Full text of Federal Reserve Bank of New York Circulars : 6523. Applicability of Regulations G, T, and U to AT&T Issue of Debentures

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F E D E R A L R E S E R V E BANK
O F N E W YORK
r Circular No. 6 5 2 3 ~[
L April 15, 1970 J

Applicability of Regulations G, T, and U
to AT&T Issue of Debentures

To A ll P ersons E xten din g Securities C redit
in the Second F ederal R eserve D istric t:

Our Circular No. 6521, dated April 10, contained the text of a letter from the Board of
Governors of the Federal Reserve System to a national securities exchange regarding the
applicability to the forthcoming issue of American Telephone & Telegraph Company (AT&T)
debentures of the Board’s margin regulations. The Board has suggested that, in addition to
the matters discussed in that letter, the following matters regarding the applicability of
Regulations G and U to transactions in the issue of AT&T debentures be considered:
In connection w ith any loans made on AT&T debentures, either a special subscription loan under
Section 221.3 (p) of R egulation U or a convertible debt security loan un d er Section 221.3 (t) of R egula­
tion U or Section 207.1(d) of R egulation G, it is im portant for the bank or other lender to keep in m ind
th a t these debentures will be issued only in registered form and th a t the registered holder of record on
October 15, 1970 will receive from the issuer two w arrants.
The bank o r other lender should be careful to arrange th a t it obtains the w arrants issuable on any
debentures it holds as collateral. (Should the borrower receive the w arran ts and not deposit them as the
collateral fo r the loan, the bank or other lender m ight be in violation of the w ithdraw al provisions of
R egulation U or R egulation G and, in addition, m ight suffer an im pairm ent of collateral value.)
I t is also im portant fo r the bank to keep in m ind th a t both the w arrants and the debentures will be
‘ ‘ convertible debt securities ’’ so long as they are held as collateral for either a special subscription loan
u nder Section 221.3(p) or a convertible debt security loan under Section 221.3(t) o r Section 207.1(d)
and th a t the restrictions on w ithdraw als of collateral contained in those sections will apply to both the
w arran ts and the debentures.
Lenders subject to R egulation G should keep in m ind th a t the regulation does not provide fo r sub­
scription loans subject to m argin requirem ents different from those applicable to ordinary “ p u rp o se”
loans secured by convertible debt securities.

Questions on these matters may be directed to our Consumer Information and Securities
Regulations Department (Telephone 212-732-5700, Extension 8209).




A lfred H

ayes,

President.