<PAGE>
As filed with the Securities and Exchange Commission on May 4, 1995
Registration No. 33-58297
=================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
___________________
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
SOUTHERN UNION COMPANY Delaware 75-0571592
SOUTHERN UNION FINANCING I Delaware To Be Applied For
SOUTHERN UNION FINANCING II Delaware To Be Applied For
SOUTHERN UNION FINANCING III Delaware To Be Applied For
(Exact name of Registrant as (State or other (I.R.S. Employer
specified in its Charter) Jurisdiction of Identification
Incorporation Number)
or Organization)
504 Lavaca Street, Suite 800
Austin, Texas 78701
(512) 477-5852
(Address, including zip code, and telephone number,
including area code, of each registrant's principal
executive offices)
__________________
Dennis K. Morgan, Esq. With a copy to:
Vice President-Legal and Secretary Stephen A. Bouchard,Esq.
SOUTHERN UNION COMPANY Fleischman and Walsh, L.L.P.
504 Lavaca Street, Suite 800 1400 Sixteenth Street, N.W.,
Suite 600
Austin, Texas 78701 Washington, D.C. 20036
(512) 477-5852 (202) 939-7911
(Name, address, including zip code,
and telephone number, including
area code, of agent for service
for each registrant)
________________________
Approximate Date of Commencement of Proposed Sale to Public:
From time to time after the effective date of the Registration
Statement, as determined by market conditions.
________________________
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans,
please check the following blank: _____
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, as amended, other than securi-
ties offered only in connection with dividend or interest
reinvestment plans, please check the following blank: X
_____
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Offering Aggregate Amount of
Title of Each Class Amount to Price Per Offering Registra-
of Securities to be be Regis- Unit Price tion Fee
Registered tered (1) (1)(2)(3) (1)(2)(3) (2)
___________________ _________ _________ _________ _________
Preferred Securities
of Southern Union
Financing I. . . .
Preferred Securities
of Southern Union
Financing II . . .
Preferred Securities
of Southern Union
Financing III. . .
Senior Debt Securi-
ties of Southern
Union Company. . .
Guarantees of Pre-
ferred Securities
of Southern Union
Financing I,
Southern Union
Financing II,
Southern Union
Financing III by
Southern Union
Company (4). . . .
_________________________________________________________________
Total $300,000,000 100% $300,000,000 $103,449.00
(1) Such indeterminate number of Preferred Securities of
Southern Union Financing I, Southern Union Financing II and
Southern Union Financing III and such indeterminate princi-
pal amount of Senior or Subordinated Debt Securities of
Southern Union Company as may from time to time be issued at
indeterminate prices. Subordinated Debt Securities may be
issued and sold to Southern Union Financing I, Southern
Union Financing II and Southern Union Financing III, in
which event such Subordinated Debt Securities may later be
distributed to the holders of Preferred Securities upon a
dissolution of Southern Union Financing I, Southern Union
Financing II and Southern Union Financing III and the dis-
tribution of the assets thereof.
(2) Estimated solely for the purpose of calculating the regis-
tration fee pursuant to Rule 457. The aggregate public
offering price of the Preferred Securities of Southern Union
Financing I, Southern Union Financing II and Southern Union
Financing III and the Senior or Subordinated Debt Securities
of Southern Union Company registered hereby will not exceed
$300,000,000.
(3) Exclusive of accrued interest and distributions, if any.
(4) No separate consideration will be received for any Guaran-
tees.
The Registrants hereby amend this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the Registrants shall file a further amendment that
specifically states that this Registration Statement shall there-
after become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
=================================================================
SUBJECT TO COMPLETION, DATED MAY 4, 1995
PROSPECTUS SUPPLEMENT
(To Prospectus Dated May ___, 1995)
3,000,000 Preferred Securities
Southern Union Financing I
____% Trust Originated Preferred Securities(sm) ("TOPrS(sm)")
(Liquidation amount $25 per Preferred Security)
guaranteed to the extent set forth herein by
SOUTHERN UNION COMPANY
_______________
The ____% Trust Originated Preferred Securities (the "Preferred
Securities") offered hereby represent preferred undivided bene-
ficial interests in the assets of Southern Union Financing I, a
statutory business trust formed under the laws of the State of
Delaware ("Southern Union Financing" or the "Trust"). Southern
Union Company, a Delaware corporation ("Southern Union" and,
together with its subsidiaries, the "Company"), will directly or
indirectly own all the common securities (the "Common Securities"
and, together with the Preferred Securities, the "Trust Securi-
ties") representing undivided beneficial interests in the assets of
Southern Union Financing. Southern Union Financing exists for the
sole purpose of issuing the Preferred Securities and Common Securi-
ties and investing the proceeds thereof in an equivalent amount of
_____% Subordinated Deferrable Interest Notes due 2025 ("Subordi-
nated Debt Securities") of Southern Union. Upon an event of a
default under the Declaration (as defined herein), the holders of
Preferred Securities will have a preference over the holders of the
Common Securities with respect to payments in respect of distribu-
tions and payments upon redemption, liquidation and otherwise.
______________________ (continued on next page)
See "Investment Considerations" for certain information relevant to
an investment in the Preferred Securities, including the period and
circumstances during and under which payments of distributions on
the Preferred Securities may be deferred and the related United
States federal income tax consequences of such deferral.
Application will be made to list the Preferred Securities on the
New York Stock Exchange. If approved, trading of the Preferred
Securities on the New York Stock Exchange is expected to commence
within a 30-day period after the initial delivery of the Preferred
Securities. See "Underwriting."
____________________
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.
Initial Proceeds to
Public Southern
Offering Underwriting Union Trust
Price (1) Commission (2) (3)(4)
Per Preferred Security. . $25.00 (3) $25.00
Total . . . . . . . . . . $75,000,000 (3) $75,000,000
(1) Plus accrued distributions, if any, from ______________, 1995.
(2) Southern Union Financing and Southern Union have agreed to
indemnify the several Underwriters against certain liabili-
ties, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the
Preferred Securities will be invested in Subordinated Debt
Securities, Southern Union has agreed to pay to the Under-
writers as compensation ("Underwriters' Compensation") for
their arranging the investment therein of such proceeds
$__________ per Preferred Security (or $____________ in the
aggregate); provided that, such compensation for sales of
10,000 or more Preferred Securities to a single purchaser will
be $____________ per Preferred Security. Therefore, to the
extent of such sales, the actual amount of Underwriters' Com-
pensation will be less than the aggregate amount specified in
the preceding sentence. See "Underwriting."
(4) Expenses of the offering which are payable by Southern Union
are estimated to be $____________.
The Preferred Securities offered hereby are offered severally by
the Underwriters, as specified herein, subject to receipt and
acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that delivery of the Preferred
Securities will be made only in book-entry form through the facili-
ties of The Depository Trust Company, on or about ____________,
1995.
_______________________
Merrill Lynch & Co.
Dean Witter Reynolds, Inc.
A.G. Edwards & Sons, Inc.
PaineWebber Incorporated
Prudential Securities Incorporated
_______________________
The date of this Prospectus Supplement is May ___, 1995.
(sm) "Trust Originated Preferred Securities" and "TOPrS" are
service marks of Merrill Lynch & Co., Inc.
Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been
filed with the Securities and Exchange Commission. These securi-
ties may not be sold nor may offers to buy be accepted prior to the
time the registration statement becomes effective. This prospectus
shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in any
State in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of
any such State.
(continued from previous page)
Holders of the Preferred Securities are entitled to receive cumu-
lative cash distributions at an annual rate of _____% of the liqui-
dation amount of $25 per Preferred Security, accruing from the date
of original issuance and payable quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year, commencing
June 30, 1995 ("distributions"). The payment of distributions out
of moneys held by Southern Union Financing and payments on liquida-
tion of Southern Union Financing or the redemption of Preferred
Securities, as set forth below, are guaranteed by Southern Union
(the "Guarantee") to the extent Southern Union Financing has funds
available therefor as described under "Description of the Guaran-
tees" in the accompanying Prospectus. The obligations of Southern
Union under the Guarantee are subordinate and junior in right of
payment to all other liabilities of Southern Union and pari passu
with the most senior preferred stock issued, from time to time, if
any, by Southern Union. The obligations of Southern Union under
the Subordinated Debt Securities are subordinate and junior in
right of payment to all present and future Senior Indebtedness (as
defined herein) of Southern Union, which aggregated approximately
$475 million at December 31, 1994, and rank pari passu with
Southern Union's other general unsecured creditors.
The distribution rate and the distribution and other payment dates
for the Preferred Securities will correspond to the interest rate
and interest and other payment dates on the Subordinated Debt
Securities, which will be the sole assets of Southern Union
Financing. As a result, if principal or interest is not paid on
the Subordinated Debt Securities, no amounts will be paid on the
Preferred Securities. If Southern Union does not make principal or
interest payments on the Subordinated Debt Securities, Southern
Union Financing will not have sufficient funds to make distribu-
tions on the Preferred Securities, in which event, the Guarantee
will not apply to such distributions until Southern Union
Financing has sufficient funds available therefor.
Southern Union has the right to defer payments of interest on the
Subordinated Debt Securities by extending the interest payment
period on the Subordinated Debt Securities at any time for up to 20
consecutive quarters (each an "Extension Period"). If interest
payments are so deferred, distributions will also be deferred.
During such Extension Period, distributions will continue to accrue
with interest thereon (to the extent permitted by applicable law)
at an annual rate of _____% per annum compounded quarterly, and
during any Extension Period, holders of Preferred Securities will
be required to include deferred interest income in their gross
income for United States federal income tax purposes in advance of
receipt of the cash distributions with respect to such deferred
interest payments. There could be multiple Extension Periods
of varying lengths throughout the term of the Subordinated Debt
Securities. See "Description of the Subordinated Debt Securities
- -- Option to Extend Interest Payment Period." See "Investment
Considerations -- Option to Extend Interest Payment Period and
Defer Payment of Interest" and "United States Federal Income
Taxation -- Original Issue Discount."
The Subordinated Debt Securities are redeemable by Southern Union,
in whole or in part, from time to time, on or after _____________,
2000, or at any time in certain circumstances upon the occurrence
of a Tax Event (as defined herein). If Southern Union redeems
Subordinated Debt Securities, Southern Union Financing must redeem
Trust Securities having an aggregate liquidation amount equal to
the aggregate principal amount of the Subordinated Debt Securities
so redeemed at $25 per Preferred Security plus accrued and unpaid
distributions thereon (the "Redemption Price") to the date fixed
for redemption. See "Description of the Preferred Securities --
Mandatory Redemption." The Preferred Securities will be redeemed
upon maturity of the Subordinated Debt Securities. The Subordi-
nated Debt Securities mature on _________________, 2025, but the
maturity date may be extended only once, for up to an additional 19
years at the option of Southern Union, provided certain financial
covenants are met. See "Description of the Subordinated Debt
Securities -- Option to Extend Maturity Date." In addition, upon
the occurrence of a Tax Event arising from a change in law or a
change in legal interpretation regarding tax matters, unless the
Subordinated Debt Securities are redeemed in the limited circum-
stances described herein, Southern Union Financing shall be
dissolved, with the result that the Subordinated Debt Securities
will be distributed to the holders of the Preferred Securities, on
a pro rata basis, in lieu of any cash distribution. See "Descrip-
tion of the Preferred Securities -- Tax Event Redemption or Distri-
bution." In certain circumstances, Southern Union will have the
right to redeem the Subordinated Debt Securities, which would
result in the redemption by Southern Union Financing of Trust
Securities in the same amount on a pro rata basis. If the Sub-
ordinated Debt Securities are distributed to the holders of the
Preferred Securities, Southern Union will use its best efforts to
have the Subordinated Debt Securities listed on the New York Stock
Exchange or on such other exchange as the Preferred Securities are
then listed. See "Description of the Preferred Securities -- Tax
Event Redemption or Distribution" and "Description of the Subordi-
nated Debt Securities."
In the event of the involuntary or voluntary dissolution, winding
up or termination of Southern Union Financing, the holders of the
Preferred Securities will be entitled to receive for each Preferred
Security a liquidation amount of $25 plus accrued and unpaid dis-
tributions thereon (including interest thereon) to the date of
payment, unless, in connection with such dissolution, the Subordi-
nated Debt Securities are distributed to the holders of the Pre-
ferred Securities. See "Description of the Preferred Securities --
Liquidation Distribution Upon Dissolution."
_____________________
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE THAT MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER
MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
SOUTHERN UNION COMPANY SELECTED HISTORICAL FINANCIAL INFORMATION
The following table sets forth selected historical financial
information with respect to the Company for the periods indi-
cated. This information should be read in conjunction with the
Company's Consolidated Financial Statements and notes thereto
included in the 1994 Form 10-K and the First, Second and Third
Quarter Form 10-Q, which are incorporated by reference into this
Prospectus. See "Incorporation of Certain Documents by Reference"
in the accompanying Prospectus. The selected historical financial
information for the year ended June 30, 1994, and each of the four
years in the period ended December 31, 1993, has been derived from
financial statements that have been audited by Coopers & Lybrand
L.L.P., the Company's independent accountants. See "Experts" in
the accompanying Prospectus. The selected historical financial
information for the twelve months ended March 31, 1995, has been
derived from financial statements that are unaudited, but which, in
the opinion of management, include all adjustments necessary for a
fair presentation of the financial position and results of opera-
tions for such period.
Nine Twelve
Months Months Year
Ended Ended Ended
March 31, March 31, June 30, Year ended December 31,(a)(b)
___________________________________
1995 1995(b) 1994 1993 1992 1991 1990
(a)(b)
________ ________ ________ ________ ________ ________ ________
(Dollars in thousands, except per share amounts)
Operating Results:
Operating Revenues
$395,981 $489,590 $374,516 $209,005 $192,445 $200,261 $199,865
Operating Margin(c)
189,773 236,768 163,389 98,621 89,527 91,023 81,314
Earnings From Continuing Operations
16,542 11,478 8,378 7,733 6,391 4,673 387
Net Earnings (Loss) Available for Common Stock
16,542 11,478 8,378 6,890 1,445 987 (3,668)
Earnings (Loss) Per Share
1.44 1.00 .85 .83 .18 .12 (.44)
Weighted Average Shares Outstanding (000's)
11,465 11,460 9,866 8,286 8,256 8,326 8,326
Operating Data:
Gas Sales (MMcf)
75,734 103,579 72,223 44,859 51,104 43,679 43,295
======== ======== ======== ======== ======== ======== ========
Gas Transported (MMcf)
34,153 61,188 36,134 22,750 25,438 8,608 5,592
======== ======== ======== ======== ======== ======== ========
Average Gas Sales Customers Served
958,447 958,444 660,425 421,233 394,199 428,077 407,139
======== ======== ======== ======== ======== ======== ========
Balance Sheet Data:
Property, Plant and Equipment, Net
$744,429 $744,429 $723,300 $325,543 $285,505 $278,881 $323,187
Total Assets
965,259 965,259 890,950 416,207 377,167 369,783 411,451
Short-Term Debt and Current Maturities of Long-Term Debt
18,956 18,956 889 40,655 14,360 2,385 10,098
Long-Term Debt - Less Current Maturities
478,062 478,062 479,048 89,019 109,464 110,482 103,783
Preferred Stock
-- -- -- -- 24,900 25,000 25,000
Common Stockholders' Equity
226,136 226,136 208,975 201,938 148,003 147,356 146,332
Weather Effect:
Degree Days (d)
2,770 3,019 1,829 1,954 2,020 2,439 2,348
Percent of Normal, Based on 30-Year Average (e)
83% 84% 92% 89% 91% 95% 87%
______________________________
(a) During 1994, the Company changed its fiscal year-end from
December 31 to June 30.
(b) On January 31, 1994 Southern Union acquired the natural gas
distribution facilities of Missouri Gas Energy. In 1993, also
in fiscal year 1994, Southern Union acquired (i) Rio Grande
Valley Gas Company, (ii) the natural gas distribution facili-
ties serving Eagle Pass, Texas, and (iii) Berry Gas Company.
During 1992, Southern Union acquired the natural gas distribu-
tion facilities serving Nixon, Texas. During 1991, Southern
Union acquired natural gas distribution and transmission
facilities serving (i) an area in south Texas, including the
cities of Lockhart, Luling, Cuero, Shiner, Yoakum, and
Gonzales, (ii) the west Texas city of Andrews and (iii) the
north Texas cities of Mineral Wells, Weatherford, Graham,
Breckenridge, Millsap, Jacksboro and surrounding communities.
In 1991, Southern Union sold the assets of its Arizona gas
utility operations. Because of these acquisitions and
divestiture, the results of operations of the Company for
certain years are not comparable to other periods.
(c) Operating margin consists of operating revenues less gas
purchase costs.
(d) "Degree days" are a measure of the coldness of the weather
experienced. A Degree day is equivalent to each degree that
the daily mean temperature for a day falls below 65 degrees
Fahrenheit.
(e) Information with respect to weather conditions is provided by
the National Oceanic and Atmospheric Administration. Per-
centages of normal are computed based on the weighted average
number of customers.
<PAGE>
The following information concerning the Company, Southern Union
Financing, the Preferred Securities, the Guarantee and the Subordi-
nated Debt Securities supplements, and should be read in conjunc-
tion with, the information contained in the accompanying
Prospectus. Capitalized terms used in this Prospectus Supplement
have the same meanings as in the accompanying Prospectus.
SOUTHERN UNION COMPANY
The Company's principal line of business is the distribution of
natural gas as a public utility through Southern Union Gas Company
("Southern Union Gas") and Missouri Gas Energy, each of which is a
division of Southern Union. Southern Union Gas serves approxi-
mately 497,000 residential, commercial, industrial, agricultural
and other customers in Texas (including the cities of Austin,
Brownsville, El Paso, Galveston and Port Arthur) and Oklahoma.
Missouri Gas Energy, acquired on January 31, 1994, serves approxi-
mately 478,000 customers in central and western Missouri (including
the cities of Kansas City, St. Joseph, Joplin and Monett).
Subsidiaries of Southern Union have been established to support and
expand natural gas sales and to capitalize on the Company's gas
energy expertise. These subsidiaries market natural gas to end-
users, sell natural gas as a vehicular fuel, convert vehicles to
operate on natural gas, operate intrastate and interstate natural
gas pipeline systems, and sell commercial gas air conditioning and
other gas-fired engine-driven applications. By providing "one-stop
shopping," the Company can serve its various customers' particular
energy needs, which encompass substantially all of the natural gas
distribution and sales businesses from natural gas sales to
specialized energy consulting services. Certain subsidiaries also
own or hold interests in real estate and other assets, which are
primarily used in Southern Union's utility business.
The Company is a sales and market-driven energy company whose
management is committed to achieving profitable growth of its
natural gas energy businesses in an increasingly competitive
business environment. Management's strategies for achieving these
objectives principally consist of (i) promoting new sales oppor-
tunities and markets for natural gas, (ii) enhancing financial and
operating performance and (iii) expanding the Company through
development of existing systems and selectively acquiring new
systems. Management develops and continually evaluates these
strategies, and the Company's implementation of them, by applying
its experience and expertise in analyzing the energy industry,
technological advances, market opportunities and general business
trends. Each of these strategies, as implemented throughout the
Company's businesses, reflects the Company's commitment to its core
natural gas utility business. Central to all of the Company's
businesses and strategies is the sale and transportation of natural
gas.
SOUTHERN UNION FINANCING I
Southern Union Financing is a statutory business trust formed under
Delaware law pursuant to (i) a declaration of trust, dated as of
March 28, 1995, executed by Southern Union, as sponsor (the
"Sponsor"), and the trustees of Southern Union Financing (the
"Southern Union Trustees") and (ii) the filing of a certificate of
trust with the Secretary of State of the State of Delaware on
March 28, 1995. Such declaration will be amended and restated in
its entirety (as so amended and restated, the "Declaration") sub-
stantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus Supplement and the accompanying
Prospectus form a part. The Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939 as amended (the
"Trust Indenture Act"). Upon issuance of the Preferred Securities,
the purchasers thereof will own all of the Preferred Securities.
See "Description of the Preferred Securities -- Book-Entry Only
Issuance -- The Depository Trust Company." Southern Union will
directly or indirectly acquire Common Securities in an aggregate
liquidation amount equal to 3% of the total capital of Southern
Union Financing. Southern Union Financing exists for the
exclusive purposes of (i) issuing the Trust Securities repre-
senting undivided beneficial interests in the assets of the
Trust, (ii) investing the gross proceeds of the Trust Securities
in the Subordinated Debt Securities and (iii) engaging in only
those other activities necessary or incidental thereto.
Pursuant to the Declaration, the number of Southern Union Trustees
will initially be three. Two of the Southern Union Trustees (the
"Regular Trustees") will be persons who are employees or officers
of or who are affiliated with Southern Union. The third trustee
will be a financial institution that maintains its principal place
of business in the state of Delaware and is unaffiliated with
Southern Union, which trustee will serve as property trustee under
the Declaration and as indenture trustee for the purposes of the
Trust Indenture Act (the "Property Trustee"). Initially,
Wilmington Trust Company, a Delaware banking corporation, will be
the Property Trustee until removed or replaced by the holder of the
Common Securities. Wilmington Trust Company will also act as
indenture trustee under the Guarantee (the "Guarantee Trustee").
See "Description of the Guarantees" in the accompanying Prospectus.
In certain circumstances, the holders of a majority of the Pre-
ferred Securities will be entitled to appoint one Regular Trustee
(a "Special Regular Trustee"), who need not be an officer or
employee of or otherwise affiliated with Southern Union. See
"Description of the Preferred Securities -- Voting Rights."
The Property Trustee will hold title to the Subordinated Debt
Securities for the benefit of the holders of the Trust Securities
and the Property Trustee will have the power to exercise all
rights, powers, and privileges under the Indenture (as defined
herein) as the holder of the Subordinated Debt Securities. In
addition, the Property Trustee will maintain exclusive control of
a segregated non-interest bearing bank account (the "Property
Account") to hold all payments made in respect of the Subordi-
nated Debt Securities for the benefit of the holders of the
Trust Securities. The Property Trustee will make payments of
distributions and payments on liquidation, redemption and
otherwise to the holders of the Trust Securities out of funds
from the Property Account. The Guarantee Trustee will hold
the Guarantee for the benefit of the holders of the Preferred
Securities. Subject to the right of the holders of the Pre-
ferred Securities to appoint a Special Regular Trustee.
Southern Union, as the direct or indirect holder of all the
Common Securities, will have the right to appoint, remove or
replace any Southern Union Trustee and to increase or decrease the
number of Southern Union Trustees; provided that, (i) the number of
Southern Union Trustees shall be at least three and (ii) a majority
shall be Regular Trustees. Southern Union will pay all fees and
expenses related to Southern Union Financing and the offering of
the Trust Securities. See "Description of the Subordinated Debt
Securities -- Miscellaneous."
The rights of the holders of the Preferred Securities, including
economic rights, rights to information and voting rights, are set
forth in the Declaration, the Delaware Business Trust Act (the
"Trust Act") and the Trust Indenture Act. See "Description of the
Preferred Securities."
INVESTMENT CONSIDERATIONS
Prospective purchasers of Preferred Securities should carefully
review the information contained elsewhere in this Prospectus Sup-
plement and in the accompanying Prospectus and should particularly
consider the following matters.
Ranking of Subordinate Obligations Under the Guarantee, and
Subordinated Debt Securities
Southern Union's obligations under the Guarantee are subordinate
and junior in right of payment to all liabilities of Southern Union
and pari passu with the most senior preferred stock issued, from
time to time, if any, by Southern Union. The obligations of
Southern Union under the Subordinated Debt Securities are subordi-
nate and junior in right of payment to all present and future
Senior Indebtedness of Southern Union and pari passu with obliga-
tions to or rights of Southern Union's other general unsecured
creditors. As of December 31, 1994, Senior Indebtedness aggregated
approximately $475 million. There are no terms in the Preferred
Securities, the Subordinated Debt Securities or the Guarantee that
limit Southern Union's ability to incur additional indebtedness,
including indebtedness that ranks senior to the Subordinated Debt
Securities and the Guarantee. See "Description of the Guarantees
- -- Status of the Guarantees" and "Particular Terms of the Subordi-
nated Debt Securities -- Subordination" in the accompanying
Prospectus, and "Description of the Subordinated Debt Securities --
Subordination" herein.
Rights Under the Guarantee
The Guarantee will be qualified as an indenture under the Trust
Indenture Act. Wilmington Trust Company will act as indenture
trustee under the Guarantee for the purposes of compliance with the
Trust Indenture Act (the "Guarantee Trustee"). The Guarantee
Trustee will hold the Guarantee for the benefit of the holders of
the Preferred Securities.
The Guarantee guarantees to the holders of the Preferred Securities
the payment of (i) any accrued and unpaid distributions that are
required to be paid on the Preferred Securities, to the extent
Southern Union Financing has funds available therefor, (ii) the
Redemption Price, including all accrued and unpaid distributions
with respect to Preferred Securities called for redemption by
Southern Union Financing, to the extent Southern Union Financing
has funds available therefor, and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of Southern
Union Financing (other than in connection with the distribution of
Subordinated Debt Securities to the holders of Preferred Securities
or a redemption of all the Preferred Securities), the lesser of (a)
the aggregate of the liquidation amount and all accrued and unpaid
distributions on the Preferred Securities to the date of the pay-
ment to the extent Southern Union Financing has funds available
therefor or (b) the amount of assets of Southern Union Financing
remaining available for distribution to holders of the Preferred
Securities in liquidation of Southern Union Financing. The holders
of a majority in liquidation amount of the Preferred Securities
have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Guarantee Trustee or
to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee. If the Guarantee Trustee
fails to enforce the Guarantee, any holder of Preferred Securities
may, after a period of 30 days has elapsed from such holder's
written request to the Guarantee Trustee to enforce the Guarantee,
institute a legal proceeding directly against Southern Union to
enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against Southern Union
Financing, the Guarantee Trustee or any other person or entity.
If Southern Union were to default on its obligation to pay amounts
payable on the Subordinated Debt Securities, Southern Union
Financing would lack available funds for the payment of distribu-
tions or amounts payable on redemption of the Preferred Securities
or otherwise, and, in such event, holders of the Preferred
Securities would not be able to rely upon the Guarantee for payment
of such amounts. Instead, holders of the Preferred Securities
would rely on the enforcement by the Property Trustee of its
rights as registered holder of the Subordinated Debt Securities
against Southern Union pursuant to the terms of the Subordinated
Debt Securities and may also vote to appoint a Special Regular
Trustee who shall have the same rights, powers and privileges as
the Regular Trustees. See "Description of the Guarantees" and
"Particular Terms of the Subordinated Debt Securities" in the
accompanying Prospectus. The Declaration provides that each holder
of Preferred Securities, by acceptance thereof, agrees to the pro-
visions of the Guarantee, including the subordination provisions
thereof, and the Subordinated Debt Securities Indenture.
Enforcement of Certain Rights by Holders of Preferred Securities
If (i) Southern Union fails to pay distributions in full on the
Preferred Securities for six consecutive quarterly distribution
periods or (ii) a Declaration Event of Default (as defined herein)
occurs and is continuing, then the holders of Preferred Securities
would rely on the enforcement by the Property Trustee of its rights
as a holder of the Subordinated Debt Securities against Southern
Union. In addition, the holders of a majority in aggregate
liquidation amount of the Preferred Securities will have the right
to direct the time, method, and place of conducting any proceeding
for any remedy available to the Property Trustee or to direct the
exercise of any trust or power conferred upon the Property Trustee
under the Declaration, including the right to direct the Property
Trustee to exercise the remedies available to it as a holder of the
Subordinated Debt Securities. If the Property Trustee fails to
enforce its rights under the Subordinated Debt Securities, a holder
of Preferred Securities may, after a period of 30 days has elapsed
from such holder's written request to the Property Trustee to
enforce such rights, institute a legal proceeding directly against
Southern Union to enforce the Property Trustee's rights under the
Subordinated Debt Securities without first instituting any legal
proceeding against the Property Trustee or any other person or
entity. Upon the occurrence of any of the events described in
clauses (i) or (ii) above, the holders of the Preferred Securities
also will be entitled, by majority vote, to appoint a Special
Regular Trustee, who shall have the same rights, powers and
privileges as the other Regular Trustees.
Option to Extend Interest Payment Period
Southern Union has the right under the Indenture (as such term is
defined in "Description of Subordinated Debt Securities" herein, to
defer payments of interest on the Subordinated Debt Securities by
extending the interest payment period at any time, and from time to
time, on the Subordinated Debt Securities. As a consequence of
such an extension, quarterly distributions on the Preferred Securi-
ties would be deferred (but despite such deferral would continue to
accrue with interest thereon compounded quarterly) by Southern
Union Financing during any such extended interest payment period.
Such right to extend the interest payment period for the Subordi-
nated Debt Securities is limited to a period not exceeding 20
consecutive quarters. In the event that Southern Union exercises
this right to defer interest payments, then (a) Southern Union
shall not and shall cause any subsidiary of Southern Union that
is not a wholly-owned subsidiary of Southern Union not to declare
or pay dividends on, or make a distribution with respect to, or
redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock or the capital stock of any
such subsidiary and (b) Southern Union shall not make any pay-
ment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by Southern
Union that rank pari passu with or junior to the Subordinated
Debt Securities; provided, however, that restriction (a)
above does not apply to any stock dividends paid by Southern
Union, or any of its subsidiaries, where the dividend stock
is the same stock as that on which the dividend is being paid.
Prior to the termination of any such extension period, Southern
Union may further extend the interest payment period; provided
that, such Extension Period, together with all such previous
and further extensions thereof, may not exceed 20 consecutive
quarters. Upon the termination of any Extension Period and the
payment of all amounts then due, Southern Union may commence a
new Extension Period, subject to the above requirements. See
"Description of the Preferred Securities -- Distributions" and
"Description of the Subordinated Debt Securities -- Option to
Extend Interest Payment Period."
Should Southern Union exercise its right to defer payments of
interest by extending the interest payment period, each holder of
Preferred Securities will continue to accrue income (as original
issue discount) in respect of the deferred interest allocable to
its Preferred Securities for United States federal income tax
purposes, which will be allocated but not distributed, to holders
of record of Preferred Securities. As a result, each such holder
of Preferred Securities will recognize income for United States
federal income tax purposes in advance of the receipt of cash and
will not receive the cash from Southern Union Financing related to
such income if such holder disposes of its Preferred Securities
prior to the record date for the date on which distributions of
such amounts are made. Southern Union has no current intention of
exercising its right to defer payments of interest by extending the
interest payment period on the Subordinated Debt Securities. How-
ever, should Southern Union determine to exercise such right in
the future, the market price of the Preferred Securities is likely
to be affected. A holder that disposes of its Preferred Securities
during an Extension Period, therefore, might not receive the same
return on its investment as a holder that continues to hold its
Preferred Securities. In addition, as a result of the existence of
Southern Union's right to defer interest payments, the market price
of the Preferred Securities (which represent an undivided bene-
ficial interest in the Subordinated Debt Securities) may be more
volatile than other securities on which original issue discount
accrues that do not have such rights. See "United States Federal
Income Taxation -- Original Issue Discount."
Tax Event Redemption or Distribution
Upon the occurrence of a Tax Event, Southern Union Financing shall
be dissolved, except in the limited circumstance described below,
with the result that the Subordinated Debt Securities would be dis-
tributed to the holders of the Trust Securities in connection with
the liquidation of Southern Union Financing. In certain circum-
stances, Southern Union shall have the right to redeem the Subordi-
nated Debt Securities, in whole or in part in lieu of a
distribution of the Subordinated Debt Securities by Southern Union
Financing; in which event Southern Union Financing will redeem the
Trust Securities on a pro rata basis to the same extent as the
Subordinated Debt Securities are redeemed by Southern Union. See
"Description of the Preferred Securities -- Tax Event Redemption or
Distribution."
Under current United States federal income tax law, a distribution
of Subordinated Debt Securities upon the dissolution of Southern
Union Financing would not be a taxable event to holders of the Pre-
ferred Securities. Upon occurrence of a Tax Event, however, a dis-
solution of Southern Union Financing in which holders of the
Preferred Securities receive cash would be a taxable event to such
holders. See "United States Federal Income Taxation -- Receipt of
Subordinated Debt Securities or Cash Upon Liquidation of Southern
Union Financing."
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debt Securities that may be distri-
buted in exchange for Preferred Securities if a dissolution or
liquidation of Southern Union Financing were to occur.
Accordingly, the Preferred Securities that an investor may pur-
chase, whether pursuant to the offer made hereby or in the
secondary market, or the Subordinated Debt Securities that a holder
of Preferred Securities may receive on dissolution and liquidation
of Southern Union Financing, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered
hereby. Because holders of Preferred Securities may receive Sub-
ordinated Debt Securities upon the occurrence of a Tax Event,
prospective purchasers of Preferred Securities are also making an
investment decision with regard to the Subordinated Debt Securities
and should carefully review all the information regarding the Sub-
ordinated Debt Securities contained herein and in the accompanying
Prospectus. See "Description of the Preferred Securities -- Tax
Event Redemption or Distribution" and "Description of the Subordi-
nated Debt Securities -- General."
Limited Voting Rights
Holders of Preferred Securities will have limited voting rights
and, except for the rights of holders of Preferred Securities to
appoint a Special Regular Trustee upon the occurrence of certain
events described herein, will not be entitled to vote to appoint,
remove or replace, or to increase or decrease the number of,
Southern Union Trustees, which voting rights are vested
exclusively in the holder of the Common Securities.
Trading Price
The Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest with respect to
the underlying Subordinated Debt Securities. A holder who disposes
of his Preferred Securities between record dates for payments of
distributions thereon will be required to include accrued but
unpaid interest on the Subordinated Debt Securities through the
date of disposition in income as ordinary income (i.e., OID), and
to add such amount to his adjusted tax basis in his pro rata share
of the underlying Subordinated Debt Securities deemed disposed of.
To the extent the selling price is less than the holder's adjusted
tax basis (which will include, in the form of OID, all accrued but
unpaid interest), a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax pur-
poses. See "United States Federal Income Taxation -- Original
Issue Discount" and "Sales of Preferred Securities."
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed
charges for Southern Union on an historical basis for the year
ended June 30, 1994, and each of the four years in the period ended
December 31, 1993, and for the nine-month and twelve-month periods
ended March 31, 1995. Such ratio is also presented on a pro forma
basis for the year ended June 30, 1994. For the purpose of calcu-
lating such ratios, "earnings" consist of income from continuing
operations before income taxes and "fixed charges" consist of
interest expense, amortization of debt discount or premium and an
estimate of interest implicit in rentals.
Twelve Nine
Months Months Year
Ended Ended Ended
March 31, March 31, June 30, Year Ended December 31,
_______________________
1994 1994 1994(a) 1993 1992 1991 1990
________ ________ ________ ____ ____ ____ ____
Ratio of
Earnings to
Fixed
Charges. . . . 1.45 1.84 1.49 1.76 1.77 1.82 1.10
==== ==== ==== ==== ==== ==== ====
Pro Forma -
Ratio of
Earnings to
Fixed
Charges(b) . . 1.39
====
___________________________________
(a) During 1994, the Company changed its fiscal year-end from
December 31 to June 30.
(b) This pro forma ratio gives effect to an increase in out-
standing debt, as of the beginning of the period presented,
primarily as a result of the January 31, 1994 acquisition of
Missouri Gas Energy, which was financed through the sale of
$475 million of 7.60% Senior Notes. Those debt proceeds,
along with proceeds of a $50 million common stock rights
offering and working capital from operations, were also used
to retire approximately $105 million of long-term debt. This
ratio also assumes the acquisition of Missouri Gas Energy
occurred as of the beginning of the period presented, as
reflected in the pro forma condensed statement of consolidated
operations included in the 1994 Form 10-K.
CAPITALIZATION OF SOUTHERN UNION AT MARCH 31, 1995
The following table sets forth the unaudited summary capitalization
of Southern Union and its consolidated subsidiaries as of March 31,
1995, and as adjusted to reflect the application of the estimated
net proceeds from the sale of 3,000,000 Preferred Securities. See
"Use of Proceeds" below. The table should be read in conjunction
with Southern Union's consolidated financial statements and notes
thereto and other financial data incorporated by reference herein.
See "Incorporation of Certain Documents by Reference" in the
accompanying Prospectus.
At March 31, 1995
__________________________________
Actual As Adjusted (1)
_________________ _______________
Amount Percent Amount Percent
________ _______ ______ _______
(thousands, except percentages)
Short-term debt(2). . . . . . . $ 18,956 $ 18,956
======== ========
Long-term debt
Senior notes . . . . . . . . 475,000 397,000
First mortgage bonds
and other. . . . . . . . . 3,062 3,062
________ ________
478,062 67.9% 400,062 57.1%
Company obligated minority
interests in trust holding
subordinated debentures of
Southern Union . . . . . . . -- -- 75,000 10.7
Common stockholders' equity . . 226,136 32.1 226,136 32.2
________ ______ ________ _____
Total Capitalization . . . . $704,198 100.0% $700,198 100.0%
======== ====== ======== =====
________________________________
(1) Adjusted for the sale of $75 million in Preferred Securities
and the application of the estimated net proceeds to repur-
chase senior debt.
(2) Includes long-term debt due within one year and notes payable.
The average outstanding balance on notes payable for the
twelve months ended December 31, 1994, was $18.5 million.
ACCOUNTING TREATMENT
The financial statements of Southern Union Financing will be
reflected in Southern Union's consolidated financial statements
with the Preferred Securities shown as a Company obligated
minority interests in trust holding subordinated debentures of
Southern Union.
USE OF PROCEEDS
All of the proceeds from the sale of the Preferred Securities will
be invested by Southern Union Financing in Subordinated Debt
Securities of Southern Union issued pursuant to the Indenture
therefor described herein and ultimately will be used by Southern
Union for general corporate purposes, which may include capital
expenditures, repurchases of outstanding long-term debt securities,
investments in subsidiaries, working capital, repayment of loans
under bank credit agreements and other business opportunities.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of
the Declaration. The Declaration will be qualified as an indenture
under the Trust Indenture Act. The Property Trustee, the
Wilmington Trust Company, will act as the indenture trustee for
purposes of compliance with the provisions of the Trust Indenture
Act. The terms of the Preferred Securities will include those
stated in the Declaration and those made part of the Declaration by
the Trust Indenture Act. The following summary of the principal
terms and provisions of the Preferred Securities does not purport
to be complete and is subject to, and qualified in its entirety by
reference to, the Declaration, a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus
Supplement is a part, the Trust Act and the Trust Indenture Act.
General
The Declaration authorizes the Regular Trustees to issue on behalf
of Southern Union Financing the Trust Securities, which represent
undivided beneficial interests in the assets of Southern Union
Financing. All of the Common Securities will be owned, directly or
indirectly, by Southern Union. The Common Securities rank pari
passu, and payments will be made thereon on a pro rata basis, with
the Preferred Securities, except that upon the occurrence of a
Declaration Event of Default, the rights of the holders of the
Common Securities to receive payment of periodic distributions and
payments upon liquidation, redemption and otherwise will be subor-
dinated to the rights of the holders of the Preferred Securities.
The Declaration does not permit the issuance by Southern Union
Financing of any securities other than the Trust Securities or the
incurrence of any indebtedness by Southern Union Financing. Pursu-
ant to the Declaration, the Property Trustee will own the Subordi-
nated Debt Securities purchased by Southern Union Financing for the
benefit of the holders of the Trust Securities. The payment of
distributions out of money held by Southern Union Financing, and
payments upon redemption of the Preferred Securities or liquidation
of Southern Union Financing, are guaranteed by Southern Union to
the extent described under "Description of the Guarantees" in the
accompanying Prospectus. The Guarantee will be held by Wilmington
Trust Company, the Guarantee Trustee, for the benefit of the
holders of the Preferred Securities. The Guarantee does not cover
payment of distributions when Southern Union Financing does not
have sufficient available funds to pay such distributions. In such
event, the remedy of a holder of Preferred Securities is to vote to
appoint a Special Regular Trustee and to direct the Property
Trustee to enforce the Property Trustees rights under the Subordi-
nated Debt Securities. See "Description of the Preferred Securi-
ties -- Voting Rights."
Distributions
Distributions on the Preferred Securities will be fixed at a rate
per annum of ____% of the stated liquidation amount of $25 per
Preferred Security. Distributions in arrears for more than one
quarter will bear interest thereon at the rate per annum of ____%
thereof compounded quarterly. The term "distribution" as used
herein includes any such interest payable unless otherwise stated.
The amount of distributions payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months.
Distributions on the Preferred Securities will be cumulative, will
accrue from _______________________, and will be payable quarterly
in arrears on March 31, June 30, September 30 and December 31 of
each year, commencing __________________, when, as and if available
for payment, distributions will be made by the Property Trustee,
except as otherwise described below.
Southern Union has the right under the Indenture to defer payments
of interest on the Subordinated Debt Securities by extending the
interest payment period from time to time on the Subordinated Debt
Securities, which, if exercised, would defer quarterly distribu-
tions on the Preferred Securities (though such distributions would
continue to accrue with interest since interest would continue to
accrue on the Subordinated Debt Securities) during any such
extended interest payment period. Such right to extend the
interest payment period for the Subordinated Debt Securities is
limited to a period not exceeding 20 consecutive quarters. In the
event that Southern Union exercises this right, then (a) Southern
Union shall not, and shall cause any subsidiary of Southern Union
that is not a wholly-owned subsidiary of Southern Union not to,
declare or pay dividends on, make distributions with respect to, or
redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock or capital stock of any such
subsidiary and (b) Southern Union shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by Southern Union that rank pari
passu with or junior to such Subordinated Debt Securities; pro-
vided, however, that, the foregoing restriction (a) does not apply
to any stock dividends paid by Southern Union, or any of its
subsidiaries, where the dividend stock is the same stock as that
on which the dividend is being paid. Prior to the termination of
any such Extension Period, Southern Union may further extend the
interest payment period; provided that, such Extension Period,
together with all such previous and further extensions thereof,
may not exceed 20 consecutive quarters. Upon the termination of
any Extension Period and the payment of all amounts then due,
Southern Union may select a new Extension Period, subject to the
above requirements. See "Description of the Subordinated Debt
Securities -- Interest" and "-- Option to Extend Interest Pay-
ment Period." If distributions are deferred, the deferred
distributions and accrued interest thereon shall be paid to
holders of record of the Preferred Securities as they appear on
the books and records of Southern Union Financing on the record
date next following the termination of such deferral period.
Distributions on the Preferred Securities must be paid on the dates
payable to the extent that Southern Union Financing has funds
available for the payment of such distributions in the Property
Account. Southern Union Financing's funds available for distribu-
tion to the holders of the Preferred Securities will be limited to
payments received from Southern Union on the Subordinated Debt
Securities. See "Description of the Subordinated Debt Securities."
The payment of distributions out of moneys held by Southern Union
Financing is guaranteed by Southern Union to the extent set forth
under "Description of the Guarantees" in the accompanying
Prospectus.
Distributions on the Preferred Securities will be payable to the
holders thereof as they appear on the books and records of Southern
Union Financing on the relevant record dates, which, as long as the
Preferred Securities remain in book-entry only form, will be one
Business Day prior to the relevant payment dates. Such distribu-
tions will be paid through the Property Trustee who will hold
amounts received in respect of the Subordinated Debt Securities
in the Property Account for the benefit of the holders of the Trust
Securities. Subject to any applicable laws and regulations and the
provisions of the Declaration, each such payment will be made as
described under "Book-Entry Only Issuance -- The Depository Trust
Company" below. In the event that the Preferred Securities do not
continue to remain in book-entry only form, the Regular Trustees
shall have the right to select relevant record dates, which shall
be more than one Business Day prior to the relevant payment dates.
In the event that any date on which distributions are to be made on
the Preferred Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next suc-
ceeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment
shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such record date.
A "Business Day" shall mean any day other than Saturday, Sunday or
any other day on which banking institutions in the City of New York
(in the state of New York) are permitted or required by any appli-
cable law to close.
Mandatory Redemption
The Subordinated Debt Securities will mature on ________________,
2025, unless the maturity date is extended at the option of
Southern Union (provided certain financial covenants are met), and
may be redeemed, in whole or in part, at any time on or after
________________, 2000, or at any time in certain circumstances
upon the occurrence of a Tax Event. Upon the repayment of the
Subordinated Debt Securities, whether at maturity or upon redemp-
tion, the proceeds from such repayment or payment shall simul-
taneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the
Subordinated Debt Securities so repaid or redeemed at the Redemp-
tion Price; provided that, holders of Trust Securities shall be
given not less than 30 nor more than 60 days notice of such redemp-
tion. See "Description of the Subordinated Debt Securities --
Optional Redemption." In the event that fewer than all of the
outstanding Preferred Securities are to be redeemed, the Preferred
Securities will be redeemed pro rata as described under "Book-Entry
Only Issuance -- the Depository Trust Company" below.
Tax Event Redemption or Distribution
"Tax Event" means that the Regular Trustees shall have received an
opinion of a nationally recognized independent tax counsel experi-
enced in such matters (a "Dissolution Tax Opinion") to the effect
that, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or
taxing authority thereof or therein or (b) any amendment to or
change in an interpretation or application of such laws or
regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation
and the publication of any judicial decision or regulatory deter-
mination on or after such date), there is more than an insubstan-
tial risk that (i) Southern Union Financing would be subject to
United States federal income tax with respect to income accrued or
received on the Subordinated Debt Securities, (ii) interest payable
to Southern Union Financing on the Subordinated Debt Securities
would not be deductible by Southern Union for United States federal
income tax purposes or (iii) Southern Union Financing would be
subject to more than a de minimis amount of other taxes, duties or
other governmental charges, which change or amendment becomes
effective on or after the date of this Prospectus Supplement.
If, at any time, a Tax Event (as defined above) shall occur and be
continuing, Southern Union Financing shall, except in the limited
circumstances described below, be dissolved with the result that
the Subordinated Debt Securities with an aggregate principal amount
equal to the aggregate stated liquidation amount of, with an
interest rate identical to the distribution rate of, and accrued
and unpaid interest equal to accrued and unpaid distributions
on, the Trust Securities, would be distributed to the holders of
the Trust Securities in liquidation of such holders' interests in
Southern Union Financing on a pro rata basis within 90 days fol-
lowing the occurrence of such Tax Event; provided that, such
dissolution and distribution shall be conditioned on (i) the
Regular Trustees receipt of an opinion of nationally recognized
independent tax counsel experienced in such matters (a "No
Recognition Opinion"), which opinion may rely on published revenue
rulings of the Internal Revenue Service, to the effect that the
holders of the Trust Securities will not recognize any gain or loss
for United States federal income tax purposes as a result of such
dissolution and distribution of Subordinated Debt Securities, and
(ii) Southern Union being unable to avoid such Tax Event within
such 90 day period by taking some ministerial action or pursuing
some other reasonable measure that will have no adverse effect on
Southern Union Financing, Southern Union or the holders of the
Trust Securities. Furthermore, if after receipt of a Dissolution
Tax Opinion by the Regular Trustees (i) Southern Union has received
an opinion (a "Redemption Tax Opinion") of nationally recognized
independent tax counsel experienced in such matters that, as a
result of a Tax Event, there is more than an insubstantial risk
that Southern Union would be precluded from deducting the interest
on the Subordinated Debt Securities for United States federal
income tax purposes, even after the Subordinated Debt Securities
were distributed to the holders of Trust Securities in liquidation
of such holders' interests in Southern Union Financing as described
above, or (ii) the Regular Trustees shall have been informed by
such tax counsel that it cannot deliver a No Recognition Opinion to
Southern Union Financing, Southern Union shall have the right, upon
not less than 30 nor more than 60 days notice, to redeem the Subor-
dinated Debt Securities, in whole or in part, for cash within 90
days following the occurrence of such Tax Event, and, following
such redemption, Trust Securities with an aggregate liquidation
amount equal to the aggregate principal amount of the Subordinated
Debt Securities so redeemed shall be redeemed by Southern Union
Financing at the Redemption Price on a pro rata basis; provided,
however, that, if at the time there is available to Southern Union
or Southern Union Financing the opportunity to eliminate, within
such 90 day period, the Tax Event by taking some ministerial
action, such as filing a form or making an election or pursuing
some other similar reasonable measure that has no adverse effect on
Southern Union Financing, Southern Union or the holders of the
Trust Securities, Southern Union or Southern Union Financing will
pursue such measure in lieu of redemption.
If the Subordinated Debt Securities are distributed to the holders
of the Preferred Securities, Southern Union will use its best
efforts to cause the Subordinated Debt Securities to be listed on
the New York Stock Exchange or on such other exchange as the Pre-
ferred Securities are then listed.
After the date for any distribution of Subordinated Debt Securities
upon dissolution of Southern Union Financing, (i) the Preferred
Securities will no longer be deemed to be outstanding, (ii) the
Depositary or its nominee, as the record holder of the Preferred
Securities, will receive a registered global certificate or cer-
tificates representing the Subordinated Debt Securities to be
delivered upon such distribution, and (iii) any certificates repre-
senting Preferred Securities not held by the Depositary or its
nominee will be deemed to represent Subordinated Debt Securities
having an aggregate principal amount equal to the aggregate stated
liquidation amount of, with an interest rate identical to the
distribution rate of, and accrued and unpaid interest equal to
accrued and unpaid distributions on such Preferred Securities until
such certificates are presented to Southern Union or its agent for
transfer or reissuance.
There can be no assurance as to the market prices for either the
Preferred Securities or the Subordinated Debt Securities that may
be distributed in exchange for the Preferred Securities if a disso-
lution and liquidation of Southern Union Financing were to occur.
Accordingly, the Preferred Securities that an investor may pur-
chase, whether pursuant to the offer made hereby or in the
secondary market, or the Subordinated Debt Securities that an
investor may receive if a dissolution and liquidation of Southern
Union Financing were to occur, may trade at a discount to the
price that the investor paid to purchase the Preferred Securities
offered hereby.
Redemption Procedures
Southern Union Financing may not redeem fewer than all of the out-
standing Preferred Securities unless all accrued and unpaid distri-
butions have been paid on all Preferred Securities for all
quarterly distribution periods terminating on or prior to the date
of redemption.
If Southern Union Financing gives a notice of redemption in respect
of Preferred Securities (which notice will be irrevocable), then,
by 12:00 noon, New York City time, on the redemption date, and if
Southern Union has paid to the Property Trustee a sufficient amount
of cash in connection with the related redemption or maturity of
the Subordinated Debt Securities, then Southern Union Financing
will irrevocably deposit with the Depositary funds sufficient to
pay the applicable Redemption Price and will give the Depositary
irrevocable instructions and authority to pay the Redemption Price
to the holders of the Preferred Securities. See "Book-Entry Only
Issuance -- The Depository Trust Company." If notice of redemption
shall have been given and funds deposited as required, then, imme-
diately prior to the close of business on the date of such deposit,
distributions will cease to accrue and all rights of holders of
such Preferred Securities so called for redemption will cease,
except the right of the holders of such Preferred Securities to
receive the Redemption Price but without interest on such Redemp-
tion Price. In the event that any date fixed for redemption of
Preferred Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next suc-
ceeding day that is a Business Day (without any interest or other
payment in respect of any such delay), except that, if such Busi-
ness Day falls in the next calendar year, such payment will be made
on the immediately preceding Business Day. In the event that pay-
ment of the Redemption Price in respect of Preferred Securities is
improperly withheld or refused and not paid either by Southern
Union Financing, or by Southern Union pursuant to the Guarantee,
distributions on such Preferred Securities will continue to accrue
at the then applicable rate from the original redemption date to
the date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calcu-
lating the Redemption Price.
In the event that fewer than all of the outstanding Preferred
Securities are to be redeemed, the Preferred Securities will be
redeemed pro rata as described below under "Book-Entry Only
Issuance -- The Depository Trust Company."
Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), Southern Union
or its subsidiaries may at any time, and from time to time, pur-
purchase outstanding Preferred Securities by tender, in the open
market or by private agreement.
Liquidation Distribution Upon Dissolution
In the event of any voluntary or involuntary liquidation, dissolu-
tion, winding-up or termination of Southern Union Financing (each
a "Liquidation"), the then holders of the Preferred Securities will
be entitled to receive out of the assets of Southern Union
Financing, after satisfaction of liabilities to creditors, distri-
butions in an amount equal to the aggregate of the stated liquida-
tion amount of $25 per Preferred Security plus accrued and unpaid
distributions thereon to the date of payment (the "Liquidation
Distribution"), unless, in connection with such Liquidation, Sub-
ordinated Debt Securities in an aggregate stated principal
amount equal to the aggregate stated liquidation amount of, with
an interest rate identical to the distribution rate of, and
accrued and unpaid interest equal to accrued and unpaid distribu-
tions on, the Preferred Securities have been distributed on a
pro rata basis to the holders of the Preferred Securities.
If, upon any such Liquidation, the Liquidation Distribution can be
paid only in part because Southern Union Financing has insufficient
assets available to pay in full the aggregate Liquidation Distribu-
tion, then the amounts payable directly by Southern Union Financing
on the Preferred Securities shall be paid on a pro rata basis. The
holders of the Common Securities will be entitled to receive dis
tributions upon any such dissolution pro rata with the holders of
the Preferred Securities, except that if a Declaration Event of
Default has occurred and is continuing, the Preferred Securities
shall have a preference over the Common Securities with regard to
such distributions.
Pursuant to the Declaration, Southern Union Financing shall
terminate (i) on __________________, 2050, the expiration of the
term of Southern Union Financing, (ii) upon the bankruptcy of
Southern Union or the holder of the Common Securities, (iii) upon
the filing of a certificate of dissolution or its equivalent with
respect to the holder of the Common Securities or Southern Union,
the filing of a certificate of cancellation with respect to
Southern Union Financing, or the revocation of the charter of the
holder of the Common Securities or Southern Union and the expira-
tion of 90 days after the date of revocation without a reinstate-
ment thereof, (iv) upon the distribution of Subordinated Debt
Securities upon the occurrence of a Tax Event, (v) upon the entry
of a decree of a judicial dissolution of the holder of the Common
Securities, Southern Union or Southern Union Financing, or (vi)
upon the redemption of all the Trust Securities.
Declaration Events of Default
An event of default under the Indenture (an "Indenture Event of
Default") constitutes an event of default under the Declaration
with respect to the Trust Securities (a "Declaration Event of
Default"), provided that, pursuant to the Declaration, the holder
of the Common Securities will be deemed to have waived any Decla-
ration Event of Default with respect to the Common Securities
until all Declaration Events of Default with respect to the
Preferred Securities have been cured, waived or otherwise elimi-
nated. Until such Declaration Events of Default with respect
to the Preferred Securities have been so cured, waived, or
otherwise eliminated, the Property Trustee will be deemed to
be acting solely on behalf of the holders of the Preferred
Securities and only the holders of the Preferred Securities
will have the right to direct the Property Trustee with respect
to certain matters under the Declaration, and therefore the
Indenture.
Upon the occurrence of a Declaration Event of Default, the Property
Trustee as the sole holder of the Subordinated Debt Securities will
have the right under the Indenture to declare the principal of and
interest on the Subordinated Debt Securities to be immediately due
and payable. Southern Union and Southern Union Financing are each
required to file annually with the Property Trustee an officer's
certificate as to its compliance with all conditions and
covenants under the Declaration.
Voting Rights
Except as described herein, under the Trust Act, the Trust Inden-
Indenture Act and under "Description of the Guarantees --
Amendments and Assignment" in the accompanying Prospectus, and as
otherwise required by law and the Declaration, the holders of the
Preferred Securities will have no voting rights.
If (i) Southern Union Financing fails to pay distributions in full
on the Preferred Securities for six (6) consecutive quarterly
distribution periods or (ii) a Declaration Event of Default occurs
and is continuing (each an "Appointment Event"), then the holders
of the Preferred Securities, acting as a single class, will be
entitled by the majority vote of such holders to appoint a Special
Regular Trustee. For purposes of determining whether Southern
Union Financing has failed to pay distributions in full for six (6)
consecutive quarterly distribution periods, distributions shall be
deemed to remain in arrears, notwithstanding any payments in
respect thereof, until full cumulative distributions have been or
contemporaneously are paid with respect to all quarterly distribu-
tion periods terminating on or prior to the date of payment of such
cumulative distributions. Any holder of Preferred Securities
(other than Southern Union or any of its affiliates) shall be
entitled to nominate any person to be appointed as Special Regular
Trustee. Not later than 30 days after such right to appoint a
Special Regular Trustee arises, the Regular Trustees shall convene
a meeting of the holders of Preferred Securities for the purpose of
appointing a Special Regular Trustee. If the Regular Trustees fail
to convene such meeting within such 30-day period, the holders of
not less than 10% of the aggregate stated liquidation amount of the
outstanding Preferred Securities will be entitled to convene such
meeting. The provisions of the Declaration relating to the con-
vening and conduct of the meetings of the holders will apply with
respect to any such meeting. Any Special Regular Trustee so
appointed shall cease to be a Special Regular Trustee if the
Appointment Event pursuant to which the Special Regular Trustee was
appointed and all other Appointment Events cease to be continuing.
Notwithstanding the appointment of any such Special Regular
Trustee, Southern Union shall retain all rights under the Inden-
ture, including the right to defer payments of interest by
extending the interest payment period as provided under "Des-
cription of the Subordinated Debt Securities -- Option to Extend
Interest Payment Period". If such an extension occurs, there will
be no Indenture Event of Default and, consequently, no Declaration
Event of Default for failure to make any scheduled interest payment
during the Extension Period on the date originally scheduled.
Subject to the requirement of the Property Trustee obtaining a tax
opinion in certain circumstances set forth in the last sentence of
this paragraph, the holders of a majority in aggregate liquidation
amount of the Preferred Securities, have the right to (i) direct
the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or direct the exercise of
any trust or power conferred upon the Property Trustee under the
Declaration including the right to direct the Property Trustee, as
holder of the Subordinated Debt Securities, to (i) exercise the
remedies available under the Indenture with respect to the Sub-
ordinated Debt Securities, (ii) waive any past Indenture
Event of Default that is waivable under Section 513 of the Base
Indenture (as defined herein), or (iii) exercise any right to
rescind or annul a declaration that the principal of all the
Subordinated Debt Securities shall be due and payable; provided,
however, that, where a consent or action under the Indenture
would require the consent or act of more than a majority of the
holders (a "Super-Majority") affected thereby, only the holders
of at least such Super-Majority of the Preferred Securities may
direct the Property Trustee to give such consent or take such
action. If the Property Trustee fails to enforce its rights
under the Subordinated Debt Securities, a record holder of
Preferred Securities may, after a period of 30 days has
elapsed from such holder's written request to the Property
Trustee to enforce such rights, institute a legal proceeding
directly against Southern Union to enforce the Property
Trustee's rights under the Subordinated Debt Securities
without first instituting any legal proceeding against the
Property Trustee or any other person or entity. The Property
Trustee shall notify all holders of the Preferred Securities
of any notice of default received from the Indenture Trustee
with respect to the Subordinated Debt Securities. Such notice
shall state that such Indenture Event of Default also con-
stitutes a Declaration Event of Default. Except with respect
to directing the time, method and place of conducting a proceeding
for a remedy, the Property Trustee shall not take any of the
actions described in clauses (i), (ii) or (iii) above unless the
Property Trustee has obtained an opinion of tax counsel to the
effect that, as a result of such action, Southern Union Financing
will not fail to be classified as a grantor trust for United States
federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of
the Subordinated Debt Securities, is required under the Indenture
with respect to any amendment, modification or termination of the
Indenture or the Subordinated Debt Securities, the Property Trustee
shall request the direction of the holders of the Trust Securities
with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification or termi-
nation as directed by a majority in liquidation amount of the Trust
Securities voting together as a single class; provided, however,
_________________
that where a consent under the Indenture would require the consent
of a Super Majority, the Property Trustee may only give such con-
sent at the direction of the holder of at least the proportion in
liquidation amount of the Trust Securities which the relevant Super
Majority represents of the aggregate principal amount of the Subor-
dinated Debt Securities outstanding. The Property Trustee shall
be under no obligation to take any such action in accordance with
the directions of the holders of the Trust Securities unless the
Property Trustee has obtained an opinion of tax counsel to the
affect that for the purposes of United States federal income tax
Southern Union Financing will not be classified as other than a
grantor trust.
A waiver of an Indenture Event of Default will constitute a waiver
of the corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securi-
ties may be given at a separate meeting of holders of Preferred
Securities convened for such purpose, at a meeting of all of the
holders of Trust Securities or pursuant to written consent. The
Regular Trustees will cause a notice of any meeting at which
holders of Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to
be taken, to be mailed to each holder of record of Preferred
Securities. Each such notice will include a statement setting
forth the following information: (i) the date of such meeting or
the date by which such action is to be taken; (ii) a description
of any resolution proposed for adoption at such meeting on which
such holders are entitled to vote or of such matter upon which
written consent is sought; and (iii) instructions for the delivery
of proxies or consents. No vote or consent of the holders of Pre-
ferred Securities will be required for Southern Union Financing to
redeem and cancel Preferred Securities or distribute Subordinated
Debt Securities in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled
to vote or consent under any of the circumstances described above,
any of the Preferred Securities that are owned at such time by
Southern Union or any entity directly or indirectly controlling or
controlled by, or under direct or indirect common control with,
Southern Union, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Pre-
ferred Securities were not outstanding.
The procedures by which holders of Preferred Securities may exer-
rcise their voting rights are described below. See "-- Book-Entry
Only Issuance -- The Depository Trust Company" below.
Except in the limited circumstances described above, in connection
with the appointment of a Special Regular Trustee, holders of the
Preferred Securities will have no rights to appoint or remove the
Southern Union Trustees, who may be appointed, removed or replaced
solely by Southern Union as the indirect or direct holder of all of
the Common Securities.
Modification of the Declaration
The Declaration may be modified and amended if approved by a
majority of the Regular Trustees (and in certain circumstances the
Property Trustee), provided that, if any proposed amendment pro-
vides for, or the Regular Trustees otherwise propose to effect,
(i) any action that would adversely affect the powers,
preferences or special rights of the Trust Securities, whether by
way of amendment to the Declaration or otherwise, or (ii) the dis-
solution, winding-up or termination of Southern Union Financing
other than pursuant to the terms of the Declaration, then the
holders of the Trust Securities voting together as a single class
will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the
approval of at least 66 2/3% in liquidation amount of the Trust
Securities affected thereby; provided that, the rights of holders
of Preferred Securities to appoint a Special Regular Trustee
shall not be amended without the consent of each holder of
Preferred Securities; provided further that, if any amendment or
proposal referred to in clause (i) above would adversely affect
only the Preferred Securities or the Common Securities, then
only the affected class will be entitled to vote on such amend-
ment or proposal and such amendment or proposal shall not be
effective except with the approval of 66 2/3% in liquidation
amount of such class of Securities.
Notwithstanding the foregoing, no amendment or modification may be
made to the Declaration if such amendment or modification would (i)
cause Southern Union Financing to be classified for purposes of
United States federal income taxation as other than a grantor
trust, (ii) reduce or otherwise adversely affect the powers of the
Property Trustee or (iii) cause Southern Union Financing to be deemed
an "investment company" which is required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act").
Mergers, Consolidations or Amalgamations
Southern Union Financing may not consolidate, amalgamate, merge or
be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety, to any corporation or other
body, except as described below. Southern Union Financing may,
with the consent of a majority of the Regular Trustees and without
the consent of the holders of the Trust Securities, consolidate,
amalgamate, merge with or into, or be replaced by a trust
organized as such under the laws of any State; provided that, (i)
such successor entity either (x) expressly assumes all of the obli-
gations of Southern Union Financing under the Trust Securities
or (y) substitutes for the Preferred Securities other securities
having substantially the same terms as the Trust Securities (the
"Successor Securities"), so long as the Successor Securities rank
the same as the Trust Securities rank with respect to distributions
and payments upon liquidation, redemption and otherwise, (ii)
Southern Union expressly acknowledges a trustee of such successor
entity possessing the same powers and duties as the Property
Trustee as the holder of the Subordinated Debt Securities, (iii)
the Preferred Securities or any Successor Securities are listed, or
any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or with another
organization on which the Preferred Securities are then listed or
quoted, (iv) such merger, consolidation, amalgamation or replace-
ment does not cause the Preferred Securities (including any
Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation,
amalgamation or replacement does not adversely affect the rights,
preferences and privileges of the holders of the Trust Securities
(including any Successor Securities) in any material respect
(other than with respect to any dilution of the holders' interest
in the new entity), (vi) such successor entity has a purpose
identical to that of Southern Union Financing, (vii) prior to such
merger, consolidation, amalgamation or replacement, Southern Union
has received an opinion of a nationally recognized independent
counsel to Southern Union Financing experienced in such matters to
the effect that, (A) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and
privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new
entity), and (B) following such merger, consolidation, amalgamation
or replacement, neither Southern Union Financing nor such successor
entity will be required to register as an investment company under
the 1940 Act and (viii) Southern Union guarantees the obligations
of such successor entity under the Successor Securities at least to
the extent provided by the Guarantee and the Common Securities
Guarantee. Notwithstanding the foregoing, Southern Union Financing
shall not, except with the consent of holders of 100% in liquida-
tion amount of the Trust Securities, consolidate, amalgamate, merge
with or into, or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or
replace it, if such consolidation, amalgamation, merger or
replacement would cause Southern Union Financing or the Successor
Entity to be classified as other than a grantor trust for United
States federal income tax purposes.
Book-Entry Only Issuance -- The Depository Trust Company
The Depository Trust Company ("DTC") will act as securities
depositary for the Preferred Securities. The Preferred Securities
will be issued only as fully-registered securities registered in
the name of Cede & Co. (DTC's nominee). One or more fully-
registered global Preferred Securities certificates, representing
the total aggregate number of Preferred Securities, will be issued
and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form.
Such laws may impair the ability to transfer beneficial interests
in the global Preferred Securities as represented by a global
certificate.
DTC 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 "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facili-
tates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corpora-
tions and certain other organizations ("Direct Participants").
DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc. (the "New York Stock Exchange"),
the American Stock Exchange, Inc., and the National Association
of Securities Dealers, Inc. Access to the DTC system is also
available to others, such as securities brokers and dealers,
banks and trust companies that clear transactions through or
maintain a direct or indirect custodial relationship with a
Direct Participant either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Partici-
pants are on file with the Securities and Exchange Commission.
Purchases of Preferred Securities within the DTC system must be
made by or through Direct Participants, which will receive a credit
for the Preferred Securities on DTC's records. The ownership
interest of each actual purchaser of each Preferred Security
("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial
Owners are expected to receive written confirmations providing
details of the transactions, as well as periodic statements of
their holdings, from the Direct or Indirect Participants through
which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to
be accomplished by entries made on the books of Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in the Pre-
ferred Securities, except in the event that use of the book-entry
system for the Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities
deposited by Participants with DTC are registered in the name of
DTC's nominee, Cede & Co. The deposit of Preferred Securities with
DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Preferred Securities. DTC's records
reflect only the identity of the Direct Participants to whose
accounts such Preferred Securities are credited, which may or may
not be the Beneficial Owners. The Participants will remain
responsible for keeping account of their holdings on behalf of
their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and
by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements that may be in effect from
time to time.
Redemption notices shall be sent to Cede & Co. If less than all of
the Preferred Securities are being redeemed, DTC will reduce the
amount of the interest of each Direct Participant in such
Preferred Securities in accordance with its procedures.
Although voting with respect to the Preferred Securities is
limited, in those cases where a vote is required, neither DTC nor
Cede & Co. will itself consent or vote with respect to Preferred
Securities. Under its usual procedures, DTC would mail an Omnibus
Proxy to Southern Union Financing as soon as possible after the
record date. The Omnibus Proxy assigns Cede & Co. consenting or
voting rights to those Direct Participants to whose accounts the
Preferred Securities are credited on the record date (identified in
a listing attached to the Omnibus Proxy). Southern Union and
Southern Union Financing believe that the arrangements among DTC,
Direct and Indirect Participants, and Beneficial Owners will enable
the Beneficial Owners to exercise rights equivalent in substance to
the rights that can be directly exercised by a holder of a bene-
beneficial interest in Southern Union Financing.
Distribution payments on the Preferred Securities will be made to
DTC. DTC's practice is to credit Direct Participants' accounts on
the relevant payment date in accordance with their respective
holdings shown on DTC's records unless DTC has reason to believe
that it will not receive payments on such payment date. Payments
by participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securi-
ties held for the account of customers in bearer form or registered
in "street name," and such payments will be the responsibility of
such Participant and not of DTC, Southern Union Financing or
Southern Union, subject to any statutory or regulatory requirements
to the contrary that may be in effect from time to time. Payment
of distributions to DTC is the responsibility of Southern Union
Financing, disbursement of such payments to Direct Participants is
the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners is the responsibility of Direct and Indirect Par-
ticipants.
Except as provided herein, a Beneficial Owner in a global Preferred
Security certificate will not be entitled to receive physical
delivery of Preferred Securities. Accordingly, each Beneficial
Owner must rely on the procedures of DTC to exercise any rights
under the Preferred Securities.
DTC may discontinue providing its services as securities depositary
with respect to the Preferred Securities at any time by giving
reasonable notice to Southern Union Financing. Under such circum-
stances, in the event that a successor securities depositary is not
obtained, Preferred Securities certificates are required to be
printed and delivered. Additionally, the Regular Trustees (with
the consent of Southern Union) may decide to discontinue use of the
system of book-entry transfers through DTC (or any successor
depositary) with respect to the Preferred Securities. In that
event, certificates for the Preferred Securities will be printed
and delivered.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Southern Union and
Southern Union Financing believes to be reliable, but neither
Southern Union nor Southern Union Financing takes responsibility
for the accuracy thereof.
Information Concerning the Property Trustee
The Property Trustee, prior to the occurrence of a default with
respect to the Trust Securities, undertakes to perform only such
duties as are specifically set forth in the Declaration and, after
default, shall exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs.
Subject to such provisions, the Property Trustee is under no obliga-
tion to exercise any of the powers vested in it by the Declaration
at the request of any holder of Preferred Securities, unless
offered reasonable indemnity by such holder against the costs,
expenses and liabilities which might be incurred thereby. The
holders of Preferred Securities will not be required to offer
such indemnity in the event such holders, by exercising their
voting rights, direct the Property Trustee to take any action
following a Declaration Event of Default.
Paying Agent
In the event that the Preferred Securities do not remain in book-
entry only form, the following provisions would apply:
The Property Trustee will act as paying agent, and may designate an
additional or substitute paying agent at any time.
Registration of transfers of Preferred Securities will be effected
without charge by or on behalf of Southern Union Financing, but
upon payment (with the giving of such indemnity as Southern Union
Financing or Southern Union may require) in respect of any tax or
other government charges that may be imposed in relation to it.
Southern Union Financing will not be required to register or cause
to be registered the transfer of Preferred Securities after such
Preferred Securities have been called for redemption.
Governing Law
The Declaration and the Preferred Securities will be governed by,
and construed in accordance with, the internal laws of the States
of Delaware.
Miscellaneous
The Regular Trustees are authorized and directed to operate
Southern Union Financing in such a way so that Southern Union
Financing will not be required to register as an "investment
company" under the 1940 Act or characterized as other than a
grantor trust for United States federal income tax purposes.
Southern Union is authorized and directed to conduct its affairs so
that the Subordinated Debt Securities will be treated as indebted-
ness of Southern Union for United States federal income tax pur-
poses. In this connection, Southern Union and the Regular Trustees
are authorized to take any action, not inconsistent with applicable
law, the certificate of trust of Southern Union Financing or the
certificate of incorporation of Southern Union, that each of
Southern Union and the Regular Trustees determines in its dis-
cretion to be necessary or desirable to achieve such end, as long
as such action does not adversely affect the interests of the
holders of the Preferred Securities or vary the terms thereof.
Holders of the Preferred Securities have no preemptive rights.
DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
Set forth below is a description of the specific terms of the Sub-
ordinated Debt Securities in which Southern Union Financing will
invest the proceeds from the issuance and sale of the Trust
Securities. This description supplements the description of the
general terms and provisions of the Subordinated Debt Securities
set forth in the accompanying Prospectus under the caption
"Particular Terms of the Subordinated Debt Securities." The fol-
following description does not purport to be complete and is sub-
ject to, and is qualified in its entirety by reference to, the
description in the accompanying Prospectus and the Subordinated
Debt Securities Indenture, dated as of ________________, 1995, (the
"Base Indenture") between Southern Union and The Chase Manhattan
Bank, N. A., as Trustee (the "Indenture Trustee"), as supplemented
by a First Supplemental Indenture, dated as of ___________________,
1995 (the Base Indenture, as so supplemented, is hereinafter
referred to as the "Indenture"), the forms of which are filed as
Exhibits to the Registration Statement of which this Prospectus
Supplement and the accompanying Prospectus form a part. Certain
capitalized terms used herein are defined in the Indenture.
Under certain circumstances involving the dissolution of Southern
Union Financing following the occurrence of a Tax Event, Subordi-
nated Debt Securities may be distributed to the holders of the
Trust Securities in liquidation of Southern Union Financing. See
"Description of the Preferred Securities -- Tax Event Redemption or
Distribution."
If the Subordinated Debt Securities are distributed to the holders
of the Preferred Securities, Southern Union will use its best
efforts to have the Subordinated Debt Securities listed on the New
York Stock Exchange or on such other national securities exchange
or similar organization on which the Preferred Securities are then
listed or quoted.
General
The Subordinated Debt Securities will be issued as unsecured debt
under the Indenture. The Subordinated Debt Securities will be
limited in aggregate principal amount to approximately $___________
million, such amount being the sum of the aggregate stated
liquidation of the Preferred Securities and the capital contributed
by Southern Union in exchange for the Common Securities (the
"Southern Union Payment").
The Subordinated Debt Securities are not subject to a sinking fund
provision. The entire principal amount of the Subordinated Debt
Securities will mature and become due and payable, together with
any accrued and unpaid interest thereon including Compound Interest
(as hereinafter defined) and Additional Interest (as hereinafter
defined), if any, on _______________, 2025, subject to the election
of Southern Union to extend the scheduled maturity date of the Sub-
ordinated Debt Securities to a date not later than _______________,
2044, which election is subject to Southern Union's satisfying
certain financial covenants. See " -- Option to Extend Maturity."
If Subordinated Debt Securities are distributed to holders of Pre-
ferred Securities in liquidation of such holders' interests in
Southern Union Financing, such Subordinated Debt Securities will
initially be issued as a Global Security (as defined below). As
described herein, under certain limited circumstances, Subordinated
Debt Securities may be issued in certificated form in exchange for
a Global Security (as defined below). See "Book-Entry and Settle-
ment" below. In the event that Subordinated Debt Securities are
issued in certificated form, such Subordinated Debt Securities will
be in denominations of $25 and integral multiples thereof and may
be transferred or exchanged at the offices described below. Pay-
ments on Subordinated Debt Securities issued as a Global Security
will be made to DTC, a successor depositary or, in the event that
no depositary is used, to a Paying Agent for the Subordinated
Debt Securities. In the event Subordinated Debt Securities are
issued in certificated form, principal and interest will be pay-
able, the transfer of the Subordinated Debt Securities will be
registrable and Subordinated Debt Securities will be exchangeable
for Subordinated Debt Securities of other denominations of a like
aggregate principal amount at the corporate trust office of the
Trustee in Brooklyn, New York; provided that, payment of
interest may be made at the option of Southern Union by check
mailed to the address of the persons entitled thereto.
Subordination
The Indenture provides that the Subordinated Debt Securities are
subordinated and junior in right of payment to all Senior Indebted-
ness of Southern Union. No payment of principal (including redemp-
tion and sinking fund payments), premium, if any, or interest on
the Subordinated Debt Securities may be made (i) if any Senior
Indebtedness of Southern Union is not paid when due, (ii) any
applicable grace period with respect to such default has ended and
such default has not been cured or waived or ceased to exist, or
(iii) if the maturity of any Senior Indebtedness of Southern Union
has been accelerated because of a default. Upon any distribution
of assets of Southern Union to creditors upon any dissolution,
winding-up, liquidation or reorganization, whether voluntary or
involuntary, or in bankruptcy, insolvency, receivership or other
proceedings, all principal, premium, if any, and interest due or to
become due on all Senior Indebtedness of Southern Union must be
paid in full before the holders of Subordinated Debt Securities are
entitled to receive or retain any payment. Upon satisfaction of
all claims of all Senior Indebtedness, then outstanding the rights
of the holders of the Subordinated Debt Securities will be subor-
gated to the rights of the holders of Senior Indebtedness of
Southern Union to receive payments or distributions applicable
to Senior Indebtedness until all amounts owing on the Subordinated
Debt Securities are paid in full.
The term "Senior Indebtedness" means, with respect to Southern
Union, (i) the principal, premium, if any, and interest in respect
of (A) indebtedness of such obligor for money borrowed and (B)
indebtedness evidenced by securities, debentures, bonds or other
similar instruments issued by such obligor including, without
limitation, in the case of Southern Union, all obligations under
its 7.60% Senior Notes due 2024, (ii) all capital lease obligations
of such obligor, (iii) all obligations of such obligor issued or
assumed as the deferred purchase price of property, all conditional
sale obligations of such obligor and all obligations of such
obligor under any title retention agreement (but excluding trade
accounts payable arising in the ordinary course of business), (iv)
all obligations of such obligor for the reimbursement on any letter
of credit, banker's acceptance, security purchase facility or simi-
lar credit transaction, (v) all obligations of the type referred to
in clauses (i) through (iv) above of other persons for the payment
of which such obligor is responsible or liable as obligor,
guarantor or otherwise, and (vi) all obligations of the type
referred to in clauses (i) through (v) above of other persons
secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor), except
for (1) any such indebtedness that is by its terms subordinated to
or pari passu with the Subordinated Debt Securities and (2) any
indebtedness between or among such obligor or its affiliates,
including all other debt securities and guarantees in respect of
those debt securities issued to (a) any other Southern Union Trust
or a trustee of such trust and (b) any other trust, or a trustee
of such trust, partnership or other entity affiliated with
Southern Union that is a financing vehicle of Southern Union (a
"financing entity") in connection with the issuance by such
financing entity of Preferred Securities or other securities that
rank pari passu with, or junior to, the Preferred Securities.
Such Senior Indebtedness shall continue to be Senior Indebtedness
and be entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term
of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued by Southern Union. As of
December 31, 1994, Senior Indebtedness of Southern Union aggregated
approximately $475 million.
Optional Redemption
Southern Union shall have the right to redeem the Subordinated Debt
Securities, in whole or in part, from time to time, on or after
___________________, 2000, or at any time in certain circumstances
upon the occurrence of a Tax Event as described under "Description
of the Preferred Securities -- Tax Event Redemption or Distribu-
tion," upon not less than 30 nor more than 60 days notice, at a
redemption price equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest, including Additional
Interest, if any, to the redemption date. If a partial redemption
of the Preferred Securities resulting from a partial redemption of
the Subordinated Debt Securities would result in the delisting of
the Preferred Securities, Southern Union may only redeem the Subor-
dinated Debt Securities in whole.
Interest
Each Subordinated Debt Security shall bear interest at the rate of
____% per annum from the original date of issuance, payable
quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year (each an "Interest Payment Date"),
commencing June 30, 1995, to the person in whose name such Subordi-
nated Debt Security is registered, subject to certain exceptions,
at the close of business on the Business Day next preceding such
Interest Payment Date. In the event the Subordinated Debt Securi-
ties shall not continue to remain in book-entry only form, Southern
Union shall have the right to select record dates, which shall be
more than one Business Day prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. The amount of
interest payable for any period shorter than a full quarterly
period for which interest is computed, will be computed on the
basis of the actual number of days elapsed per 30-day month. In
the event that any date on which interest is payable on the Sub-
ordinated Debt Securities is not a Business Day, then payment
of the interest payable on such date will be made on the next suc-
ceeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, then such
payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date.
Option to Extend Maturity Date
The maturity date of the Subordinated Debt Securities is
__________________, 2025 (the "Scheduled Maturity Date"). Southern
Union, however, may, before the Scheduled Maturity Date, extend
such maturity date no more than one time for up to an additional 19
years from the Scheduled Maturity Date; provided that (a) Southern
Union is not in bankruptcy or otherwise insolvent, (b) Southern
Union is not in default on any Subordinated Debt Securities issued
to a Southern Union Trust or to any trustee of such trust in con-
nection with an issuance of Trust Securities by such Southern Union
Trust, (c) Southern Union has made timely payments on the Subordi-
nated Debt Securities for the immediately preceding 6 quarters
without deferrals, (d) Southern Union Financing is not in arrears
on payments of distributions on the Preferred Securities, (e) the
Subordinated Debt Securities are rated Investment Grade by any one
of Standard & Poor's Corporation, Moody's Investors Service, Inc.,
Fitch Investor Services, Duff & Phelps Credit Rating Company or any
other nationally recognized statistical rating organization, and
(g) the final maturity of such Subordinated Debt Securities is not
later than the 49th anniversary of the issuance of the Preferred
Securities. Pursuant to the Declaration, the Regular Trustees are
required to give notice of Southern Union's election to extend the
Scheduled Maturity Date to the holders of the Preferred Securities.
Option to Extend Interest Payment Period
Southern Union shall have the right at any time, and from time to
time, during the term of the Subordinated Debt Securities to defer
payments of interest by extending the interest payment period for
a period not exceeding 20 consecutive quarters, at the end of which
Extension Period, Southern Union shall pay all interest then
accrued and unpaid (including any Additional Interest, as herein
defined) together with interest thereon compounded quarterly at the
rate specified for the Subordinated Debt Securities to the extent
permitted by applicable law ("Compound Interest"); provided that,
during any such Extension Period, (a) Southern Union shall not, and
shall cause any subsidiary of Southern Union that is not a wholly-
owned subsidiary of Southern Union not to, declare or pay any divi-
dends on, make any distribution with respect to, or redeem,
purchase, acquire or make a liquidation payment with respect to any
of its capital stock or the capital stock of any such subsidiary
and (b) Southern Union shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by Southern Union that rank pari passu with
or junior to the Subordinated Debt Securities; provided, however,
that, the foregoing restriction (a) does not apply to any stock
dividends paid by Southern Union, or any of its subsidiaries, where
the dividend stock is the same as that on which the dividend is paid.
Prior to the termination of any such Extension Period, Southern
Union may further defer payments of interest by extending the
interest payment period; provided, however, that, such Extension
Period, including all such previous and further extensions, may
not exceed 20 consecutive quarters. Upon the termination of
any Extension Period and the payment of all amounts then due,
Southern Union may commence a new Extension Period, subject to
the terms set forth in this section. No interest during an
Extension Period, except at the end thereof, shall be due and
payable. Southern Union has no present intention of exercising
its right to defer payments of interest by extending the
interest payment period on the Subordinated Debt Securities. If
the Property Trustee shall be the sole holder of the Subordinated
Debt Securities, Southern Union shall give the Regular Trustees
and the Property Trustee notice of its selection of such Extension
Period one Business Day prior to the earlier of (i) the date dis-
tributions on the Preferred Securities are payable or (ii) the
date the Regular Trustees are required to give notice to the New
York Stock Exchange (or other applicable self-regulatory organi-
zation) or to holders of the Preferred Securities of the record
date or the date such distribution is payable. The Regular
Trustees shall give notice of Southern Union's selection of such
Extension Period to the holders of the Preferred Securities. If
the Property Trustee shall not be the sole holder of the Subor-
dinated Debt Securities, Southern Union shall give the holders
of the Subordinated Debt Securities notice of its selection of
such Extension Period ten Business Days prior to the earlier
of (i) the Interest Payment Date or (ii) the date upon which
Southern Union is required to give notice to the New York
Stock Exchange (or other applicable self-regulatory organiza-
tion) or to holders of the Subordinated Debt Securities of the
record or payment date of such related interest payment.
Additional Interest
If at any time Southern Union Financing shall be required to pay
any taxes, duties, assessments or governmental charges of whatever
nature (other than withholding taxes) imposed by the United States,
or any other taxing authority, then, in any such case, Southern
Union will pay as additional interest ("Additional Interest") such
additional amounts as shall be required so that the net amounts
received and retained by Southern Union Financing after paying any
such taxes, duties, assessments or other governmental charges will
be not less than the amounts Southern Union Financing would have
received had no such taxes, duties, assessments or other govern-
mental charges been imposed.
Indenture Events of Default
If any Indenture Event of Default shall occur and be continuing,
the Property Trustee, as the holder of the Subordinated Debt
Securities, will have the right to declare the principal of and the
interest on the Subordinated Debt Securities (including any Com-
pound Interest and Additional Interest, if any) and any other
amounts payable under the Indenture to be forthwith due and payable
and to enforce its other rights as a creditor with respect to the
Subordinated Debt Securities. See "Particular Terms of the Subor-
dinated Debt Securities -- Events of Default" in the accompanying
Prospectus for a description of the Events of Default. An Inden-
ture Event of Default also constitutes a Declaration Event of
Default. The holders of Preferred Securities in certain circum-
stances have the right to direct the Property Trustee to exercise
its rights as the holder of the Subordinated Debt Securities. See
"Description of the Preferred Securities -- Declaration Events of
Default" and "Voting Rights."
Book-Entry and Settlement
If distributed to holders of Preferred Securities in connection
with the involuntary or voluntary dissolution, winding-up or
liquidation of Southern Union Financing as a result of the
occurrence of a Tax Event, the Subordinated Debt Securities will be
issued in the form of one or more global certificates (each a
"Global Security") registered in the name of the Depositary or its
nominee. Except under the limited circumstances described below,
Subordinated Debt Securities represented by the Global Security
will not be exchangeable for, and will not otherwise be issuable
as, Subordinated Debt Securities in definitive form. The Global
Securities described above may not be transferred except by the
depositary to a nominee of the depositary or by a nominee of the
depositary to the depositary or another nominee of the depositary
or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive
form. Such laws may impair the ability to transfer beneficial
interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a
Global Security will not be entitled to receive physical delivery
of Subordinated Debt Securities in definitive form and will not be
considered the holders (as defined in the Indenture) thereof for
any purpose under the Indenture, and no Global Security repre-
senting Subordinated Debt Securities shall be exchangeable, except
for another Global Security of like denomination and tenor to be
registered in the name of the Depositary or its nominee or to a
successor Depositary or its nominee. Accordingly, each Beneficial
Owner must rely on the procedures of the Depositary or if such
person is not a Participant, on the procedures of the Participant
through which such person owns its interest to exercise any rights
of a holder under the Indenture.
The Depositary
If Subordinated Debt Securities are distributed to holders of Pre-
ferred Securities in liquidation of such holders' interests in
Southern Union Financing, DTC will act as securities depositary for
the Subordinated Debt Securities. For a description of DTC and the
specific terms of the depositary arrangements, see "Description of
the Preferred Securities -- Book-Entry Only Issuance -- The
Depository Trust Company." As of the date of this Prospectus Sup-
pleplement, the description therein of DTC's book-entry system and
DTC's practices as they relate to purchases, transfers, notices and
payments with respect to the Preferred Securities apply in all
material respects to any debt obligations represented by one or
more Global Securities held by DTC. Southern Union may appoint a
successor to DTC or any successor depositary in the event DTC or
such successor depositary is unable or unwilling to continue as a
depository for the Global Securities.
None of Southern Union, Southern Union Financing, the Indenture
Trustee, any paying agent and any other agent of Southern Union or
the Indenture Trustee 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
Subordinated Debt Securities or for maintaining, supervising or
reviewing any records relating to such beneficial ownership
interests.
Discontinuance of the Depositary's Services
A Global Security shall be exchangeable for Subordinated Debt
Securities registered in the names of persons other than the
depositary or its nominee only if (i) the depositary notifies
Southern Union that it is unwilling or unable to continue as a
depositary for such Global Security and no successor depositary
shall have been appointed, (ii) the depositary, at any time, ceases
to be a clearing agency registered under the Exchange Act at which
time the depositary is required to be so registered to act as such
depositary and no successor depositary shall have been appointed,
(iii) Southern Union, in its sole discretion, determines that such
Global Security shall be so exchangeable or (iv) there shall have
occurred an Event of Default with respect to such Subordinated Debt
Securities. Any Global Security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for Subordinated Debt
Securities registered in such names as the depositary shall direct.
It is expected that such instructions will be based upon directions
received by the depositary from its Participants with respect to
ownership of beneficial interests in such Global Security.
Miscellaneous
The Indenture will provide that Southern Union will pay all fees
and expenses related to (i) the offering of the Trust Securities
and the Subordinated Debt Securities, (ii) the organization,
maintenance and dissolution of Southern Union Financing and (iii)
the retention of the Southern Union Trustees and (iv) the
enforcement by the Property Trustee of the rights of the holders
of the Preferred Securities. The payment of such fees and
expenses will be fully and unconditionally guaranteed by
Southern Union.
EFFECT OF OBLIGATIONS UNDER THE
SUBORDINATED DEBT SECURITIES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of Southern Union
Financing is to issue the Trust Securities evidencing undivided
beneficial interests in the assets of Southern Union Financing, and
to invest the proceeds from such issuance and sale in the Subordi-
nated Debt Securities.
As long as payments of interest and other payments are made when
due on the Subordinated Debt Securities, such payments will be
sufficient to cover distributions and payments due on the Trust
Securities because of the following factors: (i) the aggregate
principal amount of Subordinated Debt Securities will be equal to
the sum of the aggregate stated liquidation amount of the Trust
Securities; (ii) the interest rate and the interest and other
payment dates on the Subordinated Debt Securities will match the
distribution rate and distribution and other payment dates for the
Preferred Securities; (iii) Southern Union shall pay all, and
Southern Union Financing shall not be obligated to pay, directly or
indirectly, any, costs and expenses of Southern Union Financing;
and (iv) the Declaration further provides that the Southern Union
Trustees shall not cause or permit Southern Union Financing to,
among other things, engage in any activity that is not consistent
with the purposes of Southern Union Financing.
Payments of distributions (to the extent funds therefor are avail-
able) and other payments due on the Preferred Securities (to the
extent funds therefor are available) are guaranteed by Southern
Union as and to the extent set forth under "Description of the
Guarantees" in the accompanying Prospectus. If Southern Union does
not make interest payments on the Subordinated Debt Securities pur-
chased by Southern Union Financing, it is expected that Southern
Union Financing will not have sufficient funds to pay distributions
on the Preferred Securities. The Guarantee is a full and uncondi-
tional guarantee from the time of its issuance but does not apply
to any payment of distributions unless and until Southern Union
Financing has sufficient funds for the payment of such distribu-
tions.
If Southern Union fails to make interest or other payments on the
Subordinated Debt Securities when due (taking account of any Exen-
sion Period), the Declaration provides a mechanism whereby the
holders of the Preferred Securities, using the procedures described
in "Description of the Preferred Securities -- Book-Entry Only
Issuance -- The Depository Trust Company" and "-- Voting Rights,"
may (i) appoint a Special Regular Trustee and (ii) direct the
Property Trustee to enforce its rights under the Subordinated Debt
Securities. If the Property Trustee fails to enforce its rights
under the Subordinated Debt Securities, a holder of Preferred
Securities may, after a period of 30 days has elapsed from such
holder's written request to the Property Trustee to enforce such
rights, institute a legal proceeding against Southern Union to
enforce the Property Trustee's rights under the Subordinated Debt
Securities without first instituting any legal proceeding against
the Property Trustee or any other person or entity. Southern
Union, under the Guarantee, acknowledges that the Guarantee Trustee
shall enforce the Guarantee on behalf of the holders of the
Preferred Securities. If Southern Union fails to make payments
under the Guarantee, the Guarantee provides a mechanism whereby the
holders of the Preferred Securities may direct the Guarantee
Trustee to enforce its rights thereunder. If the Guarantee Trustee
fails to enforce the Guarantee, any holder of Preferred Securities
may, after a period of 30 days has elapsed from such holder's
written request to the Guarantee Trustee to enforce the Guarantee,
institute a legal proceeding directly against Southern Union to
enforce the Guarantee Trustee's rights under the Guarantee
without first instituting a legal proceeding against Southern Union
Financing, the Guarantee Trustee, or any other person or entity.
Southern Union and Southern Union Financing believe that the above
mechanisms and obligations, taken together, are substantially
equivalent to a full and unconditional guarantee by Southern Union
of payments due on the Preferred Securities. See "Description of
the Guarantees -- General" in the accompanying Prospectus.
UNITED STATES FEDERAL INCOME TAXATION
General
The following is a summary of certain of the material United States
federal income tax consequences of the purchase, ownership and dis-
position of Preferred Securities. Unless otherwise stated, this
summary deals only with Preferred Securities held as capital assets
by holders who purchase the Preferred Securities upon original
issuance ("Initial Holders"). It does not deal with special
classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies,
dealers in securities or currencies, tax-exempt investors, or
persons that will hold the Preferred Securities as a position in a
"straddle," as part of a "synthetic security" or "hedge," as part
of a "conversion transaction" or other integrated investment, or as
other than a capital asset. This summary also does not address the
tax consequences to persons that have a functional currency other
than the U.S. Dollar or the tax consequences to shareholders, part-
ners or beneficiaries of a holder of Preferred Securities.
Further, it does not include any description of any alternative
minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to
the Preferred Securities. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Code"), Treasury regulations
thereunder and administrative and judicial interpretations thereof,
as of the date hereof, all of which are subject to change, possibly
on a retroactive basis.
Classification of the Subordinated Debt Securities
In connection with the issuance of the Subordinated Debt Securi-
ties, Skadden, Arps, Slate, Meagher & Flom, special tax counsel to
Southern Union and Southern Union Financing, will render its
opinion generally to the effect that, although not entirely free
from doubt, under then current law and assuming full compliance
with the terms of the Indenture (and certain other documents),
and based on certain facts and assumptions contained in such
opinion, the Subordinated Debt Securities held by Southern
Union Financing will be classified for United States federal
income tax purposes as indebtedness of Southern Union.
Classification of Southern Union Financing
In connection with the issuance of the Preferred Securities,
Skadden, Arps, Slate, Meagher & Flom, special tax counsel to
Southern Union and Southern Union Financing, will render its
opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Declaration and the
Indenture (and certain other documents), and based on certain facts
and assumptions contained in such opinion, Southern Union Financing
will be classified for United States federal income tax purposes as
a grantor trust and not as an association taxable as a corporation.
Accordingly, for United States federal income tax purposes, each
holder of Preferred Securities will be considered the owner of an
undivided interest in the Subordinated Debt Securities, and each
holder will be required to include in its gross income any
original issue discount ("OID") accrued with respect to its
allocable share of those Subordinated Debt Securities.
Original Issue Discount
Because Southern Union has the option, under the terms of the
Subordinated Debt Securities, to defer payments of interest by
extending interest payment periods for up to 20 quarters, all of
the stated interest payments on the Subordinated Debt Securities
will treated as "original issue discount." Holders of debt
instruments issued with OID must include that discount in income on
an economic accrual basis before the receipt of cash attributable
to the interest, regardless of their method of tax accounting.
Generally, all of a holder's taxable interest income with respect
to the Subordinated Debt Securities will be accounted for as OID,
and actual distributions of stated interest will not be separately
reported as taxable income. Actual payments and distributions of
stated interest will not, however, be separately reported as tax-
able income. The amount of OID that accrues in any month will
approximately equal the amount of the interest that accrues on the
Subordinated Debt Securities in that month at the stated interest
rate. In the event that the interest payment period is extended,
holders will continue to accrue OID approximately equal to the
amount of the interest payment due at the end of the extended
interest payment period on an economic accrual basis over the
length of the extended interest period.
Because income on the Preferred Securities will constitute OID,
corporate holders of Preferred Securities will not be entitled to
a dividends - received deduction with respect to any income
recognized with respect to the Preferred Securities.
Market Discount and Bond Premium
Holders of Preferred Securities other than Initial Holders may be
considered to have acquired their undivided interests in the Sub-
ordinated Debt Securities with market discount or acquisition
premium as such phrases are defined for United States federal
income tax purposes. Such holders are advised to consult their tax
advisors as to the income tax consequences of the acquisition,
ownership and disposition of the Preferred Securities.
Receipt of Subordinated Debt Securities or Cash Upon Liquidation of
Southern Union Financing
Under certain circumstances, as described under the caption
"Description of the Preferred Securities -- Tax Event Redemp-
tion or Distribution," Subordinated Debt Securities may be dis-
tributed to holders in exchange for the Preferred Securities and in
liquidation of Southern Union Financing. Under current law, such
a distribution, for United States federal income tax purposes,
would be treated as a non-taxable event to each holder, and each
holder would receive an aggregate tax basis in the Subordinated
Debt Securities equal to such holder's aggregate tax basis in its
Preferred Securities. A holder's holding period in the Subordi-
nated Debt Securities so received in liquidation of Southern Union
Financing would include the period during which the Preferred
Securities were held by such holder.
Under certain circumstances described herein (see "Description of
the Preferred Securities"), the Subordinated Debt Securities may be
redeemed for cash and the proceeds of such redemption distributed
to holders in redemption of their Preferred Securities. Under
current law, such a redemption would, for United States federal
income tax purposes, constitute a taxable disposition of the
redeemed Preferred Securities, and a holder could recognize gain or
loss as if it sold such redeemed Preferred Securities for cash.
See "United States Federal Income Taxation -- Sales of Preferred
Securities."
Sales of Preferred Securities
A holder that sells Preferred Securities will recognize gain or
loss equal to the difference between its adjusted tax basis in the
Preferred Securities and the amount realized on the sale of such
Preferred Securities. A holder's adjusted tax basis in the Pre-
ferred Securities generally will be its initial purchase price
increased by OID previously includible in such holder's gross
income to the date of disposition and decreased by payments
received on the Preferred Securities. Such gain or loss generally
will be a capital gain or loss and generally will be a long-term
capital gain or loss if the Preferred Securities have been held for
more than one year.
The Preferred Securities may trade at a price that does not
accurately reflect the value of accrued but unpaid interest with
respect to the underlying Subordinated Debt Securities. A holder
who disposes of his Preferred Securities between record dates for
payments of distributions thereon will be required to include
accrued but unpaid interest on the Subordinated Debt Securities
through the date of disposition in income as ordinary income, and
to add such amount to his adjusted tax basis in his pro rata share
of the underlying Subordinated Debt Securities deemed disposed of.
To the extent the selling price is less than the holder's adjusted
tax basis (which will include, in the form of OID, all accrued but
unpaid interest) a holder will recognize a capital loss. Subject
to certain limited exceptions, capital losses cannot be applied
to offset ordinary income for United States federal income tax
purposes.
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is
any corporation, individual, partnership, estate or trust that is,
as to the United States, a foreign corporation, a non-resident
alien individual, a foreign partnership, or a non-resident
fiduciary of a foreign estate or trust.
Under present United States federal income tax law: (i) payments
by Southern Union Financing or any of its paying agents to any
holder of a Preferred Security who or which is a United States
Alien Holder will not be subject to United States federal with-
holding tax; provided that, (a) the beneficial owner of the Pre-
ferred Security does not actually or constructively own 10% or more
of the total combined voting power of all classes of stock of
Southern Union entitled to vote, (b) the beneficial owner of the
Preferred Security is not a controlled foreign corporation that
is related to Southern Union through stock ownership, and (c)
either (A) the beneficial owner of the Preferred Security certifies
to Southern Union Financing or its agent, under penalties of
perjury, that it is not a United States holder and provides its
name and address or (B) a securities clearing organization, bank or
other financial institution that holds customers' securities in the
ordinary course of its trade or business (a "Financial Institu-
tion"), and holds the Preferred Security in such capacity, that
certifies to Southern Union Financing or its agent, under penalties
of perjury, that such statement has been received from the bene-
ficial owner by it or by a Financial Institution between it and the
beneficial owner and furnishes Southern Union Financing or its
agent with a copy thereof; and (ii) a United States Alien Holder of
a Preferred Security will not be subject to United States federal
withholding tax on any gain realized upon the sale or other dispo-
sition of a Preferred Security.
Information Reporting to Holders
Subject to the qualifications discussed below, income on the Pre-
ferred Securities will be reported to holders on Forms 1099, which
forms should be mailed to holders of Preferred Securities by
January 31 following each calendar year.
Southern Union Financing will be obligated to report annually to
Cede & Co., as holder of record of the Preferred Securities, the
OID related to the Subordinated Debt Securities that accrued during
the year. Southern Union Financing currently intends to report
such information on Form 1099 prior to January 31 following each
calendar year even though Southern Union Financing is not legally
required to report to record holders until April 15 following each
calendar year. The Underwriters have indicated to Southern Union
Financing that, to the extent that they hold Preferred Securities
as nominees for beneficial holders, they currently expect to report
to such beneficial holders on Forms 1099 by January 31 following
each calendar year. Under current law, holders of Preferred
Securities who hold as nominees for beneficial holders will not
have any obligation to report information regarding the beneficial
holders to Southern Union Financing. Southern Union Financing,
moreover, will not have any obligation to report to beneficial
holders who are not also record holders. Thus, beneficial holders
of Preferred Securities who hold their Preferred Securities through
the Underwriters will receive Forms 1099 reflecting the income on
their Preferred Securities from such nominee holders rather than
Southern Union Financing.
Backup Withholding
Payments made on, and proceeds from the sale of, the Preferred
Securities may be subject to a "backup" withholding tax of 31%
unless the holder complies with certain identification require-
ments. Any withheld amounts will be allowed as a credit against
the holder's United States federal income tax, provided the
required information is provided to the Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS
INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE
DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO
THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
UNITED STATES FEDERAL OR OTHER TAX LAWS.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement (the "Underwriting Agreement"), Southern Union Financing
has agreed to sell to each of the Underwriters named below, and
each of the Underwriters, for whom Merrill Lynch, Pierce, Fenner &
Smith Incorporated is acting as representative (the "Representa-
tive"), has severally agreed to purchase the number of Preferred
Securities set forth opposite its name below. In the Underwriting
Agreement, the several Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the Pre-
ferred Securities offered hereby if any of the Preferred Securities
are purchased. In the event of default by an Underwriter, the
Underwriting Agreement provides that, in certain circumstances, the
purchase commitments of the nondefaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
Number of
Underwriters Preferred Securities
____________ ____________________
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Dean Witter Reynolds, Inc.
A.G. Edwards & Sons, Inc.
PaineWebber Incorporated
Prudential Securities Incorporated
Total . . . . . . . . . . . . . . . . . . . . 3,000,000
The Underwriters propose to offer the Preferred Securities, in
part, directly to the public at the initial public offering price
set forth on the cover page of this Prospectus Supplement, and, in
part, to certain securities dealers at such price less a concession
of $____________ per Preferred Security. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of
$___________ per Preferred Security to certain brokers and dealers.
After the Preferred Securities are released for sale to the public,
the offering price and other selling terms may from time to time be
varied by the Representative.
In view of the fact that the proceeds of the sale of the Preferred
Securities will ultimately be used to purchase the Subordinated
Debt Securities of Southern Union, the Underwriting Agreement pro-
vides that Southern Union will pay as compensation ("Underwriters'
Compensation") to the Underwriters' arranging the investment
therein of such proceeds, an amount in New York Clearing House
(next day) funds of $__________ per Preferred Security (or
$___________ in the aggregate) for the accounts of the several
Underwriters; provided that, such compensation for sales of 10,000
or more Preferred Securities to any single purchaser will be
$____________ per Preferred Security. Therefore, to the extent of
such sales, the actual amount of Underwriters Compensation will be
less than the aggregate amount specified in the preceding sentence.
During a period of 30 days from the date of the Prospectus Sup-
plement, neither Southern Union Financing nor Southern Union will,
without the prior written consent of the Underwriters, directly or
indirectly, sell, offer to sell, grant any option for the sale of,
or otherwise dispose of, any Preferred Securities, any security
convertible into or exchangeable into or exercisable for Preferred
Securities or any equity securities substantially similar to the
Preferred Securities (except for any series of Subordinated Debt
Securities and the Preferred Securities offered hereby).
Application has been made to list the Preferred Securities on the
New York Stock Exchange. If so approved, trading of the Preferred
Securities on the New York Stock Exchange is expected to commence
within a 30 day period after the initial delivery of the Preferred
Securities. The Representative has advised Southern Union
Financing that it intends to make a market in the Preferred Securi-
ties prior to the commencement of trading on the New York Stock
Exchange. The Representative will have no obligation to make a
market in the Preferred Securities, however, and may cease market
making activities, if commenced, at any time.
Prior to this offering there has been no public market for the
Preferred Securities. In order to meet one of the requirements for
listing the Preferred Securities on the New York Stock Exchange,
the Underwriters will undertake to sell lots of 100 or more Pre-
ferred Securities to a minimum of 400 beneficial holders.
Southern Union Financing and Southern Union have agreed to indem-
nify the Underwriters against, or contribute to payments that the
Underwriters may be required to make in respect of, certain
liabilities, including liabilities under the Securities Act of
1933, as amended.
Certain of the Underwriters engage in transactions with, and, from
time to time, have performed services for, Southern Union and its
subsidiaries in the ordinary course of business.
LEGAL MATTERS
The validity of the Preferred Securities, the Subordinated Debt
Securities, the Guarantee and certain matters relating thereto will
be passed upon for Southern Union and Southern Union Financing by
Fleischman and Walsh, L.L.P., Washington, D. C., and on behalf of
the Underwriters by Skadden, Arps, Slate, Meagher & Flom, New York,
New York. Aaron I. Fleischman, Senior Partner of Fleischman and
Walsh, L.L.P., is a director of Southern Union. Mr. Fleischman,
Fleischman and Walsh, L.L.P., and other attorneys in the firm
beneficially own shares of Southern Union common stock that, in the
aggregate, represent less than two percent (2%) of the shares of
Southern Union common stock outstanding. Certain United States
federal income taxation matters will be passed upon for Southern
Union and Southern Union Financing by Skadden, Arps, Slate, Meagher
& Flom, New York, New York.
<PAGE>
________________________________ ________________________________
No dealer, salesperson or other
individual has been authorized
to give any information or to
make any representations other
than those contained or incor-
porated by reference in this $75,000,000
Prospectus Supplement in con-
nection with the offer made by
this Prospectus Supplement and, Southern Union Financing I
if given or made, such informa-
tion or representation must not ____% Trust Originated
be relied upon as having been Preferred Securities ("TOPrS")
authorized by Southern Union guaranteed to the extent set
Company, Southern Union forth herein by
Financing I, or the Under- Southern Union Company
writers. Neither the delivery
of this Prospectus Supplement
nor any sale made hereunder and
thereunder shall under any cir-
cumstance create an implication
that there has been no change
in the affairs of Southern _____________________
Union Company or Souhern Union PROSPECTUS SUPPLEMENT
Financing I, since the date _____________________
hereof. This Prospectus Sup-
plement does not constitute an
offer or solicitation by anyone
in any state in which such
offer or solicitation is not
authorized or in which the
person making such offer or
solicitation is not qualified
to do so or to anyone to whom it Merrill Lynch & Co.
is unlawful to make such offer Dean Witter Reynolds, Inc.
or solicitation. A.G. Edwards & Sons, Inc.
PaineWebber Incorporated
______________________ Prudential Securities,
Incorporated
TABLE OF CONTENTS
Prospectus Supplement
Page
____
Selected Historical Finan-
cial Information
Southern Union Company
Southern Union Financing I
Investment Considerations _____________, 1995
Ratio of Earnings to Fixed
Charges
Capitalization of Southern
Union
Accounting Treatment
Use of Proceeds
Description of the Pre-
ferred Securities
Description of the Subordi-
nated Debt Securities
Effect of Obligations Under
the Subordinated Debt
Securities and the Guarantee
United States Federal Income
Taxation
Underwriting
Legal Matters
Prospectus
Available Information
Incorporation of Certain Docu-
ments by Reference
Southern Union Company
Southern Union Financing Trusts
Use of Proceeds
Ratio of Earnings to Fixed
Charges
Description of Southern Union
Debt Securities
Particular Terms of the Senior
Debt Securities
Particular Terms of the Sub-
ordinated Debt Securities
Description of the Southern
Union Trusts' Preferred
Securities
Description of the Guarantees
Plan of Distribution
Validity of Securities
Experts
________________________________ ________________________________
<PAGE>
EXHIBIT 12
RATIO OF EARNINGS TO FIXED CHARGES
<PAGE>
EXHIBIT 12
RATIO OF EARNINGS TO FIXED CHARGES
Twelve Nine
Months Months Year
Ended Ended Ended Year Ended
March 31, March 31, June 30, December 31,
________________________________
1995 1995 1994(a) 1993 1992 1991 1990
_________ ________ _______ _______ _______ _______ _______
(dollars in thousands)
EARNINGS:
Consoli-
dated
pretax
income
from
con-
tinuing
opera-
tions. .$19,082 $27,028 $13,563 $11,588 $10,831 $11,308 $ 1,413
Interest. 39,971 30,124 25,464 13,747 12,459 12,581 12,519
Net
amorti-
zation
of debt
discount
and pre-
mium and
issuance
expense. 1,172 852 941 604 495 462 450
Interest
portion
of ren-
tal ex-
pense. . 1,598 1,263 1,341 995 1,025 813 579
_______ _______ _______ _______ _______ _______ _______
Earnings.$61,823 $59,267 $41,309 $26,934 $24,810 $25,164 $14,961
======= ======= ======= ======= ======= ======= =======
FIXED CHARGES:
Interest.$39,971 $30,124 $25,464 $13,747 $12,459 $12,581 $12,519
Net
amorti-
zation
of debt
discount
and pre-
mium and
issuance
expense. 1,172 852 941 604 495 462 450
Interest
portion
of ren-
tal ex-
pense. . 1,598 1,263 1,341 995 1,025 813 579
_______ _______ _______ _______ _______ _______ _______
Fixed
charges.$42,741 $32,239 $27,746 $15,346 $13,979 $13,856 $13,548
======= ======= ======= ======= ======= ======= =======
Ratio of
earnings
to fixed
charges. 1.45 1.84 1.49 1.76 1.77 1.82 1.10
======= ======= ======= ======= ======= ======= =======
__________________________
(a) During 1994, the Company changed its fiscal year-end from
December 31 to June 30.
<PAGE>
EXHIBIT 12
RATIO OF EARNINGS TO FIXED CHARGES
Pro Forma (a)
______________________
Year Ended
June 30, 1994
______________________
(dollars in thousands)
EARNINGS:
Consolidated pretax income from
continuing operations. . . . . . . . . . $ 16,529
Interest . . . . . . . . . . . . . . . . . 39,744
Net amortization of debt discount
and premium and issuance expense . . . . 1,136
Interest portion of rental expense . . . . 1,684
________
Earnings . . . . . . . . . . . . . . . $ 59,093
========
FIXED CHARGES:
Interest . . . . . . . . . . . . . . . . . $ 39,744
Net amortization of debt discount
and premium and issuance expense . . . . 1,136
Interest portion of rental expense . . . . 1,684
________
Fixed charges. . . . . . . . . . . . . $ 42,564
========
Ratio of earnings to fixed charges . . . . 1.39
========
_______________________________
(a) To give effect to increase in outstanding debt, as of the
beginning of the period presented, primarily as a result of
the January 31, 1994 acquisition of Missouri Gas Energy, which
was financed through the sale of $475 million of 7.60% Senior
Notes. Those debt proceeds, along with proceeds of a $50
million common stock rights offering and working capital from
operations, were also used to retire approximately $105
million of long-term debt. This ratio also assumes the
acquisition of Missouri Gas Energy occurred as of the
beginning of the period presented, as reflected in the pro
forma condensed statements of consolidated operations included
in the 1994 Form 10-K.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 4, 1995
PROSPECTUS
$300,000,000
SOUTHERN UNION COMPANY
Senior Debt Securities and Subordinated Debt Securities
Southern Union Financing I
Southern Union Financing II
Southern Union Financing III
Preferred Securities guaranteed to the extent set forth herein by
Southern Union Company
Southern Union Company ("Southern Union" and, together with its
subsidiaries, the "Company"), a Delaware corporation, may offer,
from time to time, (i) unsecured senior debt securities (the
"Senior Debt Securities") consisting of debentures, notes or
other evidence of indebtedness, and (ii) unsecured subordinated
debt securities (the "Subordinated Debt Securities") consisting
of debentures, notes or other evidence of indebtedness (item (i)
or (ii) above being referred to herein as the "Debt Securities")
or any combination of the foregoing, in each case in one or more
series and in amounts, at prices and on terms to be determined at
or prior to the time of any such offering. The Subordinated Debt
Securities when issued will be unsecured obligations of Southern
Union. Southern Union's obligations under the Subordinated Debt
Securities will be subordinate and junior in right of payment to
certain other indebtedness of Southern Union as may be described
in an accompanying Prospectus Supplement (the "Prospectus Sup-
plement").
Southern Union Financing I, Southern Union Financing II and
Southern Union Financing III (each, a "Southern Union Trust"),
each a statutory business trust formed under the laws of the
State of Delaware, may offer, from time to time, preferred
securities, representing undivided beneficial interests in the
assets of the respective Southern Union Trust ("Preferred Securi-
ties"). The payment of periodic cash distributions ("distribu-
tions") with respect to Preferred Securities of each of the
Southern Union Trusts out of moneys held by each of the Southern
Union Trusts, and payments on liquidation, redemption or otherwise
with respect to such Preferred Securities, will be guaranteed by
Southern Union to the extent described herein (each a "Guarantee").
See "Description of the Guarantees" below. Southern Union's
obligations under the Guarantees are subordinate and junior in
right of payment to all other liabilities of Southern Union and
rank pari passu with the most senior preferred stock, if any,
issued from time to time by Southern Union. Subordinated Debt
Securities may be issued and sold from time to time in one or more
series by Southern Union to a Southern Union Trust, or a trustee of
such trust, in connection with the investment of the proceeds from
the offering of Preferred Securities and Common Securities (as
defined herein) of such Southern Union Trust. The Subordinated
Debt Securities purchased by a Southern Union Trust may be subse-
quently distributed pro rata to holders of Preferred Securities and
Common Securities in connection with the dissolution of such
Southern Union Trust, upon the occurrence of certain events as may
be described in an accompanying Prospectus Supplement.
Specific terms of the Debt Securities of any series or the Pre-
ferred Securities of any Southern Union Trust in respect of which
this Prospectus is being delivered (the "Offered Securities") will
be set forth in a Prospectus Supplement with respect to such
Offered Securities, which will describe, without limitation and
where applicable, the following: (i) in the case of Debt Securi-
ties, the specific designation, aggregate principal amount,
denomination, maturity, premium, if any, any exchange, con-
version, redemption or sinking fund provisions, if any, interest
rate (which may be fixed or variable), if any, the time and
method of calculating interest payments, if any, dates on which
premium, if any, and interest, if any, will be payable, the right
of Southern Union, if any, to defer payment of interest on the
Debt Securities and the maximum length of such deferral period,
the initial public offering price, subordination terms, and any
listing on a securities exchange and other specific terms of the
offering; and (ii) in the case of Preferred Securities, the
designation, number of securities, liquidation preference per
security, initial public offering price, any listing on a securi-
ties exchange, distribution rate (or method of calculation
thereof), dates on which distributions shall be payable and dates
from which distributions shall accrue, any voting rights, terms
for any conversion or exchange into other securities, any redemp-
tion, exchange or sinking fund provisions, any other rights,
preferences, privileges, limitations or restrictions relating to
the Preferred Securities and the terms upon which the proceeds of
the sale of the Preferred Securities shall be used to purchase a
specific series of Subordinated Debt Securities of Southern
Union.
The Offered Securities may be offered in amounts, at prices and
on terms to be determined at the time of offering; provided, how-
ever, that, the aggregate initial public offering price of all
Offered Securities shall not exceed $300,000,000. Any Prospectus
Supplement relating to any series of Offered Securities will con-
tain information concerning certain United States federal income
tax considerations, if applicable, to the Offered Securities.
Southern Union and/or each of the Southern Union Trusts may sell
the Offered Securities directly, through agents designated from
time to time or through underwriters or dealers. See "Plan of
Distribution" below. If any agents of Southern Union and/or any
Southern Union Trust or any underwriters or dealers are involved
in the sale of the Offered Securities, the names of such agents,
underwriters or dealers and any applicable commissions and dis-
counts will be set forth in any related Prospectus Supplement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION 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. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF
SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
The date of this Prospectus is _______________________, 1995.
Information contained herein is subject to completion or amend-
ment. A registration statement relating to these securities has
been filed with the Securities and Exchange Commission. These
securities may not be sold, nor may offers to buy be accepted,
prior to the time the registration statement becomes effective.
This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of
these securities in any State in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under
the securities laws of any such State. No dealer, salesperson or
any other individual has been authorized by Southern Union or any
of the Southern Union Trusts to give any information or to make any
representation other than those contained or incorporated by
reference in this Prospectus or any accompanying Prospectus
Supplement and, if given or made, such information or representa-
tion must not be relied upon as having been authorized. This
Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction. Neither the delivery
of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that there has been no change
in the affairs of Southern Union or any of the Southern Union
Trusts since the date hereof.
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") filed by Southern Union and the
Southern Union Trusts with the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Offered Securities. This
Prospectus does not contain all of the information set forth in
such Registration Statement, certain parts of which are omitted
in accordance with the rules and regulations of the SEC.
Reference is made to such Registration Statement and to the
exhibits relating thereto for further information with respect to
the Company, the Southern Union Trusts and the Offered Securi-
ties. Any statements contained herein concerning the provisions
of any document filed as an exhibit to the Registration Statement
or otherwise filed with the SEC or incorporated by reference
herein are not necessarily complete, and, in each instance,
reference is made to the copy of such document so filed for a
more complete description of the matter involved. Each such
statement is qualified in its entirety by such reference.
Southern Union is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy state-
ments and other information with the SEC. Reports, proxy state-
ments and other information concerning Southern Union can be
inspected and copied at prescribed rates at the SEC's Public
Reference Room, Judiciary Plaza, 450 Fifth Street, Northwest,
Washington, D.C. 20549, as well as the following Regional
Offices of the SEC: 7 World Trade Center, New York, New York
10048; and Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661-2511. Such reports, proxy statements
and other information may also be inspected at the offices of the
New York Stock Exchange ("NYSE"), on which Southern Union common
stock is traded, at 20 Broad Street, New York, New York 10005.
No separate financial statements of any of the Southern Union
Trusts have been included herein. Southern Union does not con-
sider that such financial statements would be material to holders
of the Preferred Securities because (i) all of the voting securi-
ties of each of the Southern Union Trusts will be owned, directly
or indirectly, by Southern Union, a reporting company under the
Exchange Act, (ii) each of the Southern Union Trusts has no inde-
pendent operations but exists for the sole purpose of issuing
securities representing undivided beneficial interests in the
assets of such Southern Union Trust and investing the proceeds
thereof in Subordinated Debt Securities issued by Southern Union,
and (iii) the obligations of each of the Southern Union Trusts
under the Trust Securities (as defined herein) are fully and uncon-
ditionally guaranteed by Southern Union to the extent that such
Southern Union Trust has funds available to meet such obligations.
See "Particular Terms of the Subordinated Debt Securities" and
"Description of the Guarantees."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Southern Union (File No. 1-6407)
with the SEC pursuant to the Exchange Act are incorporated by
reference herein and made a part hereof:
1. Transition Report on Form 10-K for the year ended June 30,
1994 (the "1994 Form 10-K").
2. Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1994 (the "First Quarter Form 10-Q"),
December 31, 1994 (the "Second Quarter Form 10-Q") and
March 31, 1995 (the "Third Quarter Form 10-Q".)
All documents filed by Southern Union pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the termination of the offering of the
Offered Securities pursuant hereto shall be deemed to be incorpo-
incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein or in any
Prospectus Supplement shall be deemed to be modified or super-
seded for purposes of this Prospectus, or in any Prospectus Sup-
plement, to the extent that a statement contained herein or
therein (or in any other subsequently filed document that also is
or is deemed to be incorporated by reference herein or therein)
modifies or supersedes such statement. Any statement so modified
or superseded shall not be deemed, except as so modified or super-
seded, to constitute a part of this Prospectus or any Prospectus
Supplement.
Southern Union undertakes to provide without charge to each per-
person to whom a copy of this Prospectus has been delivered, upon
the written or oral request of any such person, a copy of any or
all of the foregoing documents incorporated herein by reference,
other than exhibits to such documents, unless such exhibits are
specifically incorporated by reference into such documents. Such
requests should be directed to Dennis K. Morgan, Vice President
- - Legal and Secretary, Southern Union Company, at 504 Lavaca
Street, Suite 800, Austin, Texas 78701, telephone (512)
477-5852.
SOUTHERN UNION COMPANY
The Company's principal line of business is the distribution of
natural gas as a public utility through Southern Union Gas Com-
pany ("Southern Union Gas") and Missouri Gas Energy, each of
which is a division of Southern Union. Southern Union Gas serves
approximately 497,000 residential, commercial, industrial, agri-
cultural and other customers in Texas (including the cities of
Austin, Brownsville, El Paso, Galveston and Port Arthur) and
Oklahoma. Missouri Gas Energy, acquired on January 31, 1994,
serves approximately 478,000 customers in central and western
Missouri (including the cities of Kansas City, St. Joseph, Joplin
and Monett).
Subsidiaries of Southern Union have been established to support
and expand natural gas sales and to capitalize on the Company's
gas energy expertise. These subsidiaries market natural gas to
end-users, sell natural gas as a vehicular fuel, convert vehicles
to operate on natural gas, operate intrastate and interstate
natural gas pipeline systems, and sell commercial gas air condi-
tioning and other gas-fired engine-driven applications. By pro-
viding "one-stop shopping," the Company can serve its various
customers' particular energy needs, which encompass substantially
all of the natural gas distribution and sales businesses from
natural gas sales to specialized energy consulting services.
Certain subsidiaries also hold investments in real estate and
other assets, which are primarily used in Southern Union's
utility business.
The Company is a sales and market-driven energy company whose
management is committed to achieving profitable growth of its
natural gas energy businesses in an increasingly competitive
business environment. Management's strategies for achieving
these objectives principally consist of (i) promoting new sales
opportunities and markets for natural gas, (ii) enhancing finan-
cial and operating performance, and (iii) expanding the Company
through development of existing systems and selectively acquiring
new systems. Management develops and continually evaluates these
strategies, and the Company's implementation of them, by applying
its experience and expertise in analyzing the energy industry,
technological advances, market opportunities and general business
trends. Each of these strategies, as implemented throughout the
Company's businesses, reflects the Company's commitment to its
core natural gas utility business. Central to all of the Com-
pany's businesses and strategies is the sale and transportation
of natural gas.
Consistent with this strategy, the Company has actively pursued
selected acquisitions in the natural gas distribution, transpor-
tation and sales industries where management believes there are
opportunities to promote new sales of and markets for natural gas
and/or synergies that permit enhanced financial and operating
performance. Since 1990, Southern Union has acquired seven gas
distribution systems in Texas and one in Missouri. Collectively,
these systems have added nearly 593,000 of the Company's present
customers, representing approximately $319,785,000 of annual
sales revenue to Southern Union. See "Acquisitions and Divesti-
ture" in the Notes to Southern Union's Consolidated Financial
Statements included in the 1994 Form 10-K. Southern Union's most
recent acquisition was consummated on January 31, 1994, when it
acquired Missouri Gas Energy.
Southern Union was incorporated under the laws of the State of
Delaware in 1932. The Company's corporate headquarters are
located at 504 Lavaca Street, Suite 800, Austin, Texas 78701,
and its telephone number is (512) 477-5852.
THE SOUTHERN UNION FINANCING TRUSTS
Each of Southern Union Financing I, Southern Union Financing II
and Southern Union Financing III is a statutory business trust
formed under Delaware law pursuant to (i) a separate declaration
of trust (each, a "Declaration") executed by Southern Union, as
sponsor for such trust (the "Sponsor"), and the Southern Union
Trustees (as defined herein) of such trust and (ii) the filing
of a certificate of trust with the Secretary of State of the
State of Delaware on March 28, 1995. Each Southern Union Trust
exists for the exclusive purposes of (i) issuing the Preferred
Securities and common securities representing undivided bene-
ficial interests in the assets of the Trust (the "Common Securi-
ties" and, together with the Preferred Securities, the "Trust
Securities"), (ii) investing the gross proceeds from the sale of
the Trust Securities in the Subordinated Debt Securities and
(iii) engaging in only those other activities necessary or inci-
dental thereto. All of the Common Securities will be directly or
indirectly owned by Southern Union. The Common Securities will
rank pari passu, and payments will be made thereon pro rata, with
the Preferred Securities, except that, upon an event of default
under the Declaration, the rights of the holders of the Common
Securities to payment in respect of distributions and payments upon
liquidation, redemption and otherwise will be subordinated to the
rights of the holders of the Preferred Securities. Southern Union
will directly or indirectly acquire Common Securities in an aggre-
gate liquidation amount equal to 3% of the total capital of each
Southern Union Trust. Each Southern Union Trust has a term of
approximately 55 years but may terminate earlier, as provided in
each Declaration. Each Southern Union Trust's business and affairs
will be conducted by the trustees (the "Southern Union Trustees")
appointed by Southern Union as the direct or indirect holder of all
the Common Securities. The holder of the Common Securities will be
entitled to appoint, remove or replace any of, or increase or
reduce the number of, the Southern Union Trustees of a Southern
Union Trust. The duties and obligations of the Southern Union
Trustees shall be governed by the Declaration of such Southern
Union Trust. A majority of the Southern Union Trustees of each
Southern Union Trust will be persons who are employees or officers
of or who are affiliated with Southern Union (the "Regular
Trustees"). In certain limited circumstances set forth in a
Prospectus Supplement, the holders of a majority of the Preferred
Securities will be entitled to appoint one additional Regular
Trustee who need not be an employee or officer of or otherwise
affiliated with Southern Union. One Southern Union Trustee of each
Southern Union Trust will be a financial institution that is not
affiliated with Southern Union and has a specified minimum amount
of aggregate capital, surplus, and undivided profits of not less
than $50,000,000, which shall act as property trustee and as
indenture trustee for the purposes of the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), pursuant to the
terms set forth in a Prospectus Supplement (the "Property
Trustee"). In addition, unless the Property Trustee main-
tains a principal place of business in the State of Delaware and
otherwise meets the requirements of applicable law, one Southern
Union Trustee of each Southern Union Trust will have a princi-
pal place of business or reside in the State of Delaware (the
"Delaware Trustee"). Southern Union will pay all fees and
expenses related to the Southern Union Trusts and the
offering of the Trust Securities, the payment of which will
be guaranteed by Southern Union. The office of the Delaware
Trustee for each Southern Union Trust is Wilmington Trust
Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890. The principal place of business
of each Southern Union Trust is c/o Southern Union Company,
504 Lavaca Street, Suite 800, Austin, Texas 78701, telephone
(512) 477-5852.
USE OF PROCEEDS
Each Southern Union Trust will use all proceeds received from the
sale of its Preferred Securities to purchase Subordinated Debt
Securities from Southern Union. The Company intends to add the
net proceeds from the sale of the Debt Securities to Southern
Union's general funds, to be used for general corporate purposes,
including repurchases of outstanding long-term debt securities,
capital expenditures, investments in subsidiaries, working capi-
tal, repayment of borrowings under bank credit agreements and
other business opportunities or as otherwise disclosed in any
Prospectus Supplement.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed
charges for Southern Union on an historical basis for the year
ended June 30, 1994, and each of the four years in the period
ended December 31, 1993, and for the nine-month and twelve-month
periods ended March 31, 1995. Such ratios are also presented
on a pro forma basis for the year ended June 30, 1994 and the
twelve-month periods ended December 31, 1994. For the purpose of
calculating such ratios, "earnings" consist of income from con-
tinuing operations before income taxes and "fixed charges" con-
sist of interest expense, amortization of debt discount or
premium and an estimate of interest implicit in rentals.
Twelve Nine
Months Months Year
Ended Ended Ended
March 31, March 31, June 30, Year Ended December 31,
_______________________
1995 1995 1994(a) 1993 1992 1991 1990
________ ________ _______ ____ ____ ____ ____
Ratio of
Earnings to
Fixed
Charges. . . . 1.45 1.84 1.49 1.76 1.77 1.82 1.10
==== ==== ==== ==== ==== ==== ====
Pro Forma -
Ratio of
Earnings to
Fixed
Charges(b) . . 1.39
====
_____________________________
(a) During 1994, the Company changed its fiscal year-end from
December 31 to June 30.
(b) This pro forma ratio gives effect to an increase in out-
standing debt, as of the beginning of the period presented,
primarily as a result of the January 31, 1994 acquisition of
Missouri Gas Energy, which was financed through the sale of
$475 million of 7.60% Senior Notes. Those debt proceeds,
along with proceeds of a $50 million common stock rights
offering and working capital from operations, were also used
to retire approximately $105 million of long-term debt. This
ratio also assumes the acquisition of Missouri Gas Energy
occurred as of the beginning of the period presented, as
reflected in the pro forma condensed statement of consolidated
operations included in the 1994 Form 10-K.
DESCRIPTION OF SOUTHERN UNION DEBT SECURITIES
The following description sets forth certain general terms and
provisions of the Debt Securities to which any Prospectus Supple-
ment 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 may be issued, from time to time, in one or
more series, and will constitute either Senior Debt Securities or
Subordinated Debt Securities. Senior Debt Securities may be issued
under an Indenture dated as of January 31, 1994 (the "Senior Debt
Securities Indenture"), between the Company and The Chase Manhattan
Bank, N. A., as trustee (the "Senior Debt Securities Trustee").
The Subordinated Debt Securities may be issued from time to time
under an Indenture dated as of___________________ , 1995 (the "Sub-
ordinated Debt Securities Indenture"), between the Company and
The Chase Manhattan Bank, N.A. as trustee (the "Subordinated Debt
Securities Trustee").
The Senior Debt Securities Indenture and the Subordinated Debt
Securities Indenture are referred to herein individually as an
"Indenture" and, collectively, as the "Indentures," and the Senior
Debt Securities Trustee and the Subordinated Debt Securities
Trustee are each referred to herein as the "Trustee." Copies of
the Indentures are filed as an exhibit to the Registration State-
ment. Capitalized terms used in this section which are not other-
wise defined in this Prospectus shall have the meanings set forth
in the Indentures to which they relate.
The following summaries of certain provisions of the Debt
Securities and the Indentures do not purport to be complete and are
subject to, and are qualified in their entirety by express
reference to all the provisions of the Indentures, including the
definitions therein of certain terms.
General
The Debt Securities will be direct, unsecured obligations of
Southern Union.
The Indentures do not limit the aggregate principal amount of Debt
Securities that may be issued thereunder and provide that Debt
Securities may be issued thereunder from time to time in one or
more series.
Unless otherwise indicated in the Prospectus Supplement relating
thereto, the principal of, and any premium or interest on, the Debt
Securities will be payable, and the Debt Securities will be
exchangeable and transfers thereof will be registrable, at the
Place of Payment; provided that, at the option of Southern Union,
payment of interest may be made by check mailed to the address of
the person entitled thereto as it appears in the Security Register.
The Indentures do not contain any provisions that may afford the
Holders of Debt Securities protection in the event of a highly
leveraged transaction or other transaction involving Southern Union
that may occur in connection with a takeover attempt resulting in
a decline in the credit rating of the Debt Securities. Any provi-
sion that does provide such protection, if applicable to the Debt
Securities, will be described in any Prospectus Supplement relating
thereto.
The Debt Securities may be issued under the Indentures as Original
Issue Discount Securities to be offered and sold at a substantial
discount below their principal amount. Special United States
federal income tax, accounting and other considerations applicable
to any such Original Issue Discount Securities will be described in
any Prospectus Supplement relating thereto. "Original Issue Dis-
count Security" means any security that provides for an amount less
than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof as a result of
the occurrence of an Event of Default and the continuation thereof.
In addition, the Subordinated Debt Securities may, for United
States federal income tax purposes, be deemed to have been issued
with "original issue discount" ("OID") even if such securities are
offered and sold at an amount equal to their stated principal
amount. The United States federal income tax consequences of Sub-
ordinated Debt Securities deemed to be issued with OID will be
described in any Prospectus Supplement relating thereto.
The Indenture does not contain any provisions that would limit the
ability of Southern Union to incur indebtedness. Reference is made
to any Prospectus Supplement relating to the Debt Securities
offered thereby for information with respect to any deletions from,
modifications of or additions to the Events of Default or covenants
of Southern Union applicable to such Debt Securities that are
described herein.
Under the Indentures, Southern Union will have the ability to issue
Debt Securities with terms different from those of Debt Securities
previously issued, without the consent of the Holders of previously
issued series of Debt Securities, in an aggregate principal amount
determined by Southern Union.
Registration and Transfer
The Debt Securities may be issued as Registered Securities or
Bearer Securities. Registered Securities will be exchangeable for
other Registered Securities of the same series and of a like aggre-
gate principal amount and tenor of different authorized denomina-
tions. If (but only if) provided for in any Prospectus Supplement,
Bearer Securities (with all unmatured coupons, except as provided
below, and all matured coupons in default) of any series may be
exchanged for Registered Securities of the same series of any
authorized denominations and of a like aggregate principal amount
and tenor. In such event, Bearer Securities surrendered in a per-
mitted exchange for Registered Securities between a Regular Record
Date or a Special Record Date and the relevant date for payment of
interest shall be surrendered without the coupon relating to such
date for payment of interest, and interest will not be payable on
such date for payment of interest in respect of the Registered
Security issued in exchange for such Bearer Security but will be
payable only to the holder of such coupon when due, in accordance
with the terms of the Indenture. Unless otherwise specified in any
Prospectus Supplement, Bearer Securities will not be issued in
exchange for Registered Securities.
The Debt Securities may be presented for exchange as described
above, and Registered Securities may be presented for registration
of transfer (duly endorsed or accompanied by a written instrument
of transfer), at the corporate trust office of the Trustee in New
York, New York, or at the office of any transfer agent designated
by Southern Union for such purpose with respect to any series of
Debt Securities and referred to in any Prospectus Supplement. No
service charge will be made for any transfer or exchange of Debt
Securities, but Southern Union may require payment of a sum suffi-
cient to cover any tax or other governmental charge payable in con-
nection therewith. If any Prospectus Supplement refers to any
transfer agent (in addition to the Trustee) initially designated by
Southern Union with respect to any series of Debt Securities,
Southern Union may at any time rescind the designation of any such
transfer agent or approve a change in the location at which any
such transfer agent acts, except that, if Debt Securities of a
series are issuable solely as Registered Securities, Southern Union
will be required to maintain a transfer agent in each Place of Pay-
ment for such series and, if Debt Securities of a series may be
issuable both as Registered Securities and as Bearer Securities,
Southern Union will be required to maintain (in addition to the
Trustee) a transfer agent in a Place of Payment for such series
located outside the United States. Southern Union may at any time
designate additional transfer agents with respect to any series of
Debt Securities.
In the event of any redemption of Debt Securities, Southern Union
shall not be required to: (i) issue, register the transfer of or
exchange Debt Securities of any series during a period beginning at
the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of
business on (A) if Debt Securities of the series are issuable only
as Registered Securities, the day of mailing of the relevant notice
of redemption and (B) if Debt Securities of the series are issuable
as Bearer Securities, the day of the first publication of the rele-
vant notice of redemption or, if Debt Securities of the series are
also issuable as Registered Securities and there is no publication,
the day of mailing of the relevant notice of redemption; (ii)
register the transfer of or exchange any Registered Security, or
portion thereof, called for redemption, except the unredeemed por-
tion of any Registered Security being redeemed in part; (iii)
exchange any Bearer Security selected for redemption, except to
exchange such Bearer Security for a Registered Security of that
series and like tenor that is simultaneously surrendered for
redemption; or (iv) issue, register the transfer of or exchange any
Debt Securities that has been surrendered for repayment at the
option of the Holder, except the portion if any, thereof not to be
so repaid.
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 (as such term is
defined below), which will be deposited with, or on behalf of, a
depositary ("Depositary") or its nominee identified in the appli-
cable Prospectus Supplement. In such case, one or more Global
Securities will be issued in a denomination or aggregate denomina-
tion equal to the portion of the aggregate principal amount of
outstanding Debt Securities of the series to be represented by such
Global Security or Global Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in registered
form, a Global Security may not be registered for transfer or
exchange except as (i) a whole by the Depositary for such Global
Security to a nominee of such Depositary, by a nominee of such
Depositary to such Depositary or another nominee to such Depositary
or by such Depositary, or by any nominee to a successor Depositary
or a nominee of such successor Depositary, and (ii) in the circum-
stances described in the applicable Prospectus Supplement. The
term "Global Security," when used with respect to any series of
Debt Securities, means a Debt Security that is executed by Southern
Union and authenticated and delivered by the Trustee to the
Depositary or pursuant to the Depositary's instruction, which shall
be registered in the name of the Depositary or its nominee and
which shall represent, and shall be denominated in an amount equal
to the aggregate principal amount of, all of the Outstanding Debt
Securities of such series or any portion thereof, in either case
having the same terms, including, without limitation, the same
original issue date, date or dates on which principal is due, and
interest rate or method of determining interest.
The specific terms of the depositary arrangement with respect to
any portion of a series of Debt Securities to be represented by a
Global Security will be described in the applicable Prospectus
Supplement. Southern Union expects that the following provisions
will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement,
Debt Securities that are to be represented by a Global Security to
be deposited with or on behalf of a Depositary will be represented
by a Global Security registered in the name of such Depositary or
its nominee. Upon the issuance of such Global Security, and the
deposit of such Global Security with or on behalf of the Depositary
for such Global Security, the Depositary 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 or its nominee ("participants"). The accounts to be
credited will be designated by the underwriters or agents of such
Debt Securities or, if such Debt Securities are offered and sold
directly by Southern Union, by Southern Union. Ownership of bene-
ficial interests in such Global Security will be limited to par-
ticipants or Persons that may hold interests through participants.
Ownership of beneficial interests by participants in such Global
Security will be shown on, and the transfer of that ownership
interest will be effected only through, records maintained by the
Depositary or its nominee for such Global Security. Ownership of
beneficial interests in such Global Security by Persons that hold
through participants will be shown on, and the transfer of that
ownership interest within such participant will be effected only
through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take
physical delivery of such securities in certificated form. The
foregoing limitations and such laws may impair the ability to
transfer beneficial interests in such Global Securities.
So long as the Depositary for a Global Security, or its nominee, is
the registered 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. Unless otherwise
specified in the applicable Prospectus Supplement, owners of bene-
ficial interests in such 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
certificated form and will not be considered the Holders thereof
for any purposes under the Indenture. Accordingly, each Person
owning a beneficial interest in such Global Security must rely on
the procedures of the Depositary and, if such Person is not a
participant, on the procedures of the participant through which
such Person owns its interest to exercise any rights of a Holder
under the Indenture. Southern Union understands that under
existing industry practices, if Southern Union requests any action
of Holders or an owner of a beneficial interest in such Global
Security desires to give any notice or take any action a Holder is
entitled to give or take under the Indenture, then the Depositary
would authorize the participants to give such notice or take such
action, and participants would authorize beneficial owners owning
through such participants to give such notice or take such action
or would otherwise act upon the instructions of beneficial owners
owning through them.
Principal of and any premium and interest on a Global Security will
be payable in the manner described in the applicable Prospectus
Supplement.
Restrictions
The Debt Securities Indentures provide that Southern Union shall
not consolidate with or merge with or into any other corporation,
or convey, transfer or lease, or permit one or more of its Sub-
sidiaries to convey, transfer or lease, all or substantially all of
the properties and assets of the Company on a consolidated basis to
any Person, unless either Southern Union is the continuing corpora-
tion or such corporation or Person assumes by supplemental inden-
ture all the obligations of Southern Union under the Indentures and
the Debt Securities, no default or Event of Default shall exist
immediately after the transaction, and the surviving corporation or
such Person is a corporation, partnership or trust organized and
validly existing under the laws of the United States of America,
any state thereof or the District of Columbia.
Pursuant to the Indentures, Southern Union will not, nor will it
permit any Subsidiary to, create, incur, issue or assume any Debt
secured by any Lien on any property or assets owned by Southern
Union or any Subsidiary, and Southern Union will not, nor will it
permit any Subsidiary to, create, incur, issue or assume any Debt
secured by any Lien on any shares of stock or Debt of any Sub-
sidiary (such shares of stock or Debt of any Subsidiary being
called "Restricted Securities"), unless (i) in the case of Debt
which is expressly by its terms subordinate or junior in right of
payment to the applicable series of Debt Securities, such Debt
Securities are secured by a Lien on such property or assets that is
senior to such other Lien with the same relative priority as such
subordinated Debt has with respect to the applicable series of Debt
Securities or (ii) in the case of Liens securing Debt that is
ranked pari passu with the applicable series of Debt Securities,
such Debt Securities are secured by a Lien on such property or
assets that is equal and ratable with such other Lien, except that
any Lien securing such Debt Securities may be junior to any Lien on
Southern Union's accounts receivable, inventory and related con-
tract rights securing Debt under Southern Union's revolving credit
facility, entered into on September 30, 1993, with Texas Commerce
Bank, N. A., as amended on November 15, 1993, July 1, 1994, and
April 28, 1995; provided, however, that, nothing contained in
Section 1009 of the Indenture shall prevent, restrict or apply
to, and there shall be excluded from secured Debt in any
computation under that Section, Debt secured by:
(a) Liens on any property or assets or Restricted Securities of
Southern Union or any Subsidiary existing as of the date of
the first issuance by Southern Union of the applicable Debt
Securities issued pursuant to an Indenture or such other date
as may be specified in a Prospectus Supplement for an appli-
cable series of Debt Securities issued pursuant to an Inden-
ture, subject to the provisions of subsection (h) below;
(b) Liens on any property or assets or Restricted Securities of
any corporation existing at the time such corporation becomes
a Subsidiary, or arising thereafter (i) otherwise than in con-
nection with the borrowing of money arranged thereafter and
(ii) pursuant to contractual commitments entered into prior to
and not in contemplation of such corporation's becoming a Sub-
sidiary;
(c) Liens on any property or assets or Restricted Securities of
Southern Union or any Subsidiary existing at the time of
acquisition thereof, or securing the payment of all or any
part of the purchase price or construction cost thereof, or
securing any Debt incurred prior to, at the time of or within
120 days after, the acquisition of such property or assets or
Restricted Securities or the completion of any such construc-
tion, whichever, is later, for the purpose of financing all or
any part of the purchase price or construction cost thereof;
(d) Liens on any property or assets to secure all or any part of
the cost of development, operation, construction, alteration,
repair or improvement of all or any part of such property or
assets or to secure Debt incurred by Southern Union or any
Subsidiary prior to, at the time of or within 120 days after,
the completion of such development, operation, construction,
alteration, repair or improvement, whichever is later, for the
purpose of financing all or any part of such cost;
(e) Liens in favor of the Trustee for the benefit of the Holders
and subsequent holders of the Debt Securities securing the
Debt Securities;
(f) Liens secured by property or assets of Southern Union or any
Subsidiary that comprise no more than 20% of Consolidated Net
Tangible Assets (as defined below);
(g) Liens which secure Senior Indebtedness owing by a Subsidiary
to Southern Union or to another Subsidiary; and
(h) Any extension, renewal, substitution or replacement (or suc-
cessive extensions, renewals, substitutions or replacements),
in whole or in part, of any of the Liens referred to in para-
graphs (a) through (g) above or the Debt secured thereby;
provided that, (1) such extension, renewal, substitution or
replacement Lien shall be limited to all or any part of the
same property or assets or Restricted Securities that secured
the Lien extended, renewed, substituted or replaced (plus
improvements on such property and plus any other property or
assets not then owned by Southern Union or a Subsidiary or
constituting Restricted Securities) and (2) in the case of
paragraphs (a) through (c) above, the Debt secured by such
Lien at such time is not increased.
For the purposes of Section 1009, the giving of a guarantee that is
secured by a Lien on any property or assets or Restricted Securi-
ties, and the creation of a Lien on any property or assets or
Restricted Securities to secure Debt that existed prior to the
creation of such Lien, shall be deemed to involve the creation of
Debt in an amount equal to the principal amount guaranteed or
secured by such Lien; but the amount of Debt secured by Liens on
property or assets and Restricted Securities shall be computed
without cumulating the underlying indebtedness with any guarantee
thereof or Lien securing the same.
Limitation on Sale and Leaseback Transactions
Except in respect of Subordinated Debt Securities issued to a
Southern Union Trust or a trustee of such trust, Southern Union
will not, and will not permit any Subsidiary to, enter into any
arrangement after the date of the original issuance by Southern
Union of the applicable series of Debt Securities issued pursuant
to an Indenture, or such other date as may be specified in any
Prospectus Supplement for an applicable series of Debt Securities
issued pursuant to an Indenture, with any Person (other than
Southern Union or another Subsidiary) providing for the leasing by
Southern Union or any such Subsidiary of any property (except a
lease for a temporary period not to exceed three years by the end
of which it is intended that the use of such property by the lessee
will be discontinued) that was or is owned or leased by Southern
Union or a Subsidiary and that has been or is to be sold or trans-
ferred by Southern Union or such Subsidiary to such Person (herein
referred to as a "sale and leaseback transaction") unless either --
(a) after giving pro forma effect to such transaction, the
Attributable Debt (as defined below) of Southern Union and its
Subsidiaries in respect of such sale and leaseback transaction
and all other sale and leaseback transactions entered into
after the date of the first issuance by Southern Union of Debt
Securities issued pursuant to the Indenture (other than such
sale and leaseback transactions as are permitted by paragraph
(b) below) would not exceed 20% of Consolidated Net Tangible
Assets, or
(b) Southern Union, within 180 days after the sale and leaseback
transaction, applies or causes a Subsidiary to apply an amount
equal to the greater of the net proceeds from the sale of the
property subject to the sale and leaseback transaction or the
fair market value of the property so sold and leased back at
the time of the sale and leaseback transaction to the retire-
ment of Debt Securities of any series or any other Debt of
Southern Union (other than Debt subordinated to the Debt
Securities) or Debt of a Subsidiary having a stated maturity
more than 12 months from the date of such application or which
is extendible at the option of the obligor thereon to a date
more than 12 months from the date of such application (and,
unless otherwise expressly provided with respect to any one or
more series of Debt Securities, any redemption of Debt Securi-
ties pursuant to this provision shall not be deemed to consti-
tute a refunding operation or anticipated refunding operation
for the purposes of any provision limiting Southern Union's
right to redeem Debt Securities of any one or more such series
when such redemption involves a refunding operation or antici-
pated refunding operation); provided that, the amount to be so
applied shall be reduced by (i) the principal amount of Debt
Securities delivered within 180 days after such sale or trans-
fer to the Trustee for retirement and cancellation and (ii)
the principal amount of any such Debt of Southern Union or a
Subsidiary, other than Debt Securities, is voluntarily retired
by Southern Union or a Subsidiary within 180 days after such
sale or transfer. Notwithstanding the foregoing, no retire-
ment referred to in this paragraph (b) may be effected by pay-
ment at maturity or pursuant to any mandatory sinking fund
payment or any mandatory prepayment provision.
Notwithstanding the foregoing, where Southern Union or any Sub-
sidiary is the lessee in any sale and leaseback transaction,
Attributable Debt shall not include any Debt resulting from the
guarantee by Southern Union or any other Subsidiary of the lessee's
obligation thereunder.
Events of Default
Each Indenture provides, with respect to any series of Debt
Securities outstanding thereunder, that any one or more of the fol-
lowing events that has occurred and is continuing shall constitute
an Event of Default: (i) default in the payment of any interest
upon or any Additional Amounts payable in respect of any Debt
Security of that series, or of any coupon appertaining thereto,
when the same becomes due and payable and continues for 30 days;
provided, however, that, a valid extension of the interest payment
period by Southern Union for the Subordinated Debt Securities shall
not constitute a default in the payment of interest for this pur-
pose, and provided further that, if Subordinated Debt Securities are
issued to a Southern Union Trust or a trustee of such trust in con-
nection with the issuance of Trust Securities by such Southern
Union Trust, such 30-day period will be replaced by a ten-day
period, (ii) default in the payment of the principal of or any pre-
mium on any Debt Security of that series when due, whether at
maturity, upon redemption by declaration or otherwise; provided,
however, that, a valid extension of the maturity of the Subordi-
nated Debt Securities shall not constitute a default for this pur-
pose; (iii) default in the deposit of any sinking fund payment,
when and as due by the terms of any Debt Securities of that series;
(iv) default in the performance or breach of any covenant or agree0
ment of Southern Union in the Indenture with respect to any Debt
Security of that series, continued for 60 days after written notice
to Southern Union from the Trustee or from the holders of at least
25% of the outstanding Debt Securities of that series; (v) cross-
acceleration of other Debt of Southern Union in excess of 10% of
Consolidated Net Worth; (vi) certain events in bankruptcy, insol-
vency or reorganization of Southern Union; (vii) the voluntary or
involuntary dissolution, winding-up or termination of a Southern
Union Trust to which (or to a trustee of such trust to which) Sub-
ordinated Debt Securities were issued in connection with the
issuance of Trust Securities by such Southern Union Trust, except
in connection with the distribution of Subordinated Debt Securities
to the holders of Trust Securities in liquidation of such Southern
Union Trust, the redemption of all of the Trust Securities of such
Southern Union Trust, or certain mergers, consolidations or amal-
gamations, each as permitted by the Declaration of such Southern
Union Trust; and (viii) any other Event of Default provided with
respect to Debt Securities of that series. Southern Union is
required to file annually with the Trustee an officer's certificate
as to Southern Union's compliance with all conditions and covenants
under each Indenture. Each Indenture provides that the Trustee may
withhold notice to the Holders of Debt Securities of any default,
except in the case of a default on the payment of the principal of
(or premium), if any, or interest on any Debt Securities or the
payment of any sinking fund installment with respect to such
Securities if it considers it in the interest of the Holders of
Debt Securities to do so.
If an Event of Default, other than certain events with respect to
bankruptcy, insolvency and reorganization of Southern Union or any
significant Subsidiary, occurs and is continuing with respect to
Debt Securities of a particular series, the Trustee or the Holders
of not less than 25% in principal amount of Outstanding Debt
Securities of that series may declare the Outstanding Debt Securi-
ties of that series due and payable immediately. If an Event of
Default with respect to certain events of bankruptcy, insolvency or
reorganization of Southern Union or any Significant Subsidiary with
respect to Debt Securities of a particular series shall occur and
be continuing, then the principal of all the Outstanding Debt
Securities of that series, and accrued and unpaid interest thereon,
shall automatically be due and payable without any act on the part
of the Trustee or any Holder.
Subject to the provisions relating to the duties of the Trustee, if
an Event of Default with respect to Debt Securities of a particular
series occurs and is continuing, the Trustee shall be under no
obligation to exercise any of its rights or powers under the
applicable Indenture at the request or direction of any of the
Holders of Debt Securities of such series, unless such Holders
shall have offered to the Trustee reasonable indemnity and security
against the costs, expenses and liabilities that might be incurred
by it in compliance with such request. Subject to such provisions
for the indemnification of the Trustee, the Holders of a majority
in principal amount of the Outstanding Debt Securities of such
series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee
under the applicable Indenture, or exercising any trust or power
conferred on the Trustee with respect to the Debt Securities of
that series. The Trustee may refuse to follow directions in con-
flict with law or the Indenture that may involve Trustee in per-
sonal liability or may be unduly prejudicial to Holders not joining
therein.
The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may, on behalf of the
Holders of all the Debt Securities of such series and any related
coupons, waive any past default under the applicable Indenture with
respect to such series and its consequences, except a default (i)
in the payment of the principal of (or premium, if any) or interest
on or Additional Amounts payable in respect of any Debt Security of
such series unless such default has been cured and a sum sufficient
to pay all matured installments of interest and principal due
otherwise than by acceleration and any applicable premium has been
deposited with the Trustee or (ii) in respect of a covenant or
provision that cannot be modified or amended without the consent of
the Holder of each Outstanding Debt Security of such series
affected thereby.
Modification or Waiver
Modification and amendment of each of the Indentures may be made by
Southern Union and the applicable Trustee with the consent of the
Holders of not less than a majority in principal amount of all
Outstanding Indenture Securities or any series that are affected by
such modification or amendment; provided that, no such modification
or amendment may, without the consent of the Holder of each Out-
standing Debt Security of such series, among other things, (i)
change the Stated Maturity of the principal of (or premium, if any,
on) or any installment of principal of or interest on any Debt
Security of such series, (ii) reduce the principal amount or the
rate of interest on or any Additional Amounts payable in respect
of, or any premium payable upon the redemption of, any Debt
Security of such series, (iii) change any obligation of Southern
Union to pay Additional Amounts in respect of any Debt Security of
such series, (iv) reduce the amount of principal of a Debt
Security of such series that is an Original Issue Discount
Security and would be due and payable upon a declaration of
acceleration of the Maturity thereof, (v) adversely affect any
right of repayment at the option of the Holder of any Debt
Security of such series, (vi) change the place or currency of
payment of principal of, or any premium or interest on, any
Debt Security of such series, (vii) impair the right to
institute suit for the enforcement of any such payment on or after
the Stated Maturity thereof or any Redemption Date or Repayment
Date therefor, (viii) reduce the above-stated percentage of Holders
of Outstanding Debt Securities of such series necessary to modify
or amend the Indenture or to consent to any waiver thereunder or
reduce the requirements for voting or quorum described below, (ix)
modify the change of control provisions, if any, or (x) modify the
foregoing requirements or reduce the percentage of Outstanding Debt
Securities of such series necessary to waive any past default.
Modification and amendment of the Indenture may be made by Southern
Union and the applicable Trustee without the consent of any Holder,
for any of the following purposes: (i) to evidence the succession
of another Person to Southern Union as obligor under an Indenture;
(ii) to add to the covenants of Southern Union for the benefit of
the Holders of all or any series of Debt Securities; (iii) to add
Events of Default for the benefit of the Holders of all or any
series of Debt Securities; (iv) to add or change any provisions of
the applicable Indenture to facilitate the issuance of Bearer
Securities; (v) to change or eliminate any provisions of the
applicable Indenture, provided that any such change or elimination
shall become effective only when there are no Outstanding Debt
Securities of any series created prior thereto that is entitled to
the benefit of such provision; (vi) to establish the form or terms
of Debt Securities of any series and any related coupons; (vii) to
secure the Debt Securities; (viii) to provide for the acceptance of
appointment by a successor Trustee or facilitate the administration
of the trusts under the applicable Indenture by more than one
Trustee; and (ix) to close the applicable Indenture with respect to
the authentication and delivery of additional series of Debt
Securities, in order to cure any ambiguity, defect or inconsistency
in the applicable Indenture, provided such action does not
adversely affect the interest of Holders of Debt Securities of any
series in any material respect.
Each Indenture contains provisions for convening meetings of the
Holders of Debt Securities of a series if Debt Securities of that
series are issuable as Bearer Securities. A meeting may be called
at any time by the applicable Trustee and also by such Trustee pur-
suant to a request made to such Trustee by Southern Union or the
Holders of at least 10% in principal amount of the Debt Securities
of such series Outstanding, but in any case, notice shall be given
as provided in the applicable Indenture. Except for any consent
that must be given by the Holder of each Debt Security affected
thereby, as described above, any resolution presented at a meeting
or adjourned meeting duly reconvened at which a quorum is present
may be adopted by the affirmative vote of the Holders of a majority
in principal amount of the Debt Securities of that series Out-
standing; provided, however, that, any resolution with respect to
any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the
Holders of a specified percentage that is less than a majority in
principal amount of Debt Securities of a series Outstanding may be
adopted at a meeting or adjourned meeting, duly reconvened and at
which a quorum is present, by the affirmative vote of the Holders
of such specified percentage in principal amount of the Debt
Securities of that series Outstanding. Any resolution passed or
decision taken at any meeting of Holders of Debt Securities of any
series duly held in accordance with the applicable Indenture will
be binding on all Holders of Debt Securities of that series and the
related coupons. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will consist of persons
entitled to vote a majority in principal amount of the Debt Securi-
ties of a series Outstanding; provided, however, that, if any
action is to be taken at such meeting with respect to a consent or
waiver that may be given by the Holders of not less than a speci-
fied percentage in principal amount of the Debt Securities of a
series Outstanding, the Persons entitled to vote such specified
percentage in principal amount of the Debt Securities of such
series Outstanding will constitute a quorum. Notwithstanding the
foregoing provisions, if any action is to be taken at a meeting of
Holders of Debt Securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver
or other action that the applicable Indenture expressly provides
may be made, given or taken by the Holders of a specified per-
centage in principal amount of all Outstanding Debt Securities
affected thereby, or of the Holders of such series and one or more
additional series, then (i) there shall be no minimum quorum
requirement for such meeting, and (ii) the principal amount of the
Outstanding Debt Securities of such series that vote in favor of
such request, demand, authorization, direction, notice, consent,
waiver or other action shall be taken into account in determining
whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under
the applicable Indenture.
Financial Information
So long as any of the Debt Securities are outstanding, Southern
Union will file with the Commission, to the extent permitted under
the Exchange Act, the annual reports, quarterly reports and other
documents otherwise required to be filed with the Commission pursu-
ant to Section 13(a) or 15(d) of the Exchange Act as if Southern
Union were subject to such Sections, and Southern Union will also
provide to all Holders and file with the Trustees copies of such
reports and documents within 15 days after it files them with the
Commission or, if filing such reports and documents by Southern
Union with the Commission is not permitted under the Exchange Act,
within 15 days after it would otherwise have been required to file
such reports and documents if permitted, in each case at Southern
Union's cost.
Certain Definitions
"Attributable Debt" means, as to any specified lease under which
any Person is at the time liable for a term of more than 12 months,
at any date as of which the amount thereof is to be determined, the
total net amount of rent required to be paid by such Person under
such lease during the remaining term thereof (excluding any subse-
quent renewal or other extension options held by the lessee), dis-
counted from the respective due dates thereof to such date at a
rate equal to the weighted average of the interest rates borne by
the Outstanding Debt Securities, compounded monthly. The net
amount of rent required to be paid under any such lease for any
such period shall be the aggregate amount of the rent payable by
the lessee with respect to such period after excluding any amounts
required to be paid on account of maintenance and repairs, ser-
vices, insurance, taxes, assessments, water rates and similar
charges and contingent rents (such as those based on sales). In
the case of any lease that is terminable by the lessee upon the
payment of a penalty, such net amount of rent shall include the
lesser of (i) the total discounted net amount of rent required to
be paid from the later of the first date upon which such lease may
be so terminated or the date of the determination of such net
amount of rent, as the case may be, and (ii) the amount of such
penalty (in which event no rent shall be considered as required to
be paid under such lease subsequent to the first date upon which it
may be so terminated).
"Consolidated Net Tangible Assets" means the total amount of assets
(less applicable reserves and other properly deductible items) of
Southern Union and its consolidated Subsidiaries after deducting
therefrom (i) all current liabilities (excluding any current lia-
bilities that are by their terms extendible or renewable at the
option of the obligor thereon to a time more than 12 months after
the time as of which the amount thereof is being computed) and (ii)
all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles, all as set forth
on the most recent balance sheet of Southern Union and its con-
solidated subsidiaries and computed in accordance with generally
accepted accounting principles.
PARTICULAR TERMS OF THE SENIOR DEBT SECURITIES
The following description of the Senior Debt Securities sets forth
certain general terms and provisions of the Senior Debt Securities
to which any Prospectus Supplement may relate. The particular
terms of the Senior Debt Securities offered by any Prospectus Sup-
plement, and the extent, if any, to which such general provisions
may apply to the Senior Debt Securities so offered, will be
described in the Prospectus Supplement relating to such Senior Debt
Securities.
General
The Senior Debt Securities Indenture provides for the issuance of
Senior Debt Securities from time to time in one or more series.
Reference is made to the Prospectus Supplement relating to a par-
ticular issuance of a series of Senior Debt Securities being
offered (the "Senior Debt Securities") for, among other things, the
following terms thereof: (1) the title of the Senior Debt Securi-
ties; (2) any limit on the aggregate principal amount of such
Senior Debt Securities; (3) the percentage of the principal amount
at which such Senior Debt Securities will be issued and, if other
than the principal amount thereof, the portion of the principal
amount payable upon declaration of acceleration of the maturity
thereof, or the method by which such portion shall be determined;
(4) the date or dates on which the principal of such Senior Debt
Securities will be payable; (5) the rate or rates at which such
Senior Debt Securities will bear interest, or the method by which
such rate or rates shall be determined, and the date such interest
shall accrue, or the method by which such date or dates shall be
determined; (6) the dates on which such interest will be payable
and the Regular Record Dates for any Interest Payment Dates and the
basis on which interest shall be calculated; (7) the dates, if any,
on which, and the price or prices at which, the Senior Debt Securi-
ties may, pursuant to any mandatory or optional sinking fund provi-
sions, be redeemed by Southern Union and other detailed terms and
provisions of such sinking funds; (8) the date, if any, after
which, and the price or prices at which, the Senior Debt Securities
may, pursuant to any optional redemption provisions, be redeemed at
the option of Southern Union or of the Holder thereof and other
detailed terms and provisions of such optional redemption; (9) the
applicability, if at all, to such Senior Debt Securities of the
provisions of Article Fourteen of the Senior Debt Securities
Indenture described under "Defeasance and Covenant Defeasance" and
any provisions in modification of, in addition to or in lieu of any
of the provisions of such Article; (10) whether and under what cir-
cumstances Southern Union will pay Additional Amounts, as contem-
plated by Section 1005 of the Senior Debt Securities Indenture, on
such Senior Debt Securities to any Holder who is not a United
States person (including any modification to the definition of such
term as contained in the Senior Debt Securities Indenture as
originally executed) in respect to any tax, assessment or govern-
mental charge and, if so, whether Southern Union will have the
option to redeem such Senior Debt Securities rather than pay such
Additional Amounts (and the terms of any such option); (11) any
deletions from, modifications of or additions to the Events of
Default or covenants of Southern Union with respect to such Senior
Debt Securities, whether or not such Events of Default or covenants
are consistent with the Events of Default or covenants set forth
herein; and (12) any other terms of such Senior Debt Securities.
For a description of the terms of any series of Senior Debt
Securities, reference must be made to both the Prospectus Supple-
ment relating thereto and the description of Debt Securities set
forth herein.
Unless otherwise indicated in the Prospectus Supplement relating
thereto, the Senior Debt Securities will be issued in United States
dollars in fully registered form, without coupons, in denominations
of $1,000, or any integral multiple thereof. No service charge
will be made for any transfer or exchange of the Senior Debt
Securities, but Southern Union may require payment of a sum suffi-
cient to cover any tax or other governmental charge payable in con-
nection therewith.
Denominations
Senior Debt Securities may be issuable as Registered Securities
solely, as Bearer Securities solely, or as both. Registered
Securities will be issuable in denominations of $1,000 and integral
multiples of $1,000, and Bearer Securities will be issuable in the
denomination of $5,000 or, in each case, in such other denomina-
tions as may be in the terms of the Senior Debt Securities.
The Senior Debt Securities Indenture also provides that Senior Debt
Securities may be issuable in global form. Unless otherwise indi-
cated in any Prospectus Supplement, Bearer Securities will have
interest coupons attached.
Defeasance
The Senior Debt Securities Indenture provides that, if the provi-
sions of Article Fourteen are made applicable to the Senior Debt
Securities of or within any series and any related coupons pursuant
to Section 1401 of the Senior Debt Securities Indenture, Southern
Union may elect either (a) to defease and be discharged from any
and all obligations with respect to such Senior Debt Securities and
any related coupons (except for the obligation to pay Additional
Amounts, if any, upon the occurrence of certain events of tax,
assessment or governmental charge with respect to payments on such
Senior Debt Securities and the obligations to register the transfer
or exchange of such Senior Debt Securities and any related coupons,
to replace temporary or mutilated, destroyed, lost or stolen Senior
Debt Securities and any related coupons, to maintain an office or
agency in respect of such Senior Debt Securities and any related
coupons and to hold moneys for payment in trust) ("defeasance") or
(b) to be released from its obligations with respect to such Senior
Debt Securities and any related coupons under Section 1402 (being
the restriction described under "Limitation on Liens") or, if
provided pursuant to Section 1403 of the Senior Debt Securities
Indenture, its obligations with respect to any other covenant, and
any omission to comply with such obligations shall not constitute
a default or an Event of Default with respect to such Senior Debt
Securities and any related coupons ("covenant defeasance"), in
either case upon the irrevocable deposit by Southern Union with the
Senior Debt Securities Trustee (or other qualifying trustee), in
trust, of an amount, in such Currency in which such Senior Debt
Securities and any related coupons are then specified as payable at
Stated Maturity, or Government Obligations (as defined below), or
both, applicable to such Senior Debt Securities and any related
coupons (with such applicability being determined on the basis of
the currency, currency unit or composite currency in which such
Senior Debt Securities are then specified as payable at Stated
Maturity), which through the scheduled payment of principal and
interest in accordance with their terms, will provide money in an
amount sufficient to pay the principal of (and premium, if any) and
interest, if any, on such Senior Debt Securities and any related
coupons, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things,
Southern Union has delivered to the Senior Debt Securities Trustee
an Opinion of Counsel (as specified in the Senior Debt Securities
Indenture) to the effect that the Holders of such Senior Debt
Securities and any related coupons will not recognize income gain
or loss for United States federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to
United States federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred; provided that,
such Opinion of Counsel, in the case of defeasance under clause (a)
above, must refer to and be based upon a revenue ruling of the
Internal Revenue Service or a change in applicable United States
federal income tax law occurring after the date of the Senior Debt
Securities Indenture.
"Government Obligations" means securities that are (i) direct
obligations of the government that issued the Currency in which the
Senior Debt Securities of a particular series are payable, for the
payment of which its full faith and credit is pledged, or (ii)
obligations of a Person controlled or supervised by and acting as
an agency or instrumentality of the government that issued the
Currency in which the Senior Debt Securities of such series are
payable, the payment of which is unconditionally guaranteed as a
full faith and credit obligation by the United States of America or
such other government, which, in either case, are not callable or
redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as
custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government
Obligation held by such custodian for the account of the holder of
a depository receipt; provided that (except as required by law),
such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any
amount received by the custodian in respect of the Government
Obligation or the specific payment of interest in or principal of
the Government Obligation evidenced by such depository receipt.
Unless otherwise provided in the Prospectus Supplement, if, after
Southern Union has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance relating thereto with
respect to Senior Debt Securities of any series, (a) the Holder of
Senior a Debt Security of such series is entitled to and does
elect, pursuant to the terms of such Senior Debt Security, to
receive payment in a currency other than that in which such deposit
has been made in respect of such Senior Debt Security or (b) the
currency in which such deposit has been made in respect of any
Senior Debt Security of such series ceases to be used by its
government of issuance, then the indebtedness represented by such
Senior Debt Security shall be deemed to have been, and will be,
fully discharged and satisfied through the payment of the principal
of (and premium, if any) and interest, if any, on such Senior Debt
Security as they become due out of the proceeds yielded by con-
verting the amount so deposited in respect of such Senior Debt
Security into the Currency in which such Senior Debt Security
becomes payable as a result of such election or such cessation of
usage based on the applicable Market Exchange Rate. Unless
otherwise provided in the Prospectus Supplement, all payments of
principal of (and premium, if any) and interest, if any, and
Additional Amounts, if any, on any Senior Debt Security that is
payable in a Foreign Currency that ceases to be used by its
government of issuance shall be made in U. S. Dollars.
In the event Southern Union effects covenant defeasance with
respect to (i) any Senior Debt Securities and any related coupons
and (ii) such Senior Debt Securities and any related coupons are
declared due and payable because of the occurrence of any Event of
Default, other than the Event of Default described in clause (iii)
or (vi) under "Events of Default," with respect to any covenant for
which there has been defeasance, the Currency and/or Government
Obligations on deposit with the Trustee will be sufficient to pay
amounts due on such Senior Debt Securities and any related coupons
at the time of their Stated Maturity but may not be sufficient to
pay amounts due on such Senior Debt Securities and any related
coupons at the time of the acceleration resulting from such Event
of Default. However, Southern Union would remain liable to make
payment of such amounts due at the time of acceleration.
The Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including
any modifications to the provisions described above, with respect
to the Senior Debt Securities of or within a particular series and
any related coupons.
Ranking of Senior Debt Securities
The Senior Debt Securities will rank pari passu with all other
unsecured indebtedness of the Company, except that the Senior Debt
Securities will be senior in right of payment to any subordinated
indebtedness which, by its terms, is subordinate to the Senior Debt
Securities.
Information Concerning the Senior Debt Securities Trustee
The Senior Debt Securities Trustee, prior to default, undertakes to
perform only such duties as are specifically set forth in the
Senior Debt Securities Indenture and, after default, shall exercise
the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provision,
the Senior Debt Securities Trustee is under no obligation to exer-
cise any of the powers vested in it by the Senior Debt Securities
Indenture at the request of any Holder of Senior Debt Securities,
unless offered reasonable indemnity by such Holder against the
costs, expenses and liabilities which might be incurred thereby.
(Section 602). The Senior Debt Securities Trustee is not required
to expand or risk its own funds or otherwise incur personal
financial liability in the performance of its duties if the Senior
Debt Securities Trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it. (Section 602).
PARTICULAR TERMS OF THE SUBORDINATED DEBT SECURITIES
The following description of the Subordinated Debt Securities sets
forth the general terms and provisions of the Subordinated Debt
Securities to which any Prospectus Supplement may relate. The
particular terms of the Subordinated Debt Securities offered by any
Prospectus Supplement and the extent, if any, to which such general
provisions may apply will be described in the Prospectus Supplement
relating to such Subordinated Debt Securities.
General
The Subordinated Debt Securities will be unsecured, subordinated
obligations of Southern Union.
In the event Subordinated Debt Securities are issued to a
Southern Union Trust (or a trustee of such trust) in connection
with the issuance of Trust Securities by any such Southern Union
Trust, such Subordinated Debt Securities subsequently may be dis-
tributed pro rata to the holders of such Trust Securities in con-
nection with the dissolution of such Southern Union Trust upon the
occurrence of certain events described in the Prospectus Supplement
relating to such Trust Securities. Only one series of Subordinated
Debt Securities will be issued to a Southern Union Trust, or a
trustee of such trust, in connection with the issuance of Trust
Securities by such Southern Union Trust.
The Subordinated Debt Securities are issuable in one or more series
pursuant to an indenture supplement to the Subordinated Debt
Securities Indenture or a resolution of Southern Union's Board of
Directors or a special committee thereof (each a "Supplemental
Indenture").
Reference is made to the Prospectus Supplement relating to any Sub-
ordinated Debt Securities being offered for, among other things,
the following terms thereof: (1) the title of the Subordinated
Debt Securities; (2) any limit on the aggregate principal amount of
such Subordinated Debt Securities; (3) the percentage of the prin-
cipal amount at which such Subordinated Debt Securities will be
issued and, if other than the principal amount thereof, the portion
of the principal amount thereof payable upon acceleration of the
maturity thereof, or the method by which such portion shall be
determined; (4) the date or dates, on which the principal of such
Subordinated Debt Securities will be payable; (5) the rights, if
any, to defer payments of interest on the Subordinated Debt Securi-
ties by extending the interest payment period, and the duration of
such extensions; (6) the subordination terms of the Subordinated
Debt Securities of such series; (7) the rate or rates at which such
Subordinated Debt Securities will bear interest, or the method by
which such rate or rates shall be determined, and the date such
interest shall accrue, or the method by which such date or dates
shall be determined; (8) the dates on which such interest will be
payable and the Regular Record Dates for any Interest Payment Dates
and the basis on which interest shall be calculated; (9) the dates,
if any, on which, the price or prices at which the Subordinated
Debt Securities may, pursuant to any mandatory or optional sinking
fund provisions, be redeemed by Southern Union and other detailed
terms and provisions of such sinking funds; (10) the date, if any,
after which, and the price or prices at which, the Subordinated
Debt Securities may, pursuant to any optional redemption provi-
sions, be redeemed at the option of Southern Union or of the Holder
thereof, and other detailed terms and provisions of such optional
redemption; (11) whether and under what circumstances Southern
Union will pay Additional Amounts as contemplated by Section 1005
of the Indenture on such Subordinated Debt Securities to any Holder
who is not a United States person (including any modification to
the definition of such term as contained in the Subordinated Debt
Securities Indenture as originally executed) in respect to any tax,
assessment or governmental charge and, if so, whether Southern
Union will have the option to redeem such Subordinated Debt Securi-
ties rather than pay such Additional Amounts (and the terms of any
such option); (12) any deletions from, modifications of or addi-
tions to the Events of Default or covenants of Southern Union with
respect to such Subordinated Debt Securities, whether or not such
Events of Default or covenants are consistent with the Events of
Default or covenants set forth herein; and (13) any other terms of
such Subordinated Debt Securities. For a description of the terms
of any series of the Subordinated Debt Securities, reference must
be made to both the Prospectus Supplement relating thereto and to
the description of Subordinated Debt Securities set forth herein.
Unless otherwise indicated in the Prospectus Supplement relating
thereto, the Subordinated Debt Securities will be issued in United
States dollars in fully registered form, without coupons, in
denominations of $25 or any integral multiple thereof. No service
charge will be made for any transfer or exchange of the Subordi-
nated Debt Securities, but Southern Union may require payment of
a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
Certain Covenants
If Subordinated Debt Securities are issued to a Southern Union
Trust or a trustee of such trust in connection with the issuance of
Trust Securities by such Southern Union Trust and (i) there shall
have occurred any event that would constitute an Event of Default
or (ii) Southern Union shall be in default with respect to its
payment of any obligations under the related Guarantee or Common
Securities Guarantee, then (a) Southern Union shall not, and shall
cause any subsidiary of Southern Union that is not a wholly-owned
subsidiary of Southern Union not to, declare or pay dividends on,
or make a distribution with respect to or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its
capital stock or the capital stock of any such subsidiary, and (b)
Southern Union shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt
securities issued by Southern Union that rank pari passu with or
junior to such Subordinated Debt Securities; provided, however,
that, restriction (a) above does not apply to any stock
dividends paid by Southern Union, or any or its subsidiaries where
the dividend stock is the same stock as that on which the dividend
is being paid.
If Subordinated Debt Securities are issued to a Southern Union
Trust or a trustee of such trust in connection with the issuance of
Trust Securities by such Southern Union Trust and Southern Union
shall have given notice of its election to defer payments or
interest on such Subordinated Debt Securities by extending the
interest payment period as provided in the Indenture and such
period, or any extension thereof, shall be continuing then (a)
Southern Union shall not, and shall cause any subsidiary of
Southern Union that is not a wholly-owned subsidiary of Southern
Union not to, declare or pay dividends on, or make a distribution
with respect to or redeem, purchase or acquire, or make a liquida-
tion payment with respect to, any of its capital stock or the
capital stock of any such subsidiary, and (b) Southern Union shall
not make any payment of interest, principal or premium, if any, on
or repay, repurchase or redeem any debt securities issued by
Southern Union that rank pari passu with or junior to such
Subordinated Debt Securities; provided, however, that, the
restriction (a) above does not apply to any stock dividends paid
by Southern Union, or any of its subsidiaries, where the dividend
stock is the same as that on which the dividend is being paid.
(Section 1012.)
In the event Subordinated Debt Securities are issued to a Southern
Union Trust or a trustee of such trust in connection with the
issuance of Trust Securities of such Southern Union Trust, for so
long as such Trust Securities remain outstanding, Southern Union
will covenant (i) to directly or indirectly maintain 100% ownership
of the Common Securities of such Southern Union Trust; provided,
however, that any permitted successor of Southern Union under the
Indenture may succeed to Southern Union's ownership of such Common
Securities and (ii) to use its reasonable efforts to cause such
Southern Union Trust (a) to remain a statutory business trust,
except in connection with the distribution of Subordinated Debt
Securities to the holders of Trust Securities in liquidation of
such Southern Union Trust, the redemption of all of the Trust
Securities of such Southern Union Trust, or certain mergers, con-
solidations or amalgamations, each as permitted by the Declaration
of such Southern Union Trust, and (b) to otherwise continue to be
classified as a grantor trust for United States federal income tax
purposes.
Denomination
Subordinated Debt Securities may be issuable as Registered Securi-
ties solely, as Bearer Securities solely, or as both. Registered
Securities will be issuable in denominations of $25 and integral
multiples of $25 and Bearer Securities will be issuable in the
denomination of $5,000 or, in each case, in such other denomina-
tions as may be in the terms of the Subordinated Debt Securities.
The Subordinated Debt Securities Indenture also provides that Sub-
ordinated Debt Securities may be issued in global form. Unless
otherwise indicated in any Prospectus Supplement, Bearer Securities
will have interest coupons attached.
Subordination
The Subordinated Debt Securities will be subordinated and junior in
right of payment to certain other indebtedness of Southern Union to
the extent set forth in the Prospectus Supplement that will accom-
pany this Prospectus.
Governing Law
The Subordinated Debt Securities Indenture and the Subordinated
Debt Securities will be governed by, and construed in accordance
with, the internal laws of the State of New York. (Section 111).
Information Concerning the Subordinated Debt Securities Trustee
The Subordinated Debt Securities Trustee, prior to default, under-
takes to perform only such duties as are specifically set forth in
the Subordinated Debt Securities Indenture and, after default,
shall exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs. Subject
to such provision, the Subordinated Debt Securities Trustee is
under no obligation to exercise any of the powers vested in it by
the Subordinated Debt Securities Indenture at the request of any
holder of Subordinated Debt Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabili-
ties that might be incurred thereby. (Section 602). The Subordi-
nated Debt Securities Trustee is not required to expand or risk its
own funds or otherwise incur personal financial liability in the
performance of its duties if the Subordinated Debt Securities
Trustee reasonably believes that repayment or adequate indemnity is
not reasonably assured to it. (Section 602).
Defeasance
The Subordinated Debt Securities Indenture provides that, except as
may be provided in respect of any series of Securities, the
provisions of Article Fourteen are made applicable to the Subordi-
nated Debt Securities of or within any series and any related
coupons pursuant to Section 1401 of the Subordinated Debt Securi-
ties Indenture, Southern Union may elect either to (a) except in
respect of any Securities of which a Southern Union Trust or a
Trustee of such trust is the holder, defease and be discharged
from any and all obligations with respect to such Subordinated
Debt Securities and any related coupons (except for the obliga-
tion to pay Additional Amounts, if any, upon the occurrence of
certain events of tax, assessment or governmental charge with
respect to payments on such Subordinated Debt Securities and
the obligations to register the transfer or exchange of such
Subordinated Debt Securities and any related coupons, to replace
temporary or mutilated, destroyed, lost or stolen Subordinated
Debt Securities and any related coupons, to maintain an office
or agency in respect of such Subordinated Debt Securities and
any related coupons and to hold moneys for payment in trust)
("defeasance") or (b) be released from its obligations with
respect to such Subordinated Debt Securities and any related
coupons under Section 1402 (being the restriction described under
"Limitation on Liens") or, if provided pursuant to Section 1403 of
the Subordinated Debt Securities Indenture, its obligations with
respect to any other covenant, and any omission to comply with such
obligations shall not constitute a default or an Event of Default
with respect to such Subordinated Debt Securities and any related
coupons ("covenant defeasance"), in either case, upon the irrevo-
cable deposit by Southern Union with the Subordinated Debt Securi-
ties Trustee (or other qualifying trustee), in trust, of an amount,
in such Currency in which such Senior Debt Securities and any
related coupons are then specified as payable at Stated Maturity,
or Government Obligations (as defined below), or both, applicable
to such Subordinated Debt Securities and any related coupons (with
such applicability being determined on the basis of the currency,
currency unit or composite currency in which such Subordinated Debt
Securities are then specified as payable at Stated Maturity) which
through the scheduled payment of principal and interest in accor-
dance with their terms will provide money in an amount sufficient
to pay the principal of (and premium, if any) and interest, if any,
on such Subordinated Debt Securities and any related coupons, and
any mandatory sinking fund or analogous payments thereon, on the
scheduled due dates therefor.
Such a trust may only be established if, among other things,
Southern Union has delivered to the Subordinated Debt Securities
Trustee an Opinion of Counsel (as specified in the Subordinated
Debt Securities Indenture) to the effect that the Holders of such
Subordinated Debt Securities and any related coupons will not
recognize income gain or loss for United States federal income tax
purposes as a result of such defeasance or covenant defeasance and
will be subject to United States federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such defeasance or covenant defeasance had not
occurred; provided that, such Opinion of Counsel, in the case of
defeasance under clause (a) above, must refer to and be based upon
a revenue ruling of the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after
the date of the Subordinated Debt Securities Indenture.
"Government Obligations" means securities that are (i) direct
obligations of the government that issued the Currency in which the
Subordinated Debt Securities of a particular series are payable,
for the payment of which its full faith and credit is pledged, or
(ii) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the government that issued the
Currency in which the Subordinated Debt Securities of such series
are payable, the payment of which is unconditionally guaranteed as
a full faith and credit obligation by the United States of America
or such other government, which, in either case, are not callable
or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as
custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government
Obligation held by such custodian for the account of the holder of
a depository receipt; provided that (except as required by law)
such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any
amount received by the custodian in respect of the Government
Obligation or the specific payment of interest in or principal of
the Government Obligation evidenced by such depository receipt.
Unless otherwise provided in the Prospectus Supplement, if, after
Southern Union has deposited funds and/or Government Obligations to
effect defeasance or covenant defeasance relating thereto with
respect to Subordinated Debt Securities of any series, (a) the
Holder of a Subordinated Debt Security of such series is entitled
to and does elect, pursuant to the terms of such Subordinated Debt
Security, to receive payment in a currency other than that in which
such deposit has been made in respect of such Subordinated Debt
Security or (b) the currency in which such deposit has been made in
respect of any Subordinated Debt Security of such series ceases to
be used by its government of issuance, then the indebtedness
represented by such Subordinated Debt Security shall be deemed to
have been, and will be, fully discharged and satisfied through the
payment of the principal of (and premium, if any) and interest, if
any, on such Subordinated Debt Security as they become due out of
the proceeds yielded by converting the amount so deposited in
respect of such Subordinated Debt Security into the Currency in
which such Subordinated Debt Security becomes payable as a result
of such election or such cessation of usage based on the applicable
Market Exchange Rate. Unless otherwise provided in the Prospectus
Supplement, all payments of principal of (and premium, if any) and
interest, if any, and Additional Amounts, if any, on any Subordi-
nated Debt Security that is payable in a Foreign Currency that
ceases to be used by its government of issuance shall be made in
U. S. Dollars.
In the event Southern Union effects covenant defeasance with
respect to (i) any Subordinated Debt Securities and any related
coupons and (ii) such Subordinated Debt Securities and any related
coupons are declared due and payable because of the occurrence of
any Event of Default, other than the Event of Default described in
clause (iii) or (vi) under "Events of Default," with respect to any
covenant for which there has been defeasance, the Currency and/or
Government Obligations on deposit with the Trustee will be suffi-
cient to pay amounts due on such Subordinated Debt Securities and
any related coupons at the time of their Stated Maturity but may
not be sufficient to pay amounts due on such Subordinated Debt
Securities and any related coupons at the time of the acceleration
resulting from such Event of Default. However, Southern Union
would remain liable to make payment of such amounts due at the time
of acceleration.
The Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including
any modifications to the provisions described above, with respect
to the Subordinated Debt Securities of or within a particular
series and any related coupons.
Miscellaneous
Southern Union will have the right at all times to assign any of
its respective rights or obligations under the Subordinated Debt
Securities Indenture to a direct or indirect wholly-owned sub-
sidiary of Southern Union; provided, that, in the event of any such
assignment, Southern Union will remain liable for all of their
respective obligations. Subject to the foregoing, the Subordinated
Debt Securities Indenture will be binding upon and inure to the
benefit of the parties thereto and their respective successors and
assigns. The Subordinated Debt Securities Indenture provides that
it may not otherwise be assigned by the parties thereto. (Section
803).]
DESCRIPTION OF THE SOUTHERN UNION TRUSTS' PREFERRED SECURITIES
Each Southern Union Trust may issue, from time to time, only one
series of Preferred Securities having terms described in the
Prospectus Supplement relating thereto. The Declaration of each
Southern Union Trust authorizes the Regular Trustees of such
Southern Union Trust to issue on behalf of such Southern Union
Trust one series of Preferred Securities. The Declaration will be
qualified as an indenture under the Trust Indenture Act. The Pre-
ferred Securities will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred,
deferred or other special rights or such restrictions as shall be
set forth in the Declaration or made part of the Declaration by the
Trust Indenture Act. Reference is made to any Prospectus Supple-
ment relating to the Preferred Securities of a Southern Union Trust
for specific terms, including (i) the distinctive designation of
such Preferred Securities, (ii) the number of Preferred Securities
issued by such Southern Union Trust, (iii) the annual distribution
rate (or method of determining such rate) for Preferred Securities
issued by such Southern Union Trust and the date or dates upon
which such distributions shall be payable (provided, however, that,
distributions on such Preferred Securities shall be payable on a
quarterly basis to holders of such Preferred Securities as of a
record date in each quarter during which such Preferred Securities
are outstanding) (iv) whether distributions on Preferred Securities
issued by such Southern Union Trust shall be cumulative, and, in
the case of Preferred Securities having such cumulative distribu-
tion rights, the date or dates or method of determining the date or
dates from which distributions on Preferred Securities issued by
such Southern Union Trust shall be cumulative, (v) the amount or
amounts which shall be paid out of the assets of such Southern
Union Trust to the holders of Preferred Securities of such Southern
Union Trust upon voluntary or involuntary dissolution, winding-up
or termination of such Southern Union Trust, (vi) the obligation,
if any, of such Southern Union Trust to purchase or redeem Pre-
ferred Securities issued by such Southern Union Trust and the price
or prices at which, the period or periods within which and the
terms and conditions upon which Preferred Securities issued by such
Southern Union Trust shall be purchased or redeemed, in whole or in
part, pursuant to such obligation, (vii) the voting rights, if any,
of Preferred Securities issued by such Southern Union Trust in
addition to those required by law, including the number of votes
per Preferred Security and any requirement for the approval by the
holders of Preferred Securities, or of Preferred Securities issued
by one or more Southern Union Trusts, or of both, as a condition to
specified action or amendments to the Declaration of such Southern
Union Trust, and (viii) any other relevant rights, preferences,
privileges, limitations or restrictions of Preferred Securities
issued by such Southern Union Trust consistent with the Declaration
of such Southern Union Trust or with applicable law. All Preferred
Securities offered hereby will be guaranteed by Southern Union to
the extent set forth below under "Description of the Guarantees."
Certain United States federal income tax considerations applicable
to any offering of Preferred Securities will be described in the
Prospectus Supplement relating thereto.
In connection with the issuance of Preferred Securities, each
Southern Union Trust will issue one series of Common Securities.
The Declaration of each Southern Union Trust authorizes the Regular
Trustees of such trust to issue on behalf of such Southern Union
Trust one series of Common Securities having such terms including
distributions, redemption, voting, liquidation rights or such
restrictions as shall be set forth therein. The terms of the
Common Securities issued by a Southern Union Trust will be sub-
stantially identical to the terms of the Preferred Securities
issued by such trust and the Common Securities will rank pari
passu, and payments will be made thereon pro rata with the
Preferred Securities except that, upon an event of default under
the Declaration, the rights of the holders of the Common Securities
to payment in respect of distributions and payments upon liquida-
tion, redemption and otherwise will be subordinated to the rights
of the holders of the Preferred Securities. Except in certain
limited circumstances, the Common Securities will also carry the
right to vote and to appoint, remove or replace any of the Southern
Union Trustees of a Southern Union Trust. All of the Common
Securities of a Southern Union Trust will be directly or indirectly
owned by Southern Union.
DESCRIPTION OF THE GUARANTEES
Set forth below is a summary of information concerning the Guaran-
tees that will be executed and delivered by Southern Union for the
benefit of the holders, from time to time, of Preferred Securities.
Each Guarantee will be qualified as an indenture under the Trust
Indenture Act. Wilmington Trust Company will act as indenture
trustee under each Guarantee (the "Guarantee Trustee"). The terms
of each Guarantee will be those set forth in such Guarantee and
those made part of such Guarantee by the Trust Indenture Act.
The summary does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by
reference to, the form of Guarantee, which is filed as an exhibit
to the Registration Statement of which this Prospectus forms a
part, and the Trust Indenture Act. Each Guarantee will be held by
the Guarantee Trustee for the benefit of the holders of the
Preferred Securities of the applicable Southern Union Trust.
General
Pursuant to each Guarantee, Southern Union will irrevocably and
unconditionally agree, to the extent set forth herein, to pay in
full to the holders of the Preferred Securities issued by a
Southern Union Trust, the Guarantee Payments (as defined herein)
(except to the extent paid by such Southern Union Trust), as and
when due, regardless of any defense, right of set-off or counter-
claim which such Southern Union Trust may have or assert. The fol-
lowing payments with respect to Preferred Securities issued by a
Southern Union Trust (the "Guarantee Payments"), to the extent not
paid by such Southern Union Trust will be subject to the Guarantee
(without duplication): (i) any accrued and unpaid distributions
that are required to be paid on such Preferred Securities, to the
extent such Southern Union Trust shall have funds available there-
for, (ii) the redemption price, including all accrued and unpaid
distributions (the "Redemption Price"), to the extent such Southern
Union Trust has funds available therefor with respect to any Pre-
ferred Securities called for redemption by such Southern Union
Trust and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of such Southern Union Trust (other than
in connection with the distribution of Subordinated Debt Securities
to the holders of Preferred Securities or the redemption of all of
the Preferred Securities) the lesser of (a) the aggregate of the
liquidation amount and all accrued and unpaid distributions on such
Preferred Securities to the date of payment to the extent such
Southern Union Trust has funds available therefor or (b) the amount
of assets of such Southern Union Trust remaining available for dis-
tribution to holders of such Preferred Securities in liquidation of
such Southern Union Trust. Southern Union's obligation to make a
Guarantee Payment may be satisfied by direct payment of the
required amounts by Southern Union to the holders of Preferred
Securities or by causing the applicable Southern Union Trust to pay
such amounts to such holders.
Each Guarantee will be a full and unconditional guarantee with
respect to the Preferred Securities issued by the applicable
Southern Union Trust from the time of issuance of such Preferred
Securities but will not apply to any payment of distributions
except to the extent such Southern Union Trust shall have funds
available therefor. If Southern Union does not make interest
payments on the Subordinated Debt Securities purchased by a
Southern Union Trust, such Southern Union Trust will not pay dis-
tributions on the Preferred Securities issued by such Southern
Union Trust and will not have funds available therefor. See
"Particular Terms of the Subordinated Debt Securities."
Southern Union has also agreed to irrevocably and unconditionally
guarantee the obligations of the Southern Union Trusts with respect
to the Common Securities (the "Common Securities Guarantees") to
the same extent as the Guarantees, except that, upon an event of
default under the Indenture, holders of Preferred Securities
under the Guarantees shall have priority over holders of Common
Securities under the Common Securities Guarantee with respect to
distributions and payments on liquidation, redemption or otherwise.
Certain Covenants of Southern Union
In each Guarantee, Southern Union will covenant that, so long as
any Preferred Securities issued by the applicable Southern Union
Trust remain outstanding, if there shall have occurred any event
that would constitute an event of default under such Guarantee or
the Declaration of such Southern Union Trust, then (a) Southern
Union shall not, and shall cause any subsidiary of Southern Union
which is not a wholly-owned subsidiary of Southern Union not to,
declare or pay any dividend on, or make any distribution with
respect to, or redeem, purchase, acquire or make a liquidation
payment with respect to, any of its capital stock or the capital
stock of any such subsidiary and (b) Southern Union shall not make
any payment of interest, principal or premium, if any, on or repay,
repurchase or redeem any debt securities issued by Southern Union
which rank pari passu with or junior to such Subordinated Debt
Securities. However, each Guarantee will except from the foregoing
any stock dividends paid by Southern Union, or any of its
subsidiaries, where the dividend stock is of the same as that on
which the dividend is being paid.
Modification of the Guarantees; Assignment
Except with respect to any changes that do not adversely affect
the rights of holders of Preferred Securities (in which case no
vote will be required), each Guarantee may be amended only with the
prior approval of the holders of not less than 66 2/3% in
liquidation amount of the outstanding Preferred Securities issued
by the applicable Southern Union Trust. The manner of obtaining
any such approval of holders of such Preferred Securities will be
set forth in an accompanying Prospectus Supplement. All guaran-
tees and agreements contained in a Guarantee shall bind the
successors, assignees, receivers, trustees and representatives of
Southern Union and shall inure to the benefit of the holders of
the Preferred Securities of the applicable Southern Union Trust
then outstanding.
Events of Default
An Event of Default under the Guarantee will occur upon the failure
of Southern Union to perform any of its payments or other obliga-
tions thereunder. The holders of a majority in liquidation amount
of the Preferred Securities to which a Guarantee relates have the
right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in
respect of the Guarantee or to direct the exercise of any trust or
power conferred upon the Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce such Guarantee,
any holder of Preferred Securities relating to such Guarantee may,
after a period of 30 days has elapsed from such holders written
request to the Guarantee Trustee to enforce the Guarantee,
institute a legal proceeding directly against Southern Union to
enforce the Guarantee Trustee's rights under such Guarantee without
first instituting a legal proceeding against the relevant Southern
Union Trust, the Guarantee Trustee or any other person or entity.
Southern Union will be required to provide annually to the Guaran-
tee Trustee a statement as to the performance by Southern Union of
certain of its obligations under each of the Guarantees and as to
any default in such performance.
Southern Union is required to file annually with the Guarantee
Trustee an officer's certificate as to Southern Union's compli-
ance with all conditions under each of the Guarantees.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, prior to the occurrence of a default,
undertakes to perform only such duties as are specifically set
forth in the Guarantee and, after default with respect to a
Guarantee, shall exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs.
Subject to such provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by a
Guarantee Agreement at the request of any holder of Preferred
Securities unless it is offered reasonable indemnity against
the costs, expenses and liabilities that might be incurred
thereby.
Termination of the Guarantees
Each Guarantee will terminate as to the Preferred Securities issued
by the applicable Southern Union Trust upon full payment of the
Redemption Price of all Preferred Securities of such Southern Union
Trust, upon distribution of the Subordinated Debt Securities held
by such Southern Union Trust to the holders of the Preferred
Securities of such Southern Union Trust or upon full payment of the
amounts payable in accordance with the Declaration of such Southern
Union Trust upon liquidation of such Southern Union Trust. Each
Guarantee will continue to be effective or will be reinstated, as
the case may be, if at any time any holder of Preferred Securities
issued by the applicable Southern Union Trust must restore payment
of any sums paid under such Preferred Securities or such Guarantee.
Status of the Guarantees
Each Guarantee will constitute an unsecured obligation of Southern
Union and will rank (i) subordinate and junior in right of payment
to all other liabilities of Southern Union, (ii) pari passu with
the most senior preferred or preference stock now or hereafter
issued by Southern Union and with any guarantee now or hereafter
entered into by Southern Union in respect of any preferred or
preference stock of any affiliate of Southern Union and (iii)
senior to Southern Union's common stock. The terms of the
Preferred Securities provide that each holder of Preferred
Securities issued by such Southern Union Trust by acceptance
thereof agrees to the subordination provisions and other terms of
the applicable Guarantee.
Each Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights
under a Guarantee without instituting a legal proceeding against
any other person or entity).
Governing Law
The Guarantees will be governed by and construed in accordance with
the internal laws of the State of New York.
PLAN OF DISTRIBUTION
Southern Union may sell any series of the Debt Securities and the
Southern Union Trusts may sell the Preferred Securities in one or
more of the following ways from time to time (i) to or through
underwriters or dealers, (ii) directly to purchasers, or (iii)
through agents. The Prospectus Supplement with respect to any
Offered Securities will set forth (i) the terms of the offering of
the Offered Securities, including the name or names of any under-
writers, dealers or agents, (ii) the purchase price of the Offered
Securities and the proceeds to Southern Union or the applicable
Southern Union Trust as the case may be from such sale, (iii) any
underwriting discounts and commissions or agency fees and other
items constituting underwriters' or agents' compensation, (iv) any
initial public offering prices, (v) any discounts or concessions
allowed or reallowed or paid to dealers, and (vi) any securities
exchange on which such Offered Securities may be listed. Any
initial public offering price, discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Securities will
be acquired by the underwriters for their own account and may be
resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The Offered
Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or
directly by one or more firms acting as underwriters. The under-
writer or underwriters with respect to a particular underwritten
offering of Offered Securities will be named in the Prospectus
Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be
set forth on the cover of such Prospectus Supplement. Unless
otherwise set forth in the Prospectus Supplement relating thereto,
the obligations of the underwriters to purchase the Offered Securi-
ties will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all the Offered Securi-
ties if any are purchased.
If dealers are utilized in the sale of Offered Securities, Southern
Union and/or the applicable Southern Union Trust will sell such
Offered Securities to the dealers as principals. The dealers may
then resell such Offered Securities to the public at varying prices
to be determined by such dealers at the time of resale. The names
of the dealers and the terms of the transaction will be set forth
in the Prospectus Supplement relating thereto.
Any series of Debt Securities may be sold from time to time either
directly by Southern Union or through agents designated by Southern
Union. Any series of Preferred Securities may be sold from time to
time either directly by the applicable Southern Union Trust or by
agents designated by such trust. Any agent involved in the offer
or sale of the Offered Securities in respect to which this
Prospectus is delivered will be named, and any commissions payable
to Southern Union and/or the applicable Southern Union Trust to
such agent will be set forth, in the Prospectus Supplement relating
thereto. Unless otherwise indicated in the Prospectus Supplement,
any such agent will be acting on a best efforts basis for the
period of its appointment.
The Debt Securities may be sold directly by Southern Union and the
Preferred Securities may be sold directly by the applicable
Southern Union Trust to institutional investors or others who may
be deemed to be underwriters within the meaning of the Securities
Act with respect to any resale thereof. The terms of any such
sales will be described in the Prospectus Supplement relating
thereto.
If so indicated in the Prospectus Supplement, Southern Union and/or
the applicable Southern Union Trust will authorize agents, under-
writers or dealers to solicit offers from certain types of institu-
tions to purchase Offered Securities from Southern Union and/or the
applicable Southern Union Trust at the public offering price set
forth in the Prospectus Supplement pursuant to delayed delivery
contracts providing for payment and delivery on a specified date in
the future. Such contracts will be subject only to those condi-
tions set forth in the Prospectus Supplement, and the Prospectus
Supplement will set forth the commission payable for solicitation
of such contracts.
Agents, dealers and underwriters may be entitled under agreements
with Southern Union and/or the applicable Southern Union Trust to
indemnification by Southern Union and/or such Southern Union Trust
against certain civil liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments that
such agents, dealers or underwriters may be required to make in
respect thereof. Agents, dealers and underwriters may be customers
of, engage in transactions with, or perform services for Southern
Union and/or the applicable Southern Union Trust in the ordinary
course of business.
Each series of Offered Securities will be a new issue of securities
and will have no established trading market. Any underwriters to
whom Offered Securities are sold for public offering and sale may
make a market in such Offered Securities, but such underwriters
will not be obligated to do so and may discontinue any market
making at any time without notice. The Offered Securities may or
may not be listed on a national securities exchange. No assurance
can be given that there will be a market for the Offered Securi-
ties.
VALIDITY OF SECURITIES
The validity of the Offered Securities offered hereby will be
passed upon for Southern Union by Fleischman and Walsh, L.L.P.,
Washington, D. C. Aaron I. Fleischman, Senior Partner of
Fleischman and Walsh, L.L.P., is a director of Southern Union.
Mr. Fleischman, Fleischman and Walsh, L.L.P., and other attorneys
in that firm beneficially own shares of common stock that, in the
aggregate, represent less than two percent (2%) of the shares of
common stock outstanding.
EXPERTS
The consolidated financial statements and related financial state-
ment schedules included in Southern Union Company's Transition
Report on Form 10-K for the year ended June 30, 1994, are incorpo-
rated by reference in this Prospectus in reliance upon the reports
of Coopers & Lybrand L.L.P., given on the authority of that firm as
experts in accounting and auditing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.*
Securities and Exchange Commission Filing Fee . . $103,449.00
Rating Agency Fees. . . . . . . . . . . . . . . . 105,000.00
Blue Sky Fees and Expenses. . . . . . . . . . . . 15,000.00
Trustee's Expenses. . . . . . . . . . . . . . . . 20,000.00
Printing Fees and Expenses. . . . . . . . . . . . 50,000.00
Accounting Fees and Expenses. . . . . . . . . . . 110,000.00
Legal Fees and Expenses . . . . . . . . . . . . . 140,000.00
Miscellaneous . . . . . . . . . . . . . . . . . . 5,000.00
__________
Total. . . . . . . . . . . . . . . . . . . . $548,449.00
==========
_________________________________
* All fees and expenses other than SEC Registration Fee are
estimated. To be completed by amendment.
Item 15. Indemnification of Directors and Officers.
Article Twelfth of the Restated Certificate of Incorporation of
Southern Union eliminates personal liability of directors to the
fullest extent permitted by Delaware Law. Section 145 of the
Delaware Corporation Law provides that a Delaware corporation may
indemnify any person against expenses, fines and settlements
actually and reasonably incurred by any such person in connection
with a threatened, pending or completed action, suit or proceeding
in which he is involved by reason of the fact that he is or was a
director, officer, employee or agent of such corporation, provided
that (i) he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation and (ii) with respect to any criminal action or
proceeding, he had no reasonable cause to believe his conduct was
unlawful. If the action or suit is by or in the name of the
corporation, the corporation may indemnify any such person against
expenses actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification may be made in respect to any claim, issue or
matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty
to the corporation, unless and only to the extent that the Delaware
Court of Chancery or the court in which the action or suit is
brought determines upon application that, despite the adjudication
of liability but in the light of the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such
expense as the court deems proper.
The Declaration of each Southern Union Trust provides that no
Southern Union Trustee, affiliate of any Southern Union Trustee, or
any officers, directors, shareholders, members, partners,
employees, representatives or agents of any Southern Union Trustee,
or any employee or agent of such Southern Union Trust or its
affiliates (each an "Indemnified Person") shall be liable,
responsible or accountable in damages or otherwise to such Southern
Union Trust or any employee or agent of the trust or its affiliates
for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good
faith on behalf of such Southern Union Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of
the authority conferred on such Indemnified Person by such
Declaration or by law, except that an Indemnified Person shall be
liable for any such loss, damage or claim incurred by reason of
such Indemnified Person's gross negligence (or, in the case of the
Property Trustee, negligence) or willful misconduct with respect to
such acts or omissions. The Declaration of each Southern Union
Trust also provides that to the fullest extent permitted by appli-
applicable law, Southern Union shall indemnify and hold harmless
each Indemnified Person from and against any loss, damage or claim
incurred by such Indemnified Person by reason of any act or
omission performed or omitted by such Indemnified Person in good
faith on behalf of such Southern Union Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by such Declaration,
except that no Indemnified Person shall be entitled to be indemni-
fied in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of gross negligence (or, in the case
of the Property Trustee, negligence) or willful misconduct with
respect to such acts or omissions. The Declaration of each
Southern Union Trust further provides that, to the fullest extent
permitted by applicable law, expenses (including legal fees)
incurred by an Indemnified Person in defending any claim, demand,
action, suit or proceeding shall, from time to time, be advanced by
Southern Union prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by or an under-
taking by or on behalf of the Indemnified Person to repay such
amount if it shall be determined that the Indemnified Person is not
entitled to be indemnified for the underlying cause of action as
authorized by such Declaration.
The directors and officers of Southern Union and the Regular
Trustees are covered by insurance policies indemnifying against
certain liabilities, including certain liabilities arising under
the Securities Act of 1933, as amended (the "Securities Act"),
which might be incurred by them in such capacities and against
which they cannot be indemnified by Southern Union or the Southern
Union Trusts.
Any agents, dealers or underwriters who execute any of the agree-
ments filed as Exhibit 1 to this registration statement will agree
to indemnify Southern Union's directors and their officers and the
Southern Union Trustees who signed the registration statement
against certain liabilities that may arise under the Securities Act
with respect to information furnished to Southern Union or any of
the Southern Union Trusts by or on behalf of any such indemnifying
party.
Item 16. Exhibits.
Exhibits identified in parentheses below are on file with the SEC
and are incorporated herein by reference to such previous filings.
All other exhibits are provided as part of this electronic trans-
mission.
*1 - Form of Underwriting Agreement for offering of
Preferred Securities.
**4-A - Certificate of Trust of Southern Union Financing I.
**4-B - Certificate of Trust of Southern Union Financing II.
**4-C - Certificate of Trust of Southern Union Financing III.
**4-D - Form of Amended and Restated Declaration of Trust of
Southern Union Financing I.
*4-E - Form of Amended and Restated Declaration of Trust of
Southern Union Financing II.
*4-F - Form of Amended and Restated Declaration of Trust of
Southern Union Financing III.
**4-G - Form of Subordinated Debt Securities Indenture among
Southern Union Company and The Chase Manhattan Bank,
N.A., as Trustee.
**4-H - Form of Supplemental Indenture to Indenture to be used
in connection with the issuance of Subordinated Debt
Securities and Preferred Securities.
**4-I - Form of Preferred Security (included in 4-D above).
**4-J - Form of Subordinated Debt Security (included in 4-H
above).
**4-K - Form of Guarantee with respect to Preferred
Securities.
**4-L - Senior Debt Securities Indenture between The Chase
Manhattan Bank, N.A., as trustee, and Southern Union
Company dated January 31, 1994. (Filed as Exhibit 4.1
to Southern Union's Current Report on Form 8-K dated
February 15, 1994 and incorporated herein by
reference.)
*5 - Opinion of Fleischman and Walsh, L.L.P.
*8 - Opinion of Skadden, Arps, Slate, Meagher & Flom as to
certain federal income taxation matters.
12 - Computation of Ratio of Earnings to Fixed Charges of
Southern Union Company.
23-A - Consent of Independent Accountants, Coopers & Lybrand
L.L.P.
23-B - Consent of Fleischman and Walsh, L.L.P., is contained in
the opinion of counsel filed as Exhibit 5.
23-C - Consent of Skadden, Arps, Slate, Meagher & Flom is
contained in the opinion of counsel filed as Exhibit 8.
**24 - Powers of Attorney (the powers of attorney for the
Southern Union Trustees of Southern Union Financing I,
Southern Union Financing II and Southern Union
Financing III are included in Exhibits 4-A, 4-B and 4-
C, respectively).
*25-A - Statement of Eligibility under the Trust Indenture Act
of 1939, as amended, of The Chase Manhattan Bank, N.A.,
as Trustee under the Subordinated Debt Securities
Indenture.
*25-B - Statement of Eligibility under the Trust Indenture Act
of 1939, as amended, of The Chase Manhattan Bank, N.A.,
as Trustee, under the Senior Debt Securities Indenture.
*25-C - Statement of Eligibility under the Trust Indenture Act
of 1939, as amended, of Wilmington Trust Company, as
Trustee under the Amended and Restated Declaration of
Trust of Southern Union Financing I.
*25-D - Statement of Eligibility under the Trust Indenture Act
of 1939, as amended, of Wilmington Trust Company, as
Trustee under the Amended and Restated Declaration of
Trust of Southern Union Financing II.
*25-E - Statement of Eligibility under the Trust Indenture Act
of 1939, as amended, of Wilmington Trust Company, as
Trustee under the Amended and Restated Declaration of
Trust of Southern Union Financing III.
*25-F - Statement of Eligibility under the Trust Indenture Act
of 1939, as amended, of Wilmington Trust Company, as
Trustee of Preferred Securities Guarantee of Southern
Union Financing I.
*25-G - Statement of Eligibility under the Trust Indenture Act
of 1939, as amended, of Wilmington Trust Company, as
Trustee of Preferred Securities Guarantee of Southern
Union Financing II.
*25-H - Statement of Eligibility under the Trust Indenture Act
of 1939, as amended, of Wilmington Trust Company, as
Trustee of Preferred Securities Guarantee of Southern
Union Financing III.
________________________________
* To be filed by amendment.
** Previously filed.
Item 17. Undertaking.
The Registrants hereby undertake that, for purposes of determining
any liability under the Securities Act, each filing of Southern
Union's Annual Report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (and where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act)
that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and con-
trolling persons of the Registrants pursuant to the provisions
referred to in Item 15 (other than the insurance policies referred
to therein), or otherwise, the Registrants have been advised that,
in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrants of expenses incurred or paid by a director, officer
or controlling person of the Registrants in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration State-
ment
(i) to include any prospectus required by Section 10(a)(3)
of the Securities Act;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) that, individually or in the aggregate, repre-
sent a fundamental change in the information set forth
in the Registration Statement;
(iii) to include any material information with respect to the
Plan of Distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
provided, however, that the undertakings set forth in paragraphs
(i) and (ii) above do not apply if the information required to be
included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by Southern Union pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorpo-
rated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securi-
ties at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
The Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed
as part of a registration statement in reliance upon Rule 430A
and contained in the form of prospectus filed by the regis-
trant pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that
it meets the requirements for filing on Form S-3 and has duly
caused this Amendment to this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized in the
City of Austin, State of Texas, on May 2, 1995.
SOUTHERN UNION COMPANY
By RONALD J. ENDRES
_____________________________
Ronald J. Endres
Senior Vice President of
Administration and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to this Registration Statement has been signed by the
following persons in the capacities indicated on May 2, 1995.
Signature/Name Title
______________ _____
GEORGE L. LINDEMANN* Chairman of the Board,
Chief Executive Officer
and Director
JOHN E. BRENNAN* Director
FRANK W. DENIUS* Director
AARON I. FLEISCHMAN* Director
PETER H. KELLEY* Director
ADAM M. LINDEMANN* Director
ROGER J. PEARSON* Director
GEORGE ROUNTREE, III* Director
DAN K. WASSONG* Director
RONALD J. ENDRES Senior Vice President
________________
Ronald J. Endres of Administration, and
Chief Financial Officer
DAVID J. KVAPIL Vice President and
_______________
David J. Kvapil Controller
(Principal Accounting
Officer)
*By RONALD J. ENDRES
________________
Ronald J. Endres
Attorney-in-fact
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of
Southern Union Financing I, Southern Union Financing II and
Southern Union Financing III certifies that it has reasonable
grounds to believe that it meets all the requirements for filing on
Form S-3 and has duly caused this Amendment to this Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Austin, State of Texas, on the
2nd day of May, 1995.
SOUTHERN UNION FINANCING I
By RONALD J. ENDRES
________________
Ronald J. Endres, Trustee
By DAVID J. KVAPIL
_______________
David J. Kvapil, Trustee
SOUTHERN UNION FINANCING II
By RONALD J. ENDRES
________________
Ronald J. Endres, Trustee
By DAVID J. KVAPIL
_______________
David J. Kvapil, Trustee
SOUTHERN UNION FINANCING III
By RONALD J. ENDRES
________________
Ronald J. Endres, Trustee
By DAVID J. KVAPIL
_______________
David J. Kvapil, Trustee
EXHIBIT INDEX
<PAGE>
*1 - Form of Underwriting Agreement for offering of
Preferred Securities.
**4-A - Certificate of Trust of Southern Union Financing I.
**4-B - Certificate of Trust of Southern Union Financing II.
**4-C - Certificate of Trust of Southern Union Financing III.
**4-D - Form of Amended and Restated Declaration of Trust of
Southern Union Financing I.
*4-E - Form of Amended and Restated Declaration of Trust of
Southern Union Financing II.
*4-F - Form of Amended and Restated Declaration of Trust of
Southern Union Financing III.
**4-G - Form of Subordinated Debt Securities Indenture among
Southern Union Company and The Chase Manhattan Bank,
N.A., as Trustee.
**4-H - Form of Supplemental Indenture to Indenture to be
used in connection with the issuance of Subordinated
Debt Securities and Preferred Securities.
**4-I - Form of Preferred Security (included in 4-D above).
**4-J - Form of Subordinated Debt Security (included in 4-H
above).
**4-K - Form of Guarantee with respect to Preferred
Securities.
**4-L - Senior Debt Securities Indenture between Chase
Manhattan Bank, N.A., as trustee, and Southern Union
Company dated January 31, 1994. (Filed as Exhibit
4.1 to Southern Union's Current Report on Form 8-K
dated February 15, 1994 and incorporated herein by
reference.
*5 - Opinion of Fleischman and Walsh, L.L.P.
*8 - Opinion of Skadden, Arps, Slate, Meagher & Flom as to
certain federal income taxation matters.
12 - Computation of Ratio of Earnings to Fixed Charges of
Southern Union Company.
23-A - Consent of Independent Accountants, Coopers & Lybrand
L.L.P.
23-B - Consent of Fleischman and Walsh, L.L.P., is contained
in the opinion of counsel filed as Exhibit 5.
23-C - Consent of Skadden, Arps, Slate, Meagher & Flom is
contained in the opinion of counsel filed as Exhibit
8.
**24 - Powers of Attorney (the powers of attorney for the
Southern Union Trustees of Southern Union Financing
I, Southern Union Financing II and Southern Union
Financing III are included in Exhibits 4-A, 4-B and
4-C, respectively).
*25-A - Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank,
N.A., as Trustee under the Subordinated Debt Securi-
ties Indenture.
*25-B - Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of The Chase Manhattan Bank,
N.A., as Trustee under the Senior Debt Securities
Indenture.
*25-C - Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company,
as Trustee under the Amended and Restated Declaration
of Trust of Southern Union Financing I.
*25-D - Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company,
as Trustee under the Amended and Restated Declaration
of Trust of Southern Union Financing II.
*25-E - Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company,
as Trustee under the Amended and Restated Declaration
of Trust of Southern Union Financing III.
*25-F - Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company,
as Trustee of Preferred Securities Guarantee of
Southern Union Financing I.
*25-G - Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company,
as Trustee of Preferred Securities Guarantee of
Southern Union Financing II.
*25-H - Statement of Eligibility under the Trust Indenture
Act of 1939, as amended, of Wilmington Trust Company,
as Trustee of Preferred Securities Guarantee of
Southern Union Financing III.
______________________________
* To be filed by amendment.
** Previously filed.
<PAGE>
EXHIBIT 23-A
CONSENT OF INDEPENDENT ACCOUNTANTS
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23-A
We consent to the incorporation by reference in this registration
statement on Form S-3 (File No. 33-58297) of our report, which
includes an explanatory paragraph concerning certain accounting
changes, dated September 15, 1994, on our audit of the consolidated
financial statements and financial statement schedules of Southern
Union Company and Subsidiaries as of June 30, 1994 and December 31,
1993, and for each of the three years in the periods ended June 30,
1994 and December 31, 1993 and 1992. We also consent to the
reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Austin, Texas
May 2, 1995
