<PAGE> 1
FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 333-39500
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 27, 2000.
16,300,000 Shares
R&B FALCON CORPORATION
[R&B FALCON LOGO]
Common Stock
----------------------
R&B Falcon Corporation is offering 16,300,000 shares of common stock. The
common stock is listed on the New York Stock Exchange under the symbol "FLC."
The last reported sales price of the common stock on the NYSE on October 26,
2000 was $25.69 per share.
See "Risk Factors" beginning on page S-4 of this prospectus supplement and
page 4 of the accompanying prospectus to read about certain factors you should
consider before buying shares of the common stock.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price....................................... $24.75 $403,425,000
Underwriting discount....................................... $ 0.20 $ 3,260,000
Proceeds, before expenses, to R&B Falcon Corporation........ $24.55 $400,165,000
</TABLE>
----------------------
The underwriter expects to deliver the shares against payment in New York,
New York on October 31, 2000.
GOLDMAN, SACHS & CO.
----------------------
Prospectus supplement dated October 26, 2000
<PAGE> 2
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement contains the terms of this offering. A
description of our common stock is contained in the attached prospectus. This
prospectus supplement, or the information incorporated by reference in this
prospectus supplement, may add, update or change information in the attached
prospectus. If information in this prospectus supplement, or the information
incorporated by reference in this prospectus supplement, is inconsistent with
the attached prospectus, then this prospectus supplement, or the information
incorporated by reference in this prospectus supplement, will apply and will
supersede that information in the attached prospectus.
It is important for you to read and consider all information contained in
this prospectus supplement and the attached prospectus in making your investment
decision. You should also read and consider the information in the documents we
have referred you to in "Where You Can Find More Information."
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this prospectus supplement or the prospectus and,
if given or made, such information or representations must not be relied upon as
having been authorized by R&B Falcon Corporation, the underwriter or any other
person. Neither the delivery of this prospectus supplement and the prospectus
nor any sale made under this prospectus supplement and the prospectus shall
under any circumstances create an implication that there has been no change in
the affairs of R&B Falcon Corporation since the date of this prospectus
supplement or the prospectus or that the information contained in this
prospectus supplement or the prospectus is correct as of any time subsequent to
its date. This prospectus supplement and the prospectus do not constitute an
offer or solicitation by anyone in any jurisdiction in which such offer or
solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.
i
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights selected information from this document but does
not contain all of the information you need to consider in making your
investment decision. To understand all of the terms of this offering and for a
more complete understanding of our business, you should carefully read this
entire prospectus supplement, the accompanying prospectus and the documents
incorporated by reference, particularly the section entitled "Risk Factors."
When we use the terms "R&B Falcon," "we," "us" or "our," we are referring to R&B
Falcon Corporation, together with its consolidated subsidiaries and
predecessors, unless the context otherwise requires.
R&B FALCON CORPORATION
Our primary business is providing marine contract drilling and ancillary
services on a worldwide basis. We were incorporated in July 1997. Prior to
December 31, 1997, we did not own any material assets or conduct any business.
Effective on December 31, 1997, pursuant to an Agreement and Plan of Merger
dated July 10, 1997, Falcon Drilling Company, Inc., currently R&B Falcon
Holdings, Inc., a Delaware corporation incorporated in 1991, and Reading & Bates
Corporation, currently R&B Falcon (International and Deepwater) Inc., a Delaware
corporation incorporated in 1955, became our wholly owned subsidiaries. On
December 1, 1998, we acquired all of the outstanding stock of Cliffs Drilling
Company, a Delaware corporation incorporated in 1988.
Our principal executive offices are located at 901 Threadneedle, Houston,
Texas 77079, and our phone number is (281) 496-5000.
RECENT DEVELOPMENTS
On August 19, 2000, we entered into an Agreement and Plan of Merger with
Transocean Sedco Forex Inc., Transocean Holdings Inc., a wholly owned subsidiary
of Transocean Sedco Forex, and TSF Delaware Inc., an indirect wholly owned
subsidiary of Transocean Sedco Forex. Under the terms of the merger agreement,
each share of our common stock will be converted into the right to receive 0.5
Transocean Sedco Forex ordinary shares.
The completion of the merger is dependent on a number of conditions,
including the following:
- approval by our common shareholders of the proposals to adopt the merger
agreement and to approve an amendment to our certificate of incorporation
to grant voting rights in the election of directors to the holders of our
outstanding preferred stock;
- approval by Transocean Sedco Forex's shareholders of the proposals to
increase Transocean Sedco Forex's authorized ordinary share capital and
to issue ordinary shares in the merger;
- absence of (1) any court decree, order or injunction prohibiting the
merger or (2) any governmental statute, rule or regulation prohibiting
the merger or making it unlawful;
- the listing of the Transocean Sedco Forex ordinary shares to be issued in
the merger on the New York Stock Exchange;
- the rating of specified issuances of our debt as investment grade by
Moody's and Standard & Poor's;
- the completion of a public offering by us of our common shares with net
proceeds of at least $105 million, and the application of the proceeds to
a redemption of up to
S-1
<PAGE> 4
105,000 shares of our outstanding preferred stock, at the price of
$1,138.75 per share plus accrued and unpaid dividends, if any, to the
redemption date;
- the receipt by Transocean Sedco Forex and us from our respective tax
counsel of opinions that, for U.S. federal income tax purposes, the
merger will qualify as a tax-free reorganization and no gain or loss will
be recognized by our common shareholders as a result of the merger,
except with respect to cash received in lieu of fractional shares and
except with respect to some of our shareholders who will hold 5% or more
of the shares of Transocean Sedco Forex after the merger;
- the absence of any event or occurrence having or reasonably likely to
have a material adverse effect on Transocean Sedco Forex's or our
business, assets, conditions (financial or otherwise) or operations or
its ability to complete the merger or fulfill the conditions to closing
of the merger;
- expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976; and
- receipt of indications reasonably satisfactory to us and Transocean Sedco
Forex that the merger will not be referred to the Competition Commission
of the United Kingdom.
Each of the following is also a condition to the merger:
- expiration or termination of any mandatory waiting period under any
competition, antitrust or premerger notification laws of jurisdictions
other than the United States;
- absence of any claim, proceeding or action, whether pending or threatened
in writing, by the government of the United States, the United Kingdom or
the European Union seeking to prevent the merger or penalize a party for
completing the merger; and
- absence of a final or preliminary administrative order denying approval
of or prohibiting the merger under the competition, antitrust or
premerger notification laws of any jurisdiction other than the United
States;
unless, in each case, if in the reasonable judgment of Transocean Sedco Forex
non-satisfaction of any of these conditions is not reasonably expected to (1)
have a material adverse effect on Transocean Sedco Forex or us, (2) materially
impair the benefits or advantages Transocean Sedco Forex expects to receive from
the merger or (3) have a material adverse effect on Transocean Sedco Forex's
business plan or business strategy for the combined company.
The merger agreement also contains provisions that allow the parties to
terminate the agreement.
We expect the merger to close in the first quarter of 2001. For more
information on the merger, see our proxy statement filed with the SEC relating
to the merger, which is incorporated by reference into this document.
Transocean Sedco Forex and R&B Falcon made filings relating to the merger
under the Hart-Scott-Rodino Act on September 5, 2000. Transocean Sedco Forex and
R&B Falcon have both received a second request for information and documentary
materials from the Department of Justice pursuant to the Hart-Scott-Rodino Act.
The second request is intended to assist the Department of Justice in completing
its competitive analysis of the proposed merger. Both Transocean Sedco Forex and
R&B Falcon intend to respond promptly to the information request, which has the
effect of extending the waiting period under antitrust law by 20 calendar days
following both companies' compliance with the request. We cannot assure you when
or if the Hart-Scott-Rodino Act and other regulatory approval conditions to the
merger will be satisfied.
S-2
<PAGE> 5
The merger agreement provides that any outstanding shares of our 13 7/8%
Senior Cumulative Redeemable Preferred Stock will remain outstanding following
the merger. However, with the proceeds of this offering, we intend to make a
tender offer for the preferred stock, and to exercise our redemption rights for
preferred stock not tendered in that offer.
THE OFFERING
Common stock offered.................... 16,300,000 shares
Common stock outstanding after the
offering................................ 211,938,489 shares(1)
Use of proceeds......................... The net proceeds we receive from
this offering will be used: (1) to
fund all or a portion of the
purchase price of shares of 13 7/8%
Senior Cumulative Redeemable
Preferred Stock tendered pursuant
to the tender offer for our
preferred stock; (2) to redeem up
to 105,000 shares of our preferred
stock remaining outstanding after
the tender offer; and (3) for
general corporate purposes. See
"Use of Proceeds."
NYSE symbol............................. "FLC"
---------------
(1) Does not include 16,100,268 shares of common stock issuable pursuant to
options granted under our employee stock incentive plans or up to 10,255,000
shares of common stock issuable under outstanding warrants.
S-3
<PAGE> 6
RISK FACTORS
An investment in the shares involves a significant degree of risk,
including the risks described below and on pages 4 through 8 of the accompanying
prospectus. You should carefully consider the following information about these
risks, together with the other information included in this prospectus
supplement, the prospectus and the documents included or incorporated by
reference, before purchasing any shares.
We may not complete our proposed merger with Transocean Sedco Forex. If we do
not complete this merger, the price of our common stock may decline
significantly.
On August 19, 2000, we announced that we had entered into a merger
agreement with Transocean Sedco Forex. Since we made this announcement, our
stock price has increased significantly. However, the completion of the merger
is subject to numerous conditions, not all of which have been satisfied. Some of
these conditions, including regulatory clearances, are beyond our control. Some
of these conditions are in part within our control or the control of Transocean
Sedco Forex, and we or Transocean Sedco Forex may elect not to take actions
necessary to satisfy these conditions. It is possible that we will not complete
the merger, or that the merger will be delayed beyond the expected closing date
in the first quarter of 2001. If we do not complete the merger, we will continue
to operate as a separate company, and will not have access to the greater
financial resources that we believe the merger will afford us. If we do not
complete the merger with Transocean, the price of our common stock may decline
to the levels at which it traded prior to the announcement of the merger, or to
lower levels.
You will not have the right to vote the shares purchased in this offering for
or against the proposed merger between R&B Falcon and Transocean Sedco Forex.
The shares of our common stock being issued in this offering will be issued
after the record date for the special meeting of our stockholders to approve the
merger with Transocean Sedco Forex. Because these shares were not outstanding on
the record date for this meeting, you will not be entitled to vote the shares
you purchase in this offering for or against the merger. If the merger closes,
however, each of your shares will be converted into the right to receive 0.5
Transocean Sedco Forex ordinary shares along with the other shares of our common
stock outstanding at the effective time of the merger.
Our business depends on the level of activity in the oil and gas industry,
which is significantly affected by volatile oil and gas prices.
Our business depends on the level of activity in offshore oil and gas
exploration, development and production in markets worldwide. Oil and gas
prices, market expectations of potential changes in these prices and a variety
of political and economic factors significantly affect this level of activity.
Oil and gas prices are extremely volatile and are affected by numerous factors,
including:
- worldwide demand for oil and gas;
- the ability of the Organization of Petroleum Exporting Countries,
commonly called "OPEC," to set and maintain production levels and
pricing;
- the level of production in non-OPEC countries;
- the policies of the various governments regarding exploration and
development of their oil and gas reserves;
- advances in exploration and development technology; and
- the political environment of oil-producing regions.
S-4
<PAGE> 7
Our industry is highly competitive and cyclical, with intense price
competition.
The offshore contract drilling industry is highly competitive with numerous
industry participants, none of which has a dominant market share. Drilling
contracts are traditionally awarded on a competitive bid basis. Intense price
competition is often the primary factor in determining which qualified
contractor is awarded a job, although rig availability and the quality and
technical capability of service and equipment may also be considered.
Our industry has historically been cyclical. There have been periods of
high demand, short rig supply and high dayrates, followed by periods of lower
demand, excess rig supply and low dayrates. The industry experienced a period of
significantly lower demand during 1999 as a result of reduced spending for
exploration and development by our customers in response to dramatically lower
crude oil prices during 1998. In addition, rig availability has increased as a
result of contract expirations and construction by other drilling contractors of
new rigs that are competing with our rigs. Periods of excess rig supply
intensify the competition in the industry and often result in rigs being idle
for long periods of time.
Our drilling contracts may be terminated due to a number of events.
Our customers may terminate some of our term drilling contracts under
various circumstances such as the loss or destruction of the drilling unit or
the suspension of drilling operations for a specified period of time as a result
of a breakdown of major equipment. In addition, the drilling contracts for some
of our newbuild rigs contain termination or term reduction provisions tied to
late delivery of these units. In reaction to depressed market conditions, our
customers may also seek renegotiation of firm drilling contracts to reduce their
obligations. If our customers cancel some of our significant contracts and the
combined company is unable to secure new contracts on substantially similar
terms, it could adversely affect our results. Some drilling contracts permit the
customer to terminate the contract at the customer's option without paying a
termination fee.
Failure to retain key personnel could hurt our operations.
We require highly skilled personnel to operate and provide technical
services and support for drilling units. To the extent demand for drilling
services and the size of the worldwide industry fleet increase, shortages of
qualified personnel could arise, creating upward pressure on wages.
Some of our employees, including most of our employees who work in Norway,
Nigeria and Venezuela, are covered by collective bargaining agreements. Of these
represented employees, a majority are working under agreements that are subject
to salary negotiation in 2000 or 2001. In addition, we have signed a recognition
agreement requiring negotiations with a labor union representing employees in
the U.K. These negotiations could result in collective bargaining agreements
covering these employees.
In addition to the foregoing risk factors, you should read the risk factors
beginning on page 4 in the accompanying prospectus and those incorporated by
reference from our proxy statement related to the merger with Transocean Sedco
Forex.
S-5
<PAGE> 8
FORWARD-LOOKING INFORMATION
Some of the statements contained in this prospectus supplement under the
captions "Prospectus Supplement Summary" and "Risk Factors," and some of the
statements included in the documents that we have incorporated by reference, are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements:
- address activities, events or developments that we expect, believe,
anticipate or estimate will or may occur in the future, including those
related to the sale of our ownership interest in Navis ASA, the effects
of litigation, the tender offer for and/or redemption of our preferred
stock and the completion or the effects of the merger;
- are based on assumptions and analyses that we have made and that we
believe are reasonable under the circumstances when made; and
- are subject to many risks, uncertainties and other factors, many of which
are beyond our control.
Our actual results could differ materially from those anticipated in the
forward-looking statements as a result of the delay of the merger or its failure
to occur, delay or failure to receive regulatory clearances or otherwise satisfy
closing conditions to the merger and other risks, uncertainties and other
factors, any of which could materially affect our future results of operations.
When considering these forward-looking statements, you should keep in mind the
risk factors and other cautionary statements contained in this document and the
documents we have incorporated by reference. We will not update these statements
unless the securities laws require us to do so.
USE OF PROCEEDS
We expect to receive approximately $399.7 million of net proceeds from this
offering after deducting the underwriting discount and estimated offering
expenses. Promptly after the commencement of this offering, we intend to make a
cash tender offer for any and all of the outstanding shares of our 13 7/8%
Senior Cumulative Redeemable Preferred Stock. If all of the shares of preferred
stock are tendered in the tender offer, we will use all of the net proceeds from
this offering to fund a portion of the tender offer consideration. We estimate
that the total tender offer consideration if all of the shares of preferred
stock are tendered will be approximately $480.1 million. However, we cannot
assure you that the actual tender offer consideration will equal this estimated
amount. To the extent permitted by our existing debt documents, our subsidiaries
that are not subject to indenture restrictions may use a portion of their
existing cash to fund a portion of the tender offer consideration.
If less than all of the shares of preferred stock are tendered in the
tender offer and we do not use all of the net proceeds of this offering to fund
the purchase price of the shares of preferred stock that are tendered in the
tender offer, we may use up to approximately $120.8 million of the net proceeds
to redeem up to 105,000 shares of our preferred stock at a redemption price
equal to $1,138.75 per share plus accrued and unpaid dividends under the terms
of the certificate of designation for the preferred stock. In order to use any
of the proceeds from this offering to redeem shares of our outstanding preferred
stock under the certificate of designation, we must redeem the shares within 45
days of the date of the closing of this offering.
We will use the balance of the net proceeds, if any, for general corporate
purposes, including the funding of working capital requirements.
S-6
<PAGE> 9
CAPITALIZATION
The following table sets forth our unaudited consolidated capitalization as
of June 30, 2000 and our unaudited consolidated capitalization as adjusted to
give effect to the sale of the common stock in this offering and the application
of the estimated net proceeds, assuming that all of the outstanding shares of
preferred stock are tendered in the tender offer at the estimated tender offer
price. You should read this information in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and notes thereto incorporated by
reference into this document.
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
------------------------
ACTUAL AS ADJUSTED
--------- ------------
(IN MILLIONS, UNAUDITED)
<S> <C> <C>
Cash and cash equivalents, net.............................. $ 294.8 $ 236.3
======== ========
Current portion of long-term debt........................... 39.9 39.9
-------- --------
Long-term debt, excluding current portion................... 2,910.3 2,910.3
-------- --------
Minority interest........................................... 58.2 58.2
-------- --------
Redeemable preferred stock.................................. 302.0 --
-------- --------
Stockholders' equity:
Common stock, par value $.01 per share.................... 1.9 2.1
Capital in excess of par.................................. 1,124.9 1,369.5
Retained earnings......................................... 1.3 --
Other..................................................... (6.0) (6.0)
-------- --------
Total stockholders' equity........................ 1,122.1 1,365.6
-------- --------
Total capitalization, including short-term
obligations and current portion of long-term
debt............................................ $4,432.5 $4,374.0
======== ========
</TABLE>
S-7
<PAGE> 10
MARKET PRICE AND DIVIDEND POLICY
Our common stock is traded on the New York Stock Exchange under the symbol
"FLC." The following table sets forth the high and low sales prices per share of
our common stock as reported by the NYSE Composite Tape for the periods
indicated. Our common stock was first traded on January 2, 1998.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1998
First Quarter............................................. $ 35.375 $ 23.125
Second Quarter............................................ 34.188 20.500
Third Quarter............................................. 23.188 8.750
Fourth Quarter............................................ 16.500 6.750
1999
First Quarter............................................. 9.250 5.188
Second Quarter............................................ 11.750 6.625
Third Quarter............................................. 16.063 8.938
Fourth Quarter............................................ 15.000 10.688
2000
First Quarter............................................. 20.9375 11.6875
Second Quarter............................................ 25.5000 16.8125
Third Quarter............................................. 30.9375 18.3125
Fourth Quarter (through October 26, 2000)................. 31.0000 25.0000
</TABLE>
On October 26, 2000, the last sales price of our common stock as reported
by the NYSE Composite Tape was $25.69 per share.
We have not paid dividends on our common stock and do not currently intend
to pay any cash dividends in the foreseeable future. The determination of the
amount of future cash dividends to be declared and paid on the common stock, if
any, will depend upon our financial condition, earnings and cash flow from
operations, the level of our capital expenditures, our future business prospects
and other factors that our Board of Directors deems relevant. In addition, the
indentures governing our senior notes limit our ability to pay cash dividends.
S-8
<PAGE> 11
UNAUDITED PRO FORMA FINANCIAL INFORMATION
FOR R&B FALCON
BACKGROUND
On December 31, 1997, Reading & Bates Corporation and Falcon Drilling
Company combined to form R&B Falcon Corporation. The combination was accounted
for as a pooling of interests. On December 1, 1998, R&B Falcon acquired all of
the outstanding shares of Cliffs Drilling Company. The acquisition was accounted
for using the purchase method of accounting.
SOURCE OF INFORMATION
R&B Falcon is providing the following selected financial information
concerning R&B Falcon to help you in your analysis of the financial aspects of
the offering. We derived this information from the audited and unaudited
financial statements of R&B Falcon for the periods presented. The information is
only a summary, and you should read it in conjunction with the financial
information incorporated by reference in this document.
HOW WE PREPARED THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
The balance sheet data assumes the consummation of this offering and the
repurchase in the tender offer of all of our 13 7/8% Senior Cumulative
Redeemable Preferred Stock had been completed on June 30, 2000, and the
operating results data assumes the consummation of this offering and the
repurchase in the tender offer was completed on January 1, 1999. Depending upon
the results of the tender offer and, if necessary, the optional redemption, the
reduction in redeemable preferred stock, cash and cash equivalents and net loss
per share, reflected in the unaudited pro forma financial information could be
less.
If the offering and tender offer had been completed on the dates assumed in
the pro forma financial statements, R&B Falcon might have performed differently.
You should not rely on the pro forma financial information as an indication of
the financial position or results of operations that R&B Falcon would have
achieved had the offering and tender offer taken place earlier or of the future
results that R&B Falcon will achieve after the offering and tender offer.
S-9
<PAGE> 12
R&B FALCON CORPORATION
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2000
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C>
Cash and cash equivalents................................ $ 294.8 $ (58.5)(a) $ 236.3
Accounts receivable...................................... 192.0 192.0
Other current assets..................................... 168.9 168.9
-------- ------- --------
Total current assets........................... 655.7 (58.5) 597.2
Property and equipment, net.............................. 3,748.4 3,748.4
Goodwill, net............................................ 86.7 86.7
Other assets............................................. 257.5 257.5
-------- ------- --------
Total assets................................... $4,748.3 $ (58.5) $4,689.8
======== ======= ========
Current liabilities...................................... $ 295.9 $ -- $ 295.9
Long-term obligations.................................... 2,910.3 2,910.3
Deferred taxes and other credits......................... 59.8 59.8
Minority interest........................................ 58.2 58.2
Redeemable preferred shares.............................. 302.0 (302.0)(b) --
Shareholders' equity..................................... 1,122.1 243.5(c) 1,365.6
-------- ------- --------
Total liabilities and shareholders' equity..... $4,748.3 $ (58.5) $4,689.8
======== ======= ========
</TABLE>
See notes to the R&B Falcon Corporation unaudited condensed pro forma
consolidated financial statements.
S-10
<PAGE> 13
R&B FALCON CORPORATION
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Operating revenues........................................ $419.4 $ -- $ 419.4
Cost and expenses
Operating and maintenance............................... 299.3 299.3
Depreciation and amortization........................... 89.2 89.2
General and administrative.............................. 29.7 29.7
------ ------ -------
Total costs and expenses........................ 418.2 -- 418.2
------ ------ -------
Operating income.......................................... 1.2 -- 1.2
Other income(expense), net................................ (94.2) (94.2)
------ ------ -------
Loss before income tax benefit and minority interest...... (93.0) -- (93.0)
Income tax benefit........................................ (27.9) (27.9)
Minority interest......................................... (3.3) (3.3)
------ ------ -------
Net loss.................................................. (68.4) -- (68.4)
Dividends and accretion on preferred shares............... 26.2 (26.2)(b) --
------ ------ -------
Net loss applicable to common shareholders................ $(94.6) $ 26.2 $ (68.4)
====== ====== =======
Net loss per share:
Basic................................................... $ (.49) $ (.33)
====== =======
Diluted................................................. $ (.49) $ (.33)
====== =======
Weighted average shares outstanding:
Basic................................................... 193.2 16.3(d) 209.5
====== ====== =======
Diluted................................................. 193.2 16.3(d) 209.5
====== ====== =======
</TABLE>
See notes to the R&B Falcon Corporation unaudited condensed pro forma
consolidated financial statements.
S-11
<PAGE> 14
R&B FALCON CORPORATION
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------ ----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Operating revenues........................................ $ 918.8 $ -- $ 918.8
Cost and expenses
Operating and maintenance............................... 645.8 645.8
Depreciation and amortization........................... 158.0 158.0
General and administrative.............................. 69.9 69.9
------- ------ -------
Total costs and expenses........................ 873.7 -- 873.7
------- ------ -------
Operating income.......................................... 45.1 -- 45.1
Other income (expense), net............................... (132.2) (132.2)
------- ------ -------
Loss before income taxes, minority interest and
extraordinary loss...................................... (87.1) -- (87.1)
Income tax benefit........................................ (31.6) (31.6)
Minority interest......................................... (12.3) (12.3)
------- ------ -------
Loss before extraordinary loss............................ (67.8) -- (67.8)
Extraordinary loss........................................ (1.7) -- (1.7)
------- ------ -------
Net loss.................................................. (69.5) -- (69.5)
Dividends and accretion on preferred shares............... 33.7 (33.7)(b) --
------- ------ -------
Net loss applicable to common shareholders................ $(103.2) $ 33.7 $ (69.5)
======= ====== =======
Net loss per share:
Basic:
Loss before extraordinary loss and after preferred
share dividends.................................... $ (.53) $ (.32)
Extraordinary loss................................... (.01) (.01)
------- -------
Net loss........................................... $ (.54) $ (.33)
======= =======
Diluted:
Loss before extraordinary loss and after preferred
stock dividends.................................... $ (.53) $ (.32)
Extraordinary loss................................... (.01) (.01)
------- -------
Net loss........................................... $ (.54) $ (.33)
======= =======
Weighted average shares outstanding:
Basic................................................... 192.7 16.3(d) 209.0
======= ====== =======
Diluted................................................. 192.7 16.3(d) 209.0
======= ====== =======
</TABLE>
See notes to the R&B Falcon Corporation unaudited condensed pro forma
consolidated financial statements.
S-12
<PAGE> 15
R&B FALCON CORPORATION
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(a) Represents the amount of cash on hand used to pay the purchase price in the
tender offer for the preferred stock. All of the net proceeds from the
common stock offering were used to pay the purchase price in the tender
offer for the preferred stock.
(b) Represents the repurchase of 100% of the shares pursuant to the tender
offer for the preferred stock.
(c) Represents the issuance of common stock as a result of the offering at an
offering price of $24.75 per share, net of underwriter discount and
estimated offering and tender offer costs of $5.5 million, and the
estimated premium to be paid of $103.5 million, based on 130% of the $345.0
million face value of the redeemable preferred stock outstanding at June
30, 2000 and $50.9 million expense for the unamortized accretion as a
result of the repurchase of 100% of the shares pursuant to the tender offer
for the preferred stock.
(d) Represents the issuance of common stock as a result of the offering.
RATIO OF EARNINGS TO FIXED CHARGES AND TO COMBINED FIXED CHARGES AND
PREFERRED DIVIDENDS
Ratio of earnings to fixed charges
For the six months ended June 30, 2000, earnings did not cover fixed
charges by $128.6 million.
Ratio of earnings to combined fixed charges and preferred dividends
For the six months ended June 30, 2000, earnings did not cover fixed
charges by $166.0 million.
PRO FORMA RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED DIVIDENDS
The following pro forma information assumes the consummation of this
offering and the repurchase in the tender offer of all of our 13 7/8% Senior
Cumulative Redeemable Preferred Stock was completed on January 1, 1999. For the
six months ended June 30, 2000, earnings did not cover fixed charges by $128.6
million. For the year ended December 31, 1999, earnings did not cover fixed
charges by $161.2 million.
SUPPLEMENTAL FINANCIAL INFORMATION FOR THE COMBINED COMPANY
We have incorporated by reference into this document unaudited pro forma
financial information concerning the combined company that will result from our
proposed merger with Transocean Sedco Forex from our proxy statement relating to
the merger. In reviewing that unaudited pro forma financial information, you
should consider the following additional supplemental financial information.
The unaudited condensed pro forma combined financial statements
incorporated by reference into this document only reflect the redemption of
105,000 shares of the preferred stock required as a condition to closing under
the merger agreement. Depending upon the results of the tender offer, the
positive effect on unaudited pro forma diluted earnings per share for the year
ended December 31, 1999 and for the six months ended June 30, 2000 could range
from $0.03 to $0.04.
S-13
<PAGE> 16
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue up to 550,000,000 shares of common stock and up
to 50,000,000 shares of preferred stock. As of October 15, 2000, we had
195,638,489 shares of common stock and 356,961 shares of our 13 7/8% Senior
Cumulative Redeemable Preferred Stock outstanding. As of that date, we also had
approximately 26 million shares of common stock reserved for issuance upon
exercise of common stock purchase warrants and in connection with options or
other awards outstanding under various employee or director incentive,
compensation and option plans.
See "Description of Capital Stock" in the prospectus attached to this
prospectus supplement for a description of matters which may be important to you
regarding our common stock and preferred stock, including the anti-takeover
effects of provisions of Delaware law, our classified board of directors and the
terms of our outstanding 13 7/8% Senior Cumulative Redeemable Preferred Stock.
In connection with the pending merger with Transocean Sedco Forex, we have
amended the Rights Agreement, dated as of December 23, 1997, between the Company
and American Stock Transfer and Trust Company, as Rights Agent. This amendment:
- excludes Transocean Sedco Forex and its affiliates from the definition of
"acquiring person" under the Rights Agreement;
- excludes the announcement of the merger, the execution of the merger
agreement, the consummation of the merger and the other transactions
contemplated by the merger agreement from being a triggering event under
the Rights Agreement;
- provides that neither the announcement of the merger, the execution of
the merger agreement, the consummation of the merger nor any of the other
transactions contemplated by the merger agreement will result in a
distribution date under the Rights Agreement; and
- makes other changes to the Rights Agreement that generally provide that
the Rights Agreement is not triggered by the merger with Transocean Sedco
Forex.
UNDERWRITING
R&B Falcon and Goldman, Sachs & Co., as the underwriter for the offering
(the "Underwriter"), have entered into an underwriting agreement with respect to
the shares of common stock being offered. Subject to certain conditions, the
Underwriter has agreed to purchase 16,300,000 shares of common stock.
The following table shows the per share and total underwriting discount and
commission to be paid to the Underwriter by R&B Falcon.
<TABLE>
<CAPTION>
PAID BY THE COMPANY
-------------------
<S> <C>
Per share................................................... $ 0.20
Total....................................................... $3,260,000
</TABLE>
Shares sold by the Underwriter to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus. If all
the shares are not sold at the initial price to the public, the underwriter may
change the offering price and the other selling terms.
S-14
<PAGE> 17
R&B Falcon has agreed with the Underwriter not to dispose of or hedge any
of the common stock or securities convertible into or exchangeable for shares of
common stock during the period from the date of this prospectus continuing
through the date 90 days after the date of this prospectus, except with the
prior written consent of the Underwriter. This agreement does not apply to R&B
Falcon's outstanding options and warrants or options or shares granted under any
existing employee benefit plans. This agreement also does not apply to any sale
of common stock by R&B Falcon to its wholly owned subsidiaries or to a
subsequent sale of common stock required to permit R&B Falcon to exercise its
redemption rights for its preferred stock.
In connection with the offering, the Underwriter may purchase and sell
shares of the common stock in the open market. These transactions may include
short sales, stabilizing transactions and purchases to cover positions created
by short sales. Short sales involve the sale by the Underwriter of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of various bids for or purchases of common stock made by
the Underwriter in the open market prior to the completion of the offering.
Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or retarding a decline in the market price of the
common stock, and may stabilize, maintain or otherwise affect the market price
of the common stock. As a result, the price of the common stock may be higher
than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued at any time. These
transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise.
R&B Falcon estimates that its share of the total expenses of the offering,
excluding the underwriting discount and commission, will be approximately
$465,000.
R&B Falcon has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933.
Transocean Sedco Forex has agreed to indemnify R&B Falcon for certain
liabilities, including liabilities under the Securities Act of 1933 for losses
directly caused by certain untrue statements or omissions made in reliance upon
and in conformity with information that has been both incorporated into this
prospectus from Transocean Sedco Forex's Registration Statement on Form S-4 and
which relates exclusively to Transocean Sedco Forex (the "Transocean Sedco Forex
information") and R&B Falcon has agreed to indemnify Transocean Sedco Forex for
certain liabilities, including liabilities under the Securities Act of 1933 for
losses directly caused by untrue statements or omissions made in this prospectus
and the registration statement of which it is a part and which are not
Transocean Sedco Forex information.
VALIDITY OF THE COMMON STOCK
Our lawyers, Gardere Wynne Sewell & Riggs, L.L.P., Houston, Texas, will
issue opinions about the validity of the common stock for us. Sullivan &
Cromwell, New York, New York, will pass upon the validity of the common stock
for the underwriter.
EXPERTS
The consolidated balance sheets of R&B Falcon Corporation as of December
31, 1999 and 1998, and the related statements of operations, stockholders'
equity and cash flows for each of the years in the three year period ended
December 31, 1999, incorporated by reference in the registration statement to
which this prospectus supplement relates have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
S-15
<PAGE> 18
With respect to the unaudited interim financial information of R&B Falcon
Corporation for the quarters ended June 30, 2000 and 1999, Arthur Andersen LLP
has applied limited procedures in accordance with professional standards for a
review of that information. However, their separate report thereon states that
they did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their report on that
information should be restricted in light of the limited nature of the review
procedures applied. In addition, the accountants are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 for their
report on the unaudited interim financial information because that report is not
a "report" or a "part" of the registration statement prepared or certified by
the accountants within the meaning of Sections 7 and 11 of that Act.
The consolidated balance sheet of Transocean Sedco Forex Inc. and
Subsidiaries as of December 31, 1999, and the related combined statements of
operations, equity, and cash flows for the year then ended (and the financial
statement schedule) appearing in Transocean Sedco Forex Inc.'s Annual Report
(Form 10-K) for the year ended December 31, 1999, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.
The combined balance sheet as of December 31, 1998 and the related combined
statements of operations, equity and cash flows for each of the two years in the
period ended December 31, 1998 incorporated in the registration statement to
which this prospectus supplement relates by reference to the Annual Report on
Form 10-K of Transocean Sedco Forex have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
INFORMATION WE INCORPORATE BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
may make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934. The documents we incorporate by reference are:
- our Annual Report on Form 10-K for the year ended December 31, 1999;
- our Quarterly Reports on Form 10-Q for the quarterly periods ended March
31 and June 30, 2000;
- our Current Reports on Form 8-K dated August 21 and October 26, 2000;
- our Proxy Statement that is included in the Registration Statement on
Form S-4 filed by Transocean Sedco Forex Inc. relating to the merger with
Transocean Sedco Forex; and
- the description of our common stock and rights to purchase shares of our
Series A Junior Participating Preferred Stock contained in our
Registration Statements on Form 8-A relating to our common stock and
rights to purchase shares of our Series A Junior Participating Preferred
Stock, each as amended to date.
S-16
<PAGE> 19
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
R&B Falcon Corporation
Investor Relations
901 Threadneedle
Houston, Texas 77079
(281) 496-5000
S-17
<PAGE> 20
PROSPECTUS
$500,000,000
R&B FALCON CORPORATION
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES
COMMON STOCK
WARRANTS
---------------------
CONSIDER CAREFULLY THE
RISK FACTORS BEGINNING
ON PAGE 4.
We will provide
additional terms of
our securities in one
or more supplements to
this prospectus. You
should read this
prospectus and the
related prospectus
supplement carefully
before you invest in
our securities. This
prospectus may not be
used to offer and sell
our securities unless
accompanied by a
prospectus supplement.
THE OFFERING
We may offer from time to time:
- senior debt securities;
- subordinated debt securities;
- preferred stock;
- depositary shares;
- common stock; and
- warrants.
Our common stock is listed on the New York Stock Exchange under the symbol
"FLC."
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this prospectus is June 27, 2000
<PAGE> 21
TABLE OF CONTENTS
<TABLE>
<S> <C>
About this Prospectus....................................... 3
About R&B Falcon............................................ 3
Risk Factors................................................ 4
Forward-Looking Information................................. 8
Use of Proceeds............................................. 9
Ratio of Earnings to Fixed Charges and to Combined Fixed
Charges and Preferred Stock Expense....................... 9
Description of Debt Securities.............................. 10
Description of Capital Stock................................ 17
Description of Depositary Shares............................ 24
Description of Warrants..................................... 26
Plan of Distribution........................................ 28
Legal Matters............................................... 30
Independent Public Accountants.............................. 30
Where You Can Find More Information......................... 30
Information We Incorporate by Reference..................... 31
</TABLE>
THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT WE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. YOU SHOULD RELY ONLY ON THE INFORMATION WE
HAVE PROVIDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ADDITIONAL OR
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE ONLY AS
OF THE DATE ON THE FRONT OF THE DOCUMENT AND THAT ANY INFORMATION WE HAVE
INCORPORATED BY REFERENCE IS ACCURATE ONLY AS OF THE DATE OF THE DOCUMENT
INCORPORATED BY REFERENCE.
2
<PAGE> 22
ABOUT THIS PROSPECTUS
This prospectus is part of a "shelf" registration statement we have filed
with the Securities and Exchange Commission. Under the shelf process, we may
offer any combination of the securities described in this prospectus in one or
more offerings with a total initial offering price of up to $500,000,000. This
prospectus provides you with a general description of the securities we may
offer, which include senior debt securities, subordinated debt securities,
preferred stock, depositary shares, common stock and warrants. Each time we use
this prospectus to offer securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. Please carefully read this prospectus and the prospectus
supplement together with the additional information described under the heading
"Where You Can Find More Information."
ABOUT R&B FALCON
We are a leading provider of contract offshore drilling services to the
petroleum industry. Our company is the result of the 1997 merger of Reading &
Bates Corporation and Falcon Drilling Company, Inc. and the subsequent
acquisition of Cliffs Drilling Company in 1998. Our drilling rig fleet is one of
the most diverse in the industry, capable of drilling in shallow to
ultra-deepwater depths. We currently operate in most of the world's major
offshore hydrocarbon producing regions. We believe that our fleet diversity and
worldwide operations allow us to mitigate revenue and cash flow impacts
associated with a major downturn in any single segment of the marine drilling
industry or geographic region.
Our principal executive offices are located at 901 Threadneedle, Houston,
Texas 77079, and our phone number is (281) 496-5000.
3
<PAGE> 23
RISK FACTORS
You should carefully consider the following risk factors together with the
other information contained in this prospectus, any accompanying prospectus
supplement and the information we have incorporated by reference. The risks and
uncertainties described below are not the only ones relating to these securities
or facing our company. Additional risks and uncertainties not presently known to
us or that we currently do not believe are material may also impair our business
operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected. In
this case, the trading price of the securities offered in this prospectus could
decline and you may lose all or part of your investment.
RISK FACTORS RELATING TO OUR BUSINESS
Depressed industry conditions in 1999, combined with our substantial capital
requirements, have adversely affected our liquidity.
In 1999 we incurred losses of approximately $69.5 million, or approximately
$103.2 million including dividends on our preferred stock. In addition, we have
incurred substantial capital expenditures and have significant capital
commitments relating primarily to our deepwater rig construction program. The
combination of our recent operating losses and capital expenditures has
significantly reduced our liquidity, and our remaining capital commitments will
continue to adversely affect our liquidity. We believe projected levels of cash
flows from operations, which assumes an industry recovery in 2000, cash on hand
and potential asset sales will be sufficient to satisfy our short-term and
long-term working capital needs, planned investments, capital expenditures,
debt, lease and other payment obligations. If we are able to build excess cash
balances, we will most likely use a portion of the excess to retire debt
obligations and to repurchase or redeem preferred stock. However, if cash flows
from operations are not as we anticipate, or if we incur greater than
anticipated capital expenditure due to cost overruns or delays in our deepwater
rig construction program or for other reasons, our liquidity will be adversely
affected.
We are dependent on the oil and gas industry and market prices. Uncertainty
regarding future oil and gas prices has limited the increases in our dayrates
and rig utilization.
Our financial condition and results of operations are dependent upon the
price of oil and natural gas, as demand for our services is primarily dependent
upon the level of spending by oil and gas companies for exploration, development
and production activities. Activity in the contract drilling industry and
related oil service businesses deteriorated significantly in 1999 due to
decreased worldwide demand for drilling rigs and related services resulting from
a substantial decline in crude oil prices experienced in 1998. Although crude
oil and natural gas prices have generally improved, market prices remain
volatile. There can be no assurance that demand for drilling rigs and related
services will continue to increase, and demand may decrease. Our oil and gas
company customers reduced their 1999 exploration and production spending as a
result of the low commodity prices at the end of 1998, and generally have not
significantly increased their 2000 exploration and production budgets due to
uncertainty as to future oil and gas prices. This has led to significantly lower
dayrates and utilization for offshore drilling companies, particularly in the
U.S. Gulf of Mexico. If crude oil prices decline from current levels, or a
weakness in crude oil prices continued for an extended period, rig utilization
and dayrates could suffer.
We have a significant amount of debt, which exposes us to greater business
risks than those of our competitors with lower levels of debt.
We have a significant amount of debt. At December 31, 1999, our total
indebtedness and preferred stock obligations were approximately $3.2 billion,
which was approximately 65% of our
4
<PAGE> 24
total book value capitalization. This substantial indebtedness will have
important consequences to you. For example, it will:
- make it more difficult for us to make our required debt payments;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future capital expenditures and to satisfy
working capital and other general corporate requirements;
- potentially require us to sell assets or to terminate or suspend some of
our deepwater drilling construction projects; and
- place us at a competitive disadvantage compared to our competitors that
have less debt.
Our debt agreements may limit our flexibility in responding to changing market
conditions or in pursuing business opportunities.
Our debt agreements contain restrictions and requirements relating to,
among other things:
- additional borrowing;
- maintaining financial ratios;
- granting liens on our assets;
- selling assets;
- paying dividends; and
- merging.
These restrictions and requirements may limit our flexibility in responding
to changing market conditions or in pursuing business opportunities that we
believe would have a positive effect on our business.
We have committed significant resources to the deepwater drilling market, and
any weakening in this market would adversely affect our results of operations.
We have committed significant financial resources to the deepwater drilling
market through our deepwater rig construction projects. As of March 31, 2000, we
had incurred capital expenditures of approximately $2.4 billion relating to the
nine deepwater rigs we have built or are currently building and the two
deepwater rig projects that we have canceled, and had remaining capital
commitments of approximately $430 million relating to these projects. The cost
of these projects will exceed the cash flow from the contractual commitments
that we have for these projects. If the deepwater market weakens, we may not be
able to obtain contracts for the use of the contracted rigs once the initial
contracts expire, and any renewals may be at lower dayrates and for shorter
terms than those in the initial contracts. For the periods during which we are
obligated to use the drillship Deepwater Frontier, we will be obligated to pay
the full dayrate of $165,000 to the limited liability company that owns this
rig, without regard to whether we have a customer for this rig. These
developments would result in reduced cash flows and profitability, and adversely
affect our results of operations.
Our customers may seek to cancel or renegotiate contracts during depressed
market conditions.
During depressed market conditions, a customer may no longer need a rig, or
may be able to obtain a comparable rig at a lower dayrate. As a result,
customers may pressure us to renegotiate the terms of existing contracts. In
addition, customers may seek to avoid their obligations under existing drilling
contracts. Since December 1998, customers have canceled a number of contracts
within the drilling industry, including the contract for our Jack Bates
5
<PAGE> 25
semisubmersible rig, primarily based on alleged performance breaches by the
drilling contractors. In addition, our customers for our drillship Deepwater
Navigator and our semisubmersible Falcon 100 canceled their contracts with us
because of our late delivery of these rigs. If our customers cancel some of our
significant contracts and we are unable to secure new contract on substantially
similar terms, it could have a material adverse effect on our financial
condition and results of operations.
Our deepwater rigs utilize sophisticated technologies. Some of these
technologies are relatively new and unproven, and can therefore encounter
operational problems. Our customers may cancel their deepwater contracts if we
experience operational problems.
The deepwater market requires the use of floating rigs utilizing more
sophisticated technologies than those of the bottom-supported rigs that
previously constituted the majority of our fleet. We and other drilling
contractors have experienced problems with the new generation of subsea and
related systems designed for drilling in deeper waters. If this equipment fails
to function properly, the rig cannot engage in drilling operations. If we
encounter these or other operational problems on our deepwater rigs, we will
lose revenues, and our customers may have the right to terminate the drilling
contracts. The likelihood that a customer may seek to terminate a contract for
operational problems is increased during periods of market weakness. If our
customers cancel some of our significant contracts, it could have a material
adverse effect on our financial condition and results of operations.
Our construction and upgrade projects are subject to delays and cost overruns,
which could adversely affect our results of operations and liquidity.
Our deepwater rig construction and upgrade projects are subject to delays
and cost overruns from (1) delays in equipment deliveries, (2) unforeseen
engineering problems, (3) work stoppages, (4) weather interference, (5)
unanticipated cost increases and (6) shortages of materials or skilled labor.
Our conversion projects are particularly susceptible to cost overruns and delays
due to the engineering and construction uncertainties inherent in conversion
projects. The customers for our drillship Deepwater Navigator and
semisubmersible Falcon 100 have cancelled their drilling contracts due to late
delivery of these rigs. Also, the customer for our drillship Deepwater
Expedition, which has commenced operations for this customer, has given notice
to us of a claim of approximately $10.0 million for late delivery of the rig. We
may also be subject to late delivery penalties under the cancelled contract for
our semisubmersible Falcon 100. Any additional cost overruns or delays will
adversely affect our financial condition and results of operations.
Reduced dayrates resulting from competition may adversely affect our results
of operations because we cannot significantly reduce our operating costs.
The marine drilling market is highly competitive and no one competitor is
dominant. During periods when the supply of rigs exceeds demand, as it currently
does, there is significant downward pressure on the dayrates at which we can
contract our rigs. Because our rig operating costs cannot be materially reduced,
any reduction in dayrates adversely affects our results of operations.
We are subject to operational risks that expose us to significant potential
liabilities.
Our operations are subject to the hazards inherent in the marine drilling
business. These include (1) blowouts, (2) craterings, (3) fires, (4) collisions,
(5) capsizings and (6) adverse weather. These hazards could result in
substantial damage to the environment, personal injury and loss of life,
suspension of drilling operations or damage to property and producing
formations. We may incur substantial liabilities or losses as a result of these
hazards. While we maintain insurance protection against some of these risks, and
seek to obtain indemnity
6
<PAGE> 26
agreements from our customers requiring the customers to hold us harmless in the
event of loss of production, reservoir damage or liability for pollution that
originates below the water surface, our insurance and contractual indemnity
protection may not be sufficient to protect us under all circumstances or
against all risks.
We conduct turnkey drilling operations, which exposes us to risks normally
borne by the operator under a daywork drilling contract.
We conduct most of our drilling services under daywork drilling contracts
where the customer pays for the period of time required to drill or workover a
well. However, we provide a portion of our services under turnkey drilling
contracts. Under turnkey drilling contracts, we contract to drill a well to a
contract depth under specified conditions for a fixed price. Our risks under a
turnkey drilling contract are substantially greater than on a well drilled on a
daywork basis because under a turnkey drilling contract we normally assume most
of the risks associated with drilling operations, including (1) risk of blowout,
(2) loss of hole, (3) stuck drill stem, (4) machinery breakdowns, (5) abnormal
drilling conditions and (6) risks associated with subcontractors' services,
supplies and personnel. These risks are generally assumed by the operator in a
daywork contract.
We conduct foreign operations, which exposes us to additional risks not
present in domestic operations.
We currently operate our rigs worldwide. Operations outside the United
States involve additional risks, including (1) war and civil disturbances, (2)
general strikes, (3) regional economic downturns and (4) foreign governmental
activities that may limit or disrupt markets, restrict payments or the movement
of funds, impose exchange controls or cause currency devaluations, or result in
the loss of contract rights, nationalization, confiscation, expropriation or
deprivation of property.
Offshore drilling operations are subject to government regulation. Compliance
with these regulations can be expensive, and failure to comply with these
regulations can expose us to significant liabilities.
A number of federal, state, local and foreign laws and regulations govern
our operations. These include laws and regulations that restrict the discharge
of materials into the environment or otherwise relate to the protection of the
environment, the safety of our personnel and vessels and other matters.
Environmental laws and regulations could impose significant liability on us for
damages, clean-up costs and penalties if we spill oil or other pollutants in the
course of our operations. Some of these laws impose liability without regard to
negligence or fault. Environmental and other laws and regulations may increase
our costs of doing business, discourage our customers from exploring for oil and
gas and reduce demand for our services. While we maintain insurance protection
against some of these risks and seek to obtain indemnity agreements from our
customers, our insurance and contractual indemnity protection may not be
sufficient to protect us under all circumstances or against all risks.
7
<PAGE> 27
RISKS RELATING TO OUR DEBT SECURITIES
We are primarily a holding company and depend substantially on our
subsidiaries for funds to meet our financial obligations.
We are primarily a holding company that owns subsidiary companies. Our
subsidiary companies own most of our assets and conduct substantially all of our
business. This structure results in two principal risks:
- our subsidiaries may be restricted by contractual provisions or
applicable laws from providing us the cash that we need to pay parent
company debt service obligations, including payments on senior debt
securities or subordinated debt securities; and
- in any liquidation, reorganization or insolvency proceeding involving our
company, your claim as a holder of our debt securities will be
effectively junior to the claims of holders of any indebtedness or
preferred stock of our subsidiaries.
RISKS RELATING TO OUR COMMON STOCK
Sales of substantial amounts of our common stock eligible for future sale may
cause a significant decline in the market price of our common stock.
We have previously issued options, warrants and other rights to purchase
approximately 22.4 million shares of our common stock that may be exercised
within 60 days of the date of this prospectus. Most of these shares may be sold
immediately upon exercise. Sales of substantial amounts of common stock,
including shares issued upon the exercise of stock options or warrants, or the
perception that sales of substantial amounts of common stock could occur, could
adversely affect the market price for our common stock.
Our certificate of incorporation and bylaws contain anti-takeover provisions.
In addition, our common stock is subject to a rights plan. These anti-takeover
provisions or the rights plan could prevent or discourage an acquisition or
change of control that stockholders might believe to be in their best
interests.
Our certificate of incorporation authorizes our board of directors to issue
preferred stock without stockholder approval. If our board of directors elects
to issue preferred stock, it could be more difficult for a third party to
acquire control of us. In addition, provisions of the certificate of
incorporation and bylaws, such as those providing for a classified board of
directors with staggered terms, no stockholder action by written consent and
limitations on stockholder proposals at meetings of stockholders, could also
make it more difficult for a third party to acquire control of us. Our common
stock is also subject to a rights plan that could prevent or discourage an
unsolicited takeover attempt. These anti-takeover provisions or the rights plan
may prevent or discourage transactions that stockholders might believe to be in
their best interests, including those in which stockholders might receive a
premium for their stock over its then market price.
FORWARD-LOOKING INFORMATION
Some of the statements contained in this prospectus under the caption "Risk
Factors," and some of the statements included in the documents that we have
incorporated by reference, are "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements:
- address activities, events or developments that we expect, believe,
anticipate or estimate will or may occur in the future;
- are based on assumptions and analyses that we have made and that we
believe are reasonable under the circumstances when made; and
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<PAGE> 28
- are subject to many risks, uncertainties and other factors, many of which
are beyond our control.
Our actual results could differ materially from those anticipated in the
forward-looking statements as a result of these risks, uncertainties and other
factors, which could materially affect our future results of operations. When
considering these forward-looking statements, you should keep in mind the risk
factors and other cautionary statements contained in this prospectus, any
prospectus supplement and the documents we have incorporated by reference. We
will not update these statements unless the securities laws require us to do so.
USE OF PROCEEDS
Unless we inform you otherwise in the prospectus supplement, we will use
the net proceeds from the sale of securities for general corporate purposes.
These purposes may include:
- repayments or refinancings of debt;
- working capital;
- capital expenditures;
- investments in our drilling rig fleet, including construction or
refurbishment of drilling rigs;
- acquisitions;
- repurchases or redemptions of debt securities; and
- repurchases or redemptions of outstanding equity securities.
RATIO OF EARNINGS TO FIXED CHARGES AND TO COMBINED FIXED CHARGES
AND PREFERRED STOCK EXPENSE
For purposes of computing the ratio of earnings to fixed charges,
"earnings" represent income (loss) from continuing operations before income tax
expense, minority interest and extraordinary gain, plus fixed charges exclusive
of capitalized interest. "Fixed charges" consist of interest, whether expensed
or capitalized, amortization of debt expense, and an estimated portion of rental
expense on operating leases deemed to be the equivalent of interest. "Preferred
stock expense" represents the amount of pre-tax earnings required to pay
dividends on outstanding preferred stock.
The following table sets forth our consolidated ratio of earnings to fixed
charges for the periods shown:
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------------- MARCH 31,
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges......... 1.8x 3.4x 2.6x 2.0x --(1) --(1)
</TABLE>
The following table sets forth our consolidated ratio of earnings to
combined fixed charges and preferred stock dividends for the periods shown:
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED
-------------------------------- MARCH 31,
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to combined fixed charges
and preferred stock expense.............. 1.6x 3.2x 2.6x 2.0x --(2) --(2)
</TABLE>
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<PAGE> 29
---------------
(1) For the year ended December 31, 1999 and for the three months ended March
31, 2000, earnings were insufficient to cover fixed charges by $161.2
million and $71.1 million, respectively.
(2) For the year ended December 31, 1999 and for the three months ended March
31, 2000, earnings were insufficient to cover combined fixed charges and
preferred stock expense by $214.1 million and $89.7 million, respectively.
DESCRIPTION OF DEBT SECURITIES
The debt securities covered by this prospectus will be our general
unsecured obligations. We will issue senior debt securities under an indenture
between us and a trustee to be named in the applicable prospectus supplement
that we will enter into before we issue any of these securities. We will issue
subordinated debt securities under an indenture between us and a trustee to be
named in the applicable prospectus supplement that we will enter into before we
issue any of these securities. These indentures will be substantially identical,
except for the provisions relating to subordination and covenants. Please read
"-- Provisions Applicable Solely to Senior Debt Securities" and "-- Provisions
Applicable Solely to Subordinated Debt Securities."
We have summarized selected provisions of the indentures and the debt
securities below. This summary is not complete. For a complete description, we
encourage you to read the applicable indenture, which we have filed with the
SEC. Please read "Where You Can Find More Information."
In this summary description of the debt securities, all references to us
mean R&B Falcon Corporation only, unless we state otherwise or the context
clearly indicates otherwise.
PROVISIONS APPLICABLE TO BOTH SENIOR AND SUBORDINATED DEBT SECURITIES
Terms. Neither the senior indenture nor the subordinated indenture will
limit the amount of debt that we may issue under that indenture. We may issue
debt securities under the indentures from time to time in one or more series,
each in an amount we authorize prior to issuance.
Unless we inform you otherwise in the prospectus supplement, the indentures
and the debt securities will not limit or restrict:
- the amount of other indebtedness or securities that we or our
subsidiaries may incur or issue;
- transactions between us and our affiliates;
- the payment of dividends and other distributions by us to our
stockholders;
- our making investments and capital expenditures;
- the transfer of assets by us to our subsidiaries;
- the sale of assets, unless that sale is for all or substantially all our
assets; and
- the repurchase or redemption of our debt or equity securities.
The prospectus supplement relating to any series of debt securities being
offered will include specific terms relating to the offering. These terms will
include some or all of the following:
- whether the debt securities will be senior or subordinated debt
securities;
- the title of the debt securities;
- the total principal amount of the debt securities;
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<PAGE> 30
- whether we will issue the debt securities in the form of one or more
global securities and whether we will issue any global securities in
temporary or permanent global form;
- the date or dates on which the principal of and any premium on the debt
securities will be payable;
- any interest rate, whether fixed or variable, the date from which
interest will accrue, interest payment dates and record dates for
interest payments;
- the place or places where payments on the debt securities will be
payable;
- any provisions for redemption or early repayment;
- any provisions that would obligate us to redeem, purchase or repay the
debt securities prior to maturity;
- the denominations in which we will issue the debt securities;
- the portion of the principal amount of the debt securities that will be
payable if the maturity is accelerated, if other than the entire
principal amount;
- any additional means of defeasance of the debt securities, any additional
conditions or limitations to defeasance of the debt securities or any
changes to those conditions or limitations;
- any changes or additions to the events of default or covenants described
in this prospectus;
- any restrictions or other provisions relating to the transfer or exchange
of the debt securities;
- whether payments on the debt securities will be made without deduction
for taxes, assessments or governmental charges; and
- any terms for the conversion or exchange of the debt securities for other
securities issued by us or any other entity.
We may sell the debt securities at a discount, which may be substantial,
below their stated principal amount. These debt securities may bear no interest
or interest at a rate that at the time of issuance is below market rates. We
will describe in the prospectus supplement any material United States federal
income tax consequences and other special considerations.
Consolidation, Merger and Sale of Assets. We have agreed that we will
consolidate with or merge into any entity or transfer or dispose of all or
substantially all of our assets to any entity only if:
- we are the continuing corporation; or
- if we are not the continuing corporation, the successor is organized and
existing under the laws of any United States jurisdiction and assumes all
of our obligations under the indentures and the debt securities; and
- in either case, immediately after giving effect to the transaction, no
default or event of default would occur and be continuing.
Events of Default. Unless we inform you otherwise in the prospectus
supplement, the following are events of default with respect to a series of debt
securities:
- our failure to pay interest or any additional amounts on that series of
debt securities for 30 days;
- our failure to pay principal of or any premium on that series of debt
securities when due;
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<PAGE> 31
- our failure to deposit any mandatory sinking fund payment for 30 days;
- our failure to comply with any of our covenants or agreements in that
series of debt securities or the indenture for that series, other than an
agreement, covenant or provision that we have included in the applicable
indenture solely for the benefit of other series of debt securities, for
90 days after written notice by the trustee or by the holders of at least
25% in principal amount of the outstanding debt securities of the series
affected by that failure; and
- bankruptcy, insolvency or reorganization events.
Depending on the terms of our other indebtedness, an event of default under
an indenture may give rise to cross defaults on our other indebtedness. If a
default or an event of default for any series of debt securities occurs, is
continuing and is known to the trustee, the trustee will notify the holders of
those debt securities within 90 days after it occurs. The trustee may withhold
notice of any default or event of default, except in any payment on the debt
securities, if the trustee in good faith determines that withholding notice is
in the interest of the holders of the debt securities.
If an event of default for any series of debt securities occurs and is
continuing, the trustee or the holders of at least 25% in principal amount of
the outstanding debt securities of the series affected by the default may
declare the principal of and all accrued and unpaid interest on those debt
securities to be due and payable. If an event of default relating to bankruptcy,
insolvency or reorganization occurs and is continuing, the principal of and
interest on all the debt securities will become immediately due and payable
without any action on the part of the applicable trustee or any holder. The
holders of a majority in principal amount of the outstanding debt securities of
the series affected by the default may in some cases rescind the accelerated
payment requirement.
A holder of a debt security of any series may pursue any remedy under the
applicable indenture only if:
- the holder gives the applicable trustee written notice of a continuing
event of default for that series;
- the holders of at least 25% in principal amount of the outstanding debt
securities of that series make a written request to the applicable
trustee to pursue the remedy;
- the holder or holders offer to the trustee indemnity reasonably
satisfactory to it;
- the trustee fails to act for a period of 60 days after receipt of notice
and offer of indemnity; and
- during that 60-day period, the holders of a majority in principal amount
of the debt securities of that series do not give the trustee a direction
inconsistent with the request.
This provision does not, however, affect the right of a holder of a debt
security to sue for enforcement of any overdue payment.
In most cases, holders of a majority in principal amount of the outstanding
debt securities of a series may direct the time, method and place of:
- conducting any proceeding for any remedy available to the applicable
trustee; and
- exercising any trust or power conferred on the applicable trustee
relating to or arising under an event of default.
Each indenture requires us to file annually with the applicable trustee a
written statement as to our compliance with the covenants contained in that
indenture.
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<PAGE> 32
Modification and Waiver. We may amend or supplement each indenture if the
holders of a majority in principal amount of the outstanding debt securities of
all series issued under the indenture and affected by the amendment or
supplement, acting as one class, consent to it. Without the consent of the
holder of each debt security affected, however, no amendment or supplement may:
- reduce the rate of or change the time for payment of interest on any debt
security;
- reduce the principal of, premium on or any mandatory sinking fund payment
for any debt security;
- change the stated maturity of any debt security;
- reduce the amount of the principal of an original issue discount security
that would be due and payable upon a declaration of acceleration of the
maturity of that debt security;
- reduce any premium payable on the redemption of any debt security or
change the time at which any debt security may or must be redeemed;
- change any obligation to pay additional amounts on any debt security;
- make payments on any debt security payable in any currency or currency
unit other than as originally stated in that debt security;
- impair the holder's right to institute suit for the enforcement of any
payment on any debt security;
- make any change in the percentage of principal amount of debt securities
necessary to waive compliance with some provisions of the applicable
indenture or to make any change in this provision for modification;
- waive a continuing default or event of default regarding any payment on
any debt security; or
- with respect to the subordinated indenture, modify the provisions
relating to the subordination of any subordinated debt security in a
manner adverse to the holder of that security.
We may amend or supplement each indenture without the consent of any
holders of debt securities:
- to cure any ambiguity, omission, defect or inconsistency;
- to provide for the assumption of our obligations under the indenture by a
successor upon any merger, consolidation or asset transfer;
- to provide for uncertificated debt securities in addition to or in place
of certificated debt securities;
- to provide any security for any series of debt securities;
- to comply with any requirement to effect or maintain the qualification of
the indenture under the Trust Indenture Act of 1939;
- to add covenants that would benefit the holders of any debt securities or
to surrender any rights we have under the indenture;
- to add events of default with respect to any debt securities;
- to make any change that does not adversely affect any outstanding debt
securities of any series in any material respect;
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<PAGE> 33
- to facilitate the defeasance or discharge of any series of debt
securities if that change does not adversely affect the holders of debt
securities of that series or any other series under the indenture in any
material respect; and
- to provide for the acceptance of a successor or another trustee.
The holders of a majority in principal amount of the outstanding debt
securities of any series may waive compliance by us with any provision of the
indenture with respect to those debt securities. Those holders may not, however,
waive any default or event of default in any payment on any debt security or
compliance with a provision that cannot be amended or supplemented without the
consent of each holder affected.
Original Issue Discount. In determining whether the holders of the required
principal amount of debt securities have concurred in any direction, amendment,
supplement, waiver or consent the principal amount of an original issue discount
security will be the principal amount that would be due and payable upon
acceleration of the maturity of that debt security.
Defeasance. When we use the term defeasance, we mean discharge from some or
all of our obligations under an indenture.
If we deposit with the applicable trustee funds or government securities
sufficient to make payments on the debt securities of a series on the dates
those payments are due and payable, then, at our option, either of the following
will occur:
- we will be discharged from our obligations with respect to the debt
securities of that series ("legal defeasance"); or
- we will no longer have any obligation to comply with the restrictive
covenants under the applicable indenture, the related events of default
will no longer apply to us but some of our other obligations under the
indenture and the debt securities of that series, including our
obligation to make payments on those debt securities, will survive
("covenant defeasance").
If we elect legal defeasance of a series of debt securities, the holders of
the debt securities of the series affected will not be entitled to the benefits
of the applicable indenture, except for our obligations:
- to register the transfer or exchange of debt securities;
- to replace stolen, lost or mutilated debt securities; and
- to maintain paying agencies and hold moneys for payment in trust.
Unless we inform you otherwise in the prospectus supplement, we will be
required to deliver to the applicable trustee an opinion of counsel that the
deposit and related defeasance would not cause the holders of the debt
securities to recognize income, gain or loss for United States federal income
tax purposes.
In addition, unless we inform you otherwise in the prospectus supplement,
each indenture will cease to be of further effect with respect to debt
securities of a series, subject to exceptions relating to compensation and
indemnity of the applicable trustee and repayment to us of excess money or
securities, when:
- either:
(1) all outstanding debt securities of that series have been delivered
to that trustee for cancellation; or
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<PAGE> 34
(2) all outstanding debt securities of that series not delivered to
the trustee for cancellation either:
- have become due and payable;
- will become due and payable at their stated maturity within one
year; or
- are to be called for redemption within one year; and
we have deposited with the trustee funds or government securities in
trust sufficient to pay and discharge the entire indebtedness on the
debt securities of that series when due;
- we have paid all other sums payable by us with respect to those debt
securities; and
- we have delivered to the trustee other documents required by the
indenture, including an officers' certificate and an opinion of counsel.
Governing Law. New York law will govern the indentures and the debt
securities.
The Trustee. If an event of default occurs and is continuing, the trustee
will be required to use the degree of care and skill of a prudent person in the
conduct of his own affairs. The trustee will become obligated to exercise any of
its powers under the indenture at the request of any of the holders of any debt
securities only after those holders have offered the trustee indemnity
reasonably satisfactory to it.
Each indenture limits the right of the trustee, if the trustee becomes one
of our creditors, to obtain payment of claims or to realize on some property
received for any of these claims, as security or otherwise. The trustee may
engage in other transactions with us. If it acquires any conflicting interest,
however, it must eliminate that conflict or resign within 90 days after
ascertaining that it has a conflicting interest and after the occurrence of a
default under the indenture, unless that default has been cured, waived or
otherwise eliminated within the 90-day period.
Form, Exchange, Registration and Transfer. We will issue the debt
securities in registered form. We will not charge a service charge for any
registration of transfer or exchange of the debt securities. We may, however,
require the payment of any tax or other governmental charge payable for that
registration.
Debt securities of any series will be exchangeable for other debt
securities of the same series with the same total principal amount and the same
terms but in different authorized denominations in accordance with the
applicable indenture. Holders may present debt securities for registration of
transfer at the office of the registrar. The registrar will effect the transfer
or exchange when it is satisfied with the documents of title and identity of the
person making the request.
We will appoint the trustee under each indenture as registrar for our debt
securities issued under that indenture. We are required to maintain an office or
agency for transfers and exchanges in each place of payment. We may at any time
designate additional registrars for any series of debt securities.
In the case of any redemption or repurchase, we will not be required to
register the transfer or exchange of any debt security either:
- if we have called the debt security for redemption in whole or in part,
except the unredeemed portion of any debt security being redeemed in
part; or
- during a period beginning 15 business days before the mailing of the
relevant notice of redemption or repurchase and ending on the close of
business on the day of mailing.
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Payment and Paying Agents. Unless we inform you otherwise in a prospectus
supplement, payments on the debt securities will be made in U.S. dollars at the
office of the applicable trustee or any paying agent we designate. At our
option, we may make payments by check mailed to the holder's registered address
or by wire transfer for global debt securities. Unless we inform you otherwise
in a prospectus supplement, we will make interest payments to the person in
whose name the debt security is registered at the close of business on the
record date for the interest payment.
Unless we inform you otherwise in a prospectus supplement, the trustee
under each indenture will be designated as our paying agent for payments on debt
securities issued under the indenture. We may at any time designate additional
paying agents or rescind the designation of any paying agent or approve a change
in the office through which any paying agent acts.
In most cases, the trustee and paying agent will repay to us upon written
request any funds held by them for payments on the debt securities that remain
unclaimed for two years after the date upon which that payment has become due.
After payment to us, holders entitled to the money must look to us for payment.
Book-Entry Debt Securities. We may issue debt securities of a series in the
form of one or more global debt securities that would be deposited with a
depositary or its nominee identified in the prospectus supplement. We may issue
global debt securities in either temporary or permanent form. We will describe
in the prospectus supplement the terms of any depositary arrangement and the
rights and limitations of owners of beneficial interests in any global debt
security.
PROVISIONS APPLICABLE SOLELY TO SENIOR DEBT SECURITIES
Ranking. The senior debt securities will rank equally with all our
unsecured and unsubordinated debt and senior to any subordinated indebtedness,
including any subordinated debt securities.
Restrictive Covenants. We will describe any restrictive covenants relating
to the senior debt securities in a prospectus supplement.
PROVISIONS APPLICABLE SOLELY TO SUBORDINATED DEBT SECURITIES
Ranking. The subordinated debt securities will rank junior to all our
senior debt, including any senior debt securities we may issue, and may rank
equally with or senior to other subordinated debt that may be outstanding from
time to time.
Subordination. Under the subordinated indenture, payment of the principal,
interest and any premium on the subordinated debt securities will generally be
subordinated and junior in right of payment to the prior payment in full of all
senior debt. Unless we inform you otherwise in the prospectus supplement, we may
not make any payment of principal, interest or any premium on the subordinated
debt securities if:
- we fail to pay the principal, interest, premium or any other amounts on
any senior debt when due; or
- we default in performing any other covenant (a "covenant default") in any
senior debt that we have designated if the covenant default allows the
holders of that senior debt to accelerate the maturity of the senior debt
they hold.
Unless we inform you otherwise in the prospectus supplement, a covenant
default will only prevent us from making payments on the subordinated debt
securities for up to 179 days after holders of the senior debt give the trustee
for the subordinated debt securities notice of the covenant default.
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<PAGE> 36
The subordination will not affect our obligation, which will be absolute
and unconditional, to pay, when due, principal of, premium, if any, and interest
on the subordinated debt securities. In addition, the subordination will not
prevent the occurrence of any default under the subordinated indenture.
The subordinated indenture will not limit the amount of senior debt that we
may incur. As a result of the subordination of the subordinated debt securities,
if we became insolvent, holders of subordinated debt securities may receive less
on a proportionate basis than other creditors.
Unless we inform you otherwise in the prospectus supplement, "senior debt"
will mean all debt of R&B Falcon Corporation, unless the debt states that it is
not senior to the subordinated debt securities or our other junior debt. The
term "debt" of a person means:
- indebtedness for borrowed money;
- obligations evidenced by bonds, debentures, notes or similar instruments;
- undrawn obligations relating to letters of credit or similar instruments,
other than standby letters of credit and bid or performance bonds issued
in the ordinary course of business;
- reimbursement obligations relating to drawn letters of credit and similar
instruments described in the preceding item if the drawing is reimbursed
within 30 business days following demand for reimbursement;
- obligations to pay the deferred and unpaid purchase price of property or
services, except trade payables and accrued expenses incurred in the
ordinary course of business;
- capitalized lease obligations;
- indebtedness of a third party secured by a lien on any asset of that
person; and
- indebtedness of others guaranteed to the extent of the guarantee.
DESCRIPTION OF CAPITAL STOCK
GENERAL
As of the date of this prospectus, we are authorized to issue up to
550,000,000 shares of common stock and up to 50,000,000 shares of preferred
stock. As of May 1, 2000, we had 194,191,457 shares of common stock and 344,994
shares of 13 7/8% Senior Cumulative Redeemable Preferred Stock outstanding. As
of that date, we also had approximately 29 million shares of common stock
reserved for issuance upon exercise of common stock purchase warrants, in
connection with options or other awards outstanding under various employee or
director incentive, compensation and option plans, or under contingent
obligations relating to asset purchases.
The following is a summary of the key terms and provisions of our equity
securities. You should refer to the applicable provisions of our certificate of
incorporation, bylaws, the Delaware General Corporation Law and the documents we
have incorporated by reference for a complete statement of the terms and rights
of our capital stock.
COMMON STOCK
Voting Rights. Each holder of common stock is entitled to one vote per
share on all matters to be voted on by the stockholders. Subject to the rights,
if any, of the holders of any series of preferred stock pursuant to applicable
law or the provision of the certificate of designation creating that series, all
voting rights are vested in the holders of shares of common stock. Holders of
shares of common stock have noncumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of directors can
elect all of the
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<PAGE> 37
directors, and the holders of the remaining shares voting for the election of
directors will not be able to elect any directors.
Dividends. Dividends may be paid to the holders of common stock when, as
and if declared by the board of directors out of funds legally available for
their payment, subject to the rights of holders of any preferred stock. We
generally do not pay cash dividends, and we intend to retain future earnings in
order to provide funds for use in the operation and expansion of our business.
In addition, as of the date of this prospectus we are unable to pay dividends
under the covenants in some of our outstanding senior debt due to our financial
results.
Rights upon Liquidation. In the event of our voluntary or involuntary
liquidation, dissolution or winding up, the holders of common stock will be
entitled to share equally, in proportion to the number of shares of common stock
held by them, in any of our assets available for distribution after the payment
in full of all our debts and distributions and after the holders of all series
of our outstanding preferred stock, if any, have received their liquidation
preferences in full.
Non-Assessable. All outstanding shares of common stock are fully paid and
non-assessable. Any additional common stock we offer and issue under this
prospectus will also be fully paid and non-assessable.
No Preemptive Rights. Holders of common stock are not entitled to
preemptive purchase rights in future offerings of our common stock.
Listing. Our outstanding shares of common stock are listed on the New York
Stock Exchange under the symbol "FLC." Any additional common stock we issue will
also be listed on the NYSE.
PREFERRED STOCK
GENERAL
Our board of directors can, without approval of our stockholders, issue one
or more series of preferred stock and determine the number of shares of each
series and the rights, preferences and limitations of each series. The following
description of the terms of the preferred stock sets forth some of the general
terms and provisions of our authorized preferred stock. If we offer preferred
stock, we will file a description with the SEC and describe the specific
designations and rights in a prospectus supplement, including the following
terms:
- the series, the number of shares offered and the liquidation value of the
preferred stock;
- the price at which the preferred stock will be issued;
- the dividend rate, the dates on which the dividends will be payable and
other terms relating to the payment of dividends on the preferred stock;
- the liquidation preference of the preferred stock;
- the voting rights of the preferred stock;
- whether the preferred stock is redeemable or subject to a sinking fund,
and the terms of any redemption or sinking fund;
- whether the preferred stock is convertible or exchangeable for any other
securities, and the terms of any conversion; and
- any additional rights, preferences, qualifications, limitations and
restrictions of the preferred stock.
The description of the terms of the preferred stock to be set forth in an
applicable prospectus supplement will not be complete and will be subject to and
qualified by the certificate
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<PAGE> 38
of designation relating to the applicable series of preferred stock. The
registration statement of which this prospectus forms a part will include the
certificate of designation as an exhibit or will incorporate the certificate of
designation by reference.
Undesignated preferred stock may enable our board of directors to render
more difficult or to discourage an attempt to obtain control of us by means of a
tender offer, proxy contest, merger or otherwise, and to thereby protect the
continuity of our management. The issuance of shares of preferred stock may
adversely affect the rights of the holders of our common stock. For example, any
preferred stock issued may rank prior to our common stock as to dividend rights,
liquidation preference or both, may have full or limited voting rights and may
be convertible into shares of common stock. As a result, the issuance of shares
of preferred stock may discourage bids for our common stock or may otherwise
adversely affect the market price of our common stock or any existing preferred
stock.
Any preferred stock will, when issued in an offering under this prospectus
and a prospectus supplement, be fully paid and non-assessable.
13 7/8% SENIOR CUMULATIVE REDEEMABLE PREFERRED STOCK
In April 1999, our board of directors designated the 13 7/8% Senior
Cumulative Redeemable Preferred Stock as a class of preferred stock. This class
consists of a total of 1,200,000 shares, of which 300,000 shares were issued in
a private placement in April 1999, up to 300,000 were reserved for issuance in
payment of dividends in kind on the private placement shares, and up to 600,000
were issuable in exchange for the private placement shares and paid in kind
dividends issued on the private placement shares prior to the exchange, and in
payment of dividends in kind on shares issued in the exchange. The private
placement shares were exchanged for exchange shares in a registered exchange
offer in August 1999. Therefore, only up to a total of 600,000 shares of this
class of preferred stock may be issued, of which 344,994 shares are currently
issued and outstanding. The following is a summary of the terms of this class of
preferred stock.
Liquidation Preference. Each share of this class of preferred stock has a
liquidation preference of $1,000, plus accrued and unpaid dividends.
Dividends. Dividends on this class of preferred stock are payable in cash
or, on or before May 1, 2004, at our option, in additional shares of preferred
stock, on each February 1, May 1, August 1 and November 1. Cumulative dividends
on the preferred stock accrue at the rate of 13 7/8% of the liquidation
preference per annum. Covenants contained in the indentures governing a
substantial portion of our current indebtedness limit our ability to pay cash
dividends. Because of this, we have paid and intend to continue to pay dividends
on the preferred stock in additional shares of preferred stock for most or all
of the period ending May 1, 2004.
Voting Rights. Holders of this class of preferred stock have no voting
rights except as provided by law and as provided in the certificate of
designation for the preferred stock. In the event that dividends are not paid
for any three quarters, whether or not consecutive, or upon certain other events
(including the failure to make a change of control offer, to comply with other
specified covenants or to pay the mandatory redemption price when due), then the
number of directors that make up our board of directors will be increased to
permit the holders of the majority of the then outstanding shares of preferred
stock, voting separately as a class with any other class of securities having
similar voting rights, to elect two directors.
Mandatory redemption. We must redeem the shares of this class of preferred
stock on May 1, 2009 (subject to the legal availability of funds) at a
redemption price equal to the liquidation preference, plus accrued and unpaid
dividends to the redemption date.
Optional redemption. We may redeem any of the shares of this class of
preferred stock beginning May 1, 2004. The initial redemption price is 106.938%
of the liquidation preference,
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declining thereafter to 100.000% on or after May 1, 2007, in each case plus
accrued and unpaid dividends to the redemption date.
In addition, on or prior to May 1, 2002, we may redeem shares of this class
of preferred stock having an aggregate liquidation preference of up to $105
million at a price equal to 113.875% of its liquidation preference, plus accrued
and unpaid dividends to the redemption date, with proceeds from one or more
public equity offerings. We may make one of these redemptions only if it occurs
within 45 days after completion of the public equity offering.
Ranking. This class of preferred stock ranks (i) senior to our common stock
and to all other capital stock of our company unless the terms of the other
capital stock expressly provide that it ranks equally with this class of
preferred stock; and (ii) equally with any capital stock of our company the
terms of which expressly provide that it will rank equally with this class of
preferred stock.
Optional exchange feature. This class of preferred stock will become
exchangeable in whole, but not in part, into exchange debentures at our option
if the conditions described in the certificate of designation are satisfied.
Indentures governing a substantial portion of our current indebtedness restrict
our ability to consummate such an exchange.
Covenants. The certificate of designation contains covenants that restrict
our ability and the ability of our restricted subsidiaries to:
- issue capital stock;
- pay dividends or make distributions in respect of capital stock;
- redeem capital stock; or
- effect a consolidation or merger.
Change of control. Upon a change of control, we will be required to make an
offer to purchase all outstanding shares of this class of preferred stock. The
purchase price will equal 101% of the liquidation preference of the preferred
stock, plus accrued and unpaid dividends. We may not be permitted under our debt
agreements at the time of any change of control, or may not have enough funds
available at the time of any change of control, to make any required purchase of
this class of preferred stock.
Non-Assessable. All outstanding shares of this class of preferred stock are
fully paid and non-assessable. Any additional shares of this class of preferred
stock issued upon payment of dividends in kind will also be fully paid and
non-assessable.
No Preemptive Rights. Holders of this class of preferred stock are not
entitled to preemptive purchase rights in future offerings of our equity
securities.
RIGHTS PLAN
General. Under our rights plan, each share of common stock has attached to
it one right. The right is represented by a certificate which is the same
certificate representing the common stock. Each right entitles the registered
holder to purchase from us one one-hundredth of a share of our Series A Junior
Participating Preferred Stock. Until the distribution date, the rights will be
transferred only with our common stock certificates. The rights are not
exercisable until after the distribution date and are subject to redemption or
exchange as described below. The rights expire at the close of business on
November 1, 2007, unless we redeem them earlier. Holding unexercised rights
gives you no rights as a stockholder, including, without limitation, the right
to vote or to receive dividends.
Distribution Date; Separation of Rights from Common Stock. The rights will
separate from our common stock and a distribution date will occur upon the
earlier of two possible times. The first
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such time is 10 business days following a public announcement that a person or
group of affiliated or associated persons (an "acquiring person") has acquired,
or has the right to acquire, the ownership of 15% or more of the outstanding
shares of our common stock (the "share acquisition date"). The second possible
time is 10 business days (or such later date as determined by our board of
directors prior to any person becoming an acquiring person) following the
commencement of a tender or exchange offer which would result in a person or
group owning 15% or more of our outstanding shares of common stock.
Series A Preferred Stock. The Series A Preferred Stock has a par value of
$0.01 per share and a purchase price of $150. The purchase price is subject to
adjustment. Because of the nature of the Series A Preferred Stock's dividend,
liquidation and voting rights, the value of each one one-hundredth interest in a
share of Series A Preferred Stock purchasable upon exercise of each right should
approximate the value of a share of common stock. Each share of Series A
Preferred Stock purchased upon exercise of the rights will be entitled to a
minimum preferential quarterly dividend payment equal to the greater of (i)
$1.00 per share, and (ii) 100 times the dividend, if any, declared per share of
our common stock. In the event of liquidation, the holders of the Series A
Preferred Stock will be entitled to a minimum preferential liquidation payment
equal to 100 times the par value per share plus an amount equal to accrued and
unpaid dividends and distributions to the date of such payment. Each share of
Series A Preferred Stock will have 100 votes and will vote together with our
common stock. In the event of any merger, consolidation or other transaction in
which shares of our common stock are exchanged, each share of Series A Preferred
Stock will be entitled to receive 100 times the amount per share of our common
stock received in such merger, consolidation or other transaction. The shares of
Series A Preferred Stock will, if issued, be junior to any other series of our
preferred stock, unless the terms of any such other series provide otherwise.
Triggering Event. In the event that any person or group becomes an
acquiring person, we will provide that each holder of a right, other than rights
beneficially owned by the acquiring person (which will be null and void), will
have the right to receive upon exercise of the right at the current exercise
price, a number of shares of our common stock having a market value of two times
the exercise price of the right. In the event that we are acquired in a merger
or other business combination transaction or 50% or more of our consolidated
assets or earning power are sold after a person or group has become an acquiring
person, we will provide that each holder of a right will have the right to
receive, upon exercise of the right at the current exercise price, a number of
shares of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of the
right.
Redemption or Exchange of Rights. At any time prior to the tenth day after
a share acquisition date, we may redeem the rights in whole, but not in part, at
a price of $0.01 per right. The redemption of the rights may be made effective
at such time, on such basis and with such conditions as our board of directors
may establish in its sole discretion.
Anti-takeover Effects. The rights may cause substantial dilution of
shareholder voting strength to a person or group that acquires 15% or more of
our common stock or otherwise attempts to acquire us in a manner that
constitutes a triggering event. The rights should not affect any prospective
offeror who is willing:
- to make an offer for all of our outstanding shares of common stock and
other voting securities at a price and terms that are in the best
interests of us and our stockholders as determined by our board of
directors; or
- to negotiate with the board of directors because as part of any
negotiated transaction the rights would either be redeemed or otherwise
made inapplicable to the transaction.
The rights should also not interfere with any merger or other business
combination approved by the board of directors since the board may, at its
option, choose to redeem the outstanding
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rights at the $0.01 redemption price. The board may exercise this option at any
time prior to the tenth day after a share acquisition date.
BUSINESS COMBINATIONS UNDER DELAWARE LAW
We are subject to Section 203 of the Delaware General Corporation Law,
which restricts some types of business combinations of Delaware corporations.
Section 203 prohibits us from engaging in a business combination with an
interested stockholder for a period of three years after the time of the
transaction in which the person became an interested stockholder, unless:
- prior to the time of the business combination, our board of directors
approved the business combination or the transaction in which the
stockholder became an interested stockholder;
- as a result of the business combination, the interested stockholder owned
at least 85% of our voting stock outstanding at the time the transaction
commenced; or
- on or after the date of the business combination, our board of directors
and the holders of at least 66 2/3% of our outstanding voting stock not
owned by the interested stockholder approve the business combination.
The DGCL defines a "business combination" generally as:
- a merger or consolidation with the interested stockholder or with any
other corporation if the merger or consolidation is caused by the
interested stockholder;
- a sale or other disposition to or with an interested stockholder of
assets with an aggregate market value greater than or equal to 10% or
more of either the aggregate market value of all our assets or the
aggregate market value of all of our outstanding stock;
- a transaction resulting in the issuance or transfer by our company or any
of our majority-owned subsidiaries of any of our stock or stock of our
subsidiary to the interested stockholder;
- any transaction involving our company or any of our majority-owned
subsidiaries that has the effect of increasing the proportionate share of
our stock or the stock of the subsidiary owned by the interested
stockholder; or
- any receipt of the interested stockholder of the benefit of any loans or
other financial benefits provided by our company or any of our
majority-owned subsidiaries.
An interested stockholder is defined generally to mean a person who,
together with its affiliates, owns, or if the person is an affiliate of the
corporation did own within the last three years, 15% or more of our outstanding
voting stock.
CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS
The summary set forth below describes certain provisions of our amended and
restated certificate of incorporation and restated bylaws. The summary is
qualified in its entirety by reference to the provisions of our certificate of
incorporation and bylaws.
Some of the provisions of our certificate of incorporation and bylaws
discussed below may have the effect, either alone or in combination with the
provisions of Section 203 discussed above, of making more difficult or
discouraging a tender offer, proxy contest or other takeover attempt that is
opposed by our board of directors but that a stockholder might consider to be in
its best interest.
Classified Board of Directors. Our certificate of incorporation and bylaws
provide for a classified board of directors. Except for directors that may be
elected by the holders of our
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preferred stock or any other series or class of our stock, our board is divided
into three classes, with the directors of each class as nearly equal in number
as possible. The directors of each class serve a term that expires at the third
succeeding annual meeting of our stockholders after their election, and each
director holds office until his or her successor is duly elected and qualified.
At each annual meeting of our stockholders, the term of a different class of our
directors expires. Our board of directors may not consist of more than 15
directors or less than one director. In addition, our certificate of
incorporation provides that no more than a minority of the directors necessary
to constitute a quorum of our board of directors may be non-United States
citizens.
The classification of our directors will have the effect of making it more
difficult to change the composition of our board of directors. It could also
have the effect of discouraging a third party from initiating a proxy contest,
making a tender offer or otherwise attempting to obtain control of our company,
even though such an attempt might be beneficial to our company and our
stockholders.
Under the Delaware General Corporation Law, a director of a corporation
with a classified board may be removed only for cause, unless the certificate of
incorporation provides otherwise. Our certificate of incorporation is silent on
the removal of directors. Therefore, stockholders representing a majority of the
voting power of the outstanding shares entitled to vote at an election of
directors may remove a director, but only for cause.
Our certificate of incorporation also provides generally that any vacancies
will be filled only by the affirmative vote of a majority of our remaining
directors, even if less than a quorum. Therefore, without an amendment to our
certificate of incorporation, our board of directors could prevent any
stockholder from enlarging our board of directors and filling the new
directorships with that stockholder's own nominees.
No Stockholder Action by Written Consent; Special Meetings. Our certificate
of incorporation and bylaws generally provide that stockholder action can be
taken only at an annual or special meeting of our stockholders and may not be
taken by written consent in place of a meeting. Our certificate of incorporation
and bylaws generally provide that a special meeting of our stockholders may be
called by the Chairman or the President and shall be called by the Chairman, the
President or the Secretary at the written request of a majority of our board of
directors. The business conducted at any special meeting of our stockholders is
limited to the business set forth in our notice of meeting provided to
stockholders.
Advance Notice Provisions for Stockholder Nominations And Stockholder
Proposals. Our bylaws establish an advance notice procedure for our stockholders
to make nominations of candidates for election as directors or bring other
business before an annual meeting of our stockholders. This stockholder notice
procedure provides that only persons who are nominated by, or at the direction
of, our board of directors, or by a stockholder who has given timely written
notice, will be eligible for election as directors of our company. In addition,
the business that may be conducted at an annual meeting is limited to business
that has been brought before the meeting by, or at the direction of, our
chairman of the board or our board of directors or by a stockholder who has
given timely written notice of that stockholder's intention to bring that
business before the meeting.
The stockholder notice procedure may have the effect of precluding a
contest for the election of directors or the consideration of stockholder
proposals if the proper procedures are not followed, and of discouraging or
deterring a third party from conducting a solicitation of proxies to elect its
own slate of directors or to approve its own proposal, without regard to whether
consideration of those nominees or proposals might be harmful or beneficial to
our company and our stockholders.
Amendments. Our certificate of incorporation provides that the affirmative
vote of the holders of 66 2/3% of all classes of capital stock entitled to vote
in the election of our directors is
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required to alter, amend or adopt any charter provisions inconsistent with
Article SIXTH (which contains, among other things, provisions with respect to
the supermajority stockholder vote required for Bylaw amendments, the staggered
board, removal and replacement of directors, written consent and the calling of
special stockholder meetings). Our certificate of incorporation also provides
that a majority of the total number of authorized directors has the power to
adopt, amend or repeal our bylaws and that the affirmative vote of the holders
of 66 2/3% of the voting power of the then issued and outstanding shares of
capital stock entitled to vote in the election of directors is required to
adopt, amend or repeal our bylaws.
DESCRIPTION OF DEPOSITARY SHARES
General. We may, at our option, elect to offer fractional interests in
shares of preferred stock, rather than full shares of preferred stock. If we do
this, we will provide for the issuance by a depositary to investors of receipts
for depositary shares, each of which will represent a fractional interest in a
share of a particular series of preferred stock.
The shares of any series of the preferred stock underlying the depositary
shares will be deposited under a separate deposit agreement between us and a
depositary. The depositary will be a bank or trust company we select having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000. The prospectus supplement relating to a series of
depositary shares will set forth the name and address of the depositary. Each
owner of a depositary share will be entitled to all the rights and preferences
of the preferred stock underlying such depositary share (including dividend,
voting, redemption, conversion and liquidation rights).
The depositary shares will be evidenced by depositary receipts issued under
the deposit agreement.
Upon surrender of depositary receipts at the office of the depositary, a
holder of depositary shares will be entitled to receive the whole shares of
preferred stock and any money or other property represented by the surrendered
depositary receipts.
Dividends and Other Distributions. The depositary will distribute all cash
dividends or other cash distributions received on the preferred stock to the
record holders of depositary shares. The depositary will not distribute
fractions of one cent, and any balance not distributed will be added to the next
sum received by the depositary for distribution to record holders of depositary
receipts.
If we make a distribution on the underlying preferred stock other than in
cash, the depositary will distribute the property received by it to the record
holders of depositary shares, unless the depositary determines that it is not
feasible to make such distribution. If a distribution in kind of the property is
not feasible, the depositary may, with our approval, sell the property and
distribute the net proceeds from the sale to holders.
The deposit agreement will also contain provisions specifying the manner in
which any subscription or similar rights that we offer to holders of the
preferred stock will be made available to holders of depositary receipts.
Redemption of Depositary Shares. If a series of the preferred stock
underlying the depositary shares is subject to redemption, the depositary shares
will also be subject to redemption. The depositary will mail notice of
redemption of any of the underlying shares of preferred stock it holds not less
than 30 and not more than 60 days prior to the date fixed for redemption. The
depositary will mail this notice to the record holders of the depositary
receipts to be redeemed at their respective addresses appearing in the
depositary's books. The redemption price per depositary share will be equal to
the applicable fraction of the redemption price per share payable with respect
to the preferred stock. Whenever we redeem shares of preferred stock held by the
depositary, the depositary will redeem the number of depositary shares relating
to the
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redeemed shares of preferred stock. If less than all of the depositary shares
are to be redeemed, the depositary shares to be redeemed will be selected by
lot, on a pro rata basis or such other equitable basis as we and the depositary
may determine.
After the date fixed for redemption, the depositary shares called for
redemption will no longer be deemed to be outstanding, and all rights of the
holders of the depositary shares will cease except the right to receive the
moneys payable upon such redemption.
Voting the Preferred Stock. Upon receipt of notice of any meeting at which
the holders of the preferred stock are entitled to vote, the depositary will
mail the information contained in the notice of meeting to the record holders of
the depositary shares relating to the preferred stock. Each record holder of
depositary shares on the record date for the preferred stock will be entitled to
instruct the depositary how to vote the shares of preferred stock underlying the
holder's depositary shares. The depositary will use its reasonable efforts to
vote in accordance with such instructions, and we will agree to take all action
which the depositary may deem necessary to enable the depositary to do so. The
depositary will abstain from voting those shares of preferred stock for which it
does not receive specific instructions from holders.
Amendment and Termination of the Deposit Agreement. The form of depositary
receipt evidencing the depositary shares and the provisions of the deposit
agreement may be amended at any time by agreement between us and the depositary.
However, any amendment which materially and adversely alters the rights of the
existing holders of depositary shares will not affect outstanding depositary
receipts until 90 days after notice of the amendment has been mailed to the
record holders of outstanding depositary receipts. Every holder of depositary
receipts at the time the amendment becomes effective will be deemed to consent
and agree to the amendment and to be bound by the deposit agreement, as so
amended. No amendment may impair the right of any owner of depositary shares to
receive shares of the preferred stock and any money or other property
represented by those shares upon surrender of depositary receipts.
Whenever we direct it to do so, the depositary will terminate the deposit
agreement by mailing notice of termination to the record holders of all
outstanding depositary receipts at least 30 days before the termination date.
The depositary may also terminate the deposit agreement if 60 days have expired
after the depositary delivered written notice to us of its election to resign
and a successor depositary has not been appointed and accepted its appointment.
If any depositary receipts remain outstanding after the date of termination, the
depositary will discontinue the transfer of depositary receipts, will suspend
the distribution of dividends to the holders of depositary receipts, and will
not give any further notices (other than notice of termination) or perform any
further acts under the deposit agreement, except that the depositary will
continue (1) to collect dividends and any other distributions on the preferred
stock and (2) to deliver the preferred stock, together with the corresponding
dividends and distributions and the net proceeds of any sales of rights,
preferences, privileges or other property, without liability for interest
thereon, in exchange for depositary receipts surrendered. At any time after two
years from the date of termination, the depositary may sell the preferred stock
then held by it at public or private sales, at such place or places and upon
such terms as it deems proper, and may hold the net proceeds of any sale,
together with any money and other property then held by it, without liability
for interest thereon, for the pro rata benefit of the holders of depositary
receipts that have not been surrendered.
Charges of Depositary. We will pay all charges arising solely from the
existence of the depositary arrangements. We will pay charges of the depositary
in connection with the initial deposit of the preferred stock and issuance of
depositary receipts, all withdrawals of shares of preferred stock by owners of
depositary shares, any redemption of the preferred stock and the distribution of
information to holders of the depositary receipts. Holders of depositary shares
will pay transfer and other taxes and governmental charges and such other
charges as are expressly provided in the deposit agreement to be for their
accounts.
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Miscellaneous. The depositary will forward to the holders of depositary
shares all of our reports and communications delivered to the depositary and
that we are required to furnish to the holders of the preferred stock.
Neither we nor the depositary will be liable if it is prevented or delayed
by law or any circumstance beyond its control in performing its obligations
under the deposit agreement. Our obligations and the obligations of the
depositary under the deposit agreement will be limited to performance in good
faith of our and their duties under the depositary agreement, and neither we nor
they will be obligated to prosecute or defend any legal proceeding in respect of
any depositary shares or preferred stock unless satisfactory indemnity is
furnished. We and the depositary may rely on written advice of counsel or
accountants, or information provided by persons presenting preferred stock for
deposit, holders of depositary shares or other persons believed to be competent
and on documents believed to be genuine.
Resignation and Removal of Depositary. The depositary may resign at any
time by delivering notice to us of its election to do so, and we may at any time
remove the depositary. Any such resignation or removal will take effect upon the
appointment of a successor depositary and its acceptance of such appointment.
The successor depositary must be appointed within 60 days after delivery of the
notice of resignation or removal and must be a bank or trust company having its
principal office in the United States and having a combined capital and surplus
of at least $50,000,000.
DESCRIPTION OF WARRANTS
General. We may issue warrants to purchase shares of common stock, shares
of preferred stock or debt securities. The preferred stock may be represented by
depositary shares. We may issue warrants independently or together with any
common stock, preferred stock or debt securities, and the warrants may be
attached to or separate from such common stock, preferred stock or debt
securities. Each series of warrants will be issued under a separate warrant
agreement that we will enter into with a warrant agent. The warrant agent will
act solely as our agent in connection with the warrants of such series and will
not assume any obligation or relationship of agency or trust for or with any
holders or beneficial owners of warrants. The following sets forth the general
terms and provisions of the warrants. Further terms of the warrants and the
applicable warrant agreement will be set forth in the applicable prospectus
supplement.
The applicable prospectus supplement will describe the following terms of
any warrants:
- the title of the warrants;
- a description of the securities (which may include shares of common
stock, shares of preferred stock or debt securities) for which the
warrants are exercisable;
- the price or prices at which the warrants will be issued;
- the periods during which the warrants are exercisable;
- the number of shares of common stock or preferred stock or the amount of
senior debt securities or subordinate debt securities for which each
warrant is exercisable;
- the exercise price for the warrants, including any changes to or
adjustments in the exercise price;
- the currency or currencies, including composite currencies, in which the
exercise price of the warrants may be payable;
- if applicable, the designation and terms of the shares of preferred stock
with which the warrants are issued;
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- if applicable, the terms of the debt securities with which the warrants
are issued;
- if applicable, the number of warrants issued with each share of common
stock or preferred stock or debt security;
- if applicable, the date on and after which the warrants and the related
shares of common stock or preferred stock or debt securities will be
separately transferable;
- if applicable, a discussion of certain United States federal income tax
considerations;
- any listing of the warrants on a securities exchange; and
- any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
Prior to the exercise of their warrants, holders of warrants will not have
any of the rights of holders of the securities purchasable upon exercise, and
will not be entitled to:
- receive payments of principal of (or premium, if any) or interest, if
any, on any debt securities purchasable upon exercise;
- receive dividend payments, if any, with respect to any underlying
securities; or
- exercise the voting rights of any common stock or preferred stock
purchasable upon exercise.
Exercise of Warrants. Unless otherwise indicated in the applicable
prospectus supplement, the warrants will be issued in registered form. Each
warrant will entitle its holder to purchase for cash the principal amount or
number of securities at the exercise price set forth in, or determinable from,
the applicable prospectus supplement. Warrants may be exercised as set forth in
the applicable prospectus supplement at any time up to the close of business on
the expiration date set forth in the prospectus supplement. After the close of
business on the expiration date (or any extended expiration date), unexercised
warrants will become void.
Upon receipt of payment and of the certificate evidencing a warrant,
properly completed and duly executed, at the corporate trust office of the
warrant agent or any other office indicated in the applicable prospectus
supplement, we will, as soon as practicable, forward the securities purchasable
upon such exercise. If less than all of the warrants represented by a
surrendered warrant certificate are exercised, a new warrant certificate will be
issued for the remaining warrants.
Modifications. We and the warrant agent may amend the warrant agreement and
the terms of the warrants, without the consent of the holders of warrants, for
the purpose of curing any ambiguity, or of curing, correcting or supplementing
any defective or inconsistent provision contained in the warrant or warrant
agreement, or in any other manner which we may deem necessary or desirable and
which will not materially and adversely affect the interests of holders of
outstanding warrants.
We and the warrant agent also may modify or amend certain other terms of
the warrant agreement and the warrants with the consent of the holders of not
less than a majority in number of the then-outstanding unexercised warrants
affected. However, no such modification or amendment may be made without the
consent of the affected holders if the amendment would:
- shorten the period of time during which the warrants may be exercised;
- otherwise materially and adversely affect the exercise rights of the
holders of the warrants; or
- reduce the number of outstanding warrants.
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Merger, Consolidation or Sale of Assets. If at any time we undertake a
merger or consolidation, or a sale of substantially all of our assets of, as a
result of which securities underlying warrants are converted into the right to
receive stock, securities or other property, then each outstanding warrant will
thereafter only be exercisable for the kind and amount of stock, securities or
other property receivable upon the consummation of that transaction by a holder
of the number of securities underlying the warrant.
Enforceability of Rights by Holders. The warrant agent will act solely as
our agent in connection with the issuance and exercise of any warrants. The
warrant agent will have no duty or responsibility in case of any default by us
in the performance of our obligations under the warrant agreement or the warrant
certificates. Each holder of warrants may, without the consent of the warrant
agent, enforce by appropriate legal action, on its own behalf, its right to
exercise its warrants.
PLAN OF DISTRIBUTION
We may sell the offered securities in and outside the United States (1)
through underwriters or dealers, (2) directly to purchasers or (3) through
agents. The prospectus supplement will include the following information:
- the terms of the offering;
- the names of any underwriters or agents;
- the name or names of any managing underwriter or underwriters;
- the purchase price of the securities from us;
- the net proceeds to us from the sale of the securities;
- any delayed delivery arrangements;
- any underwriting discounts, commissions and other items constituting
underwriters' compensation;
- any initial public offering price;
- any discounts or concessions allowed or reallowed or paid to dealers; and
- any commissions paid to agents.
SALE THROUGH UNDERWRITERS OR DEALERS
If we use underwriters in the sale, the underwriters will acquire the
securities for their own account. The underwriters may resell the securities
from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Underwriters may offer securities to the public either
through underwriting syndicates represented by one or more managing underwriters
or directly by one or more firms acting as underwriters. Unless we inform you
otherwise in the prospectus supplement, the obligations of the underwriters to
purchase the securities will be subject to certain conditions, and the
underwriters will be obligated to purchase all the offered securities if they
purchase any of them. The underwriters may change from time to time any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers.
During and after an offering through underwriters, the underwriters may
purchase and sell the securities in the open market. These transactions may
include over allotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. The
underwriters may also impose a penalty bid, which means that selling concessions
allowed to syndicate members or other broker-dealers for the offered securities
sold for their
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account may be reclaimed by the syndicate if the offered securities are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
offered securities, which may be higher than the price that might otherwise
prevail in the open market. If commenced, the underwriters may discontinue these
activities at any time.
If we use dealers in the sale of securities, we will sell the securities to
them as principals. They may then resell those securities to the public at
varying prices determined by the dealers at the time of resale. We will include
in the prospectus supplement the names of the dealers and the terms of the
transaction.
In connection with distributions of common stock or otherwise, we may enter
into hedging transactions with broker-dealers in connection with which the
broker-dealers may sell common stock registered under the registration statement
of which this prospectus is a part in the course of hedging through short sales
the positions they assume with us.
DIRECT SALES AND SALES THROUGH AGENTS
We may sell the securities directly. In this case, no underwriters or
agents would be involved. We may also sell the securities through agents we
designate from time to time. We will name any agent involved in the offer or
sale of the offered securities in the prospectus supplement, and we will
describe any commissions payable by us to the agent. Unless we inform you
otherwise in the prospectus supplement, any agent will agree to use its
reasonable best efforts to solicit purchases for the period of its appointment.
We may sell the securities directly to institutional investors or others
who may be deemed to be underwriters within the meaning of the Securities Act of
1933 with respect to any sale of those securities. We will describe the terms of
any such sales in the prospectus supplement.
STANDBY PURCHASER AGREEMENTS
We may determine, from time to time, to redeem, repurchase or tender for
some or all of our outstanding indebtedness or preferred stock. If we do so, we
may determine to enter into an agreement with one or more underwriters or other
persons under which the underwriter or person would agree to act as a "standby
purchaser" and purchase from us a number of shares of common stock or other
securities as would be required to fund some or all of the applicable
redemption, repurchase or tender offer price. Alternatively, a standby purchaser
may agree to purchase directly any redeemed, repurchased or tendered
indebtedness and receive, as compensation for such purchase, securities that we
issue. The agreement might also provide that the standby purchaser would resell
the securities received from us. If the standby purchaser resells securities it
receives from us, the standby purchaser may be deemed to be an underwriter and
may be required to resell the securities under a prospectus supplement to this
prospectus. The terms of any such agreement or arrangement, including terms
relating to compensation and the identity of the standby purchaser, would be
disclosed in a prospectus supplement.
DELAYED DELIVERY CONTRACTS
If we so indicate in the prospectus supplement, we may authorize agents,
underwriters or dealers to solicit offers from certain types of institutions to
purchase securities from us at the public offering price under delayed delivery
contracts. These contracts would provide for payment and delivery on a specified
date in the future. The contracts would be subject only to those conditions
described in the prospectus supplement. The prospectus supplement will describe
the commission payable for solicitation of those contracts.
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GENERAL INFORMATION
We may have agreements with the agents, dealers and underwriters to
indemnify them against some civil liabilities, including liabilities under the
Securities Act of 1933, or to contribute with respect to payments that the
agents, dealers or underwriters may be required to make. Agents, dealers and
underwriters may be customers of, engage in transactions with or perform
services for us in the ordinary course of their businesses.
The securities we offer under this prospectus and applicable prospectus
supplements may or may not be listed on a national securities exchange or a
foreign securities exchange (other than our common stock, which is listed on the
New York Stock Exchange). Any common stock sold under a prospectus supplement
will be listed on the New York Stock Exchange, subject to official notice of
issuance. Any underwriters to whom we sell securities for public offering and
sale may make a market in those securities, but the underwriters will not be
obligated to do so and may discontinue any market making activities at any time
without notice. No assurances can be given that there will be an active trading
market for the securities.
LEGAL MATTERS
Gardere Wynne Sewell & Riggs, L.L.P., our special counsel, will issue
opinions about the legality of the offered securities for us. Any underwriters
will be advised about other issues relating to any offering by their own legal
counsel.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheets of R&B Falcon Corporation as of December
31, 1999 and 1998, and the related statements of operations, stockholders'
equity and cash flows for each of the years in the three year period ended
December 31, 1999, incorporated by reference in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
With respect to the unaudited interim financial information for the
quarters ended March 31, 2000 and 1999, Arthur Andersen LLP has applied limited
procedures in accordance with professional standards for a review of that
information. However, their separate report thereon states that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on that information should
be restricted in light of the limited nature of the review procedures applied.
In addition, the accountants are not subject to the liability provisions of
Section 11 of the Securities Act of 1933 for their report on the unaudited
interim financial information because that report is not a "report" or a "part"
of the registration statement prepared or certified by the accountants within
the meaning of Sections 7 and 11 of that Act.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any reports, statements or other information filed by us at the SEC's public
reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room. Our filings with the SEC are also
available to the public from commercial document retrieval services and at the
SEC's web site at "http://www.sec.gov."
This prospectus is part of a registration statement we have filed with the
SEC relating to the securities we may offer. As permitted by SEC rules, this
prospectus does not contain all of the
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information we have included in the registration statement and the accompanying
exhibits and schedules we file with the SEC. You may refer to the registration
statement, the exhibits and schedules for more information about us and our
securities. The registration statement, exhibits and schedules are available at
the SEC's Public Reference Room.
INFORMATION WE INCORPORATE BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
considered to be part of this prospectus, and later information that we file
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
may make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934. The documents we incorporate by reference are:
- our Annual Report on Form 10-K for the year ended December 31, 1999;
- our Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2000; and
- the description of our common stock and rights to purchase shares of our
Series A Junior Participating Preferred Stock contained in our
Registration Statements on Form 8-A relating to our common stock and
rights to purchase shares of our Series A Junior Participating Preferred
Stock, each as amended to date.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
R&B Falcon Corporation
Investor Relations
901 Threadneedle
Houston, Texas 77079
(281) 496-5000
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NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER TO SELL ONLY THE SHARES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES
AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN
THIS PROSPECTUS IS CURRENTLY ONLY AS OF ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Prospectus Supplement
PAGE
----
<S> <C>
Prospectus Supplement Summary............. S-1
Risk Factors.............................. S-4
Forward-Looking Information............... S-6
Use of Proceeds........................... S-6
Capitalization............................ S-7
Market Price and Dividend Policy.......... S-8
Unaudited Pro Forma Financial Information
for R&B Falcon.......................... S-9
Ratio of Earnings to Fixed Charges and to
Combined Fixed Charges and Preferred
Dividends............................... S-13
Pro Forma Ratio of Earnings to Combined
Fixed Charges and Preferred Dividends... S-13
Supplemental Financial Information for the
Combined Company........................ S-13
Description of Capital Stock.............. S-14
Underwriting.............................. S-14
Validity of the Common Stock.............. S-15
Experts................................... S-15
Information We Incorporate by Reference... S-16
</TABLE>
<TABLE>
<CAPTION>
Prospectus
PAGE
----
<S> <C>
About this Prospectus..................... 3
About R&B Falcon.......................... 3
Risk Factors.............................. 4
Forward-Looking Information............... 8
Use of Proceeds........................... 9
Ratio of Earnings to Fixed Charges and to
Combined Fixed Charges and Preferred
Stock Expense........................... 9
Description of Debt Securities............ 10
Description of Capital Stock.............. 17
Description of Depositary Shares.......... 24
Description of Warrants................... 26
Plan of Distribution...................... 28
Legal Matters............................. 30
Independent Public Accountants............ 30
Where You Can Find More Information....... 30
Information We Incorporate by Reference... 31
</TABLE>
16,300,000 Shares
R&B FALCON CORPORATION
Common Stock
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[R&B FALCON LOGO]
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GOLDMAN, SACHS & CO.
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