended September 30, 1947 (a) per books as adjusted to reflect the full effect of the loan agreements entered into between the Bank and each of the companies, and (b) pro forma to reflect the issue and sale by each company of the additional shares of its common stock and the retirement of its debt.

As indicated, the reduction in the long-term debt results in substantially improving the coverages for interest deductions and total income deductions for Cape & Vineyard and New Bedford. The same coverage for Worcester are only slightly improved since it will continue to have outstanding substantial amounts of long-term debt.

CONSOLIDATED BALANCE SHEET AND CAPITALIZATION

TABLE OF NEW ENGLAND

There is attached hereto as Appendix D a condensed consolidated balance sheet of New England and its suusidiary companies

* In addition, the agreement pursuant to which New Bedford issued and sold its existing serial notes provides that it may not have outstanding an aggregate amount of long-term debt in excess of $6,000,000.

In calculating the interest deductions for the bank loans, the interest rates have been calculated by the companies at 24%. However, as indicated in note 1, supra, p. 7, the loan agreements provide that notes issued in 1947 and 1948 will bear interest, for the most part, at 24% and notes issued in 1949 will bear interest at 2%.

27 S. E. C.

as at September 30, 1947 (a) per books, (b) as adjusted to reflect the full effect of loan agreements entered into between a number of New England's subsidiary companies and the First National