Michael A. Becker, Esq.
Cahill Gordon & Reindel
Eighty Pine Street
New York, New York 10005-1702

Dear Mr. Becker:

This responds to your letter of August 26, 1996, concerning the application of the Board's Regulation G (12 CFR Part 207) to purchasers of certain debt securities (the "Notes") offered pursuant to SEC Rule 144A (17 CFR 230.144A).

The Board and its staff have held that persons who purchase debt securities in a private placement may be "lenders" for purposes of Regulation G, if the debentures are secured directly or indirectly by margin stock. See, e.g., Board Interpretation at 12 CFR 207.112, reprinted in the Federal Reserve Regulatory Service at 5-311. Board staff has indicated that persons who purchase debt securities in a public offering are not subject to Regulation G. See, e.g., Staff Opinion in FRRS at 5-599. In the Federal Register notice adopting the Board interpretation cited above, the Board indicated that the staff opinions regarding publicly offered debt securities may continue to be relied on as long as the sale in actual practice does not resemble a private placement. See, 51 Fed. Reg. 1775.

Your client is the broker-dealer who will purchase the Notes from the issuer for resale to qualified institutional buyers. Your letter indicates that although the issuer is primarily a holding company whose assets consist substantially of margin stock, the issuer will not use the proceeds of the Notes to purchase or carry margin stock within the meaning of Regulation G. Although the credit obtained by the issuer through issuance of the Notes may be deemed to be indirectly secured by the margin stock, you seek confirmation that the purchasers of the Notes will not be required to register as lenders under Regulation G.

Board staff is of the view that it is not necessary for investors who purchase the Notes in a transaction in compliance with SEC Rule 144A to register as Regulation G lenders. As noted in your letter, the Rule 144A offering is similar in many ways to a public offering, including the issuers' printing of an offering memorandum containing information that would be required for an SEC-approved prospectus and the broker-dealer's customary due diligence investigations. In addition, because the issuer will not use the proceeds of the Notes to purchase or carry margin stock, no question arises about compliance with the margin requirements applicable to purpose credit.

This is a staff opinion only, as the matter has not been presented to the Board, and is limited to the facts presented. Different facts could compel a different conclusion.

Yours truly,

(signed) Scott Holz

Scott Holz