can be heard as to the Section 11 (b) (2) proceeding and the Section 11 (e) plan, particularly since it should be considered whether the purpose of General Gas & Electric Corporation is anything more than to relieve future income statements of depreciation charges thereby increasing book net income in an effort to increase the participation in the reorganized company through a capitalization of such earnings. The ratio of total debt to net fixed capital on a pro forma basis follows:

There appears below a consolidation table of capitalization as at March 31, 1942, based on the books and pro forma:

VIRGINIA PUBLIC SERVICE COMPANY

Capital structure (consolidated) per books as at March 31, 1942, and pro forma after giving effect to proposed refinancing and certain other adjustments

EARNINGS

There appears below a consolidated income statement for the 12 months ended March 31, 1942, based on the books and pro forma:

VIRGINIA PUBLIC SERVICE COMPANY

Income statement (consolidated) for the 12 months ended March 31, 1942, and pro forma after giving effect to the proposed issue and sale of bonds and debentures

It is proposed that the bonds and debentures will be sold at competitive bidding. Accordingly, the underwriters' commissions are not yet determined, but will be subject to approval by the Commission in

connection with the acceptance of bids. Under the terms of the offering, the successful bidders are required to pay a fee of $17,500 to Milbank, Tweed & Hope, who have been designated as "independent counsel" for the purchasers.

The company has estimated the other fees and expenses as follows:

Registration fee_-_-.

Federal issue tax, recording tax, filing and transcribing fees, and taxes on deeds____.

Trustees' initial and authentication fees___.

Legal expenses:

Hunton, Williams, Anderson, Gay and Moore, counsel for

company

Other legal fees---.

Accounting services_.

$3,988.50

92, 450.00

14, 300. 00

53, 000. 00

* 36, 375.00 13,500.00

8, 500.00

Engineering services..

Printing----

Miscellaneous expenses (including unforeseen items) -

Total estimated expenses__.

70, 000. 00

67, 886. 50

360, 000. 00

This amount includes certain services performed in connection with the previous offerings proposed but not consummated, such services being for the same general purposes as those now offered. Disbursements are not included. The amount also includes $7,500 representing fees for the independent counsel in connection with the prior offering, but does not include the amount of $17,500 proposed to be paid by the successful bidder in connection with the present offering.

On the basis of the facts now in the record, we are unable to make any determination as to the reasonableness of the legal fees proposed to be paid to counsel for the company. Rather than delay the matter, our order will therefore reserve jurisdiction for the purpose of passing upon those fees.

THE REFUNDING BONDS AND DEBENTURES

The transactions insofar as they relate to the issuance of bonds and debentures will be disposed of in the light of the fact that the state commission has approved them and in the light of the provisions of Section 6 (b) of the Act. All except approximately $1,200,000 of the proceeds of the new securities will be used to retire the presently outstanding debt of the Virginia company and the Generating company. We have determined in other decisions that the use of the proceeds of a security issue to refund other securities outstanding in the hands of the public constitutes "financing the business" of the company within the meaning of Section 6 (b). In the present case $1,200,000 of the bonds are held by the parent company. A question is presented as to whether those bonds in the hands of GENGAS are subject to any legal or equitable infirmities. At the request of the interested parties, we are reserving our determination of that question.

The record indicates that, if GENGAS is not entitled to realize cash with respect to said bonds, any cash not so used will be needed

rcier corporate purposes of the Virginia comumstances, we find that the issuance and sale the purpose of financing the business of the public utility company. The issuance has Virginia State Corporation Commission and as having jurisdiction. Accordingly, the ex

STON OF TERMS AND CONDITIONS

sideration of what terms and conditions ingropriate in the public interest or for the consumers. The company itself proposes stments in the company's property account, with respect to the amortization of debt disThe Virginia Corporation Commission in its ing approved the making of these adjusttain the conditions requiring that these be smmation of the financing.

we have determined, at the request of vareserve for further consideration the issues n 11 (b) (2) proceedings, by the plan for the power under Section 11 (e) and concerning eral Gas & Electric Corporation with respect ends which it holds of Virginia Public Service Sas agreed to surrender these bonds to the Vire understanding that there will be placed in Led by GENGAS as its participation with reThat sum amounts to $1,164,000 (representing of said bonds to GENGAS), plus interest crued on said bonds up to the date such funds are . The funds will remain in escrow pending a the issues involved with respect to the rights of

of par,

In the event that it is determined that said bonds Banner be subordinated, wholly or partially, or in the Sherwise determined for any reason that GENGAS realize upon said bonds in cash, the funds so deNA Used by the Virginia company for construction needs, cative, shall be deposited with the trustee under the new

used in the same manner as sinking-fund payments enture. Our order will be conditioned upon the surOGENGAS of these bonds on the foregoing basis. Funds a in escrow may be either held by the Virginia company account, or deposited with a bank or trust company as

There remains a further question as to whether the interests of investors require the imposition of dividend restrictions. As we have indicated, the ratio of debt to capitalization, and the similar ratios of debt to property, are high. In our opinion, the protection of investors in the new bonds requires that these ratios be improved as fast as is reasonably practical. Our order will therefore require that until the ratio of total first mortgage bonds, plus debentures, to total net assets, after the adjustments hereinbefore required, is reduced to 75 percent, no dividends shall be paid on any class of stock.

OTHER APPLICABLE STATUTORY STANDARDS

In connection with the issuance of the new bonds and debentures, it is proposed, as has been indicated, to carry out certain other transactions. For the reasons we have indicated, we are reserving jurisdiction with respect to the reclassification of equity securities and the further accounting phases of the reorganization. However, it is proposed to carry out at this time the elimination of the Generating company, Middle Virginia, and Hampton Towing. The acquisition of the assets of the Generating company has been approved by the Corporation Commission of the Commonwealth of Virginia and is therefore exempt from our jurisdiction pursuant to Section 9 (b) (1) of the Act. This acquisition has also been approved by the Federal Power Commission. Similar considerations are applicable to the acquisition of the assets of Middle Virginia. With respect to the disposition of the securities of Middle Virginia and Hampton Towing, and the liquidation of these companies and the retirement of the securities of the Generating company, we find that the applicable statutory standards are satisfied. Our order will therefore permit the carrying out of these transactions, contemporaneously with the issuance of the new securities.

In accordance with the provisions of Rule U-50, sale of the securities shall not be effected until after the completion of competitive bidding, except that the requirements of paragraph (b) of said rule will, in accordance with the application herein, be modified so as to permit the Virginia company to receive bids on the proposed bonds and debentures at the end of 5 days after publication of its invitation therefor. Paragraph (c) of said rule requires the making of a report to the Commission with respect to the proposals received and the action proposed to be taken, and the entry of a further order approving such action.

CONCLUSION

An appropriate order will issue granting Virginia Public Service Company an exemption under Section 6 (b) of the Act, permitting the carrying out of the related transactions concerning the Generating