17:9A-178 - Public utility bonds and debentures
17:9A-178. Public utility bonds and debentures
A. As used in this section,
(1) "bonds of a public utility company" and "debentures or other bonds of a public utility company" shall mean bonds or debentures, as the case may be, issued, guaranteed, assumed, or otherwise agreed to be paid by a public utility company;
(2) "public utility company" shall include constituent and predecessor companies, and shall mean:
(a) a corporation at least eighty-five per centum (85%) of whose gross operating revenues are derived within the United States from the sale or furnishing of one or more of the following:
(1) artificial gas,
(2) natural gas to consumers over systems owned or leased by it,
(3) a mixture of artificial and natural gas to consumers over systems owned or leased by it,
(4) electricity,
(5) water, or
(6) telephone, telegraph or other communication services, or any combination thereof, and
(b) except for the purposes of subsection B of this section, a corporation at least a majority of whose gross operating revenues are derived within the United States from furnishing telephone, telegraph or other communication services, or any combination thereof;
(3) "net operating revenues available for fixed charges" shall mean gross operating revenues less all operating expenses, but before deduction for (a) renewals and depreciation and (b) State and Federal income and profits taxes;
(4) "fixed charges" shall mean charges for (a) rentals, (b) interest on all outstanding mortgage debt, and (c) regularly recurring charges for amortization of discount and expense allocable to mortgage debt, but shall exclude intercompany items;
(5) "fixed assets" shall mean real property, interests in real property, plants, equipment, transmission or distribution systems, and other assets commonly accepted as fixed assets, and shall include fixed assets leased to a public utility company and operated by it under a lease expiring, by its terms, in not less than fifty years from the date an investment is made pursuant to this section;
(6) "book value of fixed assets" shall mean the value of such assets as shown on the books of the public utility company, less reserves for depreciation and renewals.
B. A savings bank may invest in
(1) bonds of a public utility company (a) whose gross operating revenues, for the five fiscal years next preceding the investment for which the necessary statistical data is available or for five consecutive twelve-month periods ending within six months of the time the investment is made, have averaged at least two million five hundred thousand dollars ($2,500,000.00) for each such year or period, and (b) whose average net operating revenues available for fixed charges for the last three of such years or periods have equaled not less than two and one-half times the average annual requirement for fixed charges for the same years or periods;
(2) bonds of a public utility company (a) which derives at least ninety-five per centum (95%) of its gross operating revenues from the sale of water, and (b) whose gross operating revenues, for the five fiscal years next preceding the investment for which the necessary statistical data is available or for five consecutive twelve-month periods ending within six months of the time the investment is made, have averaged at least five hundred thousand dollars ($500,000.00) for each such year or period, and (c) whose average net operating revenues available for fixed charges for the last three of such years or periods have equaled not less than one and three-quarters times the average annual requirement for fixed charges during the same years or periods.
C. Bonds invested in pursuant to subsection B of this section shall be secured by a mortgage on fixed assets which is (1) a first mortgage or (2) a refunding mortgage under which bonds may be issued for the retirement or refunding of all debts secured by mortgages on all or any part of such fixed assets prior to the lien of such refunding mortgage, or (3) a mortgage prior in lien to such a refunding mortgage, or (4) is secured by the pledge of mortgage bonds constituting not less than ninety-five per centum (95%) of all the outstanding mortgage debt secured by all or part of the fixed assets which are subject to the mortgage securing such pledged bonds. The aggregate principal amount of all outstanding bonds secured (1) by the mortgage securing the bonds so invested in, directly or by pledge of bonds, and by all other mortgages equal or prior thereto in lien, to which all or any part of such fixed assets are subject, or (2) by any such refunding mortgage inferior in lien to the mortgage securing the bonds so invested in, directly or by pledge of mortgage bonds, and by all other mortgages equal or prior in lien to such refunding mortgage to which all or any part of such fixed assets are subject, shall not, at the time of the investment exceed (1) sixty-six and two-thirds per centum (66 2/3 %) of the book value of such fixed assets, in the case of bonds invested in pursuant to paragraph (1) of subsection B of this section, or (2) seventy per centum (70%) of the book value of such fixed assets, in the case of bonds invested in pursuant to paragraph (2) of subsection B of this section.
D. A mortgage securing bonds shall satisfy the requirements of this section notwithstanding that it is
(1) subject to the lien of prior mortgages securing bonds which have been called for redemption or which will otherwise mature within six months of the time of the investment, and for the payment of which funds have been set aside in trust; and such bonds shall not be deemed to be outstanding for the purpose of computing the sixty-six and two-thirds per centum (66 2/3 %) and the seventy per centum (70%) limitations prescribed by subsection C of this section;
(2) subject to the lien of current taxes or assessments not past due;
(3) subject to the lien of past due taxes or assessments which are bona fide contested;
(4) subject to construction or other liens arising out of operations common to public utility companies of similar character and size.
E. A savings bank may invest in debentures or other bonds of a public utility company notwithstanding that such bonds or debentures are unsecured, or, if secured, that the mortgages securing them do not satisfy the requirements of subsection C of this section; provided, (1) that the gross operating revenues within the United States of the public utility company, for the five fiscal years next preceding the investment for which the necessary statistical data is available, or for five consecutive twelve-month periods ending within six months of the time the investment is made, have averaged not less than twenty million dollars ($20,000,000.00) for each such year or period; and (2) that the average net operating revenues of the public utility company available for fixed charges, including charges on all outstanding funded debt, whether secured or unsecured, for the last three of such years or periods have equaled not less than four times the average annual requirement for fixed charges for the same years or periods.
F. No savings bank shall make an investment pursuant to this section at any time when the total of all such investments exceeds, or if the making of such an investment would cause such total to exceed, forty per centum (40%) of the deposits.
G. No savings bank shall make an investment pursuant to this section in any obligation for the payment of which any one public utility company is primarily liable, at any time when the total of all of its investments in such obligations of such company exceeds, or if the making of such an investment would cause such total to exceed, two per centum (2%) of its deposits. The acquisition of any such obligation as a result of a refunding or other refinancing or exchange of such obligations theretofore invested in shall not be considered the making of an investment for the purposes of this subsection.
H. A savings bank may invest in debentures or other bonds of a public utility company within the meaning of subparagraph (b) or paragraph (2) of subsection A of this section, notwithstanding that such debentures or other bonds do not satisfy the requirements of subsection E of this section, or, if secured, that the mortgages securing them do not satisfy the requirements of subsection C of this section; provided, (1) that the gross operating revenues within the United States of the public utility company, for the five fiscal years next preceding the investment for which the necessary statistical data is available, or for five consecutive twelve-month periods ending within six months of the time the investment is made, have averaged not less than twenty million dollars ($20,000,000.00) for each such year or period; and (2) that the average net income of the public utility company for the last three of such years or periods, after adding to the net income for each of such three years or periods (a) charges for renewals and depreciation, (b) State and Federal income and profits taxes, and (c) interest charges and regularly recurring charges for amortization of debt discount and expense, deducted in computing the net income for such year or period, has equaled not less than four times the average annual requirement for interest charges and regularly recurring charges for amortization of debt discount and expense for the same years or periods.
L.1948, c. 67, p. 311, s. 178. Amended by L.1949, c. 47, p. 330, s. 1.