<PAGE>
Filed Pursuant to Rule 424(b)2
File No. 33-77812
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 21, 1994)
$50,000,000
Northern Illinois Gas Company
FIRST MORTGAGE BONDS, 7.26% SERIES DUE OCTOBER 15, 2025
----------------
Interest Payable April 15 and October 15
----------------
THE NEW BONDS MAY NOT BE REDEEMED BY THE COMPANY PRIOR TO OCTOBER 15,
2000. ON AND AFTER OCTOBER 15, 2000, THE NEW BONDS WILL BE
REDEEMABLE, AT THE COMPANY'S OPTION, ON NOT LESS THAN 30
NOR MORE THAN 45 DAYS NOTICE, AS A WHOLE AT ANY
TIME, OR IN PART FROM TIME TO TIME, AT THE
REDEMPTION PRICES SET FORTH HEREIN,
PLUS ACCRUED AND UNPAID
INTEREST TO THE REDEMPTION
DATE.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------
PRICE 99.515% AND ACCRUED INTEREST
----------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
----------- -------------- -------------
<S> <C> <C> <C>
Per Bond............................... 99.515% .444% 99.071%
Total.................................. $49,757,500 $222,000 $49,535,500
</TABLE>
- --------
(1) Plus accrued interest from October 15, 1995.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of
1933, as amended.
(3) Before deducting expenses payable by the Company estimated at $180,000.
----------------
The New Bonds are offered, subject to prior sale, when, as and if issued by
the Company and accepted by the Underwriters and subject to approval of
certain legal matters by Wildman, Harrold, Allen & Dixon, counsel for the
Underwriters. It is expected that delivery of the New Bonds will be made on or
about October 20, 1995, at the offices of Morgan Stanley & Co. Incorporated,
New York, N.Y., against payment therefor in immediately available funds.
----------------
MORGAN STANLEY & CO.
Incorporated
ABN AMRO SECURITIES (USA) INC.
BEAR, STEARNS & CO. INC.
CITICORP SECURITIES, INC.
FIRST CHICAGO CAPITAL MARKETS, INC.
LEHMAN BROTHERS
October 13, 1995
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
USE OF PROCEEDS
The net proceeds from the sale of the New Bonds will be used to replenish
corporate funds used for the July 1995 maturity of $50,000,000 principal amount
of unsecured notes bearing an interest rate of 5.5% per annum.
DESCRIPTION OF NEW BONDS
GENERAL. Interest at the annual rate set forth on the cover page of this
Prospectus Supplement will accrue from October 15, 1995, and is to be payable
semiannually on April 15 and October 15, beginning April 15, 1996, to the
person in whose name the New Bond is registered on the April 1 or October 1
(whether or not a business day) next preceding such interest payment date. The
New Bonds will be limited to $50,000,000 aggregate principal amount, will be
issued in fully registered form only, in denominations of $1,000 and integral
multiples thereof, and will mature October 15, 2025.
New Bonds of any denomination will be exchangeable for a like aggregate
principal amount of New Bonds of different authorized denominations upon
surrender of such New Bonds, with the request for such exchange, at Bank of
America Illinois, Corporate Trust Department, 231 South LaSalle Street,
Chicago, Illinois, or at Bank of America Illinois, c/o Mellon Securities
Transfer Services, 120 Broadway, New York, New York. Principal and interest
will be payable at the offices identified in the preceding sentence, except
that any installment of interest on the New Bonds may, at the Company's option,
be paid by mailing checks for such interest payable to or upon the written
order of the person entitled thereto to the address of such person as it
appears on the registration books.
Reference is made to the Prospectus for a description of the general terms of
the New Bonds which the particular description herein supplements.
REDEMPTION. The New Bonds may not be called for redemption by the Company
prior to October 15, 2000. On October 15, 2000 and thereafter until maturity on
October 15, 2025, the New Bonds may be redeemed at the Company's option, on not
less than 30 nor more than 45 days notice, as a whole at any time, or in part
from time to time, at the following redemption prices (expressed as percentages
of principal amount) plus accrued and unpaid interest to the date fixed for
redemption.
If redeemed during the twelve month period beginning October 15:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2000................... 105.09%
2001................... 104.75
2002................... 104.41
2003................... 104.07
2004................... 103.73
2005................... 103.39
2006................... 103.05
</TABLE>
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2007................... 102.71%
2008................... 102.38
2009................... 102.04
2010................... 101.70
2011................... 101.36
2012................... 101.02
2013................... 100.68
2014................... 100.34
</TABLE>
and thereafter at 100% of the principal amount thereof.
SINKING FUND. No sinking fund is provided for the New Bonds.
S-2
<PAGE>
UNDERWRITING
The underwriters named below (the "Underwriters") have severally agreed to
purchase from the Company, and the Company has agreed to sell to them
severally, the respective principal amounts of New Bonds indicated below. The
Underwriting Agreement provides that the obligations of the Underwriters are
subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the New Bonds if any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
NAME AMOUNT
---- -----------
<S> <C>
Morgan Stanley & Co. Incorporated............................ $ 8,500,000
ABN AMRO Securities (USA) Inc................................ 8,300,000
Bear, Stearns & Co. Inc...................................... 8,300,000
Citicorp Securities, Inc..................................... 8,300,000
First Chicago Capital Markets, Inc........................... 8,300,000
Lehman Brothers Inc.......................................... 8,300,000
-----------
Total.................................................... $50,000,000
===========
</TABLE>
The Company has been advised by the several Underwriters as follows:
The several Underwriters propose to offer part of the New Bonds directly to
the public at the public offering price set forth on the cover page of this
Prospectus Supplement and part to dealers at a price which represents a
concession of .40% of the principal amount under the public offering price, and
any Underwriter may offer the New Bonds to certain brokers or dealers who are
either a parent or subsidiary of such Underwriter at not less than such price
to dealers. The Underwriters may allow and such dealers may reallow a
concession, not in excess of .25% of the principal amount, to certain other
dealers. After the initial public offering, the public offering price and
concessions may be changed.
There is presently no trading market for the New Bonds and there is no
assurance that a market will develop. Although they are under no obligation to
do so, the Underwriters presently intend to act as market makers for the New
Bonds in the secondary trading market but may discontinue market making at any
time without notice.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended.
S-3
<PAGE>
NORTHERN ILLINOIS GAS COMPANY
$275,000,000 FIRST MORTGAGE BONDS
----------------
Northern Illinois Gas Company ("Northern Illinois Gas" or the "Company") may
offer and sell, in one or more series, up to $275,000,000 aggregate principal
amount of First Mortgage Bonds (the "New Bonds") on terms determined at the
time or times of sale. The specific aggregate principal amount of any series of
New Bonds, public offering and purchase price, maturity, rate of interest, time
of payment of interest, any redemption terms or other specific terms, and
information concerning distribution (including the names of any underwriters,
dealers or agents, their compensation and the resulting net proceeds to the
Company) of the New Bonds in respect of which this Prospectus is being
delivered will be set forth in a Prospectus Supplement. No sinking fund is to
be provided for the New Bonds.
The New Bonds will be sold directly by the Company or to underwriters or
dealers or through agents named herein (or designated from time to time) or to
a group of underwriters or dealers which may be represented by any one or more
of such firms. (See "Plan of Distribution.")
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE DATE OF THIS PROSPECTUS IS APRIL 21, 1994
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports and other information with the Securities and Exchange Commission (the
"Commission").
Such reports and other information may be inspected and copied at the offices
of the Commission at 450 Fifth Street, N.W., Washington, D.C.; 500 West Madison
Street, Chicago, Illinois; and Seven World Trade Center, New York, New York,
and copies of such material may be obtained from the Public Reference Section
of the Commission in Washington, D.C. 20549 at prescribed rates.
INCORPORATION BY REFERENCE
The Annual Report on Form 10-K for the year ended December 31, 1993, which
has been filed by the Company with the Commission pursuant to the Exchange Act,
is incorporated by reference in this Prospectus and shall be deemed to be a
part hereof.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering made by this Prospectus
shall be deemed to be incorporated herein by reference and to be a part hereof
from the date of filing such documents.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, on the written or oral request of any such person, a copy of any and
all of the documents referred to above which have been or may be incorporated
in this Prospectus by reference, other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference in the information
that the Prospectus incorporates. Written requests should be directed to Donald
W. Lohrentz, Vice President, Northern Illinois Gas Company, P.O. Box 190,
Aurora, Illinois 60507-0190. The Company's telephone number is 708/983-8888.
EXPERTS
The consolidated financial statements and schedules included in the Annual
Report on Form 10-K for the year ended December 31, 1993, incorporated by
reference in this Registration Statement, have been audited by Arthur Andersen
& Co., 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 reports.
2
<PAGE>
SUMMARY INFORMATION
The following material, which is presented herein solely to furnish limited
information regarding the Company and the offering, has been selected from the
detailed information and financial statements appearing in the documents
incorporated herein by reference or elsewhere in this Prospectus and is
qualified in its entirety by reference thereto.
THE OFFERING
<TABLE>
<S> <C>
Securities Offered................. $275,000,000 principal amount of First Mortgage
Bonds.
Use of Proceeds.................... Refinancing of First Mortgage Bonds, construction
programs, and general corporate purposes.
</TABLE>
CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31
----------------------
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Statement of Income Data:(a)
Operating Revenues..................................... $1,533 $1,425 $1,338
Net Income............................................. 95 91 91
Ratio of Earnings to Fixed Charges(b).................. 4.61x 4.36x 4.38x
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
1993
------------
<S> <C> <C>
Capitalization:
Long-Term Debt................................................... $ 447 39.5%
Preferred Stock--
Redeemable(c)................................................... 10 .9
Nonredeemable................................................... 1 .1
Common Equity.................................................... 671 59.5
------ -----
Total......................................................... $1,129 100.0%
====== =====
</TABLE>
- --------
(a) The Company is a wholly owned subsidiary of NICOR Inc. Earnings per share
and dividends declared information is therefore omitted.
(b) The ratio was 4.21 in 1990 and 4.95 in 1989. For purposes of computing the
ratio, earnings represents income before income taxes and fixed charges,
adjusted for allowance for funds used during construction. Fixed charges
consist of interest on debt, other interest charges and amortization of
debt discount, premium and expense.
(c) Does not include $.5 million of Preferred Stock due May 1, 1994 which is
classified as a current liability.
3
<PAGE>
THE COMPANY/RECENT DEVELOPMENTS
Northern Illinois Gas, an Illinois corporation, is a public utility engaged
principally in the purchase, storage, distribution, sale and transportation of
natural gas to the public in northern Illinois, generally outside the City of
Chicago. Northern Illinois Gas is subject to the jurisdiction of the Illinois
Commerce Commission ("Ill.C.C.") which has authority to regulate substantially
all phases of the public utility business in Illinois, including the issuance
of long-term debt by the Company. The Company is a wholly owned subsidiary of
NICOR Inc. ("NICOR"), a holding company exempt from regulation under the Public
Utility Holding Company Act of 1935. The mailing address of Northern Illinois
Gas' general office is P.O. Box 190, Aurora, Illinois 60507-0190. The telephone
number is 708/983-8888.
The Company's Form 10-K for the year ended December 31, 1993 discusses on
page 8 the potential environmental cleanup of certain former gas manufacturing
plant sites owned or formerly owned by the Company. In September 1992, the
Ill.C.C. issued a generic order which states that Illinois utilities may pass
through prudently incurred gas manufacturing plant cleanup costs to ratepayers
over a five-year period, but denies the utilities' request to recover capital
costs on the uncollected balances. In December 1993, the generic order was
upheld by the Illinois Appellate Court. In January 1994, the Company began
recovery of cleanup costs from its customers in accordance with an Ill.C.C-
approved cost recovery plan. On February 2, 1994 another party sought leave to
appeal from the Appellate Court's decision to the Illinois Supreme Court. On
April 6, 1994, the Illinois Supreme Court granted that party's petition for
leave to appeal. Although unable to determine the outcome of the appeal, based
on the decisions of the Ill.C.C. and the Appellate Court, the Company still
believes that any cleanup costs not recoverable from prior owners and other
sources will continue to be recoverable by Northern Illinois Gas through its
rates.
USE OF PROCEEDS
The net proceeds from the sale of the New Bonds will be used for the
refinancing, if desirable, of certain outstanding First Mortgage Bonds, for
construction programs to the extent not provided by internally generated funds,
and for general corporate purposes.
PLAN OF DISTRIBUTION
Northern Illinois Gas may sell the New Bonds, in one or more series, for
reoffering at fixed or varying prices to the public through underwriting
syndicates led by one or more managing underwriters or through one or more of
such firms acting alone. Firms which may act as managing underwriters with
respect to the New Bonds include CS First Boston, Merrill Lynch & Co., Morgan
Stanley & Co. Incorporated, PaineWebber Incorporated, Prudential Securities
Incorporated and Salomon Brothers Inc. The specific managing underwriter or
underwriters for each series will be set forth in the Prospectus Supplement
relating to the specific series of New Bonds, together with the members of the
underwriting syndicate, if any. If an underwriter is utilized in the sale,
Northern Illinois Gas will execute an underwriting agreement providing that the
obligations of the underwriters are subject to certain conditions precedent and
that the underwriters will be obligated to purchase all the New Bonds of the
series being sold if any are purchased.
The New Bonds may also be sold directly by Northern Illinois Gas or through
agents designated by Northern Illinois Gas from time to time. Any agent
involved in the offer or sale of the New Bonds of any series will be named in
the Prospectus Supplement relating thereto. Unless otherwise indicated in the
Prospectus Supplement, any such agent will act on a best efforts basis for the
period of its appointment.
In connection with the sale of any series of the New Bonds, underwriters or
agents may receive compensation from Northern Illinois Gas in the form of
discounts, concessions or commissions. Underwriters, agents or dealers that
participate in the distribution of any series of the New Bonds may be deemed to
be underwriters of such series, and any discounts or commissions received by
them from Northern Illinois Gas and any profit on the resale of the New Bonds
of such series by them may be deemed to be
4
<PAGE>
underwriting discounts and commissions under the Securities Act of 1933, as
amended (the "Act"). The Prospectus Supplement will describe such discounts and
commissions, all other underwriting compensation,
and discounts and concessions to be allowed or paid to dealers. Underwriters or
agents may be entitled under agreements entered into with Northern Illinois Gas
to indemnification by Northern Illinois Gas against certain civil liabilities,
including liabilities under the Act. Underwriters or agents may be customers
of, engage in transactions with, or perform services for Northern Illinois Gas
in the ordinary course of business.
If a dealer is utilized in the sale of any series of the New Bonds, Northern
Illinois Gas will sell the New Bonds of such series to the dealer as principal.
The dealer may then resell the New Bonds of such series to the public at
varying prices to be determined by such dealer at the time of resale. Other
sales may be made, directly or through agents, to purchasers outside existing
trading markets.
DESCRIPTION OF BONDS
All references to the Company under "Description of Bonds" exclude its
subsidiary. The properties of the Company's subsidiary, which are not material
in the aggregate, are not subject to the lien of the Indenture and do not
constitute bondable property under the Indenture.
GENERAL. The New Bonds will be issued in one or more series under the
Company's Indenture, dated as of January 1, 1954, to Continental Bank, National
Association ("Continental"), Trustee (as supplemented by Supplemental
Indentures heretofore executed), and Supplemental Indentures (each of which is
hereafter referred to as the "New Supplemental Indenture"), creating the series
in which the New Bonds are to be issued. These series will constitute the
thirty-sixth and subsequent series of bonds issued under the Indenture. The
earlier series of bonds issued under the Indenture that are currently
outstanding are as follows:
<TABLE>
<CAPTION>
AMOUNT AMOUNT
AUTHORIZED OUTSTANDING
SERIES AND ISSUED DECEMBER 31, 1993
------ ----------- -----------------
<S> <C> <C>
8.70% due July 15, 1995....................... $50,000,000 $ 50,000,000
4 1/2% due March 15, 1996..................... 50,000,000 50,000,000
5 1/2% due February 1, 1997................... 25,000,000 25,000,000
5 7/8% due February 1, 1998................... 25,000,000 25,000,000
6 1/4% due February 1, 1999................... 25,000,000 25,000,000
5 7/8% due May 1, 2000........................ 50,000,000 50,000,000
9% due July 1, 2019........................... 50,000,000 50,000,000
8 7/8% due August 15, 2021.................... 50,000,000 50,000,000
8 1/4% due July 15, 2022...................... 75,000,000 75,000,000
7 3/8% due July 1, 2023....................... 50,000,000 50,000,000
------------
$450,000,000
============
</TABLE>
Each series of the New Bonds will be dated the date of the applicable New
Supplemental Indenture, will mature on such date or dates as are set forth in
such New Supplemental Indenture, and will bear interest at the rate per annum
specified in its title, payable semiannually in each year on the date which
corresponds to the date of the New Supplemental Indenture and on the date which
is six months thereafter, commencing with the date which is six months after
the date of the New Supplemental Indenture. So long as there is no existing
default in the payment of interest on the series of New Bonds, such interest
shall be payable to the person in whose name each bond is registered on the
record dates prescribed by the New Supplemental Indenture (whether or not a
business day) next preceding the respective interest payment dates; provided,
however, if and to the extent that the Company shall default in the payment of
interest due on any such interest payment date, such defaulted interest shall
be paid to the person in whose name each such bond is registered on the record
date fixed in advance by the Company for the payment of such defaulted
interest. Both principal and interest will be payable at the office or agency
of the Company in The City of Chicago or,
5
<PAGE>
at the option of the registered owner, at the office or agency of the Company
in The City of New York. Any installment of interest on the bonds may, at the
Company's option, be paid by mailing checks for such interest payable to or
upon the written order of the person entitled thereto to the address of such
person as it appears on the registration books.
The New Bonds will be delivered, in definitive form, as registered bonds in
denominations of $1,000 each or of any authorized multiple thereof. No service
charge will be made for any registration, transfer or exchange of bonds.
Copies of the Indenture and of the above-mentioned previously executed
Supplemental Indentures and a copy of the applicable New Supplemental
Indenture, in substantially the form in which it is to be executed, except for
certain terms to be set forth in the Prospectus Supplement which will be
inserted after the sale of the series of New Bonds, are exhibits to the
Registration Statement. Reference is made to such exhibits for a complete
statement of the provisions of the Indenture and such Supplemental Indentures.
The following statements are brief summaries of certain of such provisions. The
terms "permitted liens," "prior liens," "prior lien bonds," "retired" as used
with respect to bonds, "property additions," "property of the character of
property additions," "mortgage date of acquisition" and "utilized under the
Indenture" are hereinafter used with the meanings ascribed to such terms,
respectively, by the Indenture.
REDEMPTION AND SINKING FUND. Any redemption provisions will be set forth in
the Prospectus Supplement. No sinking fund is to be provided for the New Bonds.
SECURITY. The New Bonds will rank equally and ratably as obligations of the
Company with all bonds, irrespective of series, at any time outstanding under
the Indenture. The Indenture constitutes a direct first mortgage lien on
substantially all gas property and franchises (other than expressly excepted
property) now owned by the Company, subject only to permitted liens. All gas
property and franchises (other than expressly excepted property) hereafter
acquired by the Company will, upon recordation or registration by the Company
in accordance with its agreements under the Indenture, become subject to the
lien of the Indenture, subject only to permitted liens and liens, if any,
existing or placed on such property at the time of acquisition thereof. The
Indenture contains limitations upon the acquisition of property subject to a
prior lien and the transfer of all or substantially all of the property of the
Company to another corporation the property of which is subject to a prior
lien. In general, such limitations are based upon ratios of (a) principal
amount of prior lien bonds to fair value of property securing such bonds and
(b) net earnings of such property to interest charges on such bonds. The
Company has agreed in the Indenture to maintain and protect the mortgaged
property as an operating system.
There are expressly excepted from the lien of the Indenture, whether now
owned by the Company or hereafter acquired, certain real estate not used in the
gas utility business, real estate held by the Company in the name of a nominee,
cash and securities not specifically pledged under the Indenture, receivables,
contracts (other than leases), materials, supplies, all gas in storage not
included in the Company's utility plant accounts, merchandise, automobiles,
trucks and other transportation equipment, office furniture and equipment,
natural gas wells, natural gas leases and natural gas gathering lines.
ISSUANCE OF ADDITIONAL BONDS. No bonds of any of the presently outstanding
series may be issued in addition to the bonds of such series now outstanding,
nor will any New Bonds be issuable in addition to the $275,000,000 principal
amount of the New Bonds covered by this Prospectus. Subject to the provisions
of the Indenture, additional bonds of any other series may be issued in
principal amount equal to:
(a) 66 2/3% of "net property additions" not previously utilized under the
Indenture;
(b) the amount of cash deposited with the Trustee as a basis for the
issuance of such bonds; and
(c) the amount of "bondable bond retirements" not previously utilized
under the Indenture, such term being defined, in general, to include (1)
the principal amount of bonds of any series retired otherwise than through
a sinking fund, and (2) such percentage, if any, of the principal amount of
bonds of any other series retired through a sinking fund as may be
specified in the supplemental indenture creating such series (does not
include the New Bonds or any previously issued series outstanding);
6
<PAGE>
provided, however, that no such bonds in any event may be issued under (a) or
(b), or under (c) if the bonds to be issued bear a higher rate of interest than
that borne by the bonds retired or being retired (except in case such bonds
retired or being retired mature within two years), unless the "net earnings" of
the Company for a 12 month period within the immediately preceding 15 month
period shall have been equal to at least two and one-half times the annual
interest on all bonds then outstanding under the Indenture, including the bonds
then applied for but not including any bonds then being retired, and on all
prior lien bonds then outstanding, not including any prior lien bonds then
being retired.
The term "net earnings" shall mean the earnings of the Company (including
earnings or loss of any gas utility business acquired during the period for
that part of the period prior to acquisition) computed by deducting from the
revenues of the Company the operating expenses, depreciation and taxes of the
Company except (a) charges for the amortization, write-down or write-off of
acquisition adjustments or intangibles; (b) property losses charged to
operations; (c) provisions for income and excess or other profits taxes imposed
on income after the deduction of interest charges, or charges made in lieu of
such taxes; (d) interest charges; and (e) amortization of debt and stock
discount and expense or premium. Any net profit or net loss from merchandising
and jobbing is to be deducted from operating expenses or added to operating
expenses, as the case may be. Net non-operating income from property and
securities not subject to the lien of the Indenture may be included in revenues
but only to the extent of not more than 10% of the total of such net earnings.
No profits or losses on disposition of property or securities or on the
reacquisition of securities shall be included in net earnings.
"Net property additions" means the amount of $9,000,000, plus the cost or
fair value as of the mortgage date of acquisition thereof, whichever is less,
of property additions (which may not include additions subject to a prior lien)
after January 31, 1954, less all "current provisions for depreciation" made
subsequent to that date, after deducting from such current provisions for
depreciation the amount of the "renewal fund requirement," if any, for the year
1954 (last 11 months) and subsequent years. There was no renewal fund
requirement for any of the years 1954 through 1993.
"Current provisions for depreciation" for any period means the greater of:
(a) the total of the amounts appropriated for depreciation during such
period on all property of the character of property additions subject to
the lien of the Indenture but not subject to a prior lien, increased or
decreased, as the case may be, by net salvage for such period, such amounts
not to include, however, provisions for depreciation charged to surplus,
charges to income or surplus for the amortization, write-down or write-off
of acquisition adjustments or intangibles, property losses charged to
operations or surplus, or charges to income in lieu of income and excess or
other profits taxes; or
(b) an amount equal to one-twelfth of 2% for each calendar month of such
period (or such lesser percentage as may, at intervals of not less than
five years, be certified by an independent engineer as adequate) of the
original cost, as of the beginning of such month, of all depreciable
property of the character of property additions subject to the lien of the
Indenture but not subject to a prior lien.
As of December 31, 1993, net property additions, available as a basis for the
issuance of additional bonds, amounted to approximately $280,000,000. As of
December 31, 1993, the Company was also entitled to issue approximately
$70,000,000 of bonds on the basis of available bondable bond retirements. The
New Bonds will be issued first against substantially all then available
bondable bond retirements and the balance against net property additions.
Other than the security afforded by the lien of the Indenture and the
restrictions thereunder as to issuance of additional first mortgage bonds
described above, there are no provisions in the Indenture which afford holders
of New Bonds protection in the event of a highly leveraged transaction
involving the Company.
RENEWAL FUND REQUIREMENT. Under the Indenture, the Company is required to pay
to the Trustee in each year an amount of cash, as a renewal fund, equal to the
excess, if any, of current provisions for depreciation for such year over the
cost or fair value as of the mortgage date of acquisition thereof, whichever
7
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is less, of property additions for such year. Such amount, which will be the
renewal fund requirement for such year, is subject to reduction by an amount
equal to the amount, certified to the Trustee, of net property additions or
bondable bond retirements, or both, not previously utilized under the
Indenture. The Company has not been required to date to make any such renewal
fund payment under the Indenture.
RELEASE OF PROPERTY AND WITHDRAWAL OF CASH. The Company may sell or otherwise
dispose of and secure the release of any part of the mortgaged property upon
deposit with the Trustee of cash in an amount equal to the fair value of the
property released, which in no event may be less than the consideration
received. If, however, the property to be released is subject to a prior lien,
such property may be released upon a showing that it has been released from
such prior lien upon due compliance with the release provisions thereof. Cash
to be deposited upon the release of mortgaged property may, subject to certain
limitations, be reduced by an amount not in excess of (a) the principal amount
of purchase money obligations secured by purchase money mortgage upon the
property to be released, and (b) the principal amount of any prior lien bonds
secured by a prior lien on the property to be released, the payment of which
bonds has been assumed by the purchaser. Such cash may also be reduced by an
amount equal to the amount of net property additions or bondable bond
retirements, or both, not previously utilized under the Indenture.
Cash deposited with the Trustee as a basis for the issuance of bonds may be
withdrawn in an amount equal to 66 2/3% of the amount of net property additions
not previously utilized under the Indenture, or in an amount equal to the
amount of bondable bond retirements not previously utilized under the
Indenture, or both. All other cash (except sinking fund cash) deposited with
the Trustee to be held as part of the mortgaged property may be withdrawn in an
amount equal to the amount of net property additions or bondable bond
retirements, or both, not previously utilized under the Indenture.
MODIFICATION OF INDENTURE. In general, modifications or alterations of the
Indenture and indentures supplemental thereto and of the rights and obligations
of the Company and of the bondholders, and waivers of compliance with the
Indenture and indentures supplemental thereto, may with the approval of the
Company be made at a meeting of bondholders upon the affirmative vote of
holders of 66 2/3% in principal amount of the bonds entitled to vote at the
meeting with respect to the matter involved, but no such modifications or
alterations or waivers of compliance are permitted with respect to certain
basic matters, such as terms of payment of principal, premium, if any, and
interest on bonds (but not including sinking fund requirements) and, otherwise
than as permitted by the Indenture, creation of liens ranking prior to or on a
parity with the lien of the Indenture with respect to any of the mortgage
property or the deprivation of any bondholder of his lien, or any reduction of
the vote necessary to take such actions.
DEFAULTS. The following are defined as "completed defaults": default in the
payment of principal on any bonds issued under the Indenture, including the New
Bonds, when due and payable at maturity or upon redemption or by declaration or
as otherwise provided in the Indenture; default for 60 days in the payment of
interest on any of such bonds; default for 30 days after written notice to the
Company in the payment of principal or interest (after the expiration of any
applicable grace period) on prior lien bonds; default for 90 days after written
notice to the Company in the performance of any other covenant of the
Indenture, including any covenant relating to sinking fund obligations; and in
certain events of bankruptcy and insolvency. The Company furnishes annually to
the Trustee a certificate in respect of compliance or noncompliance by the
Company with the covenants of the Indenture.
In case one or more completed defaults shall occur and be continuing, the
Trustee or the holders of not less than 25% in principal amount of the bonds
then outstanding may declare the principal of all such bonds, together with all
accrued and unpaid interest thereon, if not already due, to be due and payable
immediately. No bondholder has the right to institute any proceeding for the
enforcement of the Indenture unless such holder shall have given the Trustee
written notice of some existing default and continuance thereof and the holders
of not less than 25% in principal amount of the bonds then outstanding shall
have requested the Trustee in writing to take action and have given the Trustee
a reasonable opportunity to take such action. The Trustee is entitled to be
indemnified before taking action to enforce the lien at the request of such
bondholders.
8
<PAGE>
If, at any time after the occurrence of a completed default and before the
sale of the mortgage property shall have been made, all arrears of principal
and interest, together with other amounts described in the Indenture, shall
either be paid by the Company or be collected and paid out of the mortgage
property and all other defaults, if any, which shall have occurred, shall be
remedied or cured, to the reasonable satisfaction of the Trustee, then the
Trustee, upon the written request of the holders of a majority in principal
amount of the bonds then outstanding, shall waive any such default.
CONCERNING THE TRUSTEE. The Company and certain of its affiliates borrow
from, and utilize many of the banking services offered by, Continental in the
normal course of business.
LEGAL OPINIONS
Certain legal matters in connection with the offering of the New Bonds will
be passed upon for the Company by Mayer, Brown & Platt, 190 South LaSalle
Street, Chicago, Illinois 60603, and by Wildman, Harrold, Allen & Dixon, 225
West Wacker Drive, Chicago, Illinois 60606 for any underwriter, dealer or agent
named in the Prospectus Supplement.
9
<PAGE>
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NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE THEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS PROSPECTUS SUPPLE-
MENT. THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE 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.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Use of Proceeds............................................................ S-2
Description of New Bonds................................................... S-2
Underwriting............................................................... S-3
PROSPECTUS
Available Information...................................................... 2
Incorporation by Reference................................................. 2
Experts.................................................................... 2
Summary Information........................................................ 3
The Company/Recent Developments............................................ 4
Use of Proceeds............................................................ 4
Plan of Distribution....................................................... 4
Description of Bonds....................................................... 5
Legal Opinions............................................................. 9
</TABLE>
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[LOGO -- NORTHERN ILLINOIS GAS]
$50,000,000
FIRST MORTGAGE BONDS
7.26% SERIES
DUE OCTOBER 15, 2025
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PROSPECTUS SUPPLEMENT
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October 13, 1995
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