<PAGE> 1
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 23, 1997)
$50,000,000
NORTHERN ILLINOIS GAS COMPANY
(DOING BUSINESS AS NICOR GAS COMPANY)
FIRST MORTGAGE BONDS, 6.58% SERIES DUE FEBRUARY 15, 2028
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Interest on the New Bonds is payable semiannually on February 15 and August
15 of each year, commencing August 15, 1998. The New Bonds may not be redeemed
by the Company prior to maturity.
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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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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNTS(2) COMPANY(1)(3)
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<S> <C> <C> <C>
Per Bond 99.968% .875% 99.093%
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Total $49,984,000 $437,500 $49,546,500
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(1) Plus accrued interest from February 15, 1998.
(2) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(3) Before deducting expenses payable by the Company estimated at $177,000.
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The New Bonds are offered subject to receipt and acceptance by the
Underwriter, to prior sale and to the Underwriter's right to reject any order in
whole or in part and to withdraw, cancel or modify the offer without notice. It
is expected that delivery of the New Bonds will be made at the office of Salomon
Brothers Inc Seven World Trade Center, New York, New York, or through the
facilities of The Depository Trust Company, on or about February 25, 1998.
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SALOMON SMITH BARNEY
The date of this Prospectus Supplement is February 18, 1998.
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NEW BONDS.
SPECIFICALLY, THE UNDERWRITER MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND
MAY BID FOR, AND PURCHASE, THE NEW BONDS IN THE OPEN MARKET. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING".
RECENT DEVELOPMENTS
Recent operating results (unaudited) for the Company are as follows:
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THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31 DECEMBER 31
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1997 1996 1997 1996
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Statement of Income Data (Millions):
Operating revenues............................... $515.5 $512.0 $1,730.5 $1,610.2
Net income....................................... 32.4 30.7 106.9 107.1
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Operating revenues increased $3.5 million and $120.3 million for the three-
and twelve-month periods, respectively. In each period the change was due
primarily to higher natural gas supply costs, which are recovered from
customers.
Net income for the three-month period rose $1.7 million as additional gains
from property sales and lower operating and maintenance expenses more than
offset the impact of warmer weather. Net income for the twelve-month period was
essentially unchanged at $106.9 million. Positive factors in the twelve-month
period included lower operating and maintenance expenses, additional gains from
property sales and the positive impact of tax related matters. Negative factors
in the twelve-month period included lower deliveries due, in part, to weather
that was 3 percent warmer than the prior year and the carryover impact of rate
design changes and a depreciation rate increase implemented as part of an April
1996 general rate increase.
USE OF PROCEEDS
The net proceeds from the sale of the New Bonds will be used to replenish
corporate funds used for the February 1, 1998 maturity of $25,000,000 principal
amount of 5 7/8% First Mortgage Bonds and for the retirement of either the
$25,000,000 principal amount of 6 1/4% First Mortgage Bonds due February 1, 1999
or a portion of the $75,000,000 principal amount of 8 1/4% First Mortgage Bonds
due July 15, 2022.
DESCRIPTION OF NEW BONDS
General Interest at the annual rate set forth on the cover page of the
Prospectus Supplement will accrue from February 15, 1998, and is to be payable
semiannually on February 15 and August 15 beginning August 15, 1998, to the
person in whose name the New Bond is registered on the February 1 or August 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 February 15, 2028.
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.
S-2
<PAGE> 3
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 redeemed by the Company prior to
maturity.
Sinking Fund. No sinking fund is provided for the New Bonds.
UNDERWRITING
Salomon Brothers Inc (the "Underwriter") has agreed to purchase from the
Company, and the Company has agreed to sell to the Underwriter, all of the New
Bonds. The Underwriting Agreement provides that the obligation of the
Underwriter is subject to certain conditions precedent and that the Underwriter
will be obligated to purchase all of the New Bonds if any are purchased.
The Company has been advised by the Underwriter as follows:
The Underwriter proposes 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 0.500% of the principal amount under the public offering price,
and the Underwriter may offer the New Bonds to certain brokers or dealers who
are either a parent or subsidiary of the Underwriter at not less than such price
to dealers. The Underwriter may allow and such dealers may reallow a concession,
not in excess of 0.250% of the principal amount, to certain other dealers. After
the initial public offering, the public offering price and concessions may be
changed.
In order to facilitate the offering of the New Bonds, the Underwriter may
engage in transactions that stabilize, maintain or otherwise affect the price of
the New Bonds. Specifically, the Underwriter may overallot in connection with
the offering, creating a short position in the New Bonds for its own account. In
addition, to cover overallotments or to stabilize the price of the New Bonds,
the Underwriter may bid for, and purchase, the New Bonds in the open market. Any
of these activities may stabilize or maintain the market price of the New Bonds
above independent market levels. The Underwriter is not required to engage in
these activities and may end any of these activities at any time.
There is presently no trading market for the New Bonds and there is no
assurance that a market will develop. Although it is under no obligation to do
so, the Underwriter presently intends to act as a market maker 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 Underwriter against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended.
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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 UNDERWRITER. 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
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PAGE
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PROSPECTUS SUPPLEMENT
Recent Developments................... S-2
Use of Proceeds....................... S-2
Description of New Bonds.............. S-2
Underwriting.......................... S-3
PROSPECTUS
Available Information................. 2
Incorporation by Reference............ 2
The Company........................... 2
Use of Proceeds....................... 2
Description of Bonds.................. 3
Plan of Distribution.................. 7
Legal Opinions........................ 7
Experts............................... 7
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$50,000,000
NORTHERN ILLINOIS
GAS COMPANY
FIRST MORTGAGE BONDS
6.58% SERIES
DUE FEBRUARY 15, 2028
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PROSPECTUS SUPPLEMENT
FEBRUARY 18, 1998
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SALOMON SMITH BARNEY
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