SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: February 5 , 1999 Commission file number: 1-12151
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CHASE PREFERRED CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-3899576
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
270 Park Avenue, New York, NY 10017
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (212) 270-6000
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Item 5. Other Events
Chase Preferred Capital Corporation (the "Registrant") is a wholly-owned
subsidiary of The Chase Manhattan Bank, which is itself a wholly-owned
subsidiary of The Chase Manhattan Corporation (the "Parent Corporation"). The
Registrant has no employees. In accordance with agreements between the
Registrant and The Chase Manhattan Bank, The Chase Manhattan Bank manages all of
the Registrant's operations, including servicing all of the Registrants mortgage
loans. As a result, Year 2000 efforts for the Registrant are being coordinated,
managed and monitored as part of the Parent Corporation's overall Year 2000
efforts for itself and its subsidiaries. The following is a brief description of
these efforts.
The Parent Corporation's Year 2000 efforts commenced in mid-1995. At that
time, the Parent Corporation established an enterprise-wide program to deal with
its Year 2000 efforts on a global basis, both technical- and business-related.
The Parent Corporation formed a Year 2000 Enterprise Program Office, which
reports directly to the Parent Corporation's Executive Committee and is
responsible for the Parent Corporation's Year 2000 efforts. In addition, a Year
2000 Core Team, consisting of senior managers from internal audit, technology
risk and controls, financial management, the technology infrastructure division,
legal and the Year 2000 Enterprise Program Office, provides independent
oversight of the process. The Core Team, which also reports directly to the
Parent Corporation's Executive Committee, is charged with identifying key risks
and ensuring necessary management attention for timely resolution of project
areas. The Core Team reviews progress on a monthly basis and, prior to January
1, 1999 had been conducting formal quarterly reviews. Commencing January 1,
1999, the Core Team will be conducting formal reviews more frequently than
quarterly.
The Parent Corporation's Year 2000 Program is tracked against a
well-defined set of milestones. During its inventory and assessment phases,
which were completed on schedule on September 30, 1997, the Parent Corporation
identified hardware and software that required modification, developed
implementation plans, prioritized tasks and established implementation time
frames. Approximately 3,900 business applications (approximately 1,000 of which
are provided by third-party vendors) were identified by the Parent Corporation
as requiring Year 2000 remediation. Remediation of these software applications
was substantially completed during the fourth quarter of 1998. The majority of
internal testing of those applications had also been completed by December 31,
1998.
The Parent Corporation has set June 30, 1999 as its target date for
completion of all remediation and testing of its technical infrastructure
components, business applications, building systems and desktop systems. This
would include all software applications required by The Chase Manhattan Bank, as
Advisor and Servicer to the Registrant, in connection with the adminstration and
servicing of the Registrant's residential and commercial mortgage loans.
As systems remediation and internal testing is completed, increased focus
is being directed to external testing. During the third quarter of 1998, the
Parent Corporation commenced participation in testing with various governmental
and industry organizations and will continue that participation in 1999.
In addition to its technology related efforts, the Parent Corporation has
made significant progress on its major customer and business-partner due
diligence. The results of the Parent
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Corporation's ongoing testing, assessment and monitoring will be incorporated
into its risk management processes, including determining the extent to which
any contingency plans will need to be executed.
At September 30, 1998, the Parent Corporation revised its estimate of the
costs to remediate its Year 2000 issues for the period 1997-1999 to
approximately $363 million. Of this amount, approximately $250 million was spent
in 1997 and 1998. Accordingly, the Parent Corporation currently estimates that
full year 1999 Year 2000 costs will be approximately $127 million. These costs
include the costs of remediation, testing, third party assessment and
contingency planning and will be expensed as incurred. These costs do not
include approximately $33 million of capitalizable costs for Year 2000 compliant
equipment that will be depreciated beyond December 31, 1999.
In its normal course of business, the Parent Corporation manages many
types of risk. The Parent Corporation has recognized that the risks presented by
Year 2000 are unique given the pervasive nature of the problem and the fact that
there may be a higher likelihood that Year 2000 risk may present itself in
multiple, simultaneous impacts. Because of this, the Parent Corporation has
adjusted and will continue to adjust its risk management processes and
contingency plans to take the most probable anticipated effects into account.
Although it is too early to predict accurately what "fails" may occur, the
Parent Corporation has stated that it believes sufficient planning,
communication, coordination and testing will mitigate potential disruption. In
this regard, the Parent Corporation has begun its "event planning" for the Year
2000. In addition to the internal and external testing and the operational
assessments and planning discussed above, the Parent Corporation's Year 2000
"event planning" includes creation of command centers; establishment of special
rapid response technology teams; scheduling availability of key personnel;
additional training, testing and simulation activities; and establishment of
rapid decision processes.
The Parent Corporation's expectations about completion of its Year 2000
remediation and testing efforts, the anticipated costs to complete the project
and anticipated business, operational and financial risks to the Parent
Corporation and its subsidiaries, including the Registrant, are subject to a
number of uncertainties. The Parent Corporation's estimates as to the cost to
prepare for the Year 2000 are based on numerous assumptions regarding future
events including, among others, expectations regarding third party modification
plans and the nature and amount of testing that may be required as well as
continued availability of trained personnel. For example, if the Parent
Corporation is affected by the inability of vendors, service providers,
customers or securities exchanges to successfully implement their Year 2000
plans and continue operations, if the Parent Corporation is unsuccessful in
identifying or fixing all Year 2000 problems in its critical operations, or if
the Parent Corporation is unable to retain the staff or third party consultants
necessary to implement its technology plans at currently projected costs and
timetables, the operation or financial results of the Parent Corporation and its
subsidiaries (including the Registrant) could be materially impacted.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHASE PREFERRED CAPITAL CORPORATION
(Registrant)
Dated: February 5, 1999 By: /s/Louis M. Morrell
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Louis M. Morrell
Treasurer
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