<PAGE>
FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 33-77812
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 21, 1994)
$50,000,000
NORTHERN ILLINOIS GAS COMPANY
FIRST MORTGAGE BONDS, 7 3/8% SERIES DUE OCTOBER 15, 2027
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The New Bonds may not be redeemed by the Company prior to October 15, 2002.
On and after October 15, 2002, 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.
Interest on the New Bonds is payable semi-annually on April 15 and October
15 of each year, commencing April 15, 1998. The New Bonds will be issued only
in registered form in denominations of $1,000 and integral multiples thereof.
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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.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(1)(3)
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<S> <C> <C> <C>
Per Bond................................ 99.5% .5% 99%
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Total................................... $49,750,000 $250,000 $49,500,000
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</TABLE>
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(1) Plus accrued interest from October 15, 1997.
(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 $200,000.
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The New Bonds are offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them, subject to approval of
certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and reject orders in whole or in part. It is expected that delivery
of the New Bonds will be made in New York, New York on or about October 30,
1997, against payment in immediately available funds.
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MERRILL LYNCH & CO.
SALOMON BROTHERS INC
ABN AMRO CHICAGO CORPORATION
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The date of this Prospectus Supplement is October 23, 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NEW BONDS. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF NEW BONDS TO COVER
SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
RECENT DEVELOPMENTS
Recent operating results (unaudited) for the Company are as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS
THREE MONTHS ENDED NINE MONTHS ENDED ENDED SEPTEMBER
SEPTEMBER 30 SEPTEMBER 30 30
------------------- ----------------- -----------------
1997 1996 1997 1996 1997 1996
--------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Statement of Income Data
(Millions):
Operating revenues.... $151.1 $161.0 $1,215.1 $1,098.3 $1,727.0 $1,515.2
Net income............ 15.6 12.8 74.5 76.4 105.2 106.1
</TABLE>
Operating revenues decreased $9.9 million for the three-month period and
increased $116.8 million and $211.8 million for the nine- and twelve-month
periods, respectively. In each period the change was due to variances in
natural gas supply costs, which are recovered from customers.
Net income for the three-month period rose $2.8 million due primarily to
higher deliveries of natural gas unrelated to weather. Net income for the
nine-month period decreased $1.9 million to $74.5 million. The decrease
included the impact of a rate order that was implemented in April 1996 which
included rate design changes and a depreciation rate increase. The rate design
changes had a positive impact on 1996 results but a negative impact on first
quarter 1997 results when compared to the prior year. Net income for the
twelve-month period decreased $.9 million due to higher depreciation.
USE OF PROCEEDS
The net proceeds from the sale of the New Bonds will be used, together with
other corporate funds, for the November 1997 retirement of $50,000,000
principal amount of 9% First Mortgage Bonds due July 1, 2019.
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, 1997, and is to be payable
semiannually on April 15 and October 15, beginning April 15, 1998, 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, 2027.
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 Harris
Trust and Savings Bank, Corporate Trust Department, 311 West Monroe Street,
Chicago, Illinois, or at Harris Trust Company of New York, 77 Water St., 4th
Floor, 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.
S-2
<PAGE>
REDEMPTION. The New Bonds may not be called for redemption by the Company
prior to October 15, 2002. On October 15, 2002 and thereafter until maturity
on October 15, 2027, 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>
2002................. 105.16%
2003................. 104.82%
2004................. 104.47%
2005................. 104.13%
2006................. 103.79%
2007................. 103.44%
2008................. 103.10%
</TABLE>
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2009................. 102.75%
2010................. 102.41%
2011................. 102.07%
2012................. 101.72%
2013................. 101.38%
2014................. 101.04%
2015................. 100.69%
2016................. 100.35%
</TABLE>
and thereafter at 100% of the principal amount thereof.
SINKING FUND. No sinking fund is provided for the New Bonds.
TRUSTEE. On February 26, 1996, Harris Trust and Savings Bank succeeded Bank
of America Illinois as trustee under the Indenture.
S-3
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among the Company and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Salomon Brothers Inc and ABN AMRO Chicago
Corporation (the "Underwriters"), the Company has agreed to sell to the
Underwriters, and the Underwriters have severally agreed to purchase, the
respective principal amounts of the New Bonds set forth after their names
below.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITERS AMOUNT
------------ -----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................ $17,500,000
Salomon Brothers Inc ........................................ 17,500,000
ABN AMRO Chicago Corporation................................. 15,000,000
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Total................................................... $50,000,000
===========
</TABLE>
In the Underwriting Agreement, the Underwriters have severally agreed,
subject to the terms and conditions set forth therein, to purchase all the New
Bonds offered hereby if any New Bonds are purchased. The Underwriters have
advised the Company that they propose initially to offer the New Bonds to the
public at the public offering price set forth on the cover page of this
Prospectus Supplement, and to certain dealers at such price less a concession
not in excess of .4% of the principal amount. The Underwriters may allow, and
such dealers may reallow, a discount not in excess of .25% of the principal
amount to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
In order to facilitate the offering of the New Bonds, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price
of the New Bonds.
Until the distribution of the New Bonds is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the New Bonds. As an exception to these rules,
the Underwriters are permitted to engage in certain transactions that
stabilize the price of the New Bonds. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
New Bonds. If the Underwriters create a short position in the New Bonds in
connection with the offering, i.e., if they sell more New Bonds than are set
forth on the cover page of this Prospectus Supplement, the Underwriters may
reduce that short position by purchasing New Bonds in the open market. In
general, purchases of a security for the purpose of stabilization or to reduce
a short position could cause the price of the security to be higher than it
might be in the absence of such purchases.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the New Bonds. In
addition, neither the Company nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
The New Bonds will not be listed on any securities exchange. 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 a line of credit with ABN AMRO Bank N.V., an affiliate of
ABN AMRO Chicago Corporation.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended.
S-4
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH THEY RELATE. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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PROSPECTUS SUPPLEMENT
<S> <C>
Recent Developments........................................................ S-2
Use of Proceeds............................................................ S-2
Description of New Bonds................................................... S-2
Underwriting............................................................... S-4
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 OF NORTHERN ILLINOIS GAS]
$50,000,000
FIRST MORTGAGE BONDS
7 3/8% SERIES
DUE OCTOBER 15, 2027
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
SALOMON BROTHERS INC
ABN AMRO CHICAGO CORPORATION
OCTOBER 23, 1997
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