PROSPECTUS SUPPLEMENT
(To Prospectus Dated February 11, 1999)
THE CIT GROUP [LOGO]
$350,000,000
The CIT Group, Inc.
7.25% Notes due August 15, 2005
----------
The notes will mature on August 15, 2005. Interest on the notes is payable
semiannually on August 15 and February 15 beginning February 15, 2000. The notes
may not be redeemed prior to maturity.
----------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus supplement or the related prospectus.
Any representation to the contrary is a criminal offense.
----------
Per Note Total
--------- -------------
Public Offering Price 99.917% $349,709,500
Underwriting Discounts .550% $ 1,925,000
Proceeds to The CIT Group, Inc. (before expenses) 99.367% $347,784,500
Interest on the notes will accrue from August 24, 1999 to date of delivery.
See "Underwriting" for a discussion of expenses in connection with this
offering.
----------
The underwriters are offering the notes subject to various conditions. The
underwriters expect to deliver the notes to purchasers on or about August 24,
1999.
----------
Salomon Smith Barney
Chase Securities Inc.
Credit Suisse First Boston
August 19, 1999
<PAGE>
You should rely only on the information incorporated by reference or provided
in this prospectus supplement or the prospectus. We have not authorized anyone
else to provide you with different or additional 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 this prospectus supplement
or the prospectus is accurate as of any date other than the date on the front of
that document.
----------
TABLE OF CONTENTS
Page
----
Prospectus Supplement
Recent Developments ....................................................... S-3
Description of Notes ...................................................... S-3
Underwriting .............................................................. S-6
Prospectus
Available Information ..................................................... 2
Documents Incorporated by Reference ....................................... 2
The Company ............................................................... 3
Summary of Financial Information .......................................... 9
Use of Proceeds ........................................................... 10
Description of Debt Securities ............................................ 10
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
Newcourt Acquisition
On August 5, 1999, we announced that we had signed a new definitive
agreement under which we will acquire Newcourt Credit Group Inc. ("Newcourt"), a
financial services company, in an exchange of common stock (the "Newcourt
Acquisition"). Under the terms of the amended and restated acquisition agreement
relating to the Newcourt Acquisition, 0.70 shares of CIT Class A Common Stock
will be exchanged for each outstanding share of Newcourt common stock. This
agreement amends and restates the original acquisition agreement dated March 7,
1999. The Newcourt Acquisition, which has been approved by the Board of
Directors of both companies, is expected to close during the fourth quarter of
1999. Completion of this transaction is conditioned upon, among other things,
customary regulatory and shareholder approvals.
DESCRIPTION OF NOTES
The notes due August 15, 2005 are to be issued as a series of Debt
Securities under the Indenture, dated as of September 24, 1998 (the
"Indenture"), between CIT 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 notes offered hereby will bear interest from August 24, 1999 at the
rate of 7.25% per annum payable semiannually on August 15 and February 15 of
each year, commencing February 15, 2000, 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 notes will mature on August 15, 2005. 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.
S-3
<PAGE>
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 that 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 that permanent global note. Ownership of beneficial interests in
that permanent global note by persons who 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 that
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. These laws may impair the ability to transfer beneficial
interests in a permanent global note.
We have been advised by the Depositary that upon the issuance of a
permanent global note and the deposit of that 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
that permanent global note to the accounts of participants.
The Paying Agent will make all payments on notes represented by a permanent
global note registered in the name of or held by the Depositary or its nominee,
as the case may be, as the registered owner and holder of the permanent global
note representing those notes. We have 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 that
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 those 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 CIT, the Trustee, or any agent of CIT 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:
o the Depositary notifies us 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;
o we, in our sole discretion, determine that the permanent global note
shall be exchangeable for definitive notes in registered form; or
o an event of default under the Indenture shall have occurred and be
continuing, as described in the accompanying prospectus, and we or the
Trustee notify the Depositary that the 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. The definitive
notes will be registered in the name or names of such person or persons as the
Depositary shall instruct the Trustee. We expect that those instructions may be
based upon directions received by the Depositary from its participants with
respect to ownership of beneficial interests in the permanent global note.
S-4
<PAGE>
Except as provided above, owners of beneficial interests in a 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 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 a permanent global note must rely on the
procedures of the Depositary and, if that 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.
We understand that, under existing industry practices, in the event that we
request any action of holders, or an owner of a beneficial interest in a
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 the participants would authorize beneficial owners owning through
participants to give or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
The Depositary has advised us 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 in immediately
available funds. So long as the notes are represented by a permanent global note
or notes, we will make all payments of principal and interest 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
We, from time to time, may borrow from the Trustee, and CIT and certain of
our subsidiaries may maintain deposit accounts and conduct other banking
transactions with the Trustee.
S-5
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement"), among CIT, Salomon Smith Barney Inc., Chase
Securities Inc., and Credit Suisse First Boston Corporation (the
"Underwriters"), we have 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
Underwriter of Notes
------------ ----------------
Salomon Smith Barney Inc. ................................. $245,000,000
Chase Securities Inc. ..................................... 52,500,000
Credit Suisse First Boston Corporation .................... 52,500,000
------------
Total ..................................................... $350,000,000
============
We have 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 .30% of the principal amount of the notes.
The Underwriters may allow, and such dealers may reallow, a concession to
certain other dealers not in excess of .25% of such principal amount. After the
initial public offering, the public offering price and such concessions may be
changed from time to time. The Underwriters have agreed to reimburse us for
expenses related to this offering in the total amount of $175,000.
The notes are a new issue of securities with no established trading market.
We do not presently intend to list the notes on any securities exchange. We have
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, some of the Underwriters and their
respective affiliates may engage in transactions that stabilize, maintain or
otherwise affect the market price of the notes. Those transactions may include
stabilization transactions effected in accordance with Rule 104 of Regulation M,
pursuant to which those Underwriters and affiliates may bid for or purchase
notes for the purpose of stabilizing the 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
us, and in that case may purchase notes in the open market following completion
of this offering to cover their 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.
Some or all of the Underwriters or their affiliates have provided and will
in the future continue to provide banking and other financial services to CIT
for which they have received and will receive customary compensation.
The Underwriting Agreement provides that CIT will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, or contribute to payments the Underwriters may be
required to make in respect thereof.
S-6
<PAGE>
PROSPECTUS
The CIT Group, Inc.
Debt Securities
----------
We may issue up to an aggregate of $5.0 billion of debt securities in one
or more series with the same or different terms. These debt securities may be
either senior or senior subordinated in priority of payment and will be direct
unsecured obligations. The terms that apply to the debt securities will be set
forth in a supplement that accompanies this Prospectus when any of the debt
securities are offered. Such information will also include the names of agents,
dealers or underwriters involved in the sale, if any, and any applicable agent's
commission, dealer's purchase price or underwriter's discount, if any, and the
net proceeds from the sale after any agent's commission, dealer's purchase price
or underwriter's discount.
The terms of any debt securities offered to the public will depend on
market conditions at the time of sale. We reserve the sole right to accept or
reject, in whole or in part, any proposed purchase of any offered debt
securities.
For a description of possible indemnification arrangements with agents,
dealers, and underwriters, see "Plan of Distribution."
We urge you to carefully read this Prospectus and the Prospectus Supplement
which will describe the specific terms of the offering before you make your
investment decision.
----------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED
UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 11, 1999.
<PAGE>
AVAILABLE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. We have also filed with the SEC a Registration
Statement on Form S-3, to register the debt securities (the "Debt Securities")
being offered in this Prospectus. This Prospectus, which forms part of the
Registration Statement, does not contain all of the information included in the
Registration Statement. For further information about us and the debt securities
offered in this Prospectus, you should refer to the Registration Statement and
its exhibits.
You may read and copy any document we file with the SEC at the SEC's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the Public
Reference Room. We file our SEC materials electronically with the SEC, so you
can also review our filings by accessing the web site maintained by the SEC at
http://www.sec.gov. This site contains reports, proxy and information statements
and other information regarding issuers that file electronically with the SEC.
Certain of our securities are listed on the New York Stock Exchange and reports
and other information concerning us can also be inspected at the offices of the
New York Stock Exchange at 20 Broad Street, New York, New York 10005. You can
also obtain more information about us by visiting our web site at
http://www.citgroup.com.
You should rely only on the information contained or incorporated by
reference in this Prospectus. We have not authorized anyone to provide you with
information different from that contained or incorporated by reference in this
Prospectus. This Prospectus is an offer to sell, or a solicitation of offers to
buy, Debt Securities only in jurisdictions where offers and sales are permitted.
The information contained in this Prospectus is accurate only as of the date of
this Prospectus, regardless of the time of delivery of this Prospectus or of any
sale of Debt Securities. In this Prospectus, "the Company," "CIT," "we," "us"
and "our" refer to The CIT Group, Inc. and its subsidiaries.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means we can disclose important information to you by referring
you to those documents. The information included in the following documents is
incorporated by reference and is considered to be a part of this Prospectus. The
most recent information that we file with the SEC automatically updates and
supersedes more dated information. We have previously filed the following
documents with the SEC and are incorporating them by reference into this
Prospectus:
1. Our Annual Report on Form 10-K for the year ended December 31,
1997;
2. Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1998, June 30, 1998 and September 30, 1998; and
3. Our 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, August 27, 1998, October 15, 1998, December 2, 1998 and January 28,
1999.
We also incorporate by reference all documents subsequently filed by us
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 until all of the Debt Securities being offered in this Prospectus are sold.
We will provide without charge to each person to whom a Prospectus is
delivered, including any beneficial owner, a copy of any or all of the
information that has been incorporated by reference in this Prospectus but not
delivered with this Prospectus. If you would like to obtain this information
from us, please direct your request, either in writing or by telephone, to
Jeffrey Simon, Senior Vice President-Investor Relations, The CIT Group, Inc.,
1211 Avenue of the Americas, New York, New York 10036, telephone (212) 536-1390.
2
<PAGE>
THE COMPANY
The Company is a leading diversified finance organization offering 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 Company commenced operations in 1908 and has developed
a broad array of "franchise" strategic business units that focus on specific
industries, asset types and markets, which are balanced by client, industry and
geographic diversification. The Company believes that its strong credit risk
management expertise and long-standing commitment to its markets and its
customers provides it with a competitive advantage. The Company's principal
executive offices are at 1211 Avenue of the Americas, New York, New York 10036
and the telephone number is (212) 536-1390.
In November 1997, the Company issued 36,225,000 shares of Class A Common
Stock in an initial public offering. In November 1998, the Company filed a
Registration Statement on behalf of its largest stockholder, The Dai-Ichi Kangyo
Bank, Limited ("DKB"), to offer 49,000,000 shares of Class A Common Stock. Prior
to the offering, DKB held approximately 94% of the combined voting power and
approximately 77% of the economic interest of all of the Company's outstanding
Common Stock. Following the offering, DKB now holds approximately 44% of the
voting power and economic interest of the Company's outstanding Common Stock.
DKB continues to be the Company's largest stockholder and will be able to
exercise significant influence over us.
The Company operates through three business segments: two commercial
segments, Equipment Financing and Leasing and Commercial Finance and a consumer
segment. Each segment conducts its operations through strategic business units.
Commercial
The Company'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 Company'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 Company'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.
Equipment Financing
Equipment Financing is the largest of the Company's strategic business
units with total financing and leasing assets of $8.7 billion at September 30,
1998, representing 38.3% of the Company'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.
3
<PAGE>
Equipment Financing is a leading nationwide asset-based equipment lender.
At September 30, 1998, 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 transportation. The Equipment Financing portfolio at September
30, 1998 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 $3.9 billion at
September 30, 1998, which represented 16.9% of the Company'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. Such access 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.
Commercial Finance
The Company's Commercial Finance operations are conducted through three
strategic business units: (i) The CIT Group/Business Credit ("Business Credit"),
which provides secured financing primarily to middle-market to larger-sized
borrowers; (ii) The CIT Group/Credit Finance ("Credit Finance"), which provides
secured financing primarily to smaller-sized to middle-market borrowers; and
(iii) The CIT Group/Commercial Services which offers secured lending and
receivables/collection management products to small and mid-size companies.
Business Credit
Financing and leasing assets of Business Credit totaled $1.5 billion at
September 30, 1998 and represented 6.8% of the Company'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
4
<PAGE>
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 $1.0 billion at
September 30, 1998 and represented 4.6% of the Company'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.
Commercial Services
The CIT Group/Commercial Services ("Commercial Services") factoring
operation had total financing and leasing assets of $2.8 billion at September
30, 1998, which represented 12.1% of the Company'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 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 chargeoffs, 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.
Consumer
The Company'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").
5
<PAGE>
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 $2.1
billion at September 30, 1998, represented 9.3% of the Company's total financing
and leasing assets. The managed assets of Consumer Finance were $2.8 billion at
September 30, 1998, or 11.0% 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 Company 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 $2.7
billion at September 30, 1998, represented 11.7% of the Company's total
financing and leasing assets. The managed assets of Sales Financing were $4.6
billion at September 30, 1998, or 18.1% 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 Company'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 September 30, 1998, the consumer finance servicing
portfolio aggregated approximately 285,600 loans, including $1.1 billion of
finance receivables serviced for third parties.
Securitization Program
The Company funds its balance sheet assets 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
Company, in 1992, established a program to opportunistically access the public
and private asset backed securitization markets. Current products utilized in
the Company's program include consumer loans secured by recreation vehicles,
recreational boats and residential real estate. The Company has sold $4.0
billion of finance receivables since the inception of the Company's asset backed
securitization program and the remaining pool balance at September 30, 1998 was
$2.6 billion or 10.2% of the Company's total managed assets.
Under a typical asset backed securitization, the Company 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 Company
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
credit losses). At the date of securitization, the Company estimates the
"residual" cash flows to be received over the life of the
6
<PAGE>
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 Company, 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 Company's historical experience and
anticipated trends relative to the particular products securitized. Subsequent
to the recognition of I/Os, the Company 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 Company's
carrying values. Carrying value of the Company's I/O's at September 30, 1998 was
$165.4 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 $87.3
million at September 30, 1998.
Competition
The Company's markets are highly competitive and are characterized by
competitive factors that vary based upon product and geographic region. The
Company'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 Company. 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 Company are
large companies that have substantial capital, technological and marketing
resources. Some of these competitors are larger than the Company and may have
access to capital at a lower cost than the Company. Also, the Company'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 Company. 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 Company 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
Company seek to compete aggressively on the basis of these factors and the
Company 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 Company'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.
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 Company 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
7
<PAGE>
Reserve has determined to be "so closely related to banking or managing or
controlling banks as to be a proper incident thereto." The Company'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 Company. DKB and the Company 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 Company 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 Company is also
prohibited from engaging in any activity as would cause DKB, the Company or any
affiliate of DKB or the Company to violate any Banking Laws. In the event that,
at any time, it is determined by DKB that any activity then conducted by the
Company is prohibited by any Banking Law, the Company 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 Company 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 Company 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 Company.
The operations of the Company 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 Company'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
Company'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 Company 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 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.
8
<PAGE>
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 Company 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
Company to damages and administrative sanctions.
The above federal and state regulation and supervision could limit the
Company'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
Company 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
Company. Under certain circumstances, the Federal Reserve has the authority to
issue orders which could restrict the ability of the Company to engage in new
activities or to acquire additional businesses or to acquire assets outside of
the normal course of business.
SUMMARY OF FINANCIAL INFORMATION
The following is a summary of certain financial information of the Company
and its subsidiaries. The data for the years ended December 31, 1997, 1996 and
1995 were obtained from the Company's audited consolidated financial statements
contained in the Company'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 Company that are not incorporated by reference in this
Prospectus. The data for the quarters ended September 30, 1998 and 1997 were
obtained from the Company's unaudited condensed consolidated financial
statements contained in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998. This summary should be read in conjunction
with the financial information of the Company included in the reports referred
to under "Documents Incorporated By Reference." Results for the nine-month
period ended September 30, 1998 are not necessarily indicative of operating
results that may be expected for a full year.
<TABLE>
<CAPTION>
Nine Months Ended
September 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 ................... $1,481.4 $1,352.0 $1,824.7 $1,646.2 $1,529.2 $1,263.8 $1,111.9
Interest expense ................. 766.2 693.7 937.2 848.3 831.5 614.0 508.0
------ ------ ------ -------- --------- --------- ---------
Net finance income .............. 715.2 658.3 887.5 797.9 697.7 649.8 603.9
Fees and other income ............ 196.1 186.0 247.8 244.1 184.7 174.4 133.8
Gain on Sale of Equity interest
acquired in loan workout ...... -- 58.0 58.0 -- -- -- --
------ ------ ------ -------- --------- --------- ---------
Operating revenue ............... 911.3 902.3 1,193.3 1,042.0 882.4 824.2 737.7
------ ------ ------ -------- --------- --------- ---------
Salaries and employee benefits ... 184.4 185.3 253.5 223.0 193.4 185.8 152.1
General operating expenses ....... 126.6 128.8 174.9 170.1 152.3 152.1 130.1
------ ------ ------ -------- --------- --------- ---------
Salaries and general operating
expenses ...................... 311.0 314.1 428.4 393.1 345.7 337.9 282.2
Provision for credit losses ...... 75.0 91.8 113.7 111.4 91.9 96.9 104.9
Depreciation on operating
lease equipment ............... 121.4 108.3 146.8 121.7 79.7 64.4 39.8
Minority interest in subsidiary
trust holding solely
debentures of the company ..... 14.4 11.5 16.3 -- -- -- --
------ ------ ------ -------- --------- --------- ---------
Operating expenses ............ 521.8 525.7 705.2 626.2 517.3 499.2 426.9
------ ------ ------ -------- --------- --------- ---------
Income before provision for
income taxes .................. 389.5 376.6 488.1 415.8 365.1 325.0 310.8
Provision for income taxes ....... 138.0 137.5 178.0 155.7 139.8 123.9 128.5
------ ------ ------ -------- --------- --------- ---------
Net income .................... $251.5 $239.1 $310.1 $ 260.1 $ 225.3 $ 201.1 $ 182.3
====== ====== ====== ======== ========= ========= =========
</TABLE>
9
<PAGE>
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>
Nine Months Ended
September 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 1.49 1.53 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 Company, and the portion of rentals considered
to represent an appropriate interest factor.
USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities offered hereby will
provide additional working funds for the Company 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
Company itself may use in connection with its business and which the Company may
furnish to particular subsidiaries are not now determinable. From time to time
the Company 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 or Senior
Subordinated Indebtedness of the Company. The senior debt securities (the
"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 Company 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
debt securities (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 $5.0 billion (or (i) if the principal of the
Debt Securities is denominated in a foreign currency, the equivalent thereof at
the time of
10
<PAGE>
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 $5.0 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 Company. 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 Company. At September 30, 1998, approximately $200
million of Senior Subordinated Indebtedness was issued and outstanding. At
September 30, 1998, under the most restrictive provisions of the Senior
Subordinated Indentures, the Company could issue up to approximately $2.4
billion of additional Senior Subordinated Indebtedness. The Debt Securities will
be issued in fully registered form and, with regard to each issue of 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 Company 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 Company 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
Company 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 Company by check mailed to the
address of the person entitled thereto as it appears on the register of the
Company. (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 Company 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 Company may require payment of a sum
sufficient to cover any tax or other governmental charge in connection
therewith. (Section 2.06 of the Indentures.)
11
<PAGE>
"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 Company that is not
by its terms subordinate or junior to any other indebtedness of the Company. As
discussed below, the Senior Securities constitute Superior Indebtedness.
"Senior Subordinated Indebtedness" means all Indebtedness of the Company
that is subordinate only to Superior Indebtedness. As discussed below, the
Senior Subordinated Securities constitute Senior Subordinated Indebtedness.
"Junior Subordinated Indebtedness" means all Indebtedness of the Company
that is subordinate to both Superior Indebtedness and Senior Subordinated
Indebtedness.
Senior Securities
The Senior Securities will be direct, unsecured obligations of the Company,
and will constitute Superior Indebtedness issued on a parity with the other
Superior Indebtedness of the Company. At September 30, 1998, approximately $17.6
billion of outstanding Superior Indebtedness was reflected in the Company's
consolidated unaudited balance sheet. The Senior Securities will be senior to
all Senior Subordinated Indebtedness, including the Senior Subordinated
Securities, which at September 30, 1998, totaled $200 million outstanding, and
Junior Subordinated Indebtedness, none of which was outstanding at September 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 Company subordinated as to principal, premium, if any, and interest to the
prior payment in full of all Superior Indebtedness of the Company, 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 Company, 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 Company'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
Company in a supplement hereto will be subject to acceleration only in the event
of certain circumstances related to the insolvency of the Company.
12
<PAGE>
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 Company or its subsidiaries, but
each contains a covenant that the Company 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 Company, except
Liens in favor of any subsidiary of the Company; 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
Company; 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 Company primarily for use
in the conduct of its business; arrangements providing for the leasing by the
Company of any property or assets, which property or assets have been or will be
sold or transferred by the Company with the intention that such property or
assets will be leased back to the Company, if the obligations in respect of such
lease would not be included as liabilities on a consolidated balance sheet of
the Company; Liens to secure non-recourse debt in connection with the Company
engaging in any leveraged or single-investor or other lease transactions;
consensual Liens in the ordinary course of business of the Company that secure
indebtedness that would not be included in total liabilities as shown on the
Company's consolidated balance sheet; Liens created by the Company in connection
with any transaction intended by the Company to be a sale of property or assets
of the Company; 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 Company's consolidated net worth; and
certain other minor exceptions. (Section 6.04 of the Indentures.) In addition,
the Senior Subordinated Indentures provide that the Company 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 Company 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 Company and its consolidated
subsidiaries. (Senior Subordinated Indenture Section 6.05.) Under the more
restrictive of such tests in the Senior Subordinated Indentures, as of September
30, 1998, the Company could issue up to approximately $2.4 billion of additional
Senior Subordinated Indebtedness. For information as to restrictions in other
agreements on the Company'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 Company 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 Company with or
into any other corporation, or the merger into the Company of any other
corporation, or the sale by the Company 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 Company is not the
surviving corporation, the surviving corporation must succeed to and be
substituted for the Company 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
Company, and (ii) as a condition to any sale of the property and assets of the
Company 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
13
<PAGE>
by the Company, 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 Company, to the same extent that the Company is
bound and liable. (Senior Indenture Section 15.01, Senior Subordinated Indenture
Section 16.01.) Compliance by the Company 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 Company or provisions which afford additional protection to holders of
outstanding Debt Securities in the event of a highly leveraged transaction
involving the Company.
Modification of Indenture
Each Indenture contains provisions permitting the Company 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 66 2/3% 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 Company (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.)
14
<PAGE>
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 Company 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.
Within 120 days after the close of each fiscal year, the Company 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 Company 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 Company 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
Company 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.
15
<PAGE>
Information Concerning the Trustees
The Company from time to time may borrow from each of the Trustees, and the
Company 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
Company's other indentures.
PLAN OF DISTRIBUTION
The Company 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
Company or by agents designated by the Company 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 Company to indemnification by the Company 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 Company will sell such
Offered Debt Securities to the dealer, as principal. The dealer may 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 Company to indemnification by the Company
against certain civil liabilities, including liabilities under the Securities
Act.
If an underwriter or underwriters are utilized in the sale, the Company 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 Company 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 Company will be described in the Prospectus Supplement. Underwriters,
dealers, and agents may be customers of, engage in transactions with, or perform
services for the Company in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters and agents to solicit offers by certain institutions to purchase
Offered Debt Securities from the Company at the public offering price set forth
in the Prospectus Supplement pursuant to contracts providing for payment and
delivery on the date stated in the Prospectus Supplement ("Contracts"). Each
Contract will be for an amount not less than, and unless the Company 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 Company. 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.
16
<PAGE>
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1997 and
1996 and the related consolidated statements of income, changes in stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1997 has been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG 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
Schulte Roth & Zabel LLP, New York, New York, our counsel, is passing for
us on the validity of the Debt Securities to which this Prospectus relates. Paul
N. Roth, a director of the Company, is a partner of Schulte Roth & Zabel LLP.
17
<PAGE>
================================================================================
$350,000,000
The CIT Group, Inc.
7.25% Notes due August 15, 2005
THE CIT GROUP [LOGO]
----------
PROSPECTUS SUPPLEMENT
August 19, 1999
----------
Salomon Smith Barney
Chase Securities Inc.
Credit Suisse First Boston
================================================================================
