
[Federal Register: March 23, 2010 (Volume 75, Number 55)]
[Notices]               
[Page 13803-13805]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23mr10-112]                         

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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 29176; File No. 812-13753]

 
SeaCo Ltd.; Notice of Application

March 17, 2010.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application under section 3(b)(2) of the Investment 
Company Act of 1940 (``Act'').

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SUMMARY: Summary of Application: SeaCo Ltd. (``SeaCo'') seeks an order 
under section 3(b)(2) of the Act declaring it to be primarily engaged 
in a business other than that of investing, reinvesting, owning, 
holding or trading in securities. SeaCo is primarily engaged in the 
shipping container business.
    Applicant: SeaCo.

DATES: Filing Dates: The application was filed on Feb 9, 2009 and 
amended on March 4, 2010 and March 16, 2010.
    Hearing or Notification of Hearing: An order granting the 
application will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicant with a copy of the request, personally 
or by mail. Hearing requests should be received by the Commission by 
5:30 p.m. on April 8, 2010, and should be accompanied by proof of 
service on applicant, in the form of an affidavit or, for lawyers, a 
certificate of service. Hearing requests should state the nature of the 
writer's interest, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street, NE., Washington, DC 20549-1090; Applicant: Jonathan Adams, 
SeaCo Ltd., 22 Victoria Street, P.O. Box HM 1179, Hamilton HM EX, 
Bermuda.

FOR FURTHER INFORMATION CONTACT: Steven I. Amchan, Senior Counsel, at 
(202) 551-6826, or Julia Kim Gilmer, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicant's Representations

    1. SeaCo, a Bermuda company, was formed on August 22, 2008, to own, 
operate and manage a shipping container business throughout the world. 
SeaCo acquired its businesses from Sea Containers Limited (``SCL'') 
through a chapter 11 bankruptcy proceeding.\1\ SeaCo states that in 
addition to directly owning a fleet of shipping containers (and, to a 
lesser degree, land containers), it also conducts its business through 
its wholly-owned subsidiaries and through a controlled company, GE 
SeaCo SRL (``GE SeaCo''), in a joint venture with General Electric 
Capital Corporation (``GECC'').\2\
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    \1\ United States Bankruptcy Court for the District of Delaware, 
Case No. 06-11156 (KJC).
    \2\ As described more fully in the application, SeaCo finances 
the activities of, and collects revenues from, its other 
subsidiaries through its direct, wholly-owned subsidiary, SeaCo 
Finance Ltd. (``SC Finance''). While SeaCo owns its voting interest 
in GE SeaCo directly, it owns its economic interest in GE SeaCo 
indirectly through SC Finance and certain other intermediate, 
wholly-owned subsidiaries.
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    2. GE SeaCo is an operating company engaged in the business of 
leasing marine containers to ocean carriers and shippers, leasing land 
containers, and disposing of containers at the end of their useful 
economic life. SeaCo directly owns approximately 50% of the outstanding 
voting securities of GE SeaCo, which entitles it to appoint four 
members of GE SeaCo's board of managers (``GE SeaCo Board''). Since 
April 2006, GECC, which owns the remaining 50% of the outstanding 
voting securities of GE SeaCo, has held the right to appoint five of 
the nine members of the GE SeaCo Board. SeaCo states that by virtue of 
its ownership stake, SeaCo controls GE SeaCo as defined in section 
2(a)(9) of the Act.\3\
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    \3\ Section 2(a)(9) of the Act defines ``control'' as the power 
to exercise a controlling influence over the management or policies 
of a company, and creates a presumption that an owner of more than 
25% of the outstanding voting securities of a company controls the 
company.
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    3. SeaCo represents that it actively participates in the management 
and affairs of GE SeaCo. SeaCo states that it conducts its shipping 
container business through GE SeaCo by making decisions with GE SeaCo 
about the repair, positioning, re-leasing or sale of

[[Page 13804]]

its containers. SeaCo also states that, working in partnership with 
GECC, it provides strategic direction to management; provides policies 
for retaining, recruiting and incentivizing GE SeaCo management; makes 
container asset purchase decisions; reviews and sets marketing and 
credit review policies; oversees information technology development and 
corporate restructuring; and reviews internal control systems and 
reviews and approves financial statements. SeaCo further states that 
its representation on the GE SeaCo Board permits SeaCo to block certain 
actions that require the approval of seven out of the nine managers 
(such as the selection of auditors, the seconding of employees to GE 
SeaCo from GECC and its affiliates and the conversion of GE SeaCo to a 
new corporate form). Finally, SeaCo states that it has maintained 
strong shareholder rights, which include the power to block various 
transactions that require a super-majority vote of shareholders 
(including certain sales transactions, amending the articles of 
organization and increasing or decreasing the number of managers or the 
maximum or minimum number of managers).

Applicant's Legal Analysis

    1. SeaCo requests an order under section 3(b)(2) of the Act 
declaring that it is primarily engaged in a business other than that of 
investing, reinvesting, owning, holding or trading in securities, and 
therefore not an investment company as defined in the Act.
    2. Under section 3(a)(1)(C) of the Act, an issuer is an investment 
company if it is engaged or proposes to engage in the business of 
investing, reinvesting, owning, holding or trading in securities, and 
owns or proposes to acquire investment securities having a value in 
excess of 40% of the value of the issuer's total assets (exclusive of 
Government securities and cash items) on an unconsolidated basis. Under 
section 3(a)(2) of the Act, investment securities include all 
securities except Government securities, securities issued by 
employees' securities companies, and securities issued by majority-
owned subsidiaries of the owner which (a) are not investment companies, 
and (b) are not relying on the exclusions from the definition of 
investment company in section 3(c)(1) or 3(c)(7) of the Act 
(``Investment Securities'').
    3. SeaCo states that its only assets on an unconsolidated basis are 
its investment in its direct, wholly-owned subsidiary, SC Finance, and 
its holdings of the outstanding voting securities of GE SeaCo and 
another operating company, GE SeaCo America.\4\ SC Finance may rely on 
section 3(c)(1) of the Act because it indirectly holds the economic 
interest in GE SeaCo, and such interest may be deemed to be Investment 
Securities. Therefore, SeaCo's assets on an unconsolidated basis could 
be deemed to consist almost entirely of Investment Securities. Because 
more than 40% of SeaCo's total unconsolidated assets may consist of 
Investment Securities, SeaCo may be deemed an investment company within 
the meaning of section 3(a)(1)(C) of the Act.
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    \4\ GE SeaCo America employs United States staff that handle 
operations, leasing and end-of-useful-life disposal of certain 
United States based containers for GE SeaCo. SeaCo directly holds 
40% of GE SeaCo America's outstanding voting securities and operates 
less than 3% of its shipping container business through GE SeaCo 
America.
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    4. Rule 3a-1 under the Act provides an exemption from the 
definition of investment company if, on a consolidated basis with 
wholly-owned subsidiaries, no more than 45% of an issuer's total assets 
(exclusive of Government securities and cash items) consist of, and no 
more than 45% of its net income after taxes over the last four fiscal 
quarters combined is derived from, securities other than: Government 
securities, securities issued by employees' securities companies, and 
securities of certain majority-owned subsidiaries and companies 
controlled primarily by the issuer. SeaCo states that due to GECC's 
right to appoint an additional manager to the GE SeaCo Board, SeaCo is 
unable to rely on rule 3a-1 because it does not primarily control GE 
SeaCo.
    5. Section 3(b)(2) of the Act provides that, notwithstanding 
section 3(a)(1)(C), the Commission may issue an order declaring an 
issuer to be primarily engaged in a business other than that of 
investing, reinvesting, owning, holding or trading in securities 
directly, through majority-owned subsidiaries, or controlled companies 
conducting similar types of businesses. SeaCo submits that it qualifies 
for an order under section 3(b)(2) of the Act because it is primarily 
engaged in the shipping container business through its wholly-owned 
subsidiaries and through its controlled company, GE SeaCo. In 
determining whether an issuer is ``primarily engaged'' in a non-
investment company business under section 3(b)(2), the Commission 
considers the following factors: (a) The company's historical 
development, (b) its public representation of policy, (c) the 
activities of its officers and directors, (d) the nature of its present 
assets, and (e) the sources of its present income.\5\
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    \5\ Tonopah Mining Company of Nevada, 26 SEC 426, 427 (1947).
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    a. Historical Development. SeaCo states that it is a Bermuda 
company formed on August 22, 2008 specifically for the primary purpose 
of engaging in the shipping container business through GE SeaCo. SeaCo 
states that it does not treat its ownership of GE SeaCo's outstanding 
voting securities as investment assets but as the mechanism through 
which SeaCo operates, conducts and controls its shipping container 
business. SeaCo's interest in GE SeaCo arose from SCL's historical 
interest in GE SeaCo, which was transferred to SeaCo as part of a 
chapter 11 plan of reorganization. SeaCo does not intend to invest in 
any entity as a passive investment or in portfolio securities for 
short-term profits and will not be a ``special situation investment 
company.'' \6\
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    \6\ SCL also is not and was not a ``special situation investment 
company.''
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    b. Public Representations of Policy. SeaCo states that it has never 
held itself out as an investment company within the meaning of the Act, 
and has not made any public representations that would indicate that it 
is in any business other than that of operating a shipping container 
business. With respect to GE SeaCo, SeaCo has and intends to 
consistently report its strategy as participating actively in its 
operations through its GE SeaCo Board representatives, shareholder 
rights, and substantial information rights.
    c. Activities of Officers and Directors. SeaCo states that the 
majority of its board of directors and executive management team has 
significant experience in the shipping container industry and/or 
managing turnarounds in the operations of companies emerging from 
bankruptcy. SeaCo states that none of these individuals spends, or 
proposes to spend, any material amount of time on behalf of SeaCo or GE 
SeaCo in activities which involve investing, reinvesting, owning, 
holding, or trading in securities, directly or indirectly through 
others. SeaCo anticipates that any time spent on such activities by 
these individuals would be de minimis. SeaCo further states that the 
members of its board of directors (which include four directors who 
also serve on the GE SeaCo Board), spend between 20-40% of their time 
on monitoring the performance of GE SeaCo operations, 7-10% of their 
time making decisions regarding the owned container fleet, 20-30% of 
their time on investor communications, 13-15% of their time

[[Page 13805]]

on management oversight and 20-25% of their time providing strategic 
direction. SeaCo states that its only executive officer, the Chief 
Executive Officer, does not spend his time on activities which involve 
investing, reinvesting, owning, holding or trading in securities, and 
its three employees split their time between accountancy, contract 
management, billing and collections, investor communications and office 
administration. SeaCo does not, directly or indirectly, employ 
securities analysts or engage in the trading of securities for 
speculative or other purposes.
    d. Nature of Assets. As a holding company, SeaCo asserts that its 
financial data consolidated with its wholly-owned subsidiaries provides 
a more accurate picture of its business. SeaCo states that, as of June 
30, 2009, its interests in GE SeaCo represented 50% of its total 
assets, consolidated with its wholly-owned subsidiaries. Of SeaCo's 
remaining total assets, consolidated with its wholly-owned 
subsidiaries, SeaCo's owned container fleet represented 26%, amounts 
receivable from container leasing represented 7%, and other assets 
consisting mainly of deferred finance charges represented 2%. Treating 
the interests in GE SeaCo as an operating asset, SeaCo's remaining 
Investment Securities constituted less than 15% of SeaCo's total 
assets, consolidated with its wholly-owned subsidiaries.\7\
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    \7\ Of SeaCo's remaining Investment Securities, consolidated 
with its wholly-owned subsidiaries, restricted cash to service the 
SeaCo Group's loan facilities represented 10%, cash and cash 
equivalents for operational purposes represented 2%, securities 
issued by GE SeaCo America represented 2%, and the amount due from 
SCL arising out of bankruptcy process represented 1%.
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    e. Sources of Income. SeaCo states that on an unconsolidated basis 
it has no or minimal income from its ownership of SC Finance, which 
receives revenues from SeaCo's other subsidiaries. Applicant states 
that revenues constitute the primary source of its income. On a 
consolidated basis with its wholly-owned subsidiaries, SeaCo states 
that, for the period ending June 30, 2009, its proportionate share of 
the revenues of GE SeaCo represented 32%, revenues on the owned 
container fleet managed by GE SeaCo represented 67%, and interest 
income represented 1%, of its total income.
    6. SeaCo thus submits that it qualifies for an order under section 
3(b)(2) of the Act.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6303 Filed 3-22-10; 8:45 am]
BILLING CODE 8011-01-P

