Filed pursuant to Rule 424(b)(3)
Registration No. 333-63793
P r o s p e c t u s S u p p l e m e n t
(To Prospectus Dated September 24, 1998)
$500,000,000
[LOGO]
The CIT Group, Inc.
$200,000,000 5 1/2% Notes due October 15, 2001
$300,000,000 5 5/8% Notes due October 15, 2003
----------
The 2001 Notes will mature on October 15, 2001, and the 2003 Notes will
mature on October 15, 2003. Interest on the 2001 Notes and the 2003 Notes is
payable semiannually on April 15 and October 15 beginning April 15, 1999. The
2001 Notes and the 2003 Notes may not be redeemed prior to maturity.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the related prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
----------
<TABLE>
<CAPTION>
Notes due Notes due
October 15, 2001 October 15, 2003
------------------------ ----------------------- Combined
Per Note Total Per Note Total Total
---------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Public Offering Price 99.866% $199,732,000 99.574% $298,722,000 $498,454,000
Underwriting Discounts .350% $ 700,000 .450% $ 1,350,000 $ 2,050,000
Proceeds to The CIT
Group, Inc.
(before expenses) 99.516% $199,032,000 99.124% $297,372,000 $496,404,000
</TABLE>
Interest on the 2001 Notes and the 2003 Notes will accrue from October 23,
1998 to date of delivery.
----------
The underwriters are offering the 2001 Notes and the 2003 Notes subject to
various conditions. The underwriters expect to deliver the 2001 Notes and the
2003 Notes to purchasers on or about October 23, 1998.
----------
Salomon Smith Barney
Chase Securities Inc.
Credit Suisse First Boston
October 20, 1998
<PAGE>
You should rely only on the information contained in or incorporated by
reference in this Prospectus Supplement or the Prospectus. We have not
authorized anyone to provide you with different information. We are not making
an offer of these securities in any state where the offer is not permitted. You
should not assume that the information contained in or incorporated by reference
in this Prospectus Supplement or the Prospectus is accurate as of any date other
than the date on the front of this Prospectus Supplement.
----------
TABLE OF CONTENTS
Page
----
Prospectus Supplement
Recent Developments ...................................................... S-3
Description of Notes ..................................................... S-5
Underwriting ............................................................. S-8
Prospectus
Available Information .................................................... 2
Documents Incorporated by Reference ...................................... 2
The Corporation .......................................................... 3
Summary of Financial Information ......................................... 10
Use of Proceeds .......................................................... 11
Description of Debt Securities ........................................... 11
Plan of Distribution ..................................................... 16
Experts .................................................................. 17
Legal Opinions ........................................................... 17
S-2
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
PURCHASES OF THE NOTES TO STABILIZE THEIR MARKET PRICE AND PURCHASES OF THE
NOTES TO COVER ANY SHORT POSITION IN THE NOTES MAINTAINED BY THE UNDERWRITERS.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
----------
RECENT DEVELOPMENTS
Common Stock Offering
The CIT Group, Inc. (the "Corporation") filed a registration statement
with the Securities and Exchange Commission on October 15, 1998 indicating the
intent of its majority shareholder, The Dai-Ichi Kangyo Bank, Limited, to sell
49,000,000 shares of Class A Common Stock of the Corporation. After this common
stock offering, The Dai-Ichi Kangyo Bank will own approximately 47% of the
common stock of the Corporation and the Corporation will have only one class of
common stock outstanding. The Dai-Ichi Kangyo Bank will also grant the
underwriters in the offering an option to purchase up to 7,350,000 additional
shares of common stock of the Corporation to cover over-allotments.
Financial Results
The Corporation recently announced its financial results for the three
months and nine months ended September 30, 1998. The following table presents
the Corporation's unaudited selected supplemental consolidated financial data
and ratios reflected in such announcement. The Corporation believes that all
adjustments (all of which are normal recurring accruals) necessary for a fair
statement of financial position and results of operations for these periods have
been made; however, results for interim periods are subject to year-end audit
adjustments. This data is not necessarily indicative of operating results that
may be expected for a full year.
THE CIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
Quarter Nine Months
Ended September 30, Ended September 30,
--------------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Dollars in millions, except per share data
Finance income .................................. $510.6 $463.0 $1,481.4 $1,352.0
Interest expense ................................ 263.8 237.0 766.2 693.7
----------- ----------- ----------- -----------
Net finance income ........................ 246.8 226.0 715.2 658.3
Fees and other income ........................... 69.0 78.9 196.1 186.0
Gain on sale of equity interest acquired in
loan workout ................................. -- -- -- 58.0
----------- ----------- ----------- -----------
Operating revenue ......................... 315.8 304.9 911.3 902.3
----------- ----------- ----------- -----------
Salaries and general operating expenses ......... 105.3 103.6 311.0 314.1
Provision for credit losses ..................... 30.6 35.8 75.0 91.8
Depreciation on operating lease equipment ....... 42.7 42.3 121.4 108.3
Minority interest in subsidiary trust holding
solely debentures of the Company ............. 4.8 4.8 14.4 11.5
----------- ----------- ----------- -----------
Operating expenses ........................ 183.4 186.5 521.8 525.7
----------- ----------- ----------- -----------
Income before provision for income taxes ........ 132.4 118.4 389.5 376.6
Provision for income taxes ...................... 46.3 43.1 138.0 137.5
----------- ----------- ----------- -----------
Net income ...................................... $ 86.1 $ 75.3 $ 251.5 $ 239.1
=========== =========== =========== ===========
Net income per basic share ...................... $ 0.53 $ 0.48 $ 1.55 $ 1.52
Weighted average shares outstanding ....... 162,143,304 157,500,000 162,197,469 157,500,000
Net income per diluted share .................... $ 0.53 $ 0.48 $ 1.54 $ 1.51
Weighted average shares outstanding ....... 163,304,325 158,448,527 163,488,689 158,448,527
</TABLE>
S-3
<PAGE>
THE CIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
Dollars in millions
Assets
Financing and leasing assets
Loans
Commercial ................................... $ 10,979.1 $ 9,922.5
Consumer ..................................... 3,975.4 3,664.8
Commercial lease receivables .................... 4,570.5 4,132.4
----------- -----------
Finance receivables .......................... 19,525.0 17,719.7
Reserve for credit losses ....................... (257.9) (235.6)
----------- -----------
Net finance receivables ...................... 19,267.1 17,484.1
Operating lease equipment, net .................. 2,395.0 1,905.6
Consumer finance receivables held for sale ...... 829.7 268.2
Cash and cash equivalents ....................... 175.4 140.4
Other assets .................................... 843.2 665.8
----------- -----------
Total assets .................................... $ 23,510.4 $ 20,464.1
=========== ===========
Liabilities and Stockholders' Equity
Debt
Commercial paper ................................ $ 7,079.1 $ 5,559.6
Variable rate senior notes ...................... 3,575.0 2,861.5
Fixed rate senior notes ......................... 6,953.0 6,593.8
Subordinated fixed rate notes ................... 200.0 300.0
----------- -----------
Total debt ................................... 17,807.1 15,314.9
Credit balances of factoring clients ............ 1,429.1 1,202.6
Accrued liabilities and payables ................ 707.1 660.1
Deferred federal income taxes ................... 677.5 603.6
----------- -----------
Total liabilities ............................ 20,620.8 17,781.2
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trust holding solely
debentures of the Company .................... 250.0 250.0
Stockholders' equity
Class A common stock, par value $0.01 per share;
Authorized 700,000,000 shares
Issued: 37,146,379 shares in 1998
and 37,173,527 shares in 1997
Outstanding: 36,537,579 shares in
1998 and 37,173,527 shares in 1997 ........... 0.4 0.4
Class B common stock, par value $0.01 per share,
510,000,000 shares authorized and
126,000,000 shares issued and outstanding .... 1.3 1.3
Paid-in capital ................................. 952.3 948.3
Retained earnings ............................... 1,701.8 1,482.9
Treasury stock at cost (608,800 shares; Class A) (16.2) --
----------- -----------
Total stockholders' equity ...................... 2,639.6 2,432.9
----------- -----------
Total liabilities and stockholders' equity ...... $ 23,510.4 $ 20,464.1
----------- -----------
S-4
<PAGE>
The following financial highlights were reflected in the Company's recent
announcement:
o The 1998 third quarter net income of $86.1 million was up 14.3% from
$75.3 million reported for 1997. Nine month net income totaled a
record $251.5 million, up from $239.1 million reported in 1997. The
1997 earnings included a one-time $58 million pretax gain on the
sale of an equity interest acquired in a loan workout and certain
nonrecurring expenses. Excluding these special items, 1997 net
income was $210.4 million for the first nine months.
o Earnings per diluted share for the third quarter of 1998 were $0.53,
up from $0.48 for the third quarter of last year, with nine month
earnings per diluted share increasing to $1.54 from $1.33, excluding
the 1997 special items. The strong 1998 earnings for the third
quarter and nine months reflect continued significant growth in all
business units, sharply lower commercial credit losses, and
continued improvements in operating efficiency.
DESCRIPTION OF NOTES
The 5.50% Notes due October 15, 2001 (the "2001 Notes") and the 5.625%
Notes due October 15, 2003 (the "2003 Notes" and, together with the 2001 Notes,
the "Notes") are to be issued as a series of Debt Securities under the
Indenture, dated as of September 24, 1998 (the "Indenture"), between the
Corporation and Harris Trust & Savings Bank, as Trustee (the "Trustee"), which
is more fully described in the accompanying Prospectus. The Trustee is also the
Registrar and Paying Agent.
General
The 2001 Notes offered hereby will bear interest from October 23, 1998 at
the rate of 5.50% per annum and the 2003 Notes will bear interest from October
23, 1998 at the rate of 5.625% per annum, each payable semiannually on April 15
and October 15 of each year, commencing April 15, 1999, to the persons in whose
names the Notes are registered at the close of business on the fifteenth day
next preceding the applicable interest payment date. The 2001 Notes will mature
on October 15, 2001 and the 2003 Notes will mature on October 15, 2003. The
Notes are Senior Securities as described in the accompanying Prospectus.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. If an interest payment date or the maturity date falls on a day that is
not a business day, the payment will be made on the next business day as if it
were made on the date such payment was due, and no interest will accrue on the
amount so payable for the period from and after such interest payment date or
the maturity date, as the case may be.
The Notes will be issued in fully registered form only, without coupons.
The Notes will be issuable in denominations of $1,000 and integral multiples
thereof. The Notes will be represented by one or more permanent global Notes
registered in the name of The Depository Trust Company, New York, New York (the
"Depositary"), or its nominee, as described below.
As discussed below, payment of principal of, and interest on, Notes
represented by a permanent global Note or Notes registered in the name of or
held by the Depositary or its nominee will be made in immediately available
funds to the Depositary or its nominee, as the case may be, as the registered
owner and holder of such permanent global Note or Notes. See "Same-Day
Settlement and Payment."
Redemption
The Notes are not redeemable prior to maturity and will not be entitled to
any sinking fund.
Book-Entry System
Upon issuance, the Notes will be represented by a permanent global Note or
Notes. Each permanent global Note will be deposited with, or on behalf of, the
Depositary and registered in the name of a nominee of the Depositary. Except
under the limited circumstances described below, permanent global Notes will not
be exchangeable for definitive certificated Notes.
Ownership of beneficial interests in a permanent global Note will be
limited to institutions that have accounts with the Depositary or its nominee
("participants") or persons that may hold interests through participants. In
addition, ownership of beneficial interests by participants in such permanent
global Note will be evidenced only by, and the transfer of that ownership
interest will be effected only through, records maintained by the Depositary or
its nominee for such permanent global Note. Ownership of beneficial
S-5
<PAGE>
interests in such permanent global Note by persons that hold through
participants will be evidenced only by, and the transfer of that ownership
interest within such participant will be effected only through, records
maintained by such participant. The Depositary has no knowledge of the actual
beneficial owners of the Notes. Beneficial owners will not receive written
confirmation from the Depositary of their purchase, but beneficial owners are
expected to receive written confirmation providing details of the transaction,
as well as periodic statements of their holdings, from the participants through
which the beneficial owners entered the transaction. 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 permanent global Note.
The Corporation has been advised by the Depositary that upon the issuance
of a permanent global Note and the deposit of such permanent global Note with
the Depositary, the Depositary will immediately credit, on its book-entry
registration and transfer system, the respective principal amounts represented
by such permanent global Note to the accounts of participants.
Payment of principal of, and interest on, Notes represented by a permanent
global Note registered in the name of or held by the Depositary or its nominee
will be made to the Depositary or its nominee, as the case may be, as the
registered owner and holder of the permanent global Note representing such
Notes. The Corporation has been advised by the Depositary that upon receipt of
any payment of principal of, or interest on, a permanent global Note, the
Depositary will immediately credit, on its book-entry registration and transfer
system, accounts of participants with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such permanent global
Note as shown in the records of the Depositary. Payments by participants to
owners of beneficial interests in a permanent global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the sole responsibility of such
participants, subject to any statutory or regulatory requirements as may be in
effect from time to time.
None of the Corporation, the Trustee, or any other agent of the
Corporation or the Trustee will have any responsibility or liability for any
aspect of the records of the Depositary, any nominee, or any participant
relating to, or payments made on account of, beneficial interests in a permanent
global Note or for maintaining, supervising, or reviewing any of the records of
the Depositary, any nominee, or any participant relating to such beneficial
interests.
A permanent global Note is exchangeable for definitive Notes registered in
the name of, and a transfer of a permanent global Note may be registered to, any
person other than the Depositary or its nominee, only if:
(a) the Depositary notifies the Corporation that it is unwilling or
unable to continue as Depositary for such permanent global Note or if at
any time the Depositary ceases to be a clearing agency registered under
the Securities Exchange Act of 1934, as amended (the "Exchange Act");
(b) the Corporation in its sole discretion determines that such
permanent global Note shall be exchangeable for definitive Notes in
registered form; or
(c) there shall have occurred and be continuing an event of default
under the Indenture, as described in the accompanying Prospectus, and the
Depositary is notified by the Corporation or the Trustee that such global
Note shall be exchangeable for definitive Notes in registered form.
Any permanent global Note that is exchangeable pursuant to the preceding
sentence will be exchangeable in whole for definitive Notes in registered form,
of like tenor and of an equal aggregate principal amount as the permanent global
Note, in denominations of $1,000 and integral multiples thereof. Such definitive
Notes will be registered in the name or names of such person or persons as the
Depositary shall instruct the Trustee. It is expected that such instructions may
be based upon directions received by the Depositary from its participants with
respect to ownership of beneficial interests in such permanent global Note.
Except as provided above, owners of beneficial interests in such permanent
global Note will not be entitled to receive physical delivery of Notes in
definitive form and will not be considered the holders thereof for any purpose
under the Indenture, and no permanent global Note shall be exchangeable, except
for another
S-6
<PAGE>
permanent global Note of like denomination and tenor to be registered in the
name of the Depositary or its nominee. Accordingly, each person owning a
beneficial interest in such permanent global Note 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.
The Corporation understands that, under existing industry practices, in
the event that the Corporation requests any action of holders, or an owner of a
beneficial interest in such permanent global Note desires to give or take any
action that a holder is entitled to give or take under the Indenture, the
Depositary would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instructions of beneficial owners owning through
them.
The Depositary has advised the Corporation that the Depositary is a
limited purpose trust company organized under the laws of the State of New York,
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 under the Exchange Act. The Depositary was created to hold securities
of its participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. The Depositary is owned by a
number of its participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the Depositary's book-entry system is also available to
others, such as banks, brokers, dealers, and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly. The rules applicable to the Depositary and its participants are on
file with the Securities and Exchange Commission.
Same-Day Settlement and Payment
Settlement for the Notes will be made by the Underwriters (as defined
below in "Underwriting") in immediately available funds. So long as the Notes
are represented by a permanent global Note or Notes, all payments of principal
and interest will be made by the Corporation in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers
is generally settled in clearing-house or next-day funds. In contrast, so long
as the Notes are represented by a permanent global Note or Notes registered in
the name of the Depositary or its nominee, the Notes will trade in the
Depositary's Same-Day Funds Settlement System, and secondary market trading
activity in the Notes will therefore be required by the Depositary to settle in
immediately available funds. No assurance can be given as to the effect, if any,
of settlement in immediately available funds on trading activity in the Notes.
Information Concerning the Trustee
The Corporation from time to time may borrow from the Trustee, and the
Corporation and certain of its subsidiaries may maintain deposit accounts and
conduct other banking transactions with the Trustee.
S-7
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement"), among the Corporation, Salomon Smith
Barney Inc., Chase Securities Inc., and Credit Suisse First Boston Corporation
(the "Underwriters"), the Corporation has agreed to sell to each of the
Underwriters, and each of the Underwriters has severally agreed to purchase the
principal amount of the Notes set forth opposite its name below. See "Plan of
Distribution" in the accompanying Prospectus.
Principal Amount Principal Amount
Underwriter of 2001 Notes of 2003 Notes
------------ --------------- ---------------
Salomon Smith Barney Inc. ............. $ 66,700,000 $100,000,000
Chase Securities Inc. ................. 66,650,000 $100,000,000
Credit Suisse First
Boston Corporation ................. 66,650,000 $100,000,000
------------ ------------
Total ................................. $200,000,000 $300,000,000
============ ============
The Corporation has been advised by the Underwriters that they propose
initially to offer the Notes to the public at the public offering price set
forth on the cover page of this Prospectus Supplement, and to certain dealers at
such price less a concession not in excess of .225% of the principal amount in
the case of the 2001 Notes and .275% of the principal amount in the case of the
2003 Notes. The Underwriters may allow, and such dealers may reallow, a
concession to certain other dealers not in excess of .150% of such principal
amount in the case of the 2001 Notes and not in excess of .200% of such
principal amount in the case of the 2003 Notes. After the initial public
offering, the public offering price and such concessions may be changed from
time to time. In addition to underwriting discounts, the Corporation estimates
that it will have expenses of $125,000 in connection with the offering of the
Notes.
The Notes are a new issue of securities with no established trading
market. The Corporation does not presently intend to list the Notes on any
securities exchange. The Corporation has been advised by the Underwriters that
they intend to make a market in the Notes, but the Underwriters are not
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
the Notes.
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all the Notes if any are purchased.
In connection with this offering, certain Underwriters and their
respective affiliates may engage in transactions that stabilize, maintain or
otherwise affect the market price of the Notes. Such transactions may include
stabilization transactions effected in accordance with Rule 104 of Regulation M,
pursuant to which such persons may bid for or purchase Notes for the purpose of
stabilizing their market price. The Underwriters also may create a short
position for the account of the Underwriters by selling more Notes in connection
with this offering than they are committed to purchase from the Corporation, and
in such case may purchase Notes in the open market following completion of this
offering to cover such short position. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Notes at a level
above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph is required, and, if they are
undertaken, they may be discontinued at any time.
Certain of the Underwriters or their affiliates have provided and will in
the future continue to provide banking and other financial services to the
Corporation for which they have received and will receive customary
compensation.
The Underwriting Agreement provides that the Corporation will indemnify
the Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the Underwriters
may be required to make in respect thereof.
S-8
<PAGE>
Prospectus
The CIT Group, Inc.
Debt Securities
----------
The CIT Group, Inc. (the "Corporation") intends to issue from time to time,
in one or more series with the same or various terms, debt securities (the "Debt
Securities"), which may be either senior (the "Senior Securities") or senior
subordinated (the "Senior Subordinated Securities") in priority of payment, with
an aggregate initial offering price not to exceed $6.718 billion (or (i) if the
principal of the Debt Securities is denominated in a foreign currency, the
equivalent thereof at the time of offering, or (ii) if the Debt Securities are
issued at an original issue discount, such greater principal amount as shall
result in an aggregate initial offering price of $6.718 billion). Each Debt
Security will be a direct, unsecured obligation of the Corporation and will be
offered to the public on terms determined by market conditions at the time of
sale. The Corporation may sell its Debt Securities (i) directly to purchasers,
(ii) through agents designated from time to time, (iii) to dealers, or (iv)
through an underwriter or a group of underwriters. The specific designation,
aggregate principal amount, currency of payment, authorized denominations,
purchase price, maturity, rate and time of payment of any interest, any
redemption terms, the designation of each Trustee (as defined herein) acting
under the applicable Indenture (as defined herein), any listing on a securities
exchange, or other specific terms of the Debt Securities in respect of which
this Prospectus is being delivered (the "Offered Debt Securities") will be set
forth in the accompanying supplement to the Prospectus (the "Prospectus
Supplement"), together with the terms of offering of the Offered Debt
Securities. The Corporation reserves the sole right to accept or reject, in
whole or in part, any proposed purchase of Offered Debt Securities.
If any agents of the Corporation or any dealers or underwriters are
involved in the sale of the Offered Debt Securities in respect of which this
Prospectus is being delivered, the names of such agents, dealers, or
underwriters and any applicable agent's commission, dealer's purchase price, or
underwriter's discount will be set forth in or may be calculated from the
Prospectus Supplement. The net proceeds to the Corporation from such sale will
be (i) the purchase price of such Offered Debt Securities less such commission
in the case of an agent, (ii) the purchase price of such Offered Debt Securities
in the case of a dealer, or (iii) the public offering price less such discount
in the case of an underwriter and less, in each case, other applicable issuance
expenses. See "Plan of Distribution" for possible indemnification arrangements
with agents, dealers, and underwriters.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is September 24, 1998.
<PAGE>
NO SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED BY THE CORPORATION OR
ANY DEALER, AGENT, OR UNDERWRITER TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION, OTHER THAN AS CONTAINED IN THIS PROSPECTUS, THE PROSPECTUS
SUPPLEMENT OR THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFER CONTAINED IN THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. THIS
PROSPECTUS AND THE PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE ANY OFFER BY ANY
DEALER, AGENT OR UNDERWRITER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR SUCH DEALER,
AGENT OR UNDERWRITER TO MAKE SUCH OFFER OR SOLICITATION IN SUCH STATE. NEITHER
THE DELIVERY OF THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION AND ITS SUBSIDIARIES SINCE THE
DATE OF THE INFORMATION CONTAINED HEREIN.
AVAILABLE INFORMATION
The Corporation 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 statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the offices of
the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549; Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can be obtained from the Public Reference
Section of the Commission, at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of such site is http://www.sec.gov. Certain of the Corporation's securities are
listed on the New York Stock Exchange and reports and other information
concerning the Corporation can also be inspected at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed with the Commission by the Corporation are
incorporated by reference in this Prospectus:
(a) The Corporation's Annual Report on Form 10-K for the year ended
December 31, 1997 together with the report of KPMG Peat Marwick LLP,
independent certified public accountants;
(b) The Corporation's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1998 and June 30, 1998; and
(c) The Corporation's Current Reports on Form 8-K dated January 15,
1998, January 28, 1998, March 24, 1998, April 22, 1998, June 5, 1998, July
22, 1998, July 29, 1998 and August 27, 1998.
All documents filed by the Corporation pursuant to Sections 13(a) and (c),
14, or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the securities offered hereby shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Corporation will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon request, a copy of
any or all of the foregoing documents described above which have been or may be
incorporated by reference in this Prospectus other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference into
such documents). Such request should be directed to:
Corporate Secretary
The CIT Group, Inc.
1211 Avenue of the Americas
New York, New York 10036
(212) 536-1390
2
<PAGE>
THE CORPORATION
The Corporation is a leading diversified finance organization with over $22
billion of managed assets at December 31, 1997. The Corporation offers secured
commercial and consumer financing primarily in the United States to smaller,
middle-market and larger businesses and to individuals through a nationwide
distribution network. The Corporation commenced operations in 1908 and has
developed a broad array of "franchise" businesses that focus on specific
industries, asset types and markets, which are balanced by client, industry and
geographic diversification. The Corporation has its principal executive offices
at 1211 Avenue of the Americas, New York, New York 10036 and its telephone
number is (212) 536-1390.
The Corporation operates through two business segments: (i) commercial,
which is comprised of Equipment Financing (equipment financing and leasing),
Capital Finance (commercial aircraft and rail equipment financing and leasing),
Commercial Services (factoring), Business Credit (secured financing to
middle-market and larger-sized businesses) and Credit Finance (secured financing
to smaller-sized and middle-market businesses) strategic business units, and
(ii) consumer, which is comprised of the Consumer Finance (home equity) and
Sales Financing (recreation vehicle, manufactured housing and recreational boat
financing) strategic businesses units. These strategic business units offer
products and services designed to satisfy the financing needs of specific
customers, industries and markets.
In November 1997, the Corporation issued 36,225,000 shares of Class A
Common Stock in an initial public offering. The Dai-Ichi Kangyo Bank, Limited
("DKB") owns 126,000,000 of the outstanding shares of Class B Common Stock, each
of which has five votes per share but is otherwise identical in all material
respects to the Class A Common Stock (which has one vote per share). The Class B
Common Stock owned by DKB, which is not publicly traded, represents in the
aggregate 94.4% of the combined voting power of all of the outstanding Common
Stock of the Corporation. For as long as DKB continues to own shares of Common
Stock representing more than 50% of the combined voting power of the Class A
Common Stock and Class B Common Stock, DKB will be able to direct the election
of all of the members of the Corporation's Board of Directors and exercise a
controlling influence over the business and affairs of the Corporation.
Commercial
The Corporation's commercial operations are diverse and provide a wide
range of financing and leasing products to small, midsize and larger companies
across a wide variety of industries, including aerospace, retailing,
construction, rail, machine tool, business aircraft, apparel, textiles,
electronics and technology, chemicals, manufacturing and transportation. The
secured lending, leasing and factoring products of the Corporation's commercial
operations include direct loans and leases, operating leases, leveraged and
single investor leases, secured revolving lines of credit and term loans, credit
protection, accounts receivable collection, import and export financing and
factoring, debtor-in-possession and turnaround financing and acquisition and
expansion financing.
Equipment Financing and Leasing
The Corporation's Equipment Financing and Leasing operations are conducted
through two strategic business units: (i) The CIT Group/Equipment Financing
("Equipment Financing"), which focuses on the broad distribution of its products
through manufacturers, dealers/distributors, intermediaries and direct calling
primarily with the construction, transportation and machine tool industries; and
(ii) The CIT Group/Capital Finance ("Capital Finance"), which focuses on the
direct marketing of customized transactions relating primarily to commercial
aircraft and rail equipment.
Equipment Financing and Capital Finance personnel have extensive expertise
in managing equipment over its full life cycle. For example, Capital Finance has
the expertise to repossess commercial aircraft, if necessary, to obtain required
maintenance and repairs for such aircraft, and to recertify such aircraft with
appropriate authorities. Equipment Financing's and Capital Finance's equipment
and industry expertise enable them to evaluate effectively residual value risk
and to manage equipment and residual value risks by locating alternative
equipment users and/or purchasers in order to minimize such risk and/or the risk
of equipment remaining idle for extended periods of time or in amounts that
could materially impact profitability.
3
<PAGE>
Equipment Financing
Equipment Financing is the largest of the Corporation's strategic business
units with total financing and leasing assets of $8.0 billion at December 31,
1997, representing 40.2% of the Corporation's total financing and leasing
assets. Equipment Financing offers secured equipment financing and leasing
products, including direct secured loans, leases, revolving lines of credit,
operating leases, sale and leaseback arrangements, vendor financing and
specialized wholesale and retail financing for distributors and manufacturers.
Equipment Financing is a leading nationwide asset-based equipment lender.
At December 31, 1997, its portfolio included significant outstandings to
customers in a number of different industries, with manufacturing being the
largest as a percentage of financing and leasing assets, followed by
construction and printing. The Equipment Financing portfolio at December 31,
1997 included many different types of equipment, including construction,
transportation, and manufacturing equipment and business aircraft.
Equipment Financing originates its products through direct calling on
customers and through its relationships with manufacturers, dealers/distributors
and intermediaries that have leading or significant marketing positions in their
respective industries. This provides Equipment Financing with efficient access
to equipment end-users in many industries across a variety of equipment types.
Capital Finance
Capital Finance had financing and leasing assets of $3.7 billion at
December 31, 1997, which represented 18.5% of the Corporation's total financing
and leasing assets. Capital Finance specializes in customized secured financing,
including leases, loans, operating leases, single investor leases, debt and
equity portions of leveraged leases, and sale and leaseback arrangements
relating primarily to end-users of commercial aircraft and railcars. Typical
Capital Finance customers are middle-market to larger-sized companies.
Capital Finance has provided financing to commercial airlines for over 30
years. The Capital Finance aerospace portfolio includes most of the leading U.S.
and foreign commercial airlines. Capital Finance has developed strong
relationships with most major airlines and all major aircraft and aircraft
engine manufacturers, which provide Capital Finance with access to technical
information, which supports customer service, and provides opportunities to
finance new business.
Capital Finance has over 25 years experience in financing the rail
industry, contributing to its knowledge of asset values, industry trends,
product structuring and customer needs. To strengthen its position in the rail
financing market, Capital Finance formed a dedicated rail equipment group in
1994 and currently maintains relationships with several leading railcar
manufacturers in the United States. The Capital Finance rail portfolio includes
all of the U.S. and Canadian Class I railroads and numerous shippers. The
Capital Finance operating lease fleet includes primarily covered hopper cars
used to ship grain and agricultural products and plastic pellets, gondola cars
for coal, steel coil and mill service, open hopper cars for coal and aggregates,
center beam flat cars for lumber, and boxcars for paper and auto parts.
New business is generated by Capital Finance through (i) direct calling
efforts with equipment end-users and borrowers, including major airlines,
railroads and shippers, (ii) relationships with aerospace, railcar and other
manufacturers and (iii) intermediaries and other referral sources.
Factoring
The CIT Group/Commercial Services ("Commercial Services") factoring
operation had total financing and leasing assets of $2.1 billion at December 31,
1997, which represented 10.6% of the Corporation's total financing and leasing
assets. Commercial Services offers a full range of domestic and international
customized credit protection and lending services that include factoring,
working capital and term loans, receivable management outsourcing, bulk
purchases of accounts receivable, import and export financing and letter of
credit programs.
Commercial Services provides financing to its clients through the purchase
of accounts receivables owed to clients by their customers, usually on a
non-recourse basis, as well as by guaranteeing amounts due under letters of
credit issued to the clients' suppliers which are collateralized by accounts
receivable and other assets. The purchase of accounts receivable is
traditionally known as "factoring" and results in the payment by the
4
<PAGE>
client of a factoring fee, generally a percentage of the factored sales volume.
When Commercial Services "factors" (i.e., purchases) a customer invoice from a
client, it records the customer receivable as an asset and also establishes a
liability for the funds due to the client ("credit balances of factoring
clients"). Commercial Services also may advance funds to its clients prior to
collection of receivables, typically in an amount up to 80% of eligible accounts
receivable (as defined for that transaction), charging interest on such advances
(in addition to any factoring fees) and satisfying such advances from
receivables collections.
Clients use Commercial Services' products and services for various
purposes, including improving cash flow, mitigating or reducing the risk of bad
debt charge offs, increasing sales, improving management information and
converting the high fixed cost of operating a credit and collection department
into a lower and variable expense based on sales volume.
Commercial Services generates business regionally from a variety of
sources, including direct calling and referrals from existing clients and other
referral sources.
Commercial Finance
The Corporation's Commercial Finance operations are conducted through two
strategic business units: (i) The CIT Group/Business Credit ("Business Credit"),
which provides secured financing primarily to middle-market to larger-sized
borrowers; and (ii) The CIT Group/Credit Finance ("Credit Finance"), which
provides secured financing primarily to smaller-sized to middle-market
borrowers.
Business Credit
Financing and leasing assets of Business Credit totaled $1.2 billion at
December 31, 1997 and represented 6.3% of the Corporation's total financing and
leasing assets. Business Credit offers senior revolving and term loans secured
by accounts receivable, inventories and fixed assets to middle-market and
larger-sized companies. Such loans are used by clients primarily for growth,
expansion, acquisitions, refinancings and debtor-in-possession and turnaround
financings. Business Credit sells and purchases participation interests in such
loans to and from other lenders.
Through its variable interest rate senior revolving and term loan products,
Business Credit meets its customers' financing needs for working capital,
growth, acquisition and other financing situations otherwise not met through
bank or other unsecured financing alternatives. Business Credit typically
structures financings on a fully secured basis, though, from time to time, it
may look to a customer's cash flow to support a portion of the credit facility.
Revolving and term loans are made on a variable interest rate basis based on
published indexes such as LIBOR or a prime rate of interest.
Business is originated through direct calling efforts and intermediary and
referral sources. Business Credit has focused on increasing the proportion of
direct business origination to improve its ability to capture or retain
refinancing opportunities and to enhance finance income.
Credit Finance
Financing and leasing assets of Credit Finance totaled $889.8 million at
December 31, 1997 and represented 4.5% of the Corporation's total financing and
leasing assets. Credit Finance offers revolving and term loans to smaller-sized
and middle-market companies secured by accounts receivable, inventories and
fixed assets. Such loans are used by clients for working capital, refinancings,
acquisitions, leveraged buyouts, reorganizations, restructurings, turnarounds
and Chapter 11 financing and confirmation plans. Credit Finance sells
participation interests in such loans to other lenders and purchases
participation interests in such loans originated by other lenders. Credit
Finance borrowers are generally smaller and cover a wider range of credit
quality than those of Business Credit. While both Business Credit and Credit
Finance offer financing secured by accounts receivable, inventories and fixed
assets, Credit Finance places a higher degree of reliance on collateral and is
generally more focused on credit monitoring in its business.
Business is originated through the sales and regional offices and is also
developed through intermediaries and referral relationships and through direct
calling efforts. Credit Finance has developed long-term relationships with
selected finance companies, banks and other lenders and with many diversified
referral sources.
5
<PAGE>
Consumer
The Corporation's consumer business is focused primarily on home equity
lending through The CIT Group/Consumer Finance ("Consumer Finance") and on
retail sales financing secured by recreation vehicles, manufactured housing and
recreational boats through The CIT Group Sales Financing ("Sales Financing").
Sales Financing also provides contract servicing for securitization trusts and
other third parties through a centralized Asset Service Center ("ASC").
Additionally, in the ordinary course of business, Consumer Finance and Sales
Financing purchase loans and portfolios of loans from banks, thrifts and other
originators of consumer loans.
Consumer Finance
Financing and leasing assets of Consumer Finance, which aggregated $2.0
billion at December 31, 1997, represented 10.0% of the Corporation's total
financing and leasing assets. The managed assets of Consumer Finance were $2.4
billion at December 31, 1997, or 10.9% of total managed assets. Consumer Finance
commenced operations in December 1992. Its products include both fixed and
variable rate closed-end loans and variable rate lines of credit. The lending
activities of Consumer Finance consist primarily of originating, purchasing and
selling loans secured by first or second liens on detached, single family
residential properties. Such loans are primarily made for the purpose of
consolidating debts, refinancing an existing mortgage, funding home
improvements, paying education expenses and, to a lesser extent, purchasing a
home, among other reasons. Consumer Finance originates loans through brokers and
correspondents as well as on a direct marketing basis.
The Corporation believes that its network of Consumer Finance offices,
located in most major U.S. markets, enables it to provide a competitive,
extensive product offering complemented by high levels of service delivery.
Through experienced lending professionals and automation, Consumer Finance
provides rapid turnaround time from application to loan funding, a
characteristic considered to be critical by its broker and correspondent
relationships.
Sales Financing
The financing and leasing assets of Sales Financing, which aggregated $1.9
billion at December 31, 1997, represented 9.7% of the Corporation's total
financing and leasing assets. The managed assets of Sales Financing were $3.9
billion at December 31, 1997, or 17.3% of total managed assets. The lending
activities of Sales Financing consist primarily of providing nationwide retail
financing for the purchase of new and used recreation vehicles, manufactured
housing and recreational boats. During 1997, Sales Financing began providing
wholesale manufactured housing and recreational boat inventory financing
directly to dealers. Sales Financing originates loans predominately through
recreation vehicle, manufactured housing and recreational boat dealer,
manufacturer and broker relationships.
Servicing
The ASC centrally services and collects substantially all of the
Corporation's consumer finance receivables including loans originated or
purchased by Sales Financing or Consumer Finance, as well as loans originated or
purchased and subsequently securitized with servicing retained. The servicing
portfolio also includes loans owned by third parties that are serviced by Sales
Financing for a fee on a "contract" basis. At December 31, 1997, the consumer
finance servicing portfolio aggregated approximately 282,000 loans, including
$1.5 billion of finance receivables serviced for third parties.
Securitization Program
The Corporation funds most of its assets on balance sheet using its access
to the commercial paper, medium-term note and capital markets. In an effort to
broaden its funding sources and to provide an additional source of liquidity,
the Corporation, in 1992, established a program to opportunistically access the
public and private asset backed securitization markets. Current products
utilized in the Corporation's program include consumer loans secured by
recreation vehicles, recreational boats and residential real estate. As of
December 31, 1997, the Corporation has sold $3.3 billion of finance receivables
since the inception of the Corporation's asset backed securitization program and
the remaining pool balances at December 31, 1997 aggregated $2.4 billion or
10.7% of the Corporation's total managed assets.
6
<PAGE>
Under a typical asset backed securitization, the Corporation sells a "pool"
of secured loans to a special purpose entity, that, in turn, issues certificates
and/or notes that are collateralized by the loan pool and that entitle the
holders thereof to participate in certain loan pool cash flows. The Corporation
retains the servicing of the securitized loans, for which it is paid a fee, and
also participates in certain "residual" loan pool cash flows (cash flows after
payment of principal and interest to certificate and/or note holders and after
losses). At the date of securitization, the Corporation estimates the "residual"
cash flows to be received over the life of the securitization, records the
present value of these cash flows as an interest-only receivable, or I/O (a
retained interest in the securitization), and recognizes a gain. The I/O is then
amortized over the estimated life of the related loan pool.
The Corporation, in its estimation of residual cash flows and related I/Os,
inherently employs a variety of financial assumptions, including loan pool
credit losses, prepayment speeds and discount rates. These assumptions are
empirically supported by both the Corporation's historical experience and
anticipated trends relative to the particular products securitized. Subsequent
to the recognition of I/Os, the Corporation regularly reviews such assets for
valuation impairment. These reviews are performed on a disaggregated basis. Fair
values of I/Os are calculated utilizing current and anticipated credit losses,
prepayment speeds and discount rates and are then compared to the Corporation's
carrying values. Carrying value of the Corporation's I/O's at December 31, 1997
was $155.5 million and approximated fair value.
Equity Investments
The CIT Group/Equity Investments and its subsidiary The CIT Group/Venture
Capital (together "Equity Investments") originate and participate in merger and
acquisition transactions, purchase private equity and equity-related securities
and arrange transaction financing. Equity Investments also invests in emerging
growth opportunities in selected industries, including the life sciences,
information technology, communications and consumer products industries. Equity
Investments made its first investment in 1991 and had total investments of $65.8
million at December 31, 1997.
Competition
The Corporation's markets are highly competitive and are characterized by
competitive factors that vary based upon product and geographic region. The
Corporation's competitors include captive and independent finance companies,
commercial banks and thrift institutions, industrial banks, leasing companies,
manufacturers and vendors. Substantial national financial services networks have
been formed by insurance companies and bank holding companies that compete with
the Corporation. On a local level, community banks and smaller independent
finance and/or mortgage companies are a competitive force. Some competitors have
substantial local market positions. Many of the competitors of the Corporation
are large companies that have substantial capital, technological and marketing
resources. Some of these competitors are larger than the Corporation and may
have access to capital at a lower cost than the Corporation. Also, the
Corporation's competitors include businesses that are not related to bank
holding companies and, accordingly, may engage in activities such as short-term
equipment rental and servicing, which currently are prohibited to the
Corporation. Competition has been enhanced in recent years by an improving
economy and growing marketplace liquidity. The markets for most of the
Corporation's products are characterized by a large number of competitors.
However, with respect to some of the Corporation's products, competition is more
concentrated.
The Corporation competes primarily on the basis of pricing, terms, and
structure, with other primary competitive factors including industry experience
and client service and relationships. From time to time, competitors of the
Corporation seek to compete aggressively on the basis of these factors and the
Corporation may lose market share to the extent it is unwilling to match its
competitors' pricing and terms in order to maintain its interest margins and/or
credit standards.
Other primary competitive factors include industry experience and client
service and relationships. In addition, demand for the Corporation's products
with respect to certain industries, such as the commercial airline industry,
will be affected by demand for such industry's services and products and by
industry regulations.
7
<PAGE>
Regulation
DKB is a bank holding company within the meaning of the Bank Holding
Company Act of 1956 (the "Act"), and is registered as such with the Federal
Reserve. As a result, the Corporation is subject to certain provisions of the
Act and is subject to examination by the Federal Reserve. In general, the Act
limits the activities in which a bank holding company and its subsidiaries may
engage to those of banking or managing or controlling banks or performing
services for their subsidiaries and to continuing activities which the Federal
Reserve has determined to be "so closely related to banking or managing or
controlling banks as to be a proper incident thereto." The Corporation's current
principal business activities constitute permissible activities for a nonbank
subsidiary of a bank holding company.
In addition to being subject to the Act, DKB is subject to Japanese banking
laws, regulations, guidelines and orders that affect permissible activities of
the Corporation. DKB and the Corporation have entered into an agreement in order
to facilitate DKB's compliance with applicable U.S. and Japanese banking laws,
or the regulations, interpretations, policies, guidelines, requests, directives
and orders of the applicable regulatory authorities or the staffs thereof or a
court (collectively, the "Banking Laws"). That agreement prohibits the
Corporation from engaging in any new activity or entering into any transaction
for which prior approval, notice or filing is required under Banking Laws
without the required prior approval having been obtained, prior notice having
been given or made by DKB and accepted or such filings having been made. The
Corporation is also prohibited from engaging in any activity as would cause DKB,
the Corporation or any affiliate of DKB or the Corporation to violate any
Banking Laws. In the event that, at any time, it is determined by DKB that any
activity then conducted by the Corporation is prohibited by any Banking Law, the
Corporation is required to take all reasonable steps to cease such activity.
Under the terms of that agreement, DKB is responsible for making all
determinations as to compliance with applicable Banking Laws.
Two of the subsidiaries of the Corporation are investment companies
organized under Article XII of the New York Banking Law and, as a result, the
activities of these subsidiaries are restricted by state banking laws and these
subsidiaries are subject to examination by state banking examiners. Also, any
person or entity seeking to purchase "control" of the Corporation would be
required to apply for and obtain the prior approval of the Superintendent of
Banks of the State of New York. "Control" is presumed to exist if a person or
entity would, directly or indirectly, own, control or hold (with power to vote)
10% or more of the voting stock of the Corporation.
The operations of the Corporation are subject, in certain instances, to
supervision and regulation by state and federal governmental authorities and may
be subject to various laws and judicial and administrative decisions imposing
various requirements and restrictions, which, among other things, (i) regulate
credit granting activities, (ii) establish maximum interest rates, finance
charges and other charges, (iii) regulate customers' insurance coverages, (iv)
require disclosures to customers, (v) govern secured transactions and (vi) set
collection, foreclosure, repossession and claims handling procedures and other
trade practices.
The Corporation's consumer finance business is subject to detailed
enforcement and supervision by state authorities under legislation and
regulations which generally require licensing of the lender. Licenses are
renewable and may be subject to suspension or revocation for violations of such
laws and regulations. Applicable state laws generally regulate interest rates
and other charges and require certain disclosures. In addition, most states have
other laws, public policies and general principles of equity relating to the
protection of consumers, unfair and deceptive practices and practices that may
apply to the origination, servicing and collection of consumer finance loans.
Depending on the provision of the applicable law and the specific facts and
circumstances involved, violations of these laws, policies and principles may
limit the Corporation's ability to collect all or part of the principal of or
interest on consumer finance loans, may entitle the borrower to a refund of
amounts previously paid and, in addition, could subject the Corporation to
damages and administrative sanctions.
Federal laws preempt state usury ceilings on first mortgage loans and state
laws which restrict various types of alternative dwelling secured receivables,
except in those states which have specifically opted out, in whole or in part,
of such preemption. Loans may also be subject to other federal laws, including:
(i) the Federal Truth-in-Lending Act and Regulation Z promulgated thereunder,
which require certain disclosures to
8
<PAGE>
borrowers and other parties regarding loan terms; (ii) the Real Estate
Settlement Procedures Act and Regulation X promulgated thereunder, which require
certain disclosures to borrowers and other parties regarding certain loan terms
and regulates certain practices with respect to such loans; (iii) the Equal
Credit Opportunity Act and Regulation B promulgated thereunder, which prohibit
discrimination in the extension of credit and administration of loans on the
basis of age, race, color, sex, religion, marital status, national origin,
receipt of public assistance or the exercise of any right under the Consumer
Credit Protection Act; (iv) the Fair Credit Reporting Act, which regulates the
use and reporting of information related to a borrower's credit experience; and
(v) the Fair Housing Act, which prohibits discrimination on the basis of, among
other things, familial status or handicap.
Depending on the provisions of the applicable law and the specific facts
and circumstances involved, violations of these laws may limit the ability of
the Corporation to collect all or part of the principal of or interest on
applicable loans, may entitle the borrower to rescind the loan and any mortgage
or to obtain a refund of amounts previously paid and, in addition, could subject
the Corporation to damages and administrative sanctions.
The above federal and state regulation and supervision could limit the
Corporation's discretion in operating its businesses. For example, state laws
often establish maximum allowable finance charges for certain consumer and
commercial loans. Noncompliance with applicable statutes or regulations could
result in the suspension or revocation of any license or registration at issue,
as well as the imposition of civil fines and criminal penalties. No assurance
can be given that applicable laws or regulations will not be amended or
construed differently, that new laws and regulations will not be adopted or that
interest rates the Corporation charges will not rise to state maximum levels,
the effect of any of which could be to adversely affect the business or results
of operations of the Corporation. Under certain circumstance, the Federal
Reserve has the authority to issue orders which could restrict the ability of
the Corporation to engage in new activities or to acquire additional businesses
or to acquire assets outside of the normal course of business.
9
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SUMMARY OF FINANCIAL INFORMATION
The following is a summary of certain financial information of the
Corporation and its subsidiaries. The data for the years ended December 31,
1997, 1996 and 1995 were obtained from the Corporation's audited consolidated
financial statements contained in the Corporation's 1997 Annual Report on Form
10-K. The data for the years ended December 31, 1994 and 1993 were obtained from
audited consolidated statements of the Corporation that are not incorporated by
reference in this Prospectus. The data for the quarters ended June 30, 1998 and
1997 were obtained from the Corporation's unaudited condensed consolidated
financial statements contained in the Corporation's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998. This summary should be read in
conjunction with the financial information of the Corporation included in the
reports referred to under "Documents Incorporated By Reference."
<TABLE>
<CAPTION>
Six Months Ended
June 30, Years Ended December 31,
-------------- ------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
(Dollar Amounts in Millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Finance income ................ $ 970.8 $ 889.0 $1,824.7 $1,646.2 $1,529.2 $1,263.8 $1,111.9
Interest expense .............. 502.4 456.7 937.2 848.3 831.5 614.0 508.0
------- ------ -------- -------- -------- -------- --------
Net finance income .......... 468.4 432.3 887.5 797.9 697.7 649.8 603.9
Fees and other income ......... 127.1 107.1 247.8 244.1 184.7 174.4 133.8
Gain on Sale of Equity interest
acquired in loan workout .... -- 58.0 58.0 -- -- -- --
------- ------ -------- -------- -------- -------- --------
Operating revenue ........... 595.5 597.4 1,193.3 1,042.0 882.4 824.2 737.7
------- ------ -------- -------- -------- -------- --------
Salaries and employee benefits 121.8 123.3 253.5 223.0 193.4 185.8 152.1
General operating expenses .... 83.9 87.2 174.9 170.1 152.3 152.1 130.1
------- ------ -------- -------- -------- -------- --------
Salaries and general operating
expenses .................... 205.7 210.5 428.4 393.1 345.7 337.9 282.2
Provision for credit losses ... 44.4 56.0 113.7 111.4 91.9 96.9 104.9
Depreciation on operating
lease equipment ............. 78.7 66.0 146.8 121.7 79.7 64.4 39.8
Minority interest in subsidiary
trust holding solely
debentures of the company ... 9.6 6.7 16.3 -- -- -- --
------- ------ -------- -------- -------- -------- --------
Operating expenses ....... 338.4 339.2 705.2 626.2 517.3 499.2 426.9
------- ------ -------- -------- -------- -------- --------
Income before provision for
income taxes ................ 257.1 258.2 488.1 415.8 365.1 325.0 310.8
Provision for income taxes .... 91.7 94.4 178.0 155.7 139.8 123.9 128.5
------- ------ -------- -------- -------- -------- --------
Net income ............... $ 165.4 $163.8 $ 310.1 $ 260.1 $ 225.3 $ 201.1 $ 182.3
======= ====== ======== ======== ======== ======== ========
</TABLE>
The following table sets forth the ratio of earnings to fixed charges for
each of the periods indicated.
Ratios of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Six Months
Ended
June 30, Years Ended December 31,
------------ ---------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges 1.50 1.55 1.51 1.49 1.44 1.52 1.60
</TABLE>
The ratios of earnings to fixed charges have been computed in accordance
with requirements of the Commission's Regulation S-K. Earnings consist of income
from continuing operations before income taxes and fixed charges; fixed charges
consist of interest on indebtedness, minority interest in subsidiary trust
holding solely debentures of the Corporation, and the portion of rentals
considered to represent an appropriate interest factor.
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USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities offered hereby will
provide additional working funds for the Corporation and its subsidiaries and
will be used initially to reduce short-term borrowings (currently represented by
commercial paper) incurred primarily for the purpose of originating and
purchasing receivables in the ordinary course of business. The amounts which the
Corporation itself may use in connection with its business and which the
Corporation may furnish to particular subsidiaries are not now determinable.
From time to time the Corporation may also use the proceeds to finance the bulk
purchase of receivables and/or the acquisition of other finance-related
businesses.
DESCRIPTION OF DEBT SECURITIES
General
The Debt Securities will constitute either Superior Indebtedness (as
defined below) or Senior Subordinated Indebtedness (as defined below) of the
Corporation. Senior Securities may be issued from time to time in one or more
separate, unlimited series under one or more separate indentures, each
substantially in the form of a global indenture (each such indenture and
indentures supplemental thereto are hereinafter referred to as a "Senior
Indenture", and collectively as the "Senior Indentures"), in each case between
the Corporation and a banking institution organized under the laws of the United
States or one of the states thereof (each such banking institution is
hereinafter referred to as a "Senior Trustee", and collectively as the "Senior
Trustees"). The Senior Subordinated Securities may be issued from time to time
as either (i) one or more separate, unlimited series of Debt Securities
constituting senior subordinated indebtedness under one or more separate
indentures, each substantially in the form of a global indenture (each such
indenture and indentures supplemental thereto are hereinafter referred to as a
"Senior Subordinated Indenture", and collectively as the "Senior Subordinated
Indentures"), in each case between the Corporation and a banking institution
organized under the laws of the United States or one of the states thereof (each
such banking institution is hereinafter referred to as a "Senior Subordinated
Trustee", and collectively as the "Senior Subordinated Trustees"), or (ii) one
or more separate, unlimited series of Debt Securities constituting senior
subordinated indebtedness under the Senior Subordinated Indentures which is
intended to qualify as "Tier II Capital" under the rules and regulations of the
Ministry of Finance of Japan and the risk-based capital guidelines of the
Federal Reserve Board, if such series have the limited rights of acceleration
described under "Description of Debt Securities--Senior Subordinated Securities"
and "Description of Debt Securities--Events of Default". The Senior Indentures
and the Senior Subordinated Indentures are sometimes herein referred to as the
"Indentures", and the Senior Trustees and the Senior Subordinated Trustees are
sometimes herein referred to as the "Trustees".
The statements under this heading are subject to the detailed provisions of
each Indenture. A form of global Senior Indenture and a form of global Senior
Subordinated Indenture are filed as exhibits to the Registration Statement of
which this Prospectus is a part. Wherever particular provisions of an Indenture
or terms defined therein are referred to, such provisions or definitions are
incorporated by reference as a part of the statements made and the statements
are qualified in their entirety by such reference.
The Debt Securities to be issued pursuant to this Prospectus, comprised of
the Senior Securities and the Senior Subordinated Securities, are limited to an
aggregate initial offering price of $6.718 billion (or (i) if the principal of
the Debt Securities is denominated in a foreign currency, the equivalent thereof
at the time of offering, or (ii) if the Debt Securities are issued at an
original issue discount, such greater principal amount as shall result in an
aggregate initial offering price of $6.718 billion). The Senior Indentures do
not limit the amount of Debt Securities or other unsecured Superior Indebtedness
which may be issued thereunder or limit the amount of subordinated debt, secured
or unsecured, which may be issued by the Corporation. Except as described herein
under "Description of Debt Securities--Certain Restrictive Provisions", the
Senior Subordinated Indentures do not limit the amount of Debt Securities or
other unsecured Senior Subordinated Indebtedness which may be issued thereunder
or limit the amount of Junior Subordinated Indebtedness, secured or unsecured,
which may be issued by the Corporation. At June 30, 1998, approximately $200
million of Senior Subordinated Indebtedness was issued and outstanding. At June
30, 1998, under the most restrictive provisions of the Senior Subordinated
Indentures, the Corporation could issue up to approximately $2.4 billion of
additional Senior Subordinated Indebtedness. The Debt Securities will be issued
in fully registered
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form and, with regard to each issue of Offered Debt Securities in respect of
which this Prospectus is being delivered, in the manner and in the denominations
set forth in the accompanying Prospectus Supplement.
The Debt Securities may be issued in one or more separate series of Senior
Securities and/or one or more separate series of Senior Subordinated Securities,
in each case with the same or various maturities at par or at a discount.
Offered Debt Securities bearing no interest or interest at a rate which at the
time of issuance is below market rates ("Original Issue Discount Securities")
will be sold at a discount (which may be substantial) below their stated
principal amount. Federal income tax consequences and other special
considerations applicable to any such Original Issue Discount Securities will be
described in the Prospectus Supplement relating thereto.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Debt Securities: (i) the designation, aggregate principal amount,
and authorized denominations of the Offered Debt Securities; (ii) the percentage
of their principal amount at which such Offered Debt Securities will be issued;
(iii) the date or dates on which the Offered Debt Securities will mature; (iv)
the rate or rates (which may be fixed or variable) per annum, if any, at which
the Offered Debt Securities will bear interest, or the method of determining
such rate or rates, or the original issue discount, if applicable; (v) the times
at which any such interest will be payable and the date from which any such
interest shall accrue; (vi) provisions for a sinking, purchase, or other
analogous fund, if any; (vii) any redemption terms; (viii) the designation of
the office or agency of the Corporation in the Borough of Manhattan, The City of
New York, where the Offered Debt Securities may be presented for payment and may
be transferred or exchanged by the registered holders thereof or by their
attorneys duly authorized in writing; (ix) if other than U.S. dollars, the
currency (including composite currencies) in which the principal of, premium, if
any, and/or interest on the Offered Debt Securities will be payable; (x) any
currency (including composite currencies) other than the stated currency of the
Offered Debt Securities in which the principal of, premium, if any, and/or
interest on the Offered Debt Securities may, at the election of the Corporation
or the holders, be payable, and the periods within which, and terms and
conditions upon which, such election may be made; (xi) if the amount of payments
of principal of, premium, if any, and/or interest on the Offered Debt Securities
may be determined with reference to an index, the manner in which such amounts
will be determined; (xii) whether the Offered Debt Securities are Senior
Securities or Senior Subordinated Securities, or include both; and (xiii) other
specific terms.
Principal, premium, if any, and interest, if any, less applicable
withholding taxes, if any, will be payable at the office or agency of the
Corporation maintained for such purpose in the Borough of Manhattan, The City of
New York, provided that payment of interest, if any, less applicable withholding
taxes, if any, may be made at the option of the Corporation by check mailed to
the address of the person entitled thereto as it appears on the register of the
Corporation. (Section 2.04 of the Indentures.)
The Indentures provide that the Debt Securities will be transferable by the
registered holders thereof, or by their attorneys duly authorized in writing, at
the office or agency of the Corporation maintained for such purpose in such
cities as will be designated in the Prospectus Supplement, in the manner and
subject to the limitations provided in the Indentures, and upon surrender of the
Debt Securities. No service charge will be made for any registration of transfer
or exchange of the Debt Securities, but the Corporation may require payment of a
sum sufficient to cover any tax or other governmental charge in connection
therewith. (Section 2.06 of the Indentures.)
"Indebtedness", when used in the definition of the terms "Superior
Indebtedness", "Senior Subordinated Indebtedness", and "Junior Subordinated
Indebtedness", means all obligations which in accordance with generally accepted
accounting principles should be classified as liabilities upon a balance sheet
and in any event includes all debt and other similar monetary obligations,
whether direct or guaranteed.
"Superior Indebtedness" means all Indebtedness of the Corporation that is
not by its terms subordinate or junior to any other indebtedness of the
Corporation. As discussed below, the Senior Securities constitute Superior
Indebtedness.
"Senior Subordinated Indebtedness" means all Indebtedness of the
Corporation that is subordinate only to Superior Indebtedness. As discussed
below, the Senior Subordinated Securities constitute Senior Subordinated
Indebtedness.
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"Junior Subordinated Indebtedness" means all Indebtedness of the
Corporation that is subordinate to both Superior Indebtedness and Senior
Subordinated Indebtedness.
Senior Securities
The Senior Securities will be direct, unsecured obligations of the
Corporation, and will constitute Superior Indebtedness issued on a parity with
the other Superior Indebtedness of the Corporation. At June 30, 1998,
approximately $16.5 billion of outstanding Superior Indebtedness was reflected
in the Corporation's consolidated unaudited balance sheet. The Senior Securities
will be senior to all Senior Subordinated Indebtedness, including the Senior
Subordinated Securities, which at June 30, 1998, totaled $200.0 million
outstanding, and Junior Subordinated Indebtedness, none of which was outstanding
at June 30, 1998. The subordination provisions applicable to the Senior
Subordinated Securities are discussed below under "Description of Debt
Securities--Senior Subordinated Securities".
Senior Subordinated Securities
The Senior Subordinated Securities will be direct, unsecured obligations of
the Corporation subordinated as to principal, premium, if any, and interest to
the prior payment in full of all Superior Indebtedness of the Corporation,
including the Senior Securities. In the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization, or similar proceedings or proceedings
for voluntary liquidation, dissolution, or other winding up of the Corporation,
whether or not involving insolvency or bankruptcy proceedings, the holders of
Superior Indebtedness will first be paid in full before any payment on account
of principal, premium, if any, or interest is made on the Senior Subordinated
Securities. An event of default under and/or acceleration of Superior
Indebtedness does not in itself result in the suspension of payments on Senior
Subordinated Securities. However, in the event the Senior Subordinated
Securities are declared due and payable before their expressed maturity because
of the occurrence of one of the events of default specified in the Senior
Subordinated Indentures, holders of the Senior Subordinated Securities will be
entitled to payment only after payment in full of Superior Indebtedness or
provision for such payment is made.
By reason of the foregoing subordination, in the event of insolvency,
holders of Superior Indebtedness may recover more, ratably, than the holders of
the Senior Subordinated Securities. The Senior Subordinated Securities are
intended to rank in all respects on a parity with all other Senior Subordinated
Indebtedness, including the Corporation's outstanding Senior Subordinated
Securities, and superior in right of payment to all Junior Subordinated
Indebtedness and all outstanding capital stock.
Senior Subordinated Securities of certain series may meet the requirements
necessary for such series to be considered "Tier II Capital" under the rules and
regulations of the Ministry of Finance of Japan and the risk-based capital
guidelines of the Federal Reserve Board. If it is intended that any series be
considered Tier II Capital, such series of the Senior Subordinated Securities
may provide that the maturity date of any such series so designated by the
Corporation in a supplement hereto will be subject to acceleration only in the
event of certain circumstances related to the insolvency of the Corporation.
Certain Restrictive Provisions
Except as set forth in the next sentence, no Indenture limits the amount of
other securities which may be issued by the Corporation or its subsidiaries, but
each contains a covenant that the Corporation will not pledge or otherwise
subject to any lien ("Liens") any of its property or assets to secure
indebtedness for money borrowed, incurred, issued, assumed or guaranteed by the
Corporation, except Liens in favor of any subsidiary of the Corporation;
purchase money Liens existing on property, assets, shares of capital stock or
indebtedness hereafter acquired; Liens on any property or assets existing at the
time of acquisition by the Corporation; Liens securing the performance of
letters of credit, bids, tenders, sales contracts, purchase agreements,
repurchase agreements, reverse repurchase agreements, bankers' acceptances,
leases, surety and performance bonds, and other similar obligations incurred in
the ordinary course of business; Liens upon any real property acquired or
constructed by the Corporation primarily for use in the conduct of its business;
arrangements providing for the leasing by the Corporation of any property or
assets, which property or assets have been or will be sold or transferred by the
Corporation with the intention that such property or assets will be leased back
to the Corporation, if the obligations in respect of such lease would not be
included as liabilities on a consolidated balance sheet of the Corporation;
Liens to secure non-recourse debt in connection with the Corporation engaging in
any leveraged or single-investor or other lease transactions; consensual Liens
in the ordinary
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course of business of the Corporation that secure indebtedness that would not be
included in total liabilities as shown on the Corporation's consolidated balance
sheet; Liens created by the Corporation in connection with any transaction
intended by the Corporation to be a sale of property or assets of the
Corporation; Liens on property or assets financed through tax-exempt municipal
obligations; any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any of the foregoing,
provided that any such extension, renewal or replacement is limited to all or a
part of the property or assets which secured the Lien so extended, renewed or
replaced (plus improvements on such property); Liens that secure certain other
indebtedness which, in an aggregate principal amount then outstanding, does not
exceed 10% of the Corporation's consolidated net worth; and certain other minor
exceptions. (Section 6.04 of the Indentures.) In addition, the Senior
Subordinated Indentures provide that the Corporation will not permit (i) the
aggregate amount of Senior Subordinated Indebtedness outstanding at any time to
exceed 100% of the aggregate amount of the par value of the capital stock plus
the surplus (including retained earnings) of the Corporation and its
consolidated subsidiaries or (ii) the aggregate amount of Senior Subordinated
Indebtedness and Junior Subordinated Indebtedness outstanding at any time to
exceed 150% of the aggregate amount of the par value of the capital stock plus
the surplus (including retained earnings) of the Corporation and its
consolidated subsidiaries. (Senior Subordinated Indenture Section 6.05.) Under
the more restrictive of such tests in the Senior Subordinated Indentures, as of
June 30, 1998, the Corporation could issue up to approximately $2.4 billion of
additional Senior Subordinated Indebtedness. For information as to restrictions
in other agreements on the Corporation's ability to issue Senior Subordinated
Indebtedness, see "Description of Debt Securities--General" above.
The holders of at least a majority in principal amount of the outstanding
Debt Securities of any series may, on behalf of the holders of all Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Corporation with the foregoing restrictions. (Senior Indenture
Section 6.06, Senior Subordinated Indenture Section 6.07.)
Each Indenture provides that, subject to the restrictions described in the
first sentence of the first paragraph under this caption, nothing contained in
such Indenture will prevent the consolidation or merger of the Corporation with
or into any other corporation, or the merger into the Corporation of any other
corporation, or the sale by the Corporation of its property and assets as, or
substantially as, an entirety, or otherwise. Notwithstanding the foregoing: (i)
in the event of any such consolidation or merger in which the Corporation is not
the surviving corporation, the surviving corporation must succeed to and be
substituted for the Corporation and must expressly assume by an indenture
executed and delivered to the applicable Trustee, the due and punctual payment
of the principal of (and premium, if any) and interest, if any, on all Debt
Securities then outstanding and the performance and observance of every covenant
and condition of such Indenture which is required to be performed or observed by
the Corporation, and (ii) as a condition to any sale of the property and assets
of the Corporation as, or substantially as, an entirety, the corporation to
which such property and assets will be sold must (a) expressly assume, as part
of the purchase price thereof, the due and punctual payment of the principal of
(and premium, if any) and interest, if any, on all Debt Securities and the
performance and observance of every covenant and condition of such Indenture
which is required to be performed or observed by the Corporation, and (b)
simultaneously with the delivery to it of the conveyances or instruments of
transfer of such property and assets, execute and deliver to the applicable
Trustee a proper indenture in form satisfactory to such Trustee, pursuant to
which such purchasing corporation will assume the due and punctual payment of
the principal of (and premium, if any) and interest, if any, on all Debt
Securities then outstanding and the performance and observance of every covenant
and condition of such Indenture which is required to be performed or observed by
the Corporation, to the same extent that the Corporation is bound and liable.
(Senior Indenture Section 15.01, Senior Subordinated Indenture Section 16.01.)
Compliance by the Corporation with the foregoing restrictions may be waived by
or on behalf of the holders of the outstanding Debt Securities. For information
as to the modification of each Indenture, see "Description of Debt
Securities--Modification of Indenture" below.
Other than the foregoing restrictions, no Indenture contains covenants of
the Corporation or provisions which afford additional protection to holders of
outstanding Debt Securities in the event of a highly leveraged transaction
involving the Corporation.
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Modification of Indenture
Each Indenture contains provisions permitting the Corporation and the
Trustee thereunder to add any provisions to or change in any manner or eliminate
any of the provisions of such Indenture or any indenture supplemental thereto or
to modify in any manner the rights of the holders of any series of Debt
Securities with the consent of the holders of not less than 662/3% in aggregate
principal amount of such series of Debt Securities at the time outstanding,
except that no such amendment or modification may (i) extend the fixed maturity
of any Debt Security, reduce the rate or extend the time of payment of interest
thereon, reduce the amount of the principal thereof, or premium, if any, payable
with respect thereto, or reduce the amount of an Original Issue Discount
Security payable upon the acceleration of the stated maturity thereof, without
the consent of the holder of such Debt Security, or (ii) reduce the aforesaid
percentage of any series of Debt Securities, the holders of which are required
to consent to any such amendment or modification, without the consent of the
holders of all the Debt Securities of such series then outstanding. (Section
14.02 of the Indentures.)
Outstanding Debt Securities
In determining whether the holders of the requisite principal amount of
outstanding Debt Securities have given any request, demand, authorization,
direction, notice, consent, or waiver under any Indenture, (i) the principal
amount of an Original Issue Discount Security that will be deemed to be
outstanding for such purposes will be the amount of the principal thereof that
would be due and payable as of the date of such determination upon a declaration
of acceleration of the maturity thereof upon an event of default and (ii) the
principal amount of a Debt Security denominated in a foreign currency or
currencies will be the U.S. dollar equivalent, determined on the date of
original issuance of such Debt Security, of the principal amount. (Section
1.02 of the Indentures.)
Events of Default
Each Indenture defines an "event of default" with respect to any series of
Debt Securities as being any one of the following events and such other events
as may be established for the Debt Securities of a particular series: (i)
default for thirty days in any payment of interest on such series; (ii) default
in any payment of principal of, and premium, if any, on such series when due;
(iii) default in the payment of any sinking fund installment of such series when
due; (iv) default for thirty days after appropriate notice in performance of any
other covenant in such Indenture (other than a covenant included in the
Indenture solely for the benefit of another series of Debt Securities); (v)
certain events in bankruptcy, insolvency, or reorganization; or (vi) default in
the payment of any installment of interest on any evidence of indebtedness of,
or assumed or guaranteed by, the Corporation (other than indebtedness
subordinated to such series), or in the payment of any principal of any such
evidence of indebtedness, and with respect to which any period of grace shall
have expired, after appropriate notice. (Section 7.01 of the Indentures.) Each
Indenture provides that the Trustee may withhold notice of any default (except
in the payment of principal of, premium, if any, or interest, if any, on any
series of Debt Securities) if it considers such withholding in the interests of
the holders of such series of Debt Securities issued thereunder. (Section 11.03
of the Indentures.)
Except as set forth below, each Indenture provides that the Trustee
thereunder or the holders of not less than 25% in principal amount of any series
of Debt Securities then outstanding may declare the principal of all Debt
Securities of such series to be due and payable on an event of default. (Section
7.02 of the Indentures.) Notwithstanding the foregoing, any series of Senior
Subordinated Securities which will be considered "Tier II" may provide that the
Senior Subordinated Trustee or the holders of at least 25% in aggregate
principal amount of the Senior Subordinated Securities of that series which are
then outstanding may declare the principal of all Senior Subordinated Securities
of that series to be due and payable immediately only if an event of default
pursuant to (v) above shall have occurred and be continuing. Any such series
will be designated by the Corporation in a supplement hereto.
Reference is made to the Prospectus Supplement relating to any series of
Offered Debt Securities which are Original Issue Discount Securities for the
particular provisions relating to acceleration of the maturity of a portion of
the principal amount of such Original Issue Discount Securities upon the
occurrence of an event of default and the continuation thereof.
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Within 120 days after the close of each fiscal year, the Corporation must
file with each Trustee a statement, signed by specified officers, stating
whether or not such officers have knowledge of any default, and, if so,
specifying each such default, the nature thereof and what action, if any, has
been taken to cure such default. (Senior Indenture Section 6.05, Senior
Subordinated Indenture Section 6.06.)
Subject to provisions relating to its duties in case of default, no Trustee
is under any obligation to exercise any of its rights or powers thereunder at
the request, order, or direction of any holders of any series of Debt
Securities, unless such holders shall have offered to such Trustee reasonable
indemnity. (Section 11.01 of the Indentures.) Subject to such provisions for
indemnification, the holders of a majority in principal amount of any series of
Debt Securities outstanding may direct the time, method, and place of conducting
any proceeding for any remedy available to the Trustee thereunder, or of
exercising any trust or power conferred upon such Trustee. (Section 7.08 of the
Indentures.)
Defeasance of the Indenture and Debt Securities
The Corporation at any time may satisfy its obligations with respect to
payments of principal of the Debt Securities, and premium, if any, and interest,
if any, on the Debt Securities of any series by irrevocably depositing in trust
with the Trustee money or U.S. Government Obligations (as defined in the
Indenture) or a combination thereof sufficient to make such payments when due.
If such deposit is sufficient, as verified by a written report of a nationally
recognized, independent public accounting firm, to make all payments of (i)
interest, if any, on the Debt Securities of such series prior to and on their
redemption or maturity, as the case may be, and (ii) principal of the Debt
Securities, and premium, if any, on the Debt Securities of such series when due
upon redemption or at the designated maturity date, as the case may be, then all
the obligations of the Corporation with respect to the Debt Securities of such
series and the Indenture insofar as it relates to the Debt Securities of such
series will be satisfied and discharged (except as otherwise provided in the
Indenture). In the event of any such defeasance, holders of the Debt Securities
of such series would be able to look only to such trust fund for payment of
principal of, premium, if any, and interest, if any, on the Debt Securities of
such series until the designated maturity date or redemption. (Sections 12.01,
12.02 and 12.03 of the Indentures.)
Such a trust may only be established if, among other things, (i) the
Corporation has obtained an opinion of legal counsel (which may be based on a
ruling from, or published by, the Internal Revenue Service) to the effect that
holders of the Debt Securities of such series will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amounts and in
the same manner and at the same times as would have been the case if such
deposit, defeasance and discharge had not occurred and (ii) at that time, with
respect to any series of Debt Securities then listed on The New York Stock
Exchange, the rules of The New York Stock Exchange do not prohibit such deposit
with the Trustee.
Information Concerning the Trustees
The Corporation from time to time may borrow from each of the Trustees, and
the Corporation and certain of its subsidiaries maintain deposit accounts and
conduct other banking transactions with some of the Trustees. A Trustee under a
Senior Indenture or a Senior Subordinated Indenture may act as trustee under any
of the Corporation's other indentures.
PLAN OF DISTRIBUTION
The Corporation may sell the Debt Securities being offered hereby (i)
directly to purchasers, (ii) through agents, (iii) to dealers, or (iv) through
an underwriter or a group of underwriters.
Offers to purchase Offered Debt Securities may be solicited directly by the
Corporation or by agents designated by the Corporation from time to time. Unless
otherwise indicated in the Prospectus Supplement, any such agent will be acting
on a best efforts basis for the period of its appointment (ordinarily five
business days or less). Agents may be entitled under agreements which may be
entered into with the Corporation to indemnification by the Corporation against
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act").
If a dealer is utilized in the sale of the Offered Debt Securities in
respect of which this Prospectus is delivered, the Corporation will sell such
Offered Debt Securities to the dealer, as principal. The dealer may
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then resell such Offered Debt Securities to the public at varying prices to be
determined by such dealer at the time of resale. Dealers may be entitled under
agreements which may be entered into with the Corporation to indemnification by
the Corporation against certain civil liabilities, including liabilities under
the Securities Act.
If an underwriter or underwriters are utilized in the sale, the Corporation
may enter into an arrangement with such underwriters at the time of sale to them
providing for their indemnification against certain liabilities, including
liabilities under the Securities Act. The names of the underwriters and the
terms of the transaction will be set forth in the Prospectus Supplement which is
intended for use by the underwriters to make resales of the Offered Debt
Securities in respect of which this Prospectus is delivered to the public.
The underwriters, dealers, and agents may be deemed to be underwriters and
any discounts, commissions, or concessions received by them from the Corporation
or any profit on the resale of Offered Debt Securities by them may be deemed to
be underwriting discounts and commissions under the Securities Act. Any such
person who may be deemed to be an underwriter and any such compensation received
from the Corporation will be described in the Prospectus Supplement.
Underwriters, dealers, and agents may be customers of, engage in transactions
with, or perform services for the Corporation in the ordinary course of
business.
If so indicated in the Prospectus Supplement, the Corporation will
authorize underwriters and agents to solicit offers by certain institutions to
purchase Offered Debt Securities from the Corporation at the public offering
price set forth in the Prospectus Supplement pursuant to Delayed Delivery
Contracts ("Contracts") providing for payment and delivery on the date stated in
the Prospectus Supplement. Each Contract will be for an amount not less than,
and unless the Corporation otherwise agrees the aggregate principal amount of
Offered Debt Securities sold pursuant to Contracts will be not less nor more
than, the respective amounts stated in the Prospectus Supplement. Institutions
with whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions, but shall in all cases be
subject to the approval of the Corporation. Contracts will not be subject to any
conditions except that the purchase by an institution of the Offered Debt
Securities covered by its Contract must not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to which such
institution is subject. A commission indicated in the Prospectus Supplement will
be granted to underwriters and agents soliciting purchases of Offered Debt
Securities pursuant to Contracts accepted by the Corporation. Underwriters and
agents will have no responsibility in respect of the delivery or performance of
Contracts.
The place and time of delivery for the Offered Debt Securities in respect
of which this Prospectus is delivered will be set forth in the Prospectus
Supplement.
EXPERTS
The financial statements of the Corporation as of December 31, 1997 and
1996, and for each of the years in the three-year period ended December 31, 1997
have been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, also incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing.
LEGAL OPINIONS
The legality of the Debt Securities to which this Prospectus relates has
been passed upon for the Corporation by Schulte Roth & Zabel LLP, 900 Third
Avenue, New York, New York 10022. Paul N. Roth, a director of the Corporation,
is a partner of Schulte Roth & Zabel LLP.
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================================================================================
$500,000,000
The CIT Group, Inc.
$200,000,000 5 1/2% Notes due October 15, 2001
$300,000,000 5 5/8% Notes due October 15, 2003
[LOGO]
THE
CIT
GROUP
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P R O S P E C T U S S U P P L E M E N T
October 20, 1998
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Salomon Smith Barney
Chase Securities Inc.
Credit Suisse First Boston
================================================================================
