Prospectus Supplement
(To Prospectus dated January 23, 1997)
$300,000,000
CHRYSLER FINANCIAL CORPORATION [logotype]
6 3/8% Notes Due January 28, 2000
Interest on the Notes is payable semiannually on each January 28 and
July 28, beginning July 28, 1997. The Notes are not redeemable prior to
maturity and will mature on January 28, 2000.
The Notes will be issued only in fully registered form and will be
represented by one or more Global Securities registered in the name of a
nominee of The Depository Trust Company, as depositary (the "Depositary").
Beneficial interests in the Notes will be shown on, and transfers thereof
will be effected only through, the records maintained by the Depositary's
participants. Except as described in "Description of Notes - Book-Entry
System," owners of beneficial interests in the Notes will not be entitled to
receive Notes in definitive form and will not be considered the holders
thereof. Settlement for the Notes will be made in immediately available
funds. The Notes will trade in the Depositary's Same-Day Funds Settlement
System until maturity, and secondary market trading activity will therefore
settle in immediately available funds. All payments of principal and interest
will be made by Chrysler Financial Corporation (the "Company") in immediately
available funds. See "Description of Notes -- Book-Entry System."
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 TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
=============================================================================
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to the
Public (1) Discount (2) Company (1)(3)
---------- ------------ ---------------
<S> <C> <C> <C>
Per Note ...................... 99.809% .350% 99.459%
Total ......................... $299,427,00 $1,050,000 $298,377,000
=============================================================================
<FN>
(1) Plus accrued interest, if any, from January 28, 1997.
(2) The Company has agreed to indemnify the several Underwriters against
certain liabilities under the Securities Act of 1933. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $175,000.
</TABLE>
The Notes are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' 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 Global Securities will be made
through the facilities of the Depositary on or about January 28, 1997.
J.P. Morgan & Co.
Merrill Lynch & Co.
Salomon Brothers Inc
The date of this Prospectus Supplement is January 23, 1997.
<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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS.
DESCRIPTION OF NOTES
The following description of the particular terms of the Notes
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debt Securities set
forth in the Prospectus, to which description reference is hereby made.
General
The Notes are to be issued under an Indenture dated as of February 15,
1988, as amended (the "Indenture"), between the Company and Manufacturers
Hanover Trust Company, which has been succeeded by United States Trust
Company of New York as successor Trustee (the "Trustee").
The Notes will be limited to an aggregate principal amount of
$300,000,000 and will mature on January 28, 2000. Under the Indenture, any
payment of principal or interest required to be made in respect of a Note on
a date that is not a Business Day for such Note need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on such date, and no additional interest shall accrue
as a result of such delayed payment. The Notes will bear interest at the rate
of 6 3/8% per annum from January 28, 1997 or from the most recent Interest
Payment Date to which interest has been paid or provided for, payable
semiannually in arrears on each January 28 and July 28 or, if such day is not
a Business Day,on the next succeeding Business Day, beginning July 28, 1997,
and at maturity to the persons in whose names the Notes (or any Predecessor
Securities) are registered at the close of business on January 13 or July 13,
as the case may be, immediately preceding such Interest Payment Date or, in
the case of interest payable at maturity, to the persons to whom principal
shall be payable. Interest payments on the Notes will be computed on the
basis of a 360-day year of twelve 30-day months.
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, on which banking institutions in The City of New York are not
authorized or obligated by law to close.
The Notes are not redeemable at the option of the Company prior to
maturity and do not provide for any sinking fund.
The Notes will be issued in registered form and will rank pari passu
with all existing and future unsecured and unsubordinated indebtedness of the
Company. The Notes, which upon issuance will be represented by one or more
Global Securities, are being offered in denominations of $1,000 and any
integral multiple thereof. Payment of the purchase price of a Note may be
made, and payment of the principal of and interest on the Notes will be made,
only in U.S. dollars.
See the Prospectus for a further description of the Trustee, the
Indenture and the Notes, including the covenants, modification provisions and
events of default relating to the Notes.
Book-Entry System
Upon issuance, the Notes will be represented by one or more Global
Securities deposited with, or on behalf of, the Depositary. The Global
Securities representing the Notes will be registered in the name of a nominee
of the Depositary. Upon issuance, the Depositary will credit, on its
book-entry registration
S-2
<PAGE>
and transfer system, the respective principal amounts of the Notes
represented by the Global Securities to the accounts of institutions that
have accounts with the Depositary ("participants"), and ownership of
beneficial interests in the Global Securities will be limited to participants
or persons that may hold interests through participants. Except under the
circumstances described in the Prospectus under "Description of Debt
Securities -- Global Securities," the Notes will not be issuable in
definitive form. As long as the Notes are represented by Global Securities,
the Depositary's nominee will be considered the sole owner or holder of the
Notes for all purposes under the Indenture, and the beneficial owners of the
Notes will be entitled only to those rights and benefits afforded to them in
accordance with the following summary and with the Depositary's regular
operating procedures. So long as the Depositary or its nominee is the sole
owner of the Global Securities, principal and interest payments on the Notes
will be made to the Depositary or its nominee, as the case may be, as the
registered owner or holder of the Global Securities representing the Notes.
The Company expects that the Depositary, upon receipt of any payment of
principal or interest in respect of the Global Securities, will credit
immediately participants' accounts with payments in amounts proportionate to
their respective interests in the principal amount of the Global Securities
as shown on the records of the Depositary.
The Depositary has advised the Company as follows: the Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. The Depositary was created to hold
securities for its participants and to facilitate the clearance and
settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movements of
securities certificates. The Depositary's participants include securities
brokers and dealers (including the Underwriters), banks, trust companies,
clearing corporations and certain other organizations, some of whom (and/or
their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to other entities, such as banks,
brokers, dealers and trust companies, that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Settlement for the Notes will be made by the Underwriters in
immediately available funds. All payments of principal and interest will be
made by the Company in immediately available funds. The Notes will trade in
the Depositary's Same-Day Funds Settlement System until maturity, and
secondary market trading activity in the Notes will therefore be required by
the Depositary to settle in immediately available funds.
See "Description of Debt Securities -- Global Securities" in the
accompanying Prospectus for additional information concerning the book-entry
system.
UNDERWRITING
The Underwriters named below have severally agreed to purchase from the
Company the following respective principal amount of the Notes:
<TABLE>
<CAPTION>
Principal
Amount
Underwriter of Notes
----------- --------
<S> <C>
J.P. Morgan Securities Inc. ............... $100,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................... 100,000,000
Salomon Brothers Inc ...................... 100,000,000
------------
Total ................................ $300,000,000
============
</TABLE>
S-3
<PAGE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent. In the event of
default by one of the Underwriters, the Underwriting Agreement provides that
in certain circumstances the commitment of the non-defaulting Underwriter may
be increased or the Underwriting Agreement may be terminated.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the Notes to the public initially 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 of.20% of the principal amount
of the Notes; that the Underwriters and such dealers may allow a discount of
.15% of such principal amount on sales to certain other dealers; and that
after the initial public offering the public offering price and concession and
discount to dealers may be changed by the Underwriters.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including civil liabilities under the Securities Act of
1933, or contribute to payments which the Underwriters may be required to
make in respect thereof.
In the ordinary course of their respective businesses, affiliates of
J.P. Morgan Securities Inc. have engaged, and may in the future engage, in
commercial banking and investment banking transactions with the Company.
S-4
<PAGE>
PROSPECTUS
CHRYSLER FINANCIAL CORPORATION [logotype]
Debt Securities and Warrants
Chrysler Financial Corporation (the "Company") may offer from time to
time its debt securities consisting of senior debentures, notes, bonds and/or
other evidences of indebtedness ("Debt Securities"), and warrants to purchase
Debt Securities ("Warrants") up to an aggregate initial public offering price
of approximately $6,871,400,850 or the equivalent thereof in one or more
foreign currencies or composite currencies. Debt Securities and Warrants may
be offered, separately or together, in separate series in amounts, at prices
and on terms to be set forth in supplements to this Prospectus. Unless
otherwise provided in any such supplement, the Debt Securities and Warrants
will be sold only for U.S. dollars, and the principal of and any interest on
the Debt Securities will likewise be payable only in U.S. dollars.
The Debt Securities will rank pari passu in right of payment with all
existing and future unsecured and unsubordinated indebtedness of the Company.
See "Description of Debt Securities."
Debt Securities of a series may be issuable in registered form without
coupons ("Registered Securities"), in bearer form with coupons attached
("Bearer Securities") or in the form of one or more global securities (each a
"Global Security"). Warrants of a series may be issuable in registered form
("Registered Warrants") and may be issuable in bearer form ("Bearer
Warrants"). Bearer Securities and Bearer Warrants will be offered only to
non-United States persons and to offices located outside the United States of
certain United States financial institutions.
The terms of the Debt Securities and/or Warrants in respect of which
this Prospectus is being delivered, including, where applicable, the specific
designation, aggregate principal amount, currency, denominations, maturity,
premium, rate (which may be fixed or variable) and time of payment of
interest, the nature of any liens securing the Debt Securities, terms for
redemption at the option of the Company or the holder, terms for sinking fund
payments, terms for exercising the Warrants, the initial public offering
price, the names of, and the principal amounts to be purchased by,
underwriters and the compensation of any agents and underwriters and other
terms in connection with the offering and sale of such Debt Securities and/or
Warrants are set forth in the accompanying Prospectus Supplement (the
"Prospectus Supplement").
The Company may offer and sell Debt Securities and Warrants, separately
or together, to or through underwriters, and also may offer and sell Debt
Securities and Warrants, separately or together, directly to other purchasers
or through agents. See "Plan of Distribution." If any agents of the Company
or any underwriters are involved in the sale of any Debt Securities in
respect of which this Prospectus is being delivered, the names of such agents
or underwriters and any applicable commissions or discounts will be set forth
in the applicable Prospectus Supplement. The net proceeds to the Company from
such sale also will be set forth in the applicable Prospectus Supplement.
This Prospectus may not be used to consummate sales of Debt Securities or
Warrants unless accompanied by a Prospectus Supplement.
---------
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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------
The date of this Prospectus is January 23, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company and Chrysler Corporation are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in accordance therewith, file reports and other
information with the Securities and Exchange Commission (the "Commission").
Such reports and other information may be inspected and copies may be
obtained at the principal office of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at the following
regional offices of the Commission: Northwestern Atrium Center, Suite 1400,
500 West Madison Street, Chicago, Illinois 60661-2511; and Seven World Trade
Center, 13th Floor, New York, New York, 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports
and other information concerning the Company can be inspected at the offices
of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York
10005, on which certain of the Company's debt securities are listed.
The Company has filed with the Commission a Registration Statement
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Debt Securities and Warrants offered hereby. This Prospectus
does not contain all of the information included in the Registration
Statement and the exhibits and schedules thereto. For further information
with respect to the Company and the Debt Securities and Warrants, reference
is hereby made to the Registration Statement and the exhibits and schedules
thereto.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for its fiscal year ended
December 31, 1996, which was previously filed with the Commission pursuant to
the Exchange Act, is incorporated herein by reference.
All documents filed by the Company 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 of the Debt Securities and Warrants
shall be deemed to be incorporated by reference into this Prospectus and to
be a part hereof from the date of filing such documents. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein, in the
accompanying Prospectus Supplement or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or
superceded shall not be deemed, except as so modified or superceded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon written or oral request, a copy of any
and all documents incorporated by reference as a part of the Registration
Statement, other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into the information that the
Prospectus incorporates. Requests should be directed to: Office of the
Secretary, Chrysler Financial Corporation, 27777 Franklin Road, Southfield,
Michigan 48034 (telephone: (810) 948-3058).
These securities have not been approved or disapproved by the
Commissioner of Insurance for the State of North Carolina, nor has the
Commissioner of Insurance ruled upon the accuracy or the adequacy of this
Prospectus or any Prospectus Supplement hereto.
2
<PAGE>
CHRYSLER FINANCIAL CORPORATION
General
The Company is a financial services organization that principally
provides consumer and dealer automotive financing. The Company provides
retail and lease financing for vehicles, dealer inventory and other financing
needs, dealer property and casualty insurance, and dealership facility
development and management, primarily for Chrysler Corporation dealers and
their customers. All of the Company's common stock is owned by Chrysler
Corporation, a Delaware corporation (together with its subsidiaries,
"Chrysler"). The Company's primary objective is to provide financing for
automotive dealers and retail purchasers of Chrysler's products. The Company
sells significant amounts of automotive receivables acquired in transactions
subject to limited recourse provisions. The Company remains as servicer of
such receivables for which it is paid a servicing fee. At December 31, 1996,
the Company had approximately 3,000 employees and its portfolio of
receivables managed, which includes receivables owned and serviced for
others, totaled $39.1 billion. The Company's executive offices are located at
27777 Franklin Road, Southfield, Michigan 48034; telephone (810) 948-3058.
This Prospectus contains brief summaries of certain more detailed
information contained in documents incorporated herein by reference. Such
summaries are qualified in their entirety by the more detailed information
contained in the incorporated documents.
Company Operations
The Company's portfolio of finance receivables managed includes
receivables owned and receivables serviced for others. Receivables serviced
for others includes securitized automotive receivables and retail leases. At
December 31, 1996, receivables serviced for others accounted for 71% of the
Company's portfolio of receivables managed. Total finance receivables managed
at the end of each of the five most recent years were as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(in millions of dollars)
<S> <C> <C> <C> <C> <C>
Automotive ................ $36,858 $35,696 $29,962 $25,011 $22,481
Nonautomotive ............. 2,204 2,391 2,775 3,251 7,657
------- ------- ------- ------- -------
Total financing ........... $39,062 $38,087 $32,737 $28,262 $30,138
======= ======= ======= ======= =======
</TABLE>
Automotive Financing. The Company conducts its automotive finance
business through Chrysler Financial Corporation in the United States and
Chrysler Credit Canada Ltd. in Canada. The Company is the major source of car
and truck wholesale financing and retail financing for Chrysler vehicles
throughout North America. The Company also offers dealers working capital
loans, real estate and equipment financing and financing plans for fleet
buyers, including daily rental car companies independent of, and affiliated
with, Chrysler. The automotive financing operations of the Company are
conducted through 29 zone offices in the United States and Canada. During
1996, the Company expanded into international markets by opening offices in
Belgium, France, Italy and Japan.
During 1996, the Company financed or leased approximately 790,000 new
and used vehicles at retail in the United States, including approximately
485,000 new Chrysler cars and trucks representing 20 percent of Chrysler's
U.S. retail and fleet deliveries. During 1996, the Company financed
approximately 2,693,000 new and used vehicles at wholesale in the United
States, including approximately 1,771,000 new Chrysler cars and trucks
representing 72 percent of Chrysler's U.S. factory shipments.
Nonautomotive Financing. The Company conducts its nonautomotive finance
business through its subsidiary, Chrysler Capital Corporation. At December
31, 1996, the nonautomotive receivables managed throughout the United States
consisted of $0.2 billion of commercial loans and leases and $2.0 billion of
leveraged leases.
3
<PAGE>
Risk Factors
Prior to deciding to invest in the Debt Securities, potential
purchasers should carefully consider the following factors, together with the
information herein contained and incorporated herein by reference.
Liquidity and Capital Resources. The Company has significant liquidity
requirements. If cash provided by operations, borrowings under bank credit
lines, continued receivable sales and the placement of term debt does not
provide the necessary liquidity, the Company would be required to restrict
its financing of Chrysler products and dealers. A significant reduction in
such financing support would have a material adverse effect on the Company
and Chrysler. Additionally, an impairment of the Company's ability to sell or
securitize its receivables, a reduction in Chrysler's automotive product
sales, and a variety of other factors could affect the Company's ability to
repay its debt at maturity. See, "Chrysler Financial Corporation Selected
Consolidated Financial Data -- Liquidity and Capital Resources."
Relationship with Chrysler. Due to the significant portion of the
Company's business that relates to Chrysler and the Company's increasing
dependence upon Chrysler, lower levels of production and sales of Chrysler
automotive products would likely result in a reduction in the level of
finance operations of the Company. Chrysler's long-term profitability will
depend significantly on its ability to continue its capital expenditure and
vehicle development programs and market its vehicles successfully. See
"Information Concerning Chrysler Corporation."
4
<PAGE>
CHRYSLER FINANCIAL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected financial data of the Company for each of the
last five years ended December 31, 1996 have been derived from the audited
consolidated financial statements of the Company. The consolidated financial
statements as of December 31, 1996 and 1995 and for each of the last three
years in the period ended December 31, 1996 and the report of Deloitte &
Touche LLP thereon are incorporated herein by reference. The following
selected consolidated financial data should be read in conjunction with such
consolidated financial statements, related notes and other financial
information incorporated herein by reference.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(dollars in millions)
<S> <C> <C> <C> <C> <C>
Earnings Statement Data:(1)
Total finance revenue .................. $ 1,672 $ 1,631 $ 1,368 $ 1,418 $ 1,939
Interest expense ....................... 797 910 754 791 1,022
Depreciation on vehicles leased ........ 92 46 11 -- --
Net margin ............................. 783 675 603 627 917
Other revenues ......................... 809 808 627 621 636
Operating and other expenses ........... 523 508 603 463 595
Provision for credit losses ............ 387 342 203 216 309
Earnings before income taxes and
cumulative effect of changes in
accounting principles ................ 586 522 315 267 295
Net earnings(2) ........................ 376 339 195 129 231
<CAPTION>
December 31,
-----------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(dollars in millions)
Balance Sheet Data:(1)
Finance receivables -- net ............. $11,158 $12,644 $12,423 $ 9,626 $10,200
Retained interests in sold
receivables -- net ................... 3,153 2,733 2,251 2,620 2,759
Cash and cash equivalents .............. 230 476 174 265 433
Marketable securities .................. 472 674 583 348 333
Assets held for sale ................... -- -- -- -- 2,393
Loans and other amounts due from
affiliated companies................. 859 -- 66 -- --
Repossessed collateral ................. 146 194 162 269 192
Dealership properties leased -- net .... 319 363 407 423 454
Vehicles leased -- net ................. 614 397 130 -- --
Other assets ........................... 582 354 452 700 784
------- ------- ------- ------- -------
Total assets ....................... $17,533 $17,835 $16,648 $14,251 $17,548
======= ======= ======= ======= =======
Short-term notes (primarily
commercial paper) .................... $ 2,616 $ 2,435 $ 4,315 $ 2,772 $ 352
Bank borrowings ........................ 90 -- -- -- 5,924
Senior term debt ....................... 8,435 9,234 6,069 5,139 4,436
Subordinated term debt ................. -- -- 27 77 585
Other debt ............................. 104 100 260 447 455
Accounts payable, accrued
expenses and other ................... 1,372 1,236 1,155 1,147 1,270
Amounts due to affiliated companies .... -- 29 -- 24 35
Deferred income taxes .................. 1,628 1,499 1,549 1,514 1,493
------- ------- ------- ------- -------
Total liabilities .................. 14,245 14,533 13,375 11,120 14,550
------- ------- ------- ------- -------
Shareholder's investment:
Common(3) ............................ 3,288 3,302 3,273 3,131 2,998
------- ------- ------- ------- -------
Total shareholder's investment ..... 3,288 3,302 3,273 3,131 2,998
------- ------- ------- ------- -------
Total liabilities and shareholder's
investment ....................... $17,533 $17,835 $16,648 $14,251 $17,548
======= ======= ======= ======= =======
<FN>
- ----------------
(1) Prior periods reclassified to conform to current classifications.
(2) Net earnings for 1993 included a $30 million after-tax charge from the
adoption of Statement of Financial Accounting Standards ("SFAS") No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
and SFAS No. 112, "Employers' Accounting for Postemployment Benefits,"
while 1992 net earnings included a $51 million favorable after-tax
adjustment from the adoption of SFAS No. 109, "Accounting for Income
Taxes" and an after-tax one-time $24 million charge for the write-off of
goodwill.
(3) The Company paid dividends to Chrysler Corporation totaling $382 million,
$335 million and $40 million for the years ended December 31, 1996, 1995,
and 1994, respectively. The Company declared no cash dividends in respect
of its common stock, during 1993 and 1992.
</TABLE>
5
<PAGE>
Financial Review
The Company had net earnings of $376 million in 1996 compared to $339
million and $195 million in 1995 and 1994, respectively. The increase in net
earnings for the year ended December 31, 1996 reflects net margin
improvements partially offset by an increase in the provision for credit
losses.
Total assets at December 31, 1996 totaled $17.5 billion compared to
$17.8 billion at December 31, 1995. Total debt outstanding at December 31,
1996 was $11.2 billion compared to $11.8 billion at December 31, 1995. The
Company's debt-to-equity ratio was 3.4 to 1 at December 31, 1996 compared to
3.6 to 1 at December 31, 1995.
The Company's portfolio of receivables managed, which includes
receivables owned and receivables serviced for others, totaled $39.1 billion
at December 31, 1996, up from $38.1 billion at December 31, 1995. The
increase in receivables managed during the last two years reflects higher
volumes of automotive receivables acquired. Receivables serviced for others
totaled $27.8 billion at December 31, 1996 compared to $25.2 billion at
December 31, 1995.
The Company's allowance for credit losses totaled $526 million, $578
million, and $512 million at December 31, 1996, 1995, and 1994, respectively.
The allowance for credit losses as a percentage of related finance
receivables outstanding was 1.52 percent at December 31, 1996, 1.69 percent
at December 31, 1995, and 1.66 percent at December 31, 1994. The decline in
the allowance for credit losses as a percentage of related finance
receivables outstanding from December 31, 1995 is primarily attributable to
the Company's sale of nonautomotive assets and higher loss experience on the
Company's retail automotive receivables.
Net credit loss experience, including net losses on receivables sold
subject to limited recourse provisions, for the years ended December 31,
1996, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
Net Credit Losses
-----------------------------
December 31,
-----------------------------
1996 1995 1994
---- ---- ----
(in millions of dollars)
<S> <C> <C> <C>
Automotive financing .................... $358 $229 $117
Nonautomotive financing ................. 35 23 41
---- ---- ----
Total ............................... $393 $252 $158
==== ==== ====
<CAPTION>
Net Credit Losses to Average
Gross Receivables Outstanding
-----------------------------
December 31,
-----------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Automotive financing .................... 1.06% .70% .42%
Nonautomotive financing ................. 1.06% .69% 1.05%
Total ............................... 1.06% .70% .50%
</TABLE>
6
<PAGE>
Liquidity and Capital Resources
Term debt, commercial paper and receivable sales represent the
Company's primary funding sources. During 1996, the Company issued $1.2
billion of term debt (primarily medium term notes), repaid term debt of $2.0
billion and increased its commercial paper outstandings by $0.2 billion as
compared to 1995.
Receivable sales continued to be a significant source of funding. Net
proceeds from the sales of automotive retail receivables were $8.1 billion
during 1996, as compared to $6.5 billion for 1995. Securitization of
revolving wholesale account balances provided funding which aggregated $6.8
billion and $6.7 billion at December 31, 1996 and 1995, respectively.
As of December 31, 1996, the Company had contractual debt maturities of
$5.7 billion in 1997 (including $2.6 billion of short-term notes with an
average remaining term of 37 days), $2.6 billion in 1998, $1.6 billion in
1999, $0.8 billion in 2000, $0.4 billion in 2001, and $0.1 billion in years
thereafter.
The Company's revolving credit facilities which total $8.0 billion
consist of a $2.0 billion facility expiring in April, 1997 and a $6.0 billion
facility expiring in April, 2001. These facilities include $0.8 billion
allocated to Chrysler Credit Canada Ltd. As of December 31, 1996, no amounts
were outstanding under these facilities.
The Company paid $382 million and $335 million in dividends to Chrysler
during 1996 and 1995, respectively.
For additional information regarding the results of operations and
financial condition of the Company, see the Company's Annual Report on Form
10-K for the year ended December 31, 1996, which is incorporated by
reference into this Prospectus.
New Accounting Standard
In June 1996, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS
No. 125 requires securitization transactions to be accounted for as sales
when legal and effective control over transferred receivables is surrendered.
In addition, servicing assets or liabilities are to be recognized when
servicing rights are retained by the seller. Current accounting standards do
not permit recognition of servicing assets arising from securitization
transactions. SFAS No. 125 is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after December
31, 1996, and is to be applied prospectively.
The Company will adopt SFAS No. 125 effective on January 1, 1997. The
adoption of SFAS No. 125 is not expected to have a material effect on results
of operations or financial position of the Company. Securitization
transactions entered into after December 31, 1996 are expected to be
structured in a manner that qualifies for sale accounting under SFAS No. 125.
Gains or losses from securitization transactions occurring after December 31,
1996 may vary from historical results due to, among other things, adoption
of SFAS No. 125, the level of securitization activity and interest rates.
7
<PAGE>
INFORMATION CONCERNING CHRYSLER CORPORATION
The Company's results of operations depend significantly upon the
results of operations of Chrysler. Chrysler is subject to the informational
requirements of the Exchange Act, and in accordance therewith files reports
and other information with the Commission. Such reports and other information
can be inspected and copied at the public reference facilities of the
Commission referred to above under "Available Information."
The results of operations and balance sheet data set forth below for
Chrysler reflect the full consolidation of the accounts of all significant
majority-owned subsidiaries and entities over which Chrysler has a
controlling financial interest for each of the last three years ended
December 31, 1996. Such information has been derived from the audited
consolidated financial statements of Chrysler.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1996 1995 1994
---- ---- ----
(in millions of dollars)
<S> <C> <C> <C>
Results of Operations Data
Sales of manufactured products ................ $57,587 $49,601 $49,363
Finance and insurance revenues ................ 1,746 1,589 1,384
Other revenues ................................ 2,064 2,005 1,488
------- ------- -------
Total Revenues ................................ 61,397 53,195 52,235
------- ------- -------
Total Expenses ................................ 55,305 49,746 46,405
------- ------- -------
Earnings Before Income Taxes, Extraordinary
Item, and Cumulative Effect of a Change in
Accounting Principle ....................... 6,092 3,449 5,830
Provision for income taxes .................... 2,372 1,328 2,117
------- ------- -------
Earnings Before Extraordinary Item and
Cumulative Effect of a Change in Accounting
Principle .................................. 3,720 2,121 3,713
Extraordinary item -- Loss on early
extinguishment of debt, net of taxes ........ (191) -- --
Cumulative effect of a change in accounting
principle ................................... -- (96) --
------- ------- -------
Net Earnings .................................. $ 3,529 $ 2,025 $ 3,713
Preferred stock dividends ..................... 3 21 80
------- ------- -------
Net Earnings on Common Stock ................. $ 3,526 $ 2,004 $ 3,633
======= ======= =======
<CAPTION>
December 31,
---------------------------
1996 1995 1994
---- ---- ----
(in millions of dollars)
<S> <C> <C> <C>
Balance Sheet Data
Cash, cash equivalents and marketable
securities .................................. $ 7,752 $ 8,125 $ 8,371
Total assets .................................. 56,184 53,756 49,539
Total debt .................................... 13,396 14,193 13,106
Shareholders' equity .......................... 11,571 10,959 10,694
</TABLE>
Results of Operations
Chrysler reported earnings before income taxes, extraordinary item, and
the cumulative effect of a change in accounting principle of $6.1 billion in
1996, compared with $3.4 billion in 1995. Net earnings for 1996 were $3.5
billion, or $4.77 per common share, compared with $2.0 billion, or $2.65 per
common share in 1995.
Earnings before income taxes, extraordinary item, and the cumulative
effect of a change in accounting principle for 1996 included a charge of $97
million ($61 million after taxes) for costs associated with a voluntary early
retirement program for certain salaried employees, a charge of $77 million
($51 million after taxes) related to a write-down of Pentastar Electronics,
Inc. ("PEI"), a charge of $65 million ($100 million after taxes) related to a
write-down of Thrifty Rent-A-Car System, Inc. ("Thrifty"), a charge of $50
million ($31 million after taxes) for lump sum retiree pension costs related
8
<PAGE>
to the new UAW collective bargaining agreement, and a gain of $101 million
($87 million after taxes) from the sale of Electrospace Systems, Inc. ("ESI")
and Chrysler Technologies Airborne Systems, Inc. ("CTAS") Earnings before
income taxes, extraordinary item, and the cumulative effect of a change in
accounting principle for 1995 included a charge of $263 million ($162 million
after taxes) for costs associated with production changes at Chrysler's
Newark assembly plant and a charge of $115 million ($71 million after taxes)
for a voluntary minivan owner service action.
Excluding the items listed above, pretax earnings for calendar-year
1996 increased as compared with calendar-year 1995 primarily as a result of
an increase in vehicle shipments and improved vehicle margins due to pricing
actions and a reduction in average sales incentives per vehicle, partially
offset by increased profit-based employee compensation costs. The increase in
shipments for calendar-year 1996 was primarily due to increased shipments of
minivans and Dodge Ram pickup trucks. Minivan shipments for calendar-year
1995 were adversely affected by the changeover and launch of Chrysler's
all-new minivans. The increase in shipments of Dodge Ram pickup trucks
primarily reflects a full year of production in 1996 at two additional
assembly plants.
In December 1996, Chrysler extinguished $550 million, or 50% of the
outstanding principal amount of its Auburn Hills Trust Guaranteed
Exchangeable Certificates Due 2020 (the "Certificates") at a cost of $859
million. The extinguishment of the Certificates resulted in an extraordinary
after-tax loss of $191 million (net of income tax benefit of $118 million),
or $0.26 per common share.
Effective January 1, 1995, Chrysler changed its accounting treatment
for certain vehicle sales (principally to non-affiliated rental car
companies) in accordance with Emerging Issues Task Force issue 95-1,
"Revenue Recognition on Sales with a Guaranteed Minimum Resale Value." This
change in accounting principle resulted in the recognition of an after-tax
charge of $96 million (net of income tax benefit of $59 million), or $0.13
per common share in 1995. The ongoing effect of this accounting change was
not material to 1996 and 1995 earnings.
Chrysler's worldwide vehicle shipments in 1996 were 2,958,800 units, an
increase of 285,261 units or 11 percent from 1995 levels. Chrysler's vehicle
shipments outside of the U.S., Canada and Mexico in 1996 were 223,657 units,
an increase of 15,385 units or seven percent from 1995 levels.
Chrysler's revenues and results of operations are principally derived
from the U.S. and Canada automotive marketplaces. Retail industry sales
(including fleet) of new cars and trucks in the U.S. and Canada were 16.6
million units in 1996, compared with 16.3 million units in 1995, an increase
of two percent.
Chrysler's U.S. and combined U.S. and Canada retail sales and market
share data for 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
Increase/
1996 1995 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
U.S. Retail Market(1):
Car sales ............................ 832,633 786,180 46,453
Car market share ..................... 9.8% 9.1% 0.7%
Truck sales (including minivans) ..... 1,618,193 1,378,163 240,030
Truck market share ................... 23.3% 21.3% 2.0%
Combined car and truck sales ......... 2,450,826 2,164,343 286,483
Combined car and truck market share .. 15.9% 14.3% 1.6%
U.S. and Canada Retail Market(1):
Combined car and truck sales ......... 2,690,340 2,389,465 300,875
Combined car and truck market share .. 16.1% 14.7% 1.4%
<FN>
- ----------------
(1) All retail sales and market share data include fleet sales.
</TABLE>
9
<PAGE>
The increase in Chrysler's U.S. car market share during 1996 was
primarily due to increased sales of its midsize sedans and coupes, including
the new Plymouth Breeze and Chrysler Sebring convertible. The increase in
Chrysler's U.S. truck market share during 1996 was primarily due to increased
sales of its Dodge Ram pickup trucks, Jeep(R) sport-utility vehicles, and
minivans.
In 1996, Chrysler completed the sale of ESI and CTAS for net proceeds
of $476 million. ESI and CTAS were engaged principally in the manufacture of
defense electronics and aircraft modification, respectively, and represented
substantially all of the operations of Chrysler Technologies Corporation, a
wholly owned subsidiary of Chrysler. The sale resulted in a pretax gain of
$101 million ($87 million after taxes).
Consistent with its strategy to focus on its core automotive business,
in 1996, Chrysler committed to a plan of disposal for Thrifty. In accordance
with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of," a pretax loss of $65 million ($100 million after taxes)
was recognized in 1996 to write down Thrifty's carrying value to estimated
fair value less cost to sell. Chrysler's estimate of the fair value of
Thrifty is based principally on an analysis of non-binding bids. The
after-tax loss includes the effect of not being able to claim a tax deduction
for the capital loss on Chrysler's investment in Thrifty. Thrifty's assets
and liabilities at December 31, 1996 and its results of operations for 1996
were immaterial to Chrysler's consolidated assets and liabilities and results
of operations, respectively. Chrysler is continuing with its efforts to sell
Thrifty and is uncertain when the sale of Thrifty may occur.
In the fourth quarter of 1996, Chrysler signed an agreement to sell PEI
for net proceeds of $17 million. PEI produces automatic test equipment for
military applications and represents the remaining operations of Chrysler
Technologies Corporation. In accordance with SFAS No. 121, a pretax loss of
$77 million ($51 million after taxes) was recognized in the fourth quarter of
1996 to write down PEI's carrying value to estimated fair value less cost to
sell. Chrysler's estimate of the fair value of PEI was based on the terms of
the agreement. Included in the cost to sell PEI is an estimate for job
security benefits, special early retirement benefits and other employee costs
related to employees which Chrysler agreed to retain. PEI's assets and
liabilities at December 31, 1996 and its results of operations for 1996 were
immaterial to Chrysler's consolidated assets and liabilities and results of
operations, respectively. The sale of PEI was completed on January 10, 1997.
In 1995, Chrysler recorded a $263 million provision ($162 million after
taxes) for costs associated with production changes at its Newark assembly
plant. Newark production of the Chrysler Concorde and Dodge Intrepid was
reduced to one shift in August 1995 and terminated in July 1996. Production
of an all-new sport-utility vehicle, the Dodge Durango, is scheduled to begin
at the Newark assembly plant in the fall of 1997. The provision reflects the
recognition of supplemental unemployment benefits, job security benefits and
other related employee costs, and the write-down of certain equipment and
tooling.
Chrysler's effective tax rates in 1996, 1995 and 1994 were 38.9
percent, 38.5 percent and 36.3 percent, respectively. The provision for
income taxes in 1994 included favorable adjustments aggregating $132 million,
including $100 million for the recognition of tax credits related to
expenditures in prior years for qualifying research and development
activities.
For the past several years, Chrysler has benefitted from the following
factors: (1) favorable economic conditions in the U.S. and Canada, where
Chrysler's sales are concentrated, and (2) a continuing shift in U.S. and
Canada consumer preferences toward trucks, as Chrysler manufactures a higher
proportion of trucks to total vehicles than its principal competitors in the
U.S. and Canada. A significant deterioration in either of these factors could
adversely affect Chrysler's consolidated operating results. In addition,
Chrysler has also benefitted over the past several years from a cost
advantage in comparison to vehicles manufactured in Japan (and vehicles
containing significant material components manufactured in Japan) as a result
of favorable exchange rates between the Japanese yen and the U.S. dollar.
During 1996, this cost advantage was substantially reduced as a result of
unfavorable changes in the Japanese yen to U.S. dollar exchange rate. These
changes did not have a material adverse effect on Chrysler's 1996
consolidated operating results. Chrysler believes, however, that further
substantial
10
<PAGE>
unfavorable exchange rate changes could, over time, have an adverse effect on
Chrysler's consolidated operating results. Further, Chrysler has benefitted
from a strategy of focusing resources on its core automotive business and an
aggressive capital expenditure and vehicle development program that has
resulted in the replacement of its entire product lineup over the last five
years. Chrysler's long-term profitability will depend significantly on its
ability to continue its capital expenditure and vehicle development programs
and to market its vehicles successfully in an increasingly competitive
environment.
Liquidity and Capital Resources
Chrysler's consolidated combined cash, cash equivalents and marketable
securities totaled $7.8 billion at December 31, 1996 (including $797 million
held by the Company and Car Rental Operations), $8.1 billion at December 31,
1995 (including $1.2 billion held by the Company and Car Rental Operations),
and $8.4 billion at December 31, 1994 (including $756 million held by the
Company and Car Rental Operations). At December 31, 1996, the Company had
approximately $400 million of marketable securities which were limited for
use in its insurance operations in accordance with various statutory
requirements. The decrease in Chrysler's consolidated combined cash, cash
equivalents and marketable securities in 1996 was primarily the result of
capital expenditures, common stock repurchases, net debt repayments and
dividend payments, largely offset by cash generated by operating activities,
marketable securities acquired in non-cash transactions related to the
securitization of retail receivables and net proceeds from the sales of
nonautomotive assets. The decrease in Chrysler's consolidated combined cash,
cash equivalents and marketable securities in 1995 was primarily the result
of capital expenditures, net finance receivables acquired and common stock
repurchases, largely offset by cash generated by operating activities and
cash provided by an increase in long-term debt.
Chrysler's long-term profitability will depend significantly on its
ability to continue its capital expenditure and vehicle development programs
and to market its vehicles successfully in an increasingly competitive
environment. Chrysler's expenditures for new product development and the
acquisition of productive assets were $17.1 billion for the three-year period
ended December 31, 1996. Expenditures for these items during the succeeding
three-year period are expected to be at similar or higher levels. At December
31, 1996, Chrysler had commitments for capital expenditures, including
commitments for assets currently under construction, totaling approximately
$1.6 billion.
In May 1996, Chrysler declared a two-for-one stock split in the form of
a 100 percent stock dividend which was distributed on July 15, 1996 to
shareholders of record on June 15, 1996. All per share data and the average
common and dilutive equivalent shares outstanding have been adjusted to
reflect this stock split for all periods presented. The number of common
shares issued, outstanding and held in treasury for 1996 have been adjusted
to reflect this stock split. In addition, the par value of the new shares
issued as a result of the two-for-one stock split has been transferred from
additional paid-in capital to common stock. Additional paid-in capital,
common stock balances, common shares issued, outstanding and held in treasury
for prior periods have not been restated for the two-for-one stock split.
During 1996, Chrysler repurchased 66 million shares of its common stock
at a cost of $2.0 billion (including $16 million in unsettled repurchases at
December 31, 1996). In December 1996, Chrysler's Board of Directors approved
an increase in Chrysler's planned 1997 common stock repurchases from $1
billion to $2 billion. The planned 1997 common stock repurchases are subject
to market and general economic conditions. Since beginning its common stock
repurchase program in 1995, Chrysler has repurchased 112 million shares of
its common stock at a cost of $3.1 billion.
In the second quarter of 1996, Chrysler increased its quarterly
dividend from $0.30 to $0.35 per common share. In the fourth quarter of 1996,
Chrysler increased its quarterly dividend from $0.35 to $0.40 per common
share. Dividends per common share have been adjusted to reflect the
two-for-one stock split.
In December 1996, Chrysler extinguished $550 million, or 50 percent of
the outstanding principal amount of its Auburn Hills Trust Guaranteed
Exchangeable Certificates Due 2020 at a cost of $859 million. At December 31,
1996, $550 million of the Certificates remained outstanding. The remaining
11
<PAGE>
Certificates outstanding are not redeemable prior to maturity and carry a
current interest rate of 12 percent. In addition, Chrysler entered into
forward contracts (notional amount $520 million) to mitigate interest rate
risk related to debt Chrysler intends to incur in the first quarter of 1997
to refinance the extinguished Certificates. The refinancing is subject to
market and general economic conditions.
Chrysler's ability to market its products successfully depends
significantly on the availability of vehicle financing for its dealers and,
to a lesser extent, the availability of financing for retail and fleet
customers, both of which are provided by the Company.
Chrysler's strategy is to focus on its core automotive business. As
part of this strategy, Chrysler has sold certain assets and businesses in
past years which are not related to its core automotive business, and is
exploring the sale of other such assets and businesses in the near term.
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges of the Company Consolidated and
Chrysler Consolidated for each of the last five years were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
The Company Consolidated .......... 1.72X 1.56X 1.41X 1.33X 1.28X
Chrysler Consolidated ............. 5.51X 3.45X 5.52X 3.62X 1.48X
</TABLE>
The Company Consolidated. The ratios of earnings to fixed charges have
been computed by dividing earnings before taxes on income and fixed charges
by fixed charges. Fixed charges consist of interest, amortization of debt
discount and expense, and rentals. Rentals included in fixed charges are the
portion of total rent expense representative of the interest factor (deemed
to be one-third).
Chrysler Consolidated. For purposes of computing the ratios of earnings
to fixed charges, earnings are determined by adding back fixed charges to
earnings from continuing operations (including equity in net earnings
of unconsolidated subsidiaries) before taxes on income and excluding
undistributed earnings from less than 50% owned affiliates. Fixed charges
consist of interest expense, credit line commitment fees and the interest
portion of rent expense.
12
<PAGE>
USE OF PROCEEDS
Unless otherwise provided in the applicable Prospectus Supplement, the
net proceeds to be received by the Company from the sale of the Debt
Securities and Warrants and the exercise of Warrants will be added to its
general corporate funds and may be used to repay long-term or short-term
borrowings and for other general corporate purposes. If the Company elects at
the time of the issuance of Debt Securities or Warrants to make different or
more specific use of proceeds other than as set forth herein, such use will
be described in the Prospectus Supplement.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities set forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions may apply to the Debt Securities so offered will be
described in the Prospectus Supplement relating to such Debt Securities.
The Debt Securities are to be issued under an Indenture dated as of
February 15, 1988, as amended (the "Indenture"), between the Company and
Manufacturers Hanover Trust Company, which has been succeeded by United
States Trust Company of New York as successor Trustee (the "Trustee"). The
Indenture is incorporated by reference as an exhibit to the Registration
Statement. The following summary of certain provisions of the Indenture does
not purport to be complete and is qualified in its entirety by reference to
the provisions of the Indenture. Numerical references in parentheses below
are to sections of the Indenture. Wherever particular sections or defined
terms of the Indenture are referred to, it is intended that such sections or
defined terms shall be incorporated herein by reference.
General
Debt Securities and Warrants offered by this Prospectus will be limited
to an aggregate initial public offering price of approximately $6,871,400,850
or the equivalent thereof in one or more foreign currencies or composite
currencies. The Indenture provides that Debt Securities in an unlimited
amount may be issued thereunder from time to time in one or more series.
(Section 301)
The Securities will rank pari passu in right of payment with all
existing and future unsecured and unsubordinated indebtedness of the Company.
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Debt Securities offered thereby for the terms of such
Debt Securities, including, where applicable: (i) the designation, aggregate
principal amount, currency or currencies and denominations of such Debt
Securities; (ii) the price (expressed as a percentage of the aggregate
principal amount thereof) at which such Debt Securities will be issued; (iii)
the date or dates on which such Debt Securities will mature; (iv) the
currency or currencies in which such Debt Securities are being sold and in
which the principal of and any interest on such Debt Securities will be
payable, whether the holder of any such Debt Securities may elect the
currency in which payments thereon are to be made and, if so, the manner of
such election; (v) the rate or rates (which may be fixed or variable) per
annum at which such Debt Securities will bear interest; (vi) the date from
which such interest on such Debt Securities will accrue, the dates on which
such interest will be payable and the date on which payment of such interest
will commence; (vii) the dates on which and the price or prices at which such
Debt Securities will, pursuant to any mandatory sinking fund provision, or
may, pursuant to any optional redemption or required repayment provisions, be
redeemed or repaid and the other terms and provisions of any such optional
redemption or required repayment; (viii) whether such Debt Securities are to
be issuable as Registered Securities, Bearer Securities or both and the terms
upon which any Bearer Securities of such series may be exchanged for
Registered Securities of such series; (ix) whether such Debt Securities are
to be issued in whole or in part in the form of one or more Global Securities
and, if so, the identity of the Depositary for such Global Security or
Securities; (x) any special provisions for the payment of additional amounts
with respect to
13
<PAGE>
such Debt Securities; (xi) if a temporary Global Security is to be issued
with respect to such series, whether any interest thereon payable on an
interest payment date prior to the issuance of a permanent Global Security or
definitive Bearer Securities will be credited to the account of the persons
entitled thereto on such interest payment date; (xii) if a temporary Global
Security is to be issued with respect to such series, the terms upon which
interests in such temporary Global Security may be exchanged for interests in
a permanent Global Security or for definitive Debt Securities of the series
and the terms upon which interests in a permanent Global Security, if any,
may be exchanged for definitive Debt Securities of the series; (xiii) any
additional restrictive covenants included for the benefit of holders of such
Debt Securities; (xiv) additional Events of Default provided with respect to
such Debt Securities; and (xv) the terms of any Warrants offered together
with such Debt Securities.
The Debt Securities may be issuable as Registered Securities, Bearer
Securities or both. Debt Securities of a series may be issuable in whole or
in part in the form of one or more Global Securities, as described below
under "Global Securities." Unless the Prospectus Supplement relating thereto
specifies otherwise, Registered Securities denominated in U.S. dollars will
be issued only in denominations of $1,000 or any integral multiple thereof
and Bearer Securities denominated in U.S. dollars will be issued only in the
denomination of $5,000. See, however, "Limitations on Issuance of Bearer
Securities and Bearer Warrants" below. One or more Global Securities may be
issued in a denomination or aggregate denominations equal to the aggregate
principal amount of Outstanding Debt Securities of the series to be
represented by such Global Security or Securities. The Prospectus Supplement
relating to a series of Debt Securities denominated in a foreign or composite
currency will specify the denomination thereof. No service charge will be
made for any transfer or exchange of Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. (Sections 302 and 305)
At the option of the Holder upon request confirmed in writing, and
subject to the terms of the applicable Indenture, Bearer Securities (with all
unmatured coupons, except as provided below) of any series will be
exchangeable into an equal aggregate principal amount of Registered
Securities (if the Debt Securities of such series are issuable as Registered
Securities) or Bearer Securities of the same series (with the same interest
rate and maturity date), but no Bearer Security will be delivered in or to
the United States, and Registered Securities of any series (other than a
Global Security, except as set forth below) will be exchangeable into an
equal aggregate principal amount of Registered Securities of the same series
(with the same interest rate and maturity date) of different authorized
denominations. If a Holder surrenders Bearer Securities in exchange for
Registered Securities between a Regular Record Date or, in certain
circumstances, a Special Record Date, and the relevant interest payment date,
such Holder will not be required to surrender the coupon relating to such
interest payment date. Registered Securities may not be exchanged for Bearer
Securities. (Section 305)
Debt Securities may be presented for exchange, and Registered
Securities (other than a Global Security) may be presented for transfer (with
the form of transfer endorsed thereon duly executed), at the office of any
transfer agent or at the office of the Security Registrar, without service
charge and upon payment of any taxes and other governmental charges as
described in the applicable Indenture. (Section 305) Bearer Securities will
be transferable by delivery.
Debt Securities may be issued under the Indenture as Original Issue
Discount Securities to be offered and sold at a discount below their stated
principal amount. Federal income tax consequences and other special
considerations applicable to any such Original Issue Discount Securities will
be described in the Prospectus Supplement relating thereto. "Original Issue
Discount Securities" means any Debt Securities that provide for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof upon the occurrence of an
Event of Default and the continuation thereof. (Section 101)
Global Securities
The Debt Securities of a series may be issued in whole or in part in
the form of one or more Global Securities that will be deposited with, or on
behalf of, a depositary (the "Depositary") identified in the Prospectus
Supplement relating to such series. Global Securities may be issued in either
registered or bearer form and in either temporary or permanent form. Unless
and until it is exchanged in whole or in
14
<PAGE>
part for Debt Securities in definitive form, a Global Security may not be
transferred except as a whole by the Depositary for such Global Security to a
nominee of such Depositary or by a nominee of such Depositary to such
Depositary or another nominee of such Depositary or by such Depositary or any
such nominee to a successor of such Depositary or a nominee of such
successor. (Sections 303 and 305)
The specific terms of the depositary arrangement with respect to any
Debt Securities of a series will be described in the Prospectus Supplement
relating to such series. The Company anticipates that the following
provisions will apply to all depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such
Global Security to the accounts of institutions that have accounts with such
Depositary ("participants"). The accounts to be credited shall be designated
by the underwriters of such Debt Securities or by the Company, if such Debt
Securities are offered and sold directly by the Company. Ownership of
beneficial interests in a Global Security will be limited to participants or
persons that may hold interests through participants. Ownership of beneficial
interests in such Global Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by participants
or persons that hold through participants. The laws of some states require
that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the
ability to transfer beneficial interests in a Global Security.
So long as the Depositary for a Global Security, or its nominee, is the
owner of such Global Security, such Depositary or such nominee, as the case
may be, will be considered the sole owner or holder of the Debt Securities
represented by such Global Security for all purposes under the Indenture
governing such Debt Securities. Except as set forth below, owners of
beneficial interests in a Global Security will not be entitled to have Debt
Securities of the series represented by such Global Security registered in
their names, will not receive or be entitled to receive physical delivery of
Debt Securities of such series in definitive form and will not be considered
the owners or holders thereof under the Indenture.
Subject to the restrictions discussed under "Limitations on Issuance of
Bearer Securities and Bearer Warrants" below, principal, premium, if any, and
interest payments on Debt Securities registered in the name of or held by a
Depositary or its nominee will be made to the Depositary or its nominee, as
the case may be, as the registered owner or the holder of the Global Security
representing such Debt Securities. None of the Company, the Trustee for such
Debt Securities, any Paying Agent or the Security Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Security for such Debt Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depositary for Debt Securities of a
series, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Security, will credit immediately participants'
accounts with payments in amounts proportionate to their respective
beneficial interests in the principal amount of such Global Security as shown
on the records of such Depositary. The Company also expects that payments by
participants to owners of beneficial interests in such Global Security held
through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in "street name," and will be the
responsibility of such participants. Receipt by owners of beneficial
interests in a temporary Global Security of payments in respect of such
temporary Global Security will be subject to the restrictions discussed under
"Limitations on Issuance of Bearer Securities and Bearer Warrants" below.
If a Depositary for Debt Securities of a series is at any time
unwilling or unable to continue as depositary and a successor depositary is
not appointed by the Company within ninety days, the Company will issue Debt
Securities of such series in definitive form in exchange for all of the
Global Securities representing the Debt Securities of such series. In
addition, the Company may at any time and in its sole
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discretion determine not to have any Debt Securities of a series represented
by one or more Global Securities and, in such event, will issue Debt
Securities of such series in definitive form in exchange for all of the
Global Securities representing such Debt Securities. Further, if the Company
so specifies with respect to the Debt Securities of a series, an owner of a
beneficial interest in a Global Security representing Debt Securities of such
series may, on terms acceptable to the Company and the Depositary for such
Global Security, receive Debt Securities of such series in definitive form.
In any such instance, an owner of a beneficial interest in a Global Security
will be entitled to physical delivery in definitive form of Debt Securities
of the series represented by such Global Security equal in principal amount
to such beneficial interest and to have such Debt Securities registered in
its name (if the Debt Securities of such series are issuable as Registered
Securities). Debt Securities of such series so issued in definitive form will
be issued (a) as Registered Securities in denominations, unless otherwise
specified by the Company, of $1,000 and integral multiples thereof if the
Debt Securities of such series are issuable as Registered Securities, (b) as
Bearer Securities in the denomination, unless otherwise specified by the
Company, of $5,000 if the Debt Securities of such series are issuable as
Bearer Securities or (c) as either Registered or Bearer Securities, if the
Debt Securities of such series are issuable in either form. (Section 305)
See, however, "Limitations on Issuance of Bearer Securities and Bearer
Warrants" below for a description of certain restrictions on the issuance of
a Bearer Security in definitive form in exchange for an interest in a Global
Security.
Payment and Paying Agents
Payment of principal of and premium, if any, and interest on Bearer
Securities will be payable in the currency designated in the Prospectus
Supplement, subject to any applicable laws and regulations, at such paying
agencies outside the United States as the Company may appoint from time to
time. Any such payment may be made by a check in the designated currency. No
payment with respect to any Bearer Securities will be made at the Corporate
Trust Office of the Trustee or any other paying agency maintained by the
Company in the United States nor will any such payment be made by transfer to
an account, or by mail to an address, in the United States. Notwithstanding
the foregoing, payments of principal of and premium, if any, and interest on
Bearer Securities will be made in U.S. dollars at the Corporate Trust Office
of the Trustee in The City of New York if payment of the full amount thereof
at all paying agencies outside the United States is illegal or effectively
precluded by exchange controls or other similar restrictions. (Section 1002)
Payment of principal of and premium, if any, on Registered Securities
will be made in the designated currency against surrender of such Registered
Securities at the Corporate Trust Office of the Paying Agent in The City of
New York. Unless otherwise indicated in the Prospectus Supplement, payment of
any installment of interest on Registered Securities will be made to the
person in whose name such Debt Security is registered at the close of
business on the regular record date for such interest. Unless otherwise
indicated in the Prospectus Supplement, payments of such interest will be
made at the Corporate Trust Office of the Paying Agent in The City of New
York, or by a check in the designated currency mailed to each Holder at such
Holder's registered address. (Sections 307 and 1001)
The paying agents outside the United States initially appointed by the
Company for a series of Debt Securities will be named in the Prospectus
Supplement. The Company may terminate the appointment of any of the paying
agents from time to time, except that the Company will maintain at least one
paying agent in The City of New York for payments with respect to Registered
Securities and at least one paying agent in a city in Europe so long as any
Bearer Securities are outstanding where Bearer Securities may be presented
for payment and may be surrendered for exchange, provided that so long as any
series of Debt Securities is listed on The International Stock Exchange of
the United Kingdom and the Republic of Ireland or the Luxembourg Stock
Exchange or any other stock exchange located outside the United States and
such stock exchange shall so require, the Company will maintain a paying
agent in London or Luxembourg or any other required city located outside the
United States, as the case may be, for such series of Debt Securities.
(Section 1002)
All moneys paid by the Company to a paying agent for the payment of
principal of or premium, if any, or interest on any Debt Security that
remains unclaimed at the end of two years after such
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principal, premium or interest shall have become due and payable may be
repaid to the Company and the Holder of such Debt Security or any coupon
appertaining thereto will thereafter look only to the Company for payment
thereof. (Section 1003)
Covenants
The Indenture imposes the following restrictive covenants on the
Company.
Limitation on Liens. The Company will not subject its assets or assets
of a Restricted Subsidiary to liens without securing the Debt Securities
equally and ratably with other indebtedness for borrowed money so secured
except for (1) liens securing exports to or marketing of goods in foreign
countries other than Canada, (2) liens on receivables payable in foreign
currencies to secure borrowings in foreign countries other than Canada, (3)
deposits in connection with public obligations or legal proceedings, (4)
liens securing intercompany indebtedness, (5) purchase money mortgages on
fixed assets hereafter acquired by the Company or any of its Restricted
Subsidiaries for use in the Finance Business or the Finance-Related Insurance
Business, liens on such property at the time of its acquisition or liens on
fixed assets used in the Finance Business or the Finance-Related Insurance
Business existing when a company becomes a Subsidiary, and (6) renewals of
the foregoing. (Section 1004) The term "Restricted Subsidiary" means any
Subsidiary of the Company engaged in the Finance Business or in the
Finance-Related Insurance Business other than Subsidiaries that are organized
or conduct a major portion of their business outside the United States,
Puerto Rico or Canada. The term "Subsidiary" means a corporation a majority
of the outstanding voting stock of which is owned, directly or indirectly, by
the Company. (Section 101)
Limitation on Dividends. Cash dividends on or acquisitions for value of
capital stock of the Company subsequent to December 31, 1984 are limited to
the sum of (i) consolidated net income of the Company and its consolidated
Subsidiaries calculated in accordance with generally accepted accounting
principles and (ii) net proceeds from cash sales of or cash contributions to
capital stock, subsequent to December 31, 1984. Substantially concurrent
acquisitions of capital stock out of the net proceeds of sales of capital
stock are excluded. (Section 1005)
Restricted Subsidiary Stock and Debt. The Company will not, and will
not permit any Subsidiary to, sell or otherwise dispose of any shares of
stock or indebtedness for borrowed money of any Restricted Subsidiary except
to the Company or to a Restricted Subsidiary unless simultaneously therewith
all shares of stock and such indebtedness of such Restricted Subsidiary at
the time owned by the Company and all Subsidiaries are sold or transferred.
The Company will not permit any Restricted Subsidiary to issue, sell or
dispose of, except to the Company or to a Restricted Subsidiary, (i) any
preferred stock, except to any holders of the stock of such Restricted
Subsidiary in the exercise of a pre-emptive right to subscribe to such
preferred stock, or (ii) any other class of stock except on the condition
that the proportionate amount of shares of stock of such class and of the
total number of shares of stock of such Restricted Subsidiary held by persons
other than the Company and its Restricted Subsidiaries shall not be increased
and except for directors' qualifying shares. (Sections 1007 and 1008)
Modification of the Indentures
The Indenture permits the Company and the Trustee, with the consent of
the holders of not less than 66-2/3% in principal amount of the Debt
Securities at the time outstanding thereunder and affected thereby, to
execute a supplemental indenture modifying the Indenture or the rights of the
holders of such Debt Securities and any related coupons, provided that no
such modification shall, without the consent of the holder of each Debt
Security affected thereby, (i) change the maturity of any Debt Security or
coupon, or reduce the principal amount thereof, or reduce the rate or change
the time of payment of interest thereon, or change any Place of Payment or
change the coin or currency in which a Debt Security or coupon is payable or
affect the right of any holder to institute suit for the enforcement of
payment in accordance with the foregoing, or (ii) reduce the aforesaid
percentage of Debt Securities, the consent of the holders of which is
required for any such modification. (Section 902)
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The Indenture contains provisions for convening meetings of the Holders
of Debt Securities of a series if Debt Securities of that series are issuable
in whole or in part as Bearer Securities. (Section 1401) A meeting may be
called at any time by the Trustee, or upon the request of the Company or the
Holders of at least 10% in principal amount of the outstanding Debt
Securities of such series, in any such case upon notice given in accordance
with the Indenture. (Section 1402) The quorum at any meeting called to adopt
a resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the outstanding Debt
Securities of a series; provided, however, that if any action is to be taken
at such meeting with respect to a consent or waiver which may be given by the
Holders of not less than 66-2/3% in principal amount of the outstanding Debt
Securities of a series, the persons holding or representing 66-2/3% in
principal amount of the outstanding Debt Securities of such series will
constitute a quorum. (Section 1404) Except as limited by the proviso in the
preceding paragraph, any resolution presented at a meeting or adjourned
meeting at which a quorum is present may be adopted by the affirmative vote
of the Holders of a majority in principal amount of the outstanding Debt
Securities of that series; provided, however, that, except as limited by the
proviso in the preceding paragraph, any resolution with respect to any
consent or waiver that may be given by the Holders of not less than 66-2/3%
in principal amount of the outstanding Debt Securities of a series may be
adopted at a meeting or an adjourned meeting at which a quorum is present
only by the affirmative vote of 66-2/3% in principal amount of the
outstanding Debt Securities of that series; and provided further that, except
as limited by the proviso in the preceding paragraph, any resolution with
respect to any demand, consent, waiver or other action that may be made,
given or taken by the Holders of a specified percentage, which is less than a
majority, in principal amount of outstanding Debt Securities of a series may
be adopted at a meeting or adjourned meeting at which a quorum is present by
the affirmative vote of the Holders of such specified percentage in principal
amount of the outstanding Debt Securities of that series.
Any resolution passed or decision taken at any meeting of Holders of
Debt Securities of any series duly held in accordance with the Indenture will
be binding on all Holders of Debt Securities of that series and the related
coupons.
Events of Default
The Indenture provides that the following shall constitute Events of
Default with respect to any series of Debt Securities thereunder: (i) default
in payment of principal of or premium, if any, on any Debt Security of such
series when due; (ii) default for 30 days in payment of interest on any Debt
Security of such series when due; (iii) default in the deposit of any sinking
fund payment on any Debt Security of such series when due; (iv) default in
performance of any other covenant in such Indenture, continued for 30 days
after written notice thereof by the Trustee thereunder or the holders of 25%
in principal amount of the Debt Securities of such series at the time
outstanding; (v) default resulting in acceleration of maturity of any other
indebtedness of the Company or any Restricted Subsidiary provided that such
acceleration has not been rescinded or annulled within 10 days of written
notice; and (vi) certain events of bankruptcy, insolvency or reorganization.
(Section 501) The Company is required to file with each Trustee annually an
Officers' Certificate as to the absence of certain defaults under the terms
of the Indenture. (Section 1010)
The Indenture provides that if an Event of Default specified therein
shall occur and be continuing, either the Trustee or the holders of 25% in
principal amount of the Debt Securities of such series then outstanding may
declare the principal of all such Debt Securities (or in the case of Original
Issue Discount Securities, such portion of the principal amount thereof as
may be specified in the terms thereof) to be due and payable. (Section 502)
In certain cases, the holders of a majority in principal amount of the
outstanding Debt Securities of any series may on behalf of the holders of all
such Debt Securities and any related coupons waive any past default or event
of default except a default not theretofore cured in payment of the principal
of or premium, if any, or interest on any of the Debt Securities of such
series and any related coupons. (Sections 502 and 513)
The Indenture contains a provision entitling the Trustee, subject to
the duty of such Trustee during default to act with the required standard of
care, to be indemnified by the holders of the Debt Securities of any series
or any related coupons before proceeding to exercise any right or power under
the
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Indenture with respect to such series at the request of such holders.
(Section 603) The Indenture provides that no holder of any Debt Securities of
any series or any related coupons may institute any proceeding, judicial or
otherwise, to enforce the Indenture except in the case of failure of the
Trustee, for 60 days, to act after it is given notice of default, a request
to enforce the Indenture by the holders of not less than 25% in aggregate
principal amount of the then outstanding Debt Securities of such series and
an offer of reasonable indemnity to such Trustee. (Section 507) This
provision will not prevent any holder of Debt Securities or any related
coupons from enforcing payment of the principal thereof and premium, if any,
and interest thereon at the respective due dates thereof. (Section 508) The
holders of a majority in aggregate principal amount of the Debt Securities of
any series then outstanding may direct the time, method and place of
conducting any proceedings for any remedy available to the Trustee or
exercising any trust or power conferred on it with respect to the Debt
Securities of such series. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture or which would be unjustly
prejudicial to holders not joining therein. (Section 512)
The Indenture provides that the Trustee thereunder will, within 90 days
after the occurrence of a default with respect to any series of Debt
Securities thereunder known to it, give to the holders of the Debt Securities
of such series notice of such default if not cured or waived; but, except in
the case of a default in the payment of principal of (or premium, if any), or
interest on, any Debt Securities, the Trustee shall be protected in
withholding such notice if it determines in good faith that the withholding
of such notice is in the interests of the holders of such Debt Securities.
(Section 602)
Defeasance
The Company may terminate certain of its obligations under the
Indenture with respect to Debt Securities of any series, including its
obligations to comply with the covenants described under the heading
"Restrictive Covenants" above, with respect to the Debt Securities of such
series, on the terms and subject to the conditions contained in the
Indenture, by depositing in trust with the Trustee money or Government
Obligations sufficient to pay the principal of and interest on the Debt
Securities of such series to maturity. Such deposit and termination is
conditioned upon the Company's delivery of (a) an opinion of nationally
recognized independent counsel that the holders of the Debt Securities of
such series will have no federal income tax consequences as a result of such
deposit and termination, (b) an officer's certificate and (c) if the Debt
Securities of such series are then listed on the New York Stock Exchange, an
opinion of counsel that the Debt Securities of such series will not be
delisted as a result of the exercise of this option. Such termination will
not relieve the Company of its obligation to pay when due the principal of or
interest on the Debt Securities of such series if the Debt Securities of such
series are not paid from the money or Government Obligations held by the
Trustee for the payment thereof. (Section 1301)
Concerning the Trustee
The Trustee is also trustee under indentures dated as of June 15, 1984
and September 15, 1986 between it and the Company.
DESCRIPTION OF WARRANTS
The following description of the terms of the Warrants sets forth
certain general terms and provisions of the Warrants to which any Prospectus
Supplement may relate. The particular terms of the Warrants offered by any
Prospectus Supplement and the extent, if any, to which such general
provisions may apply to the Warrants so offered will be described in the
Prospectus Supplement relating to such Warrants.
Warrants may be offered independently or together with any series of
Debt Securities offered by a Prospectus Supplement and may be attached to or
separate from such Debt Securities. Each series of Warrants will be issued
under a separate warrant agreement ("Warrant Agreement") to be entered into
between the Company and a bank or trust company, as Warrant Agent (the
"Warrant Agent"), all as set
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forth in the Prospectus Supplement relating to such series of Warrants. The
Warrant Agent will act solely as the agent of the Company in connection with
the certificates for the Warrants (the "Warrant Certificates") of such series
and will not assume any obligation or relationship of agency or trust for or
with any holders of Warrant Certificates or beneficial owners of Warrants.
Copies of the forms of Warrant Agreements, including the forms of Warrant
Certificates, are filed as an exhibit to the Registration Statement to which
this Prospectus pertains. The following summaries of certain provisions of
the forms of Warrant Agreements and Warrant Certificates do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Warrant Agreements and the Warrant
Certificates. Numerical references in parentheses below are to sections of
the Warrant Agreements. Wherever particular sections or defined terms of the
Warrant Agreement are referred to, it is intended that such sections or
defined items shall be incorporated herein by reference.
General
Reference is hereby made to the Prospectus Supplement relating to the
particular series of Warrants, if any, offered thereby for the terms of such
Warrants, including, where applicable: (i) the offering price; (ii) the
currency or currencies in which such Warrants are being offered; (iii) the
designation, aggregate principal amount, currency or currencies,
denominations and terms of the series of Debt Securities purchasable upon
exercise of such Warrants; (iv) the designation and terms of the series of
Debt Securities with which such Warrants are being offered and the number of
such Warrants being offered with each such Debt Security; (v) the date on and
after which such Warrants and the related series of Debt Securities will be
transferable separately; (vi) the principal amount of the series of Debt
Securities purchasable upon exercise of each such Warrant and the price at
which and currency or currencies in which such principal amount of Debt
Securities of such series may be purchased upon such exercise; (vii) the date
on which the right to exercise such Warrants shall commence and the date (the
"Expiration Date") on which such right shall expire; (viii) whether such
Warrants are to be issuable as Bearer Warrants and the terms upon which any
Bearer Warrants of such series may be exchanged for Registered Warrants of
such series; (ix) federal income tax consequences; and (x) any other terms of
such Warrants.
Warrant Certificates of each series will be issuable as Registered
Warrants and may be issuable as Bearer Warrants. At the option of the holder
upon request confirmed in writing, and subject to the terms of the relevant
Warrant Agreement, Bearer Warrants of any series will be exchangeable into
Registered Warrants or Bearer Warrants of the same series representing in the
aggregate the number of Warrants surrendered for exchange, and Registered
Warrants of any series will be exchangeable into Registered Warrants of the
same series representing in the aggregate the number of Warrants surrendered
for exchange. Warrant Certificates may be presented for exchange, and
Registered Warrants may be presented for transfer (with the form of transfer
endorsed thereon duly executed), at the corporate trust office of the Warrant
Agent for such series of Warrants (or any other office indicated in the
Prospectus Supplement relating to such series of Warrants) without service
charge and upon payment of any taxes and other governmental charges as
described in the relevant Warrant Agreement. Such transfer or exchange will
be effected when the Warrant Agent for such series of Warrants is satisfied
with the documents of title and identity of the person making the request.
Bearer Warrants will be transferable by delivery. (Section 4.01) Prior to the
exercise of their Warrants, holders of Warrants will not have any of the
rights of holders of the series of Debt Securities purchasable upon such
exercise, including the right to receive payments of principal of, premium,
if any, or interest, if any, on the series of Debt Securities purchasable
upon such exercise, or to enforce any of the covenants in the Indenture.
(Section 3.01)
Exercise of Warrants
Each Warrant will entitle the holder thereof to purchase such principal
amount of the related series of Debt Securities at such exercise price as
shall in each case be set forth in, or calculable as set forth in, the
Prospectus Supplement relating to such Warrant. Warrants of a series may be
exercised at the corporate trust office of the Warrant Agent for such series
of Warrants (or any other office indicated in
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the Prospectus Supplement relating to such series of Warrants) at any time
prior to 5:00 P.M., New York City time, on the Expiration Date set forth in
the Prospectus Supplement relating to such series of Warrants. After the
close of business on the Expiration Date relating to such series of Warrants
(or such later date to which such Expiration Date may be extended by the
Company), unexercised Warrants of such series will become void. (Sections
2.02 and 2.03)
Warrants of a series may be exercised by delivery to the appropriate
Warrant Agent of payment, as provided in the Prospectus Supplement relating
to such series of Warrants, of the amount required to purchase the principal
amount of the series of Debt Securities purchasable upon such exercise,
together with certain information as set forth on the reverse side of the
Warrant Certificate evidencing such Warrants and, in the case of Bearer
Warrants, compliance with the procedures specified in the applicable
Prospectus Supplement. Such Warrants will be deemed to have been exercised
upon receipt of the exercise price, subject to the receipt within five
business days of such Warrant Certificate. Upon receipt of such payment and
such Warrant Certificate, properly completed and duly executed, at the
corporate trust office of the appropriate Warrant Agent (or any other office
indicated in the Prospectus Supplement relating to such series of Warrants),
the Company will, as soon as practicable, issue and deliver the principal
amount of the series of Debt Securities purchasable upon such exercise.
Registered Securities will be issued and delivered upon exercise of
Registered Warrants. At the option of the holder of any Bearer Warrants,
Registered Securities or Bearer Securities will be issued and delivered upon
exercise of such Bearer Warrants. If fewer than all of the Warrants
represented by a Registered Warrant are exercised, a new Registered Warrant
will be issued and delivered for the remaining amount of Warrants. If fewer
than all the Warrants represented by a Bearer Warrant are exercised, at the
option of the holder thereof, a new Registered Warrant or Bearer Warrant will
be issued and delivered for the remaining amount of Warrants. (Section 2.03)
LIMITATIONS ON ISSUANCE OF BEARER SECURITIES AND BEARER WARRANTS
In compliance with United Stated federal tax laws and regulations
regarding the distribution of debt securities in bearer form, Bearer
Securities and Bearer Warrants may not, in connection with their original
issuance, be offered, sold, resold or delivered in the United States or to
United States persons (each as defined below) except as otherwise permitted
by Treasury Regulation Section 1.163-5(c)(2)(i)(D) including offers and sales
to offices located outside the United States of certain United States
financial institutions that agree in writing to comply with the requirements
of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986 (the
"Code") and the regulations thereunder, and any underwriters, agents and
dealers participating in the offering of Bearer Securities or Bearer Warrants
will agree in writing that they will not offer, sell or resell any Bearer
Securities or Bearer Warrants to persons within the United States or to
United States persons (except as described above) nor deliver Bearer
Securities or Bearer Warrants within the United States. In addition, any such
underwriters, agents and dealers will agree to send confirmations to each
purchaser of a Bearer Security or Bearer Warrant confirming that such
purchaser represents that it is not a United States person or is a financial
institution described above and, if such person is a dealer, that it will
send similar confirmations to purchasers from it. Bearer Securities and any
coupons attached thereto will bear a legend substantially to the following
effect: "Any United States person who holds this obligation will be subject
to limitations under the United States income tax laws, including the
limitations provided in Sections 165(j) and 1287(a) of the United States
Internal Revenue Code."
Generally, for United States federal income tax purposes, any United
States person who holds a Bearer Security will not be allowed to deduct any
loss sustained on the sale, exchange, redemption or other disposition of such
Bearer Security and will be taxed at ordinary income rates on any gain (which
might otherwise be characterized as capital gain) recognized on such sale,
exchange, redemption or disposition.
As used herein, "United States" mean the United States of America
(including the States and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction, and "United States
person" means an individual who is a citizen or resident of the United
States,
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a corporation, partnership or other entity created or organized in or under
the laws of the United States or any political subdivision thereof, or any
estate income of which is subject to United States federal income taxation
regardless of its source, or a trust if a court within the United States is
able to exercise primary supervision of the administration of the trust and
one or more United States fiduciaries have the authority to control all
substantial decisions of the trust.
Pending the availability of a permanent Global Security or definitive
Bearer Securities, as the case may be, Debt Securities that are issuable as
Bearer Securities may initially be represented by a single temporary Global
Security, with or without interest coupons, each to be deposited with a
depositary in London for Morgan Guaranty Trust Company of New York, Brussels
Office, as operator of the Euroclear System ("Euroclear") and Cedel Bank,
societe anonyme ("Cedel") for credit to the designated accounts against
certifications to the effect described below. Following the availability of a
permanent Global Security or definitive forms of Bearer Securities and
subject to any further limitations described in the applicable Prospectus
Supplement, the temporary Global Security will be exchangeable for a
permanent Global Security or for definitive Bearer Securities, respectively,
only upon certification that an interest in such permanent Global Security or
such definitive Bearer Securities is not being acquired by or on behalf of a
United States person or, if a beneficial interest in such a Bearer Security
is being acquired by or on behalf of a United States person, that such United
States person is a financial institution described above; provided, however,
that no definitive Bearer Security will be issued if the Company has reason
to know that such certificate is false. No definitive Bearer Security will be
delivered in or to the United States. If so specified in the applicable
Prospectus Supplement, interest in respect of any portion of the temporary
Global Security payable in respect of an Interest Payment Date prior to the
issuance of a permanent Global Security or definitive Bearer Securities of
any series will be paid to each of Euroclear and Cedel, with respect to the
portion of the temporary Global Security held for its account. Each of
Euroclear and Cedel, will undertake in such circumstances to credit such
interest received by it in respect of the temporary Global Security to the
respective accounts for which it holds the temporary Global Security only
upon receipt in each case of (i) certification that as of the relevant
interest payment date the portion of the temporary Global Security on which
such interest is to be so credited is not beneficially owned by a United
States person or any person who has purchased its interest in the temporary
Global Security for resale to any United States person or (ii) if a
beneficial interest in the portion of the temporary Global Security on which
such interest is to be so credited is beneficially owned by a United States
person or any person who has purchased its interest in the temporary Global
Security for resale to any United States person, certification that such
United States person is a financial institution described above.
Bearer Warrants will be issued only on receipt of a certification that
the Bearer Warrant in question is not being acquired by or on behalf of a
United States person or, if a beneficial interest in such Bearer Warrant is
being acquired by or on behalf of a United States person, that such United
States person is a financial institution described above.
PLAN OF DISTRIBUTION
The Company may offer and sell Debt Securities and Warrants, separately
or together, to or through underwriters, acting as principals for their own
accounts and/or as agents, and also may offer and sell Debt Securities and
Warrants, separately or together, directly to dealers or other purchasers.
Any such Debt Securities and Warrants may be offered and sold upon their
original issuance or, if so indicated in the Prospectus Supplement, in
connection with a remarketing upon their purchase by or on behalf of the
Company, whether in accordance with a redemption or repayment pursuant to
their terms, in the open market or otherwise. Any underwriter and/or agent
will be identified and the terms of its agreement with the Company and its
compensation will be described in the Prospectus Supplement. Only
underwriters named in the Prospectus Supplement are deemed to be underwriters
in connection with the Debt Securities or Warrants offered thereby.
Debt Securities and Warrants, separately or together, also may be
offered and sold, if so indicated in the Prospectus Supplement, in connection
with a remarketing upon their purchase, in accordance with
22
<PAGE>
a redemption or repayment pursuant to their terms, by one or more firms
("remarketing firms") acting as principals for their own accounts or as
agents for the Company. Any remarketing firm will be identified and the terms
of its agreement, if any, with the Company and its compensation will be
described in the Prospectus Supplement. Remarketing firms may be deemed to be
underwriters in connection with the Debt Securities and Warrants remarketed
thereby.
The distribution of the Debt Securities and Warrants may be effected
from time to time in one or more transactions at a fixed price or prices,
which may be changed, or at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities and Warrants, dealers
may receive compensation from the Company or from purchasers of Debt
Securities or Warrants for whom they may act as agents, in the form of
discounts, concessions or commissions. The dealers that participate in the
distribution of Debt Securities or Warrants may be deemed to be underwriters
and any discounts or commissions received by them and any profit on the
resale of Debt Securities or Warrants by them may be deemed to be
underwriting discounts and commissions under the Securities Act. Any such
compensation will be described in the Prospectus Supplement.
Under agreements that may be entered into with the Company,
underwriters, dealers, agents and remarketing firms may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act. Underwriters, dealers, agents and
remarketing firms may be customers of, engage in transactions with, or
perform services for the Company in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will
authorize dealers or other persons acting as the Company's agents to solicit
offers by certain institutions to purchase Debt Securities or Warrants from
the Company pursuant to contracts providing for payment and delivery on a
future date. Institutions with which such contracts may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and others, but in all
cases such institutions must be approved by the Company. The obligations of
any purchaser under any such contract will not be subject to any conditions
except that (i) the purchase of the Debt Securities or Warrants shall not at
the time of delivery be prohibited under the laws of the jurisdiction to
which such purchaser is subject, and (ii) if the series of Debt Securities or
Warrants being sold to such institutions are also being sold to underwriters,
the Company shall have sold to such underwriters the Debt Securities or
Warrants not sold for delayed delivery. The dealers and such other persons
will not have any responsibility in respect of the validity of performance of
such contracts.
Each underwriter, dealer, agent and remarketing firm participating in
the distribution of any Debt Securities that are issuable as Bearer
Securities will agree that it will not offer, sell or deliver, directly or
indirectly, Bearer Securities in the United States or to United States
persons (other than qualifying financial institutions) in connection with the
original issuance of such Debt Securities.
Neither the Debt Securities nor the Warrants may be offered or sold
directly or indirectly in Great Britain other than to persons whose ordinary
business it is to buy or sell shares or debentures (except in circumstances
which do not constitute an offer to the public within the meaning of the
Companies Act of 1985), and this Prospectus and any Prospectus Supplement or
any other offering material relating to the Debt Securities or the Warrants
may not be distributed in or from Great Britain other than to persons whose
business involves the acquisition and disposal, or the holding, of securities
whether as principal or as agent.
23
<PAGE>
LEGAL MATTERS
The validity of the Debt Securities and Warrants offered hereby will be
passed upon for the Company by Christopher A. Taravella, Esq., Vice President
and General Counsel of the Company, and for any underwriters and agents by
Brown & Wood LLP, New York, New York. Mr. Taravella will rely as to all
matters of New York law on the opinion of Brown & Wood LLP, and Brown & Wood
LLP, will rely as to all matters of Michigan law on the opinion of Mr.
Taravella Mr.Taravella owns and has options to purchase shares of common stock
of Chrysler. Brown & Wood LLP may from time to time render legal services to
the Company and its affiliates.
EXPERTS
The consolidated financial statements and the related financial
statement schedule of the Company as of December 31, 1996 and 1995 and for
each of the three years in the period ended December 31, 1996 incorporated in
this prospectus by reference from the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports, which are incorporated
herein by reference, and have been so incorporated in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
24
<PAGE>
=================================== ===================================
No dealer, salesman or any
other person has been authorized
to give any information, or to make
any representations, other than
those contained in this Prospectus $300,000,000
Supplement or the Prospectus, in
connection with the offer contained
in this Prospectus Supplement and
the Prospectus, and, if given or
made, such information or Chrysler Financial Corporation
representations must not be [ Logotype ]
relied upon as having been
authorized by the Company or any
Underwriter. Neither the delivery
of this Prospectus Supplement and the
Prospectus nor any sale made here-
under and thereunder shall under
any circumstances create an implica- 6 3/8% Notes due 2000
tion that there has been no change
in the affairs of the Company since
the date hereof. This Prospectus
Supplement and the Prospectus are
not an offer to sell or a solici-
tation of an offer to buy any
security in any jurisdiction in
which it is unlawful to make such
an offer or solicitation.
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TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
Page ---------------------
----
Prospectus Supplement
Description of Notes ......... S-2
Underwriting ................. S-3
Prospectus
Available Information ........ 2
Incorporation of Certain
Documents by Reference ..... 2
Chrysler Financial
Corporation ................ 3
Chrysler Financial Corporation
Selected Consolidated
Financial Data ............. 5
Information Concerning
Chrysler Corporation ....... 8
Ratio of Earnings to Fixed
Charges .................... 12 J.P. Morgan & Co.
Use of Proceeds .............. 13 Merrill Lynch & Co.
Description of Debt Salomon Brothers Inc
Securities ................. 13
Description of Warrants ...... 19
Limitations on Issuance of
Bearer Securities and
Bearer Warrants ............ 21
Plan of Distribution ........ 22
Legal Matters ................ 24
Experts ...................... 24 January 23, 1997
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