EPIC Properties, Inc. , (Oct. 21,
1991)
INQUIRY LETTER 1
JOHNSON & GIBBS
100 FOUNDERS SQUARE, 900 JACKSON STREET
DALLAS, TEXAS 75202-4499
TELEPHONE(214) 977-9000
August 06, 1991
Securities Act of 1933,
Sections 2(11), 5, and 10
August 6, 1991
Office of the Chief Counsel
Division of Corporate Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Abigail Arms, Deputy Chief Counsel
Re: EPIC Properties, Inc.
Ladies and Gentlemen:
Facts
Our client, EPIC Properties, Inc. (the "Company"), is a Texas corporation
that is a wholly-owned subsidiary of EPIC Healthcare Group, Inc. The Company, in
a recent transaction (the "Private Placement") made in reliance on Section 4(2)
of the Securities Act of 1933, as amended (the "Securities Act"), and Regulation
D promulgated thereunder, sold $100 million in aggregate principal amount of its
11-3/8% Class A1 First Priority Mortgage Notes due 2001, $85 million in
aggregate principal amount of its 11-1/2% Class A2 First Priority Mortgage Notes
due 2001, and $15 million in aggregate principal amount of its Floating Rate
Class A3 First Priority Mortgage Notes due 1998 (collectively, the "Mortgage
Notes"). The Mortgage Notes were sold to persons who represented that they (i)
were "accredited investors," as such term is defined in Regulation D
("Accredited Investors") and (ii) were acquiring the Mortgage Notes for their
own account, or for accounts as to which they exercised sole investment
discretion, for investment purposes only and not with a view to public
distribution (the "Purchasers"). None of the Purchasers is an affiliate of the
Company nor, with the exception of Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), a broker-dealer. It is our understanding that DLJ has sold,
or intends to sell, before the effective date of the Registration Statement (as
hereinafter defined) all of its Mortgage Notes to persons who satisfy the
standards set forth in the preceding two sentences. The Purchasers may resell
the Mortgage Notes pursuant to Rule 144A or any other available exemption under
the Securities Act.
The
Company agreed in the Private Placement to file a registration statement (the
"Registration Statement") registering three new classes of notes (the
"Registered Notes"), the terms of which would be substantially identical to the
three outstanding classes of Mortgage Notes, and, upon the Registration
Statement becoming effective, to offer the Registered Notes to the holders of
the Mortgage Notes (the "Noteholders") in exchange for their Mortgage Notes (the
"Exchange Offer"). The Company is required to file the Registration Statement
with the Securities and Exchange Commission (the "Commission") no later than
January 30, 1992. If the Registration Statement is not effective by such time,
the interest rates with respect to each class of the Mortgage Notes will
increase .25% per annum for each quarter that elapses until the Registration
Statement becomes effective.
Confirmation Request
The purpose of this letter is to request confirmation that the
Noteholders who exchange their Mortgage Notes for Registered Notes in the
Exchange Offer (a) may resell the Registered Notes to the public without further
registration under the Securities Act and (b) may effect such resales without
delivering to the purchasers thereof a prospectus that meets the requirements of
Section 10 of the Securities Act.
Prior Interpretative Letters
The Commission has previously granted several no-action letters to
companies involved in exchange offers similar to the one described above. See
Morgan Stanley & Co. Incorporated, No-Action Letter - June 5, 1991 ("Morgan
Stanley"); Mary Kay Cosmetics, Inc., No-Action Letter - June 5, 1991 ("Mary
Kay"); and Exxon Capital Holdings Corporation, No-Action Letter - April 13, 1988
("Exxon Capital"). In each of the Morgan Stanley, Mary Kay, and Exxon Capital
no-action letters, the Commission concluded that, as long as the holders of the
privately placed securities were not affiliates of the issuer, they could resell
the registered securities they received in exchange for their privately placed
securities without complying with the provisions of the Securities Act
pertaining to registration and prospectus delivery, provided that they acquired
the registered securities in the ordinary course of business and had no
arrangement or understanding with any other person to participate in the
distribution of such registered securities. See also American Council of
Life Insurance, No-Action Letter - May 10, 1983 (institutional investors
generally should not be deemed to be "statutory underwriters" under Section
2(11) of the Securities Act with respect to purchases of large amounts of
securities in a primary offering, provided such securities are acquired in the
ordinary course of business from the issuer or underwriter of the securities and
such purchasers have no arrangement with any person to participate in the
distribution of the securities).
Conclusion
We believe that the Commissions position set forth in the above cited
no-action letters is equally applicable to the transaction described herein.
Therefore, the Noteholders who exchange their Mortgage Notes for Registered
Notes and then resell the Registered Notes should be allowed to (a) resell the
Registered Notes to the public without further registration under the Securities
Act and (b) effect such resales without delivering to the purchasers thereof a
prospectus that meets the requirements of Section 10 of the Securities Act.
Prior to
the effective date of the Registration Statement, the Company would provide a
letter to the Commission (i) stating that the Company is registering the
Exchange Offer in reliance on the Staff position enunciated in the Morgan
Stanley, Mary Kay, and Exxon Capital no-action letters, this letter, and
interpretive letters to similar effect and (ii) including a representation
substantially to the following effect:
The
Company has not entered into any arrangement or understanding with any person to
distribute the Registered Notes to be received in the Exchange Offer and, to the
best of the Companys information and belief, each person participating in the
Exchange Offer is acquiring the Registered Notes in its ordinary course of
business and has no arrangement or understanding with any other person to
participate in the distribution of the Registered Notes. In this regard, the
Company will make each person participating in the Exchange Offer aware (through
the Exchange Offer prospectus or otherwise) that if such person is participating
in the Exchange Offer for the purpose of distributing the Registered Notes, such
person (i) could not rely on the Staff position enunciated in the Morgan
Stanley, Mary Kay, and Exxon Capital no-action letters, this letter, or
interpretive letters to similar effect and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. The Company acknowledges that
such a secondary resale transaction by such person participating in the Exchange
Offer for the purpose of distributing the Registered Notes should be covered by
an effective registration statement containing the selling securityholder
information required by Item 507 of Regulation S-K promulgated under the
Securities Act.
The
Company would also include in the transmittal letter or similar documentation to
be executed by each Noteholder in order to participate in the Exchange Offer a
representation to the Company that such Noteholder has no intention of
distributing the Registered Notes.
In order
to avoid an increase in interest rate payable on the Mortgage Notes as described
above, the Company wishes to comply with its registration obligations as soon as
practical. Accordingly, your prompt response to this letter will be greatly
appreciated. If for any reason you are unable to provide the requested
confirmation, we respectfully request an opportunity to discuss this matter with
you prior to your issuance of any written response.
If you
should have any questions or require further information, please call the
undersigned or Sally A. Schreiber at (214) 977-9000. In accordance with Release
No. 33-6269 under the Securities Act, enclosed are seven copies of this letter.
Very truly yours,
Michael A. Bezney
MAB/dkd
cc: Stanley Baldwin
Sally A. Schreiber
INQUIRY LETTER 2
JOHNSON & GIBBS
100 FOUNDERS SQUARE, 900 JACKSON STREET
DALLAS, TEXAS 75202-4499
TELEPHONE(214) 977-9000
September 06, 1991
Securities Act of 1933,
Sections 2(11), 5, and 10
September 6, 1991
Office of the Chief Counsel
Division of Corporate Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Abigail Arms, Deputy Chief Counsel
Re: EPIC Properties, Inc.
Ladies and Gentlemen:
Facts
Our client, EPIC Properties, Inc. (the "Company"), is a Texas corporation
that is a wholly-owned subsidiary of EPIC Healthcare Group, Inc. The Company, in
a recent transaction (the "Private Placement") made in reliance on Section 4(2)
of the Securities Act of 1933, as amended (the "Securities Act"), and Regulation
D promulgated thereunder, sold $100 million in aggregate principal amount of its
11-3/8% Class A1 First Priority Mortgage Notes due 2001, $85 million in
aggregate principal amount of its 11-1/2% Class A2 First Priority Mortgage Notes
due 2001, and $15 million in aggregate principal amount of its Floating Rate
Class A3 First Priority Mortgage Notes due 1998 (collectively, the "Mortgage
Notes"). The Mortgage Notes were sold to persons who represented that they (i)
were "accredited investors," as such term is defined in Regulation D
("Accredited Investors") and (ii) were acquiring the Mortgage Notes for their
own account, or for accounts as to which they exercised sole investment
discretion, for investment purposes only and not with a view to public
distribution (the "Purchasers"). None of the Purchasers is an affiliate of the
Company nor, with the exception of Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), a broker-dealer. It is our understanding that DLJ has sold,
or intends to sell, pursuant to Rule 144A under the Securities Act before the
effective date of the Registration Statement (as hereinafter defined) all of its
Mortgage Notes to persons who satisfy the standards set forth in the preceding
two sentences. The Purchasers may resell the Mortgage Notes pursuant to Rule
144A or any other available exemption under the Securities Act.
The
Company agreed in the Private Placement to file a registration statement (the
"Registration Statement") registering three new classes of notes (the
"Registered Notes"), the terms of which would be substantially identical to the
three outstanding classes of Mortgage Notes, and, upon the Registration
Statement becoming effective, to offer the Registered Notes to the holders of
the Mortgage Notes (the "Noteholders") in exchange for their Mortgage Notes (the
"Exchange Offer"). The Company is required to file the Registration Statement
with the Securities and Exchange Commission (the "Commission") no later than
January 30, 1992. If the Registration Statement is not effective by such time,
the interest rates with respect to each class of the Mortgage Notes will
increase .25% per annum for each quarter that elapses until the Registration
Statement becomes effective.
Confirmation Request
The purpose of this letter is to request confirmation that the
Noteholders who exchange their Mortgage Notes for Registered Notes in the
Exchange Offer (a) may resell the Registered Notes to the public without further
registration under the Securities Act and (b) may effect such resales without
delivering to the purchasers thereof a prospectus that meets the requirements of
Section 10 of the Securities Act.
Prior Interpretative Letters
The Commission has previously granted several no-action letters to
companies involved in exchange offers similar to the one described above. See
Morgan Stanley & Co. Incorporated, No-Action Letter - June 5, 1991 ("Morgan
Stanley"); Mary Kay Cosmetics, Inc., No-Action Letter - June 5, 1991 ("Mary
Kay"); and Exxon Capital Holdings Corporation, No-Action Letter - April 13, 1988
("Exxon Capital"). In each of the Morgan Stanley, Mary Kay, and Exxon Capital
no-action letters, the Commission concluded that, as long as the holders of the
privately placed securities were not affiliates of the issuer, they could resell
the registered securities they received in exchange for their privately placed
securities without complying with the provisions of the Securities Act
pertaining to registration and prospectus delivery, provided that they acquired
the registered securities in the ordinary course of business and had no
arrangement or understanding with any other person to participate in the
distribution of such registered securities. See also American Council of
Life Insurance, No-Action Letter - May 10, 1983 (institutional investors
generally should not be deemed to be "statutory underwriters" under Section
2(11) of the Securities Act with respect to purchases of large amounts of
securities in a primary offering, provided such securities are acquired in the
ordinary course of business from the issuer or underwriter of the securities and
such purchasers have no arrangement with any person to participate in the
distribution of the securities).
Conclusion
We believe that the Commissions position set forth in the above cited
no-action letters is equally applicable to the transaction described herein.
Therefore, the Noteholders who exchange their Mortgage Notes for Registered
Notes and then resell the Registered Notes should be allowed to (a) resell the
Registered Notes to the public without further registration under the Securities
Act and (b) effect such resales without delivering to the purchasers thereof a
prospectus that meets the requirements of Section 10 of the Securities Act.
Prior to
the effective date of the Registration Statement, the Company would provide a
letter to the Commission (i) stating that the Company is registering the
Exchange Offer in reliance on the Staff position enunciated in the Morgan
Stanley, Mary Kay, and Exxon Capital no-action letters, this letter, and
interpretive letters to similar effect and (ii) including a representation
substantially to the following effect:
The
Company has not entered into any arrangement or understanding with any person to
distribute the Registered Notes to be received in the Exchange Offer and, to the
best of the Companys information and belief, each person participating in the
Exchange Offer is acquiring the Registered Notes in its ordinary course of
business and has no arrangement or understanding with any other person to
participate in the distribution of the Registered Notes. In this regard, the
Company will make each person participating in the Exchange Offer aware (through
the Exchange Offer prospectus or otherwise) that if such person is participating
in the Exchange Offer for the purpose of distributing the Registered Notes, such
person (i) could not rely on the Staff position enunciated in the Morgan
Stanley, Mary Kay, and Exxon Capital no-action letters, this letter, or
interpretive letters to similar effect and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. The Company acknowledges that
such a secondary resale transaction by such person participating in the Exchange
Offer for the purpose of distributing the Registered Notes should be covered by
an effective registration statement containing the selling securityholder
information required by Item 507 of Regulation S-K promulgated under the
Securities Act.
The
Company would also include in the transmittal letter or similar documentation to
be executed by each Noteholder in order to participate in the Exchange Offer a
representation to the Company that such Noteholder has no intention of
distributing the Registered Notes.
In order
to avoid an increase in interest rate payable on the Mortgage Notes as described
above, the Company wishes to comply with its registration obligations as soon as
practical. Accordingly, your prompt response to this letter will be greatly
appreciated. If for any reason you are unable to provide the requested
confirmation, we respectfully request an opportunity to discuss this matter with
you prior to your issuance of any written response.
If you
should have any questions or require further information, please call the
undersigned or Sally A. Schreiber at (214) 977-9000. In accordance with Release
No. 33-6269 under the Securities Act, enclosed are seven copies of this letter.
Very truly yours,
Michael A. Bezney
MAB/dkd
cc: Stanley Baldwin
Sally A. Schreiber
INQUIRY LETTER 3
JOHNSON & GIBBS
100 FOUNDERS SQUARE, 900 JACKSON STREET
DALLAS, TEXAS 75202-4499
TELEPHONE(214) 977-9000
October 14, 1991
Office of the Chief Counsel
Division of Corporate Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Abigail Arms, Deputy Chief Counsel
Re: EPIC Properties, Inc. Request for No-action Letter dated August 6,
1991, Relating
to its 11-3/8% Class A-1 First
Priority Mortgage Notes due 2001, 11-1/2% Class
A-2 First Priority Mortgage Notes due
2001, and Floating Rate Class A-3 First
Priority Mortgage Notes due 1998
(collectively, the "Mortgage Notes")
Dear Ms. Arms:
Pursuant to our discussion on Friday, I am writing to confirm that in
order to go forward with its proposal to exchange new classes of notes that have
been registered under the Securities Act of 1933, as amended (the "Registered
Notes"), for the Mortgage Notes, EPIC Properties, Inc., a Texas corporation (the
"Company"), is contractually obligated to the holders of the Companys Mortgage
Notes to receive the no-action letter that was requested from the Securities and
Exchange Commission by letter dated August 6, 1991.
Assuming
that the Company would receive a favorable response to its request for a
no-action letter, the Company filed a registration statement (the "Registration
Statement") on Form S-1 (Registration No. 33-43255), a copy of which was
provided to you on October 8, 1991, relating to the Registered Notes. If the
Company does not receive a favorable response, the Company will be required to
revise the Registration Statement so that the Prospectus included therein may
instead be used by holders of the Mortgage Notes to sell such notes.
The
interest rate payable on the Mortgage Notes will increase if the registration of
neither the exchange of the Registered Notes nor the resale of the Mortgage
Notes is effective by January 30, 1992. If the Registration Statement is not
declared effective by November 14, 1991, the Company will be required to wait
until the end of December for the September 30, 1991, financial information to
be available for inclusion in the Registration Statement. That would leave a
relatively short period of time to have the Registration Statement reviewed,
revised, and declared effective. Accordingly, the Company would appreciate a
prompt response to this request so that it would have an opportunity to make any
necessary revisions to the Registration Statement.
If you
have any questions or require further information, please call the undersigned
or Sally A. Schreiber at (214) 977-9000.
Very truly yours,
Michael A. Bezney
MAB/dkd
cc: Sally A. Schreiber
Stanley Baldwin
STAFF REPLY LETTER
October 21, 1991
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
DIVISION OF CORPORATION FINANCE
Re: Epic Properties, Inc. ("Company")
Incoming letters dated August 6,
September 6 and
October 14, 1991
Based on the facts presented, it is the Divisions view that the holders
of privately placed unregistered mortgage notes who exchange such securities for
similar securities to be issued pursuant to a registered exchange offer
("Registered Mortgage Notes") may resell the Registered Mortgage Notes without
compliance with the registration and prospectus delivery requirements of the
Securities Act of 1933 provided such holder acquires the Registered Mortgage
Notes in the ordinary course of business and has no arrangement or understanding
with any person to participate in the distribution of the Registered Mortgage
Notes. This position assumes that the holder is not affiliated with the Company.
Further, prior to the effectiveness of the registration statement, the issuer
should provide a supplemental letter to the staff that contains a statement and
representation substantially in the form set forth on pages 6-7 of your
September 6th letter.
Because
this position is based on the facts and representations contained in your
letters, it should be noted that any different facts or conditions might require
another result.
Sincerely,
Abigail Arms
Deputy Chief Counsel
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