<PAGE> 1
Filed pursuant to Rule 424(b)(3)
Registration No. 333-71361
PROSPECTUS SUPPLEMENT
(To Prospectus Dated September 23, 1999)
$1,500,000,000
[THE CIT GROUP LOGO]
THE CIT GROUP, INC.
$500,000,000 FLOATING RATE NOTES DUE OCTOBER 1, 2002
$1,000,000,000 7.125% NOTES DUE OCTOBER 15, 2004
------------------
The floating rate notes will mature on October 1, 2002 and the 7.125% notes
will mature on October 15, 2004. Interest on the floating rate notes is payable
quarterly on January 6, April 6, July 6, and October 6 of each year and at
maturity, beginning January 6, 2000. Interest on the 7.125% notes is payable
semiannually on April 15 and October 15 of each year, beginning April 15, 2000.
We have applied to have the notes listed on the Luxembourg Stock Exchange
in accordance with the rules of this exchange.
You should refer to and read carefully the "Important Notice" on page S-3
of this prospectus supplement before making an investment decision.
------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
------------------
<TABLE>
<CAPTION>
FLOATING RATE NOTES 7.125% NOTES
------------------------ ------------------------
PER NOTE TOTAL PER NOTE TOTAL
------------------------ ------------------------
<S> <C> <C> <C> <C>
Public Offering Price 100.000% $500,000,000 99.988% $999,880,000
Underwriting Discounts 0.225% $ 1,125,000 0.350% $ 3,500,000
Proceeds to The CIT Group, Inc. (before
expenses) 99.775% $498,875,000 99.638% $996,380,000
</TABLE>
Interest on the notes will accrue from October 6, 1999.
------------------
The underwriters are offering the notes subject to various conditions. The
underwriters expect to deliver the notes, in book-entry form only, to purchasers
through The Depository Trust Company, Cedelbank S.A. and the Euroclear System,
as the case may be, on or about October 6, 1999.
------------------
JOINT BOOK RUNNING MANAGERS:
CHASE SECURITIES INC. SALOMON SMITH BARNEY
------------------
CREDIT SUISSE FIRST BOSTON LEHMAN BROTHERS MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER WARBURG DILLON READ LLC
------------------
BANC OF AMERICA SECURITIES LLC BANC ONE CAPITAL MARKETS, INC.
BNY CAPITAL MARKETS, INC. FIRST UNION CAPITAL MARKETS CORP. J.P. MORGAN & CO.
September 29, 1999
<PAGE> 2
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 PLACE WHERE THE OFFER IS NOT PERMITTED. THE
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS, AND ANY
DOCUMENTS INCORPORATED BY REFERENCE IS ACCURATE ONLY AS OF THE DATE ON THE FRONT
OF THAT DOCUMENT.
You should read the information about our agreement to acquire Newcourt Credit
Group, Inc. under "Recent Developments" on page S-6 of this prospectus
supplement.
The prospectus supplement and the prospectus include particulars given in
compliance with the rules governing the listing of securities on the Luxembourg
Stock Exchange for the purpose of giving information with regard to CIT. We
accept full responsibility for the accuracy of the information contained in this
prospectus supplement and the prospectus and confirm, having made all reasonable
inquiries, that to the best of our knowledge and belief there are no other facts
the omission of which would make any statement herein or in the prospectus
misleading in any material respect.
The Luxembourg Stock Exchange takes no responsibility for the contents of this
document, makes no representation as to its accuracy or completeness, and
expressly disclaims any liability whatsoever for any loss howsoever arising from
or in reliance upon the whole or any part of the contents of this prospectus
supplement and the prospectus.
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
PAGE
----
Important Notice.................... S-3
Description of The CIT Group,
Inc............................... S-3
Directors and Principal Executive
Officers of The CIT Group,
Inc. ............................. S-3
Capitalization of The CIT Group,
Inc............................... S-4
Selected Consolidated Financial
Information of The CIT Group,
Inc............................... S-5
Recent Developments................. S-6
Unaudited Pro Forma Condensed
Consolidated Financial
Statements........................ S-6
Description of the Notes............ S-20
Material United States Tax
Considerations.................... S-28
Underwriting........................ S-31
Offering Restrictions............... S-32
Legal Opinions...................... S-33
General Information................. S-33
PROSPECTUS
PAGE
----
Where You Can Find More
Information....................... 2
The CIT Group, Inc.................. 2
Summary of Financial Information.... 9
Special Note Regarding Forward-
Looking Statements................ 10
Use of Proceeds..................... 11
Description of Debt Securities...... 11
Plan of Distribution................ 16
Experts............................. 17
Legal Opinions...................... 17
</TABLE>
S-2
<PAGE> 3
IMPORTANT NOTICE
Your attention is drawn specifically to the following:
As a purchaser of any of the notes, you will be deemed to have sufficient
knowledge and experience and to have received sufficient professional advice to
make (and to have made and continue to make) your own legal, financial, tax,
accounting, and other business evaluations of the merits and risks of an
investment in the notes. You will also be deemed not to be relying on CIT in
that regard.
There may be significant risks, including liquidity risks, associated with the
issuance of the notes that may be complex. CIT makes no representation as to the
existence of a market for the notes.
If we redeem notes upon a tax event, we will have discharged our obligations in
respect of these notes and shall have no other liability or obligation
whatsoever in respect thereof. See "Description of the Notes -- Redemption Upon
a Tax Event."
It is your responsibility to ensure that any person to whom you sell your notes
is aware of the foregoing and that the notes are intended only for sophisticated
professional investors.
DESCRIPTION OF THE CIT GROUP, INC.
CIT is a leading diversified finance organization. We offer 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. We commenced operations in 1908 and have 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.
Our principal executive offices are located at 1211 Avenue of the Americas, New
York, New York 10036, and our telephone number is (212) 536-1390. CIT is a
Delaware corporation of perpetual duration.
The Dai-Ichi Kangyo Bank, Limited holds approximately 43.9% of the voting power
and economic interest of our outstanding common stock.
Our business focus is commercial and consumer finance. We offer a broad array of
products to our customers, including loans and leases. We operate through three
business segments:
- - Equipment Financing and Leasing
- - Commercial Finance
- - Consumer
Each segment conducts its operations through strategic business units which
market its products and services to satisfy the financing needs of specific
customers, industries, and markets.
DIRECTORS AND PRINCIPAL EXECUTIVE OFFICERS OF THE CIT GROUP, INC.
BOARD OF DIRECTORS
Present members of the Board of Directors and their principal occupations are:
Hisao Kobayashi
President, Hibiya Building Co., Ltd.
Chairman of the Board of Directors of CIT
Albert R. Gamper, Jr.
President & Chief Executive Officer of CIT
Daniel P. Amos
President and Chief Executive Officer, AFLAC Incorporated and American
Family
Life Assurance Company of Columbus
Anthea Disney
Executive Vice President of
News Corporation Ltd.
Takasuke Kaneko
President, DKB Securities Co., Ltd.
William M. O'Grady
Executive Vice President & Chief
Administrative Officer of CIT
Joseph A. Pollicino
Vice Chairman of CIT
S-3
<PAGE> 4
Paul N. Roth
Partner, Schulte Roth & Zabel LLP
Peter J. Tobin
Dean, College of Business
Administration, St. John's University
Tohru Tonoike
General Manager, The Americas Specialized
Finance Division, New York Branch, DKB
Keiji Torii
Director and General Manager,
New York Branch, DKB
Alan F. White
Senior Associate Dean, Massachusetts
Institute of Technology, Alfred P. Sloan
School of Management
OFFICERS
Present officers of CIT are:
Albert R. Gamper, Jr.
President and Chief Executive Officer
Joseph M. Leone
Executive Vice President and Chief
Financial Officer
William O'Grady
Executive Vice President & Chief
Administrative Officer
Joseph A. Pollicino
Vice Chairman
Ernest D. Stein
Executive Vice President, General Counsel and Secretary
CAPITALIZATION OF THE CIT GROUP, INC
The following table sets out our capitalization as of June 30, 1999 and December
31, 1998, respectively, and is derived from our unaudited condensed consolidated
financial statements as of and for the six months ended June 30, 1999 and our
audited consolidated financial statements as of and for the year ended December
31, 1998, respectively. You should read this table in conjunction with these
consolidated financial statements. See "Where Can You Find More Information" in
the prospectus.
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------- --------------
(IN MILLIONS OF U.S. DOLLARS)
<S> <C> <C>
DEBT:
Commercial paper.......................................... $ 5,674.3 $ 6,144.1
Variable-rate senior notes................................ 5,349.7 4,275.0
Fixed-rate senior notes................................... 8,611.3 8,032.3
Subordinated fixed-rate notes............................. 200.0 200.0
--------- ---------
Total debt................................................ 19,835.3 18,651.4
--------- ---------
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 $.01 per share,
700,000,000 shares authorized and 163,186,543 and
163,144,879 shares issued and 161,712,782 and
162,176,949 shares outstanding at June 30, 1999 and
December 31, 1998, respectively........................ 1.7 1.7
Paid-in capital........................................... 957.2 952.5
Retained earnings......................................... 1,928.5 1,772.8
Treasury stock at cost (1,473,761 and 967,930 shares at
June 30, 1999 and December 31, 1998, respectively, of
Class A Common Stock).................................. (41.0) (25.4)
--------- ---------
Total stockholders' equity.................................. 2,846.4 2,701.6
--------- ---------
Total capitalization........................................ $22,931.7 $21,603.0
========= =========
</TABLE>
- ---------------
Since June 30, 1999 there has been no material change in the capitalization of
CIT and its consolidated subsidiaries.
S-4
<PAGE> 5
SELECTED CONSOLIDATED FINANCIAL INFORMATION OF THE CIT GROUP, INC.
The summary results of operations and balance sheet data presented below as of
and for the six-month periods ended June 30, 1999 and 1998 have been derived
from the unaudited condensed consolidated financial statements of CIT as of and
for the six months ended June 30, 1999 included in the Report on Form 10-Q which
is referred to under "Where You Can Find More Information" in the prospectus.
The summary results of operations and balance sheet data presented below as of
and for each of the years in the five-year period ended December 31, 1998, have
been derived from the audited consolidated financial statements of CIT as of and
for the years ended December 31, 1998, 1997, 1996, 1995, and 1994. All of the
consolidated financial data have been prepared in accordance with U.S. generally
accepted accounting principles ("U.S. GAAP").
You should read the selected consolidated financial data below in conjunction
with our consolidated financial statements. See "Where Can You Find More
Information" in the prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEARS ENDED DECEMBER 31,
---------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------ ------ -------- -------- -------- ------ ------
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net finance income............... $541.8 $468.4 $ 974.3 $ 887.5 $ 797.9 $697.7 $649.8
Total operating revenue.......... 681.3 595.5 1,229.7 1,193.3(1) 1,042.0 882.4 824.2
Salaries and general operating
expenses....................... 222.0 205.7 417.8 428.4 393.1 345.7 337.9
Provision for credit losses...... 45.7 44.4 99.4 113.7 111.4 91.9 96.9
Net income....................... 188.2 165.4 338.8 310.1 260.1 225.3 201.1
Net income per diluted share..... 1.16 1.01 2.08 1.95 1.64 1.43 1.28
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
----------- -------------------------------------------------------------
1999 1998 1997 1996 1995 1994
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Finance and Leasing Assets
Loans
Commercial................. $12,482.2 $11,415.5 $10,342.5 $10,195.6 $10,356.3 $ 9,910.6
Consumer................... 4,176.4 4,266.9 3,664.8 3,239.0 2,344.0 1,973.2
Lease receivables............ 4,239.0 4,173.6 3,712.4 3,562.0 3,095.2 2,910.6
--------- --------- --------- --------- --------- ---------
Total finance
receivables........... 20,897.6 19,856.0 17,719.7 16,996.6 15,795.5 14,794.4
Reserve for credit losses...... 276.8 263.7 235.6 220.8 206.0 192.4
Operating lease equipment,
net.......................... 3,433.2 2,774.1 1,905.6 1,402.1 1,113.0 867.9
Total assets................... 26,144.3 24,303.1 20,464.1 18,932.5 17,420.3 15,959.7
Commercial paper............... 5,674.3 6,144.1 5,559.6 5,827.0 6,105.6 5,660.2
Variable-rate senior notes..... 5,349.7 4,275.0 2,861.5 3,717.5 3,827.5 3,812.5
Fixed-rate senior notes........ 8,611.3 8,032.3 6,593.8 4,761.2 3,337.0 2,619.4
Subordinated fixed-rate
notes........................ 200.0 200.0 300.0 300.0 300.0 300.0
Company-obligated mandatorily
redeemable preferred
securities of subsidiary
trust holding solely
debentures of the Company.... 250.0 250.0 250.0 -- -- --
Stockholders' equity........... 2,846.4 2,701.6 2,432.9 2,075.4 1,914.2 1,793.0
</TABLE>
- ---------------
(1) Includes a 1997 gain of U.S. $58.0 million on the sale of an equity interest
acquired in connection with a loan workout.
S-5
<PAGE> 6
RECENT DEVELOPMENTS
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 0.70 shares of CIT Common Stock for each
outstanding share of Newcourt Common Shares (the "Newcourt Acquisition"). This
agreement amends and restates the original acquisition agreement dated March 7,
1999. Each company's board of directors has approved the Newcourt Acquisition,
which is expected to close during the fourth quarter of 1999. Completion of this
transaction is subject to conditions, including, among other things, regulatory
and shareholder approvals.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
We have based the following unaudited pro forma condensed consolidated balance
sheet and statements of income of CIT on the historical consolidated financial
statements of CIT and Newcourt as of June 30, 1999 and for the six months then
ended and for the year ended December 31, 1998. We have prepared the unaudited
pro forma condensed consolidated balance sheet assuming that the pending
Newcourt Acquisition had occurred on June 30, 1999. We have prepared the
unaudited pro forma condensed consolidated statements of income assuming that
the pending Newcourt Acquisition had occurred on January 1, 1998.
The unaudited pro forma condensed consolidated financial statements reflect pro
forma estimated adjustments to Newcourt's assets and liabilities to reflect
their respective fair values under the purchase method of accounting. We have
allocated the excess of the purchase price over the estimated fair value of the
net assets acquired to goodwill. There may be changes in the allocation of the
purchase price to the fair value of the net assets acquired and goodwill, and as
of the Newcourt Acquisition closing date, this allocation will be finalized.
You should read the following unaudited pro forma condensed consolidated
financial statements in conjunction with:
- - the notes that accompany these financial statements,
- - our unaudited condensed consolidated financial statements included in our
Quarterly Report on Form 10-Q as of and for the six months ended June 30,
1999, and our 1998 audited consolidated financial statements, which are
included in our Annual Report on Form 10-K as of and for the year ended
December 31, 1998, and
- - Newcourt's unaudited consolidated financial statements as of and for the six
months ended June 30, 1999 as filed on Form 6-K with the SEC, and Newcourt's
audited consolidated financial statements as of and for the year ended
December 31, 1998 as filed on Form 6-K with the SEC.
We have prepared the unaudited pro forma condensed consolidated financial
statements based upon currently available information and assumptions deemed
appropriate by management of CIT. These pro forma financial statements do not
necessarily indicate either the financial position or the results of operations
that would have been achieved had the Newcourt Acquisition actually occurred on
the dates referred to above, nor do they necessarily indicate the results of
future operations, because we have based these unaudited pro forma condensed
consolidated financial statements on estimates of financial effects that may
prove to be inaccurate over time. These pro forma financial statements do not
reflect, among other things, our management's plans to reduce the level of
securitization activity, the cost savings or the revenue enhancements that may
or may not be achieved as a result of the Newcourt Acquisition, or the post
acquisition legal and tax structure.
The unaudited pro forma condensed consolidated financial statements and the
accompanying notes contain information that constitute forward-looking
statements concerning the combined companies' operations, economic performance
and financial condition. Because these statements reflect risks and
uncertainties, actual results may differ materially from the results these
statements express or imply. Those risks and uncertainties include but are not
limited to:
- - risks of economic slowdown or downturn,
S-6
<PAGE> 7
- - risks inherent in changes in prevailing interest rates,
- - unanticipated difficulties in combining the management, operations or cultures
of CIT and Newcourt,
- - cost savings that are not realized or are not realizable within the time
anticipated,
- - risks associated with the value and recoverability of leased equipment,
adequacy of credit reserves for credit losses, funding opportunities and
borrowing costs,
- - changes in regulations governing the combined companies business and
operations,
- - competitive factors,
- - issues associated with year 2000 compliance, and
- - uncertainties associated with risk management, including credit risk
management, asset/liability management and interest rate risk management.
In addition, some of this information is based upon preliminary estimates of
fair values and of future costs, and those estimates may be revised as we obtain
additional information.
S-7
<PAGE> 8
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
CIT
PRO FORMA PRO FORMA
CIT NEWCOURT(a) ADJUSTMENTS NOTE CONSOLIDATED
--------- ----------- ----------- ---- ------------
(IN MILLIONS OF U.S. DOLLARS)
<S> <C> <C> <C> <C> <C>
ASSETS
Financing and leasing assets
Loans
Commercial..................................... $12,482.2 $ 4,969.0 $ (200.0) 3a $17,251.2
Consumer....................................... 4,176.4 -- -- 4,176.4
Lease receivables................................. 4,239.0 3,956.0 (175.0) 3a 8,020.0
--------- --------- --------- ---------
Finance receivables............................ 20,897.0 8,925.0 (375.0) 29,447.6
Reserve for credit losses......................... (276.8) (199.3) -- (476.1)
--------- --------- --------- ---------
Net finance receivables........................ 20,620.8 8,725.7 (375.0) 28,971.5
Operating lease equipment, net...................... 3,433.2 2,103.5 -- 5,536.7
Consumer finance receivables held for sale.......... 864.4 -- -- 864.4
Commercial finance receivables held for sale........ -- 1,563.9 -- 1,563.9
Goodwill............................................ 348.4 1,252.3 126.5 3c 1,727.2
Cash and cash equivalents........................... 92.9 310.8 -- 403.7
Other assets........................................ 784.6 1,427.3 (100.0) 3a 2,111.9
--------- --------- --------- ---------
Total assets................................. $26,144.3 $15,383.5 $ (348.5) $41,179.3
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt
Commercial paper.................................. $ 5,674.3 $ 1,659.2 -- $ 7,333.5
Variable rate senior notes........................ 5,349.7 1,156.8 -- 6,506.5
Fixed rate senior notes........................... 8,611.3 9,030.4 $ 250.0 3a 17,891.7
Subordinated fixed rate notes..................... 200.0 -- -- 200.0
--------- --------- --------- ---------
Total debt................................... 19,835.3 11,846.4 250.0 31,931.7
Credit balances of factoring clients................ 1,761.6 -- -- 1,761.6
Accrued liabilities and payables.................... 675.9 682.4 200.0 2d 1,558.3
Deferred federal income taxes....................... 775.1 (206.0) (300.0) 3a 269.1
--------- --------- --------- ---------
Total liabilities............................ 23,047.9 12,322.8 150.0 35,520.7
Company-obligated mandatorily redeemable preferred
securities of subsidiary trust holding solely
debentures of the Company......................... 250.0 -- -- 250.0
Stockholders' equity:
Common stock...................................... 1.7 -- 1.0 2a 2.7
Paid-in capital................................... 957.2 -- 2,561.2 2a 3,518.4
Share capital..................................... -- 2,791.6 (2,791.6) 3b --
Retained earnings................................. 1,928.5 269.1 (269.1) 3b 1,928.5
Treasury stock at cost............................ (41.0) -- -- (41.0)
--------- --------- --------- ---------
Total stockholders' equity................... 2,846.4 3,060.7 (498.5) 5,408.6
--------- --------- --------- ---------
Total liabilities and stockholders' equity... $26,144.3 $15,383.5 $ (348.5) $41,179.3
========= ========= ========= =========
</TABLE>
- ---------------
(a) Presented in accordance with U.S. GAAP -- See Note 1 -- Basis of
Presentation and Note 6 -- Newcourt Credit Group Inc. -- Pro Forma
Reclassifications and Conversions.
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
S-8
<PAGE> 9
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
CIT
PRO FORMA PRO FORMA
CIT NEWCOURT(a) ADJUSTMENTS NOTE CONSOLIDATED
----------- ----------- ----------- ---- ------------
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Finance income................................... $ 1,095.9 $ 1,031.3 $(17.0) 3e $ 2,110.2
Interest expense................................. 554.1 407.5 (43.8) 3e 917.8
----------- ----------- ------ -----------
Net finance income............................. 541.8 623.8 26.8 1,192.4
Fees and other income............................ 139.5 268.2 -- 407.7
Gain on sale of automobile fleet leasing
businesses..................................... -- 34.3 -- 34.3
Gain on extinguishment of derivative financial
instruments.................................... -- 56.6 -- 56.6
----------- ----------- ------ -----------
Operating revenue................................ 681.3 982.9 26.8 1,691.0
----------- ----------- ------ -----------
Salaries and general operating expenses.......... 213.8 389.2 -- 603.0
Provision for credit losses...................... 45.7 58.4 -- 104.1
Depreciation on operating lease equipment........ 115.3 396.7 -- 512.0
Goodwill amortization............................ 8.2 23.2 4.4 3d 35.8
Minority interest in subsidiary trust holding
solely debentures of the Company............... 9.6 -- -- 9.6
----------- ----------- ------ -----------
Operating expenses............................. 392.6 867.5 4.4 1,264.5
----------- ----------- ------ -----------
Income before provision for income taxes....... 288.7 115.4 22.4 426.5
Provision for income taxes....................... 100.5 46.1 10.2 3f 156.8
----------- ----------- ------ -----------
Net income..................................... $ 188.2 $ 69.3 $ 12.2 $ 269.7
=========== =========== ====== ===========
Basic earnings per share......................... $ 1.17 $ 0.47 4 $ 1.02
Weighted average common shares outstanding....... 161,021,757 148,356,885 264,871,577
Diluted earnings per share....................... $ 1.16 $ 0.47 4 $ 1.01
Weighted average common shares outstanding....... 162,267,941 148,822,829 266,443,921
</TABLE>
- ---------------
(a) Presented in accordance with U.S. GAAP -- See Note 1 -- Basis of
Presentation and Note 6 -- Newcourt Credit Group Inc. -- Pro Forma
Reclassifications and Conversions.
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
S-9
<PAGE> 10
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
CIT
PRO FORMA PRO FORMA
CIT NEWCOURT(a) ADJUSTMENTS NOTE CONSOLIDATED
----------- ----------- ----------- ---- ------------
(IN MILLIONS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Finance income................................... $ 2,015.1 $ 1,888.4 $(34.0) 3e $ 3,869.5
Interest expense................................. 1,040.8 657.9 (87.5) 3e 1,611.2
----------- ----------- ------ -----------
Net finance income............................. 974.3 1,230.5 53.5 2,258.3
Fees and other income............................ 255.4 548.7 -- 804.1
----------- ----------- ------ -----------
Operating revenue.............................. 1,229.7 1,779.2 53.5 3,062.4
----------- ----------- ------ -----------
Salaries and general operating expenses.......... 407.7 698.3 -- 1,106.0
Provision for credit losses...................... 99.4 100.5 -- 199.9
Depreciation on operating lease equipment........ 169.5 686.7 -- 856.2
Goodwill amortization............................ 10.1 44.4 10.8 3d 65.3
Minority interest in subsidiary trust holding
solely debentures of the Company............... 19.2 -- -- 19.2
----------- ----------- ------ -----------
Operating expenses............................. 705.9 1,529.9 10.8 2,246.6
----------- ----------- ------ -----------
Income before provision for income taxes....... 523.8 249.3 42.7 815.8
Provision for income taxes....................... 185.0 91.5 20.3 3f 296.8
----------- ----------- ------ -----------
Net income..................................... $ 338.8 $ 157.8 $ 22.4 $ 519.0
=========== =========== ====== ===========
Basic earnings per share......................... $ 2.09 $ 1.11 4 $ 1.98
Weighted average common shares outstanding....... 161,987,897 142,741,776 261,907,140
Diluted earnings per share....................... $ 2.08 $ 1.09 4 $ 1.96
Weighted average common shares outstanding....... 163,188,739 144,859,067 264,590,086
</TABLE>
- ---------------
(a) Presented in accordance with U.S. GAAP -- See Note 1 -- Basis of
Presentation and Note 6 -- Newcourt Credit Group Inc. -- Pro Forma
Reclassifications and Conversions.
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
S-10
<PAGE> 11
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
FOR THE YEAR ENDED DECEMBER 31, 1998
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated balance sheet as of June 30, 1999
was prepared as if the Newcourt Acquisition had been consummated on that date.
The unaudited pro forma condensed consolidated statements of income for the six
months ended June 30, 1999 and for the year ended December 31, 1998 were
prepared as if the Newcourt Acquisition had been consummated on January 1, 1998.
The unaudited pro forma condensed consolidated financial statements have been
prepared using the following information:
(a) Unaudited condensed consolidated financial statements of CIT as of
and for the six months ended June 30, 1999, which are included in
CIT's Quarterly Report on Form 10-Q filed with the SEC, and audited
consolidated financial statements of CIT as of and for the year
ended December 31, 1998, which are included in CIT's Annual Report
on Form 10-K filed with the SEC;
(b) Unaudited consolidated financial statements of Newcourt as of and
for the six months ended June 30, 1999, as filed on Form 6-K with
the SEC, and audited consolidated financial statements of Newcourt
as of and for the year ended December 31, 1998, as filed on Form 6-K
with the SEC, both prepared in accordance with Canadian generally
accepted accounting principles ("Canadian GAAP"). The financial
statements of Newcourt prior to January 1, 1999 were reported in
Canadian dollars. On January 1, 1999, Newcourt changed its reporting
currency to U.S. dollars. For purposes of these unaudited pro forma
condensed consolidated financial statements, Newcourt's balance
sheet and income statement information has been: (1) adjusted to
conform to U.S. GAAP, (2) reclassified as to certain financial
statement line items to conform to CIT's presentation under U.S.
GAAP -- See Note 6 -- Newcourt Credit Group Inc. -- Pro Forma
Reclassifications and Conversions and (3) with respect to the
unaudited pro forma condensed consolidated statement of income for
the year ended December 31, 1998, converted to a presentation in
U.S. dollars using an exchange rate of .6733 Canadian dollar to each
U.S. dollar.
2. PRO FORMA ASSUMPTIONS
(a) The value of CIT Common Stock issued to acquire Newcourt Common
Shares is $2,562.2 million, based upon 148,488,329 outstanding
Newcourt Common Shares per the Amended and Restated Reorganization
Agreement at a price per Newcourt Common Share of $17.26. The price
per share was determined by multiplying .70 ("the Exchange Ratio")
by the average closing price of CIT Common Stock for the two day
period both before and after August 5, 1999, the date of the
announcement of the Newcourt Acquisition.
(b) The acquisition of Newcourt has been accounted for using the
purchase method. The difference between the total purchase price and
the fair value of the net assets acquired has been allocated to
goodwill.
(c) Estimated fair values for commercial loans, lease receivables, other
assets, fixed rate senior notes and debt related hedges were
estimated through the application of cash flow discounting
methodologies considering such factors as current market interest
rates, current market equipment values and credit risks, as
applicable. The resulting net premium/discount on commercial loans,
fixed rate senior notes and debt related hedges for the purposes of
S-11
<PAGE> 12
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
FOR THE YEAR ENDED DECEMBER 31, 1998
these unaudited pro forma condensed consolidated statements is
assumed to be amortized/ accreted into interest income/expense to
produce a constant yield to maturity. No fair value adjustment has
been made to operating lease equipment, and any such adjustment is
not expected to be material to the unaudited pro forma condensed
consolidated financial statements -- See Note 5 -- Estimated Effect
of Pro Forma Amortization and Accretion of Purchase Accounting
Adjustments.
The actual fair value of net assets acquired will be determined as of
the Closing of the Newcourt Acquisition and is subject to revision as
additional information becomes available.
(d) A preliminary estimate of $200.0 million has been made for costs
associated with the Newcourt Acquisition including, without
limitation, financial advisory, legal and accounting fees and
disbursements, severance payments, and operational redundancies
("Restructuring Charge"). This Restructuring Charge is based upon
information currently available to management and is subject to
change in conjunction with the integration project that is
undertaken in connection with the acquisition.
CIT will record the Restructuring Charge and disclose its components
in accordance with the requirements of EITF 94-3: "Liability
Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a
Restructuring)"; and EITF 95-3: "Recognition of Liabilities in
Connection with a Purchase Business Combination". CIT expects the
Restructuring Charge will consist principally of cash payments, and
will fund such amounts from operations. The actual Restructuring
Charge is not expected to be materially different from the estimate
provided herein, or to materially affect the financial condition or
results of operations of the combined entity.
S-12
<PAGE> 13
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
FOR THE YEAR ENDED DECEMBER 31, 1998
3. PRO FORMA ADJUSTMENTS -- The allocation of the purchase price has not been
finalized and the portion of the purchase price allocated to fair value
adjustments and goodwill is subject to change, because the fair value of net
assets acquired will be determined as of Closing and is subject to revision as
additional information becomes available.
(a) Estimated pro forma purchase accounting adjustments for the Newcourt
Acquisition were as follows (dollars in millions):
<TABLE>
<S> <C>
Newcourt net tangible assets -- historical at June 30,
1999.................................................... $1,808.4
Fair Value Adjustments:
Commercial loans........................................ (200.0)(i)
Lease receivables....................................... (175.0)(ii)
Other assets............................................ (100.0)(iii)
Fixed rate senior notes................................. (250.0)(iv)
--------
Subtotal -- net fair value adjustments.................... (725.0)
Restructuring charge...................................... (200.0)(v)
Tax effects of adjustments @ 38%.......................... 300.0
--------
Total net adjustments to net assets acquired.............. (625.0)
--------
Net tangible assets acquired.............................. $1,183.4
========
</TABLE>
i. Adjustment reflects the estimated decrease in carrying value
required in connection with the acquisition to conform Newcourt
credit policies and practices, including charge-offs and loss
reserves, to CIT standards and practices, as well as post
acquisition strategies for problem loan resolution. Adjustment
also includes a mark-to-market to increase the value of the
portfolio based upon current market interest rates.
ii. Adjustment to reflect the future realizability of estimated lease
residuals.
iii. Adjustment to estimated fair value of other assets, including
retained interests in securitizations.
iv. Mark-to-market of fixed rate debt and debt related hedges based
upon current market interest rates.
v. Preliminary estimate for costs associated with the Newcourt
Acquisition, including, without limitation, financial advisory,
legal and accounting fees and disbursements, severance payments,
and operational redundancies. This Restructuring Charge is based
upon information currently available to management and is subject
to change. Certain components of this charge may not be deductible
for tax purposes.
(b) Purchase accounting adjustments were made to eliminate Newcourt's
stockholders' equity accounts and to reflect the issuance of
shares of CIT Common Stock to purchase Newcourt Common Shares at
the Exchange Ratio of 0.70.
S-13
<PAGE> 14
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
FOR THE YEAR ENDED DECEMBER 31, 1998
(c) Goodwill for the Newcourt Acquisition was calculated as follows
(dollars in millions):
<TABLE>
<S> <C>
Purchase price............................................. $2,562.2
Net tangible assets acquired, as above..................... 1,183.4
--------
Goodwill............................................ 1,378.8
Goodwill recorded by Newcourt at June 30, 1999............. 1,252.3
--------
Incremental goodwill created by the Newcourt
Acquisition...................................... $ 126.5
========
</TABLE>
(d) The goodwill related to the Newcourt Acquisition is amortized on a
straight-line basis over a period of twenty-five years.
(e) Pro forma adjustments to finance income and interest expense were
estimated for the Newcourt Acquisition as follows (dollars in
millions):
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
---------------- ------------
<S> <C> <C>
Amortization of premium on commercial
loans................................ $(17.0) $(34.0)
Accretion of discount on fixed rate
senior notes and debt related
hedges............................... 43.8 87.5
------ ------
Total net adjustment to net finance
income............................... $ 26.8 $ 53.5
====== ======
</TABLE>
(f) Income tax expense was calculated at a 38% tax rate, representing
the expected tax rate of the temporary differences which are
expected to be realized. Goodwill amortization is assumed to be
non-deductible for tax purposes.
4. EARNINGS PER SHARE
Basic earnings per common share was calculated by dividing the net income by the
weighted average number of common shares outstanding for the six months ended
June 30, 1999 and for the year ended December 31, 1998, for both CIT and
Newcourt. For the unaudited pro forma condensed consolidated financial
statements, Newcourt Common Shares were adjusted to the equivalent shares of CIT
Common Stock based upon the Exchange Ratio.
Diluted earnings per common share was calculated using the same method as basic
earnings per share, and includes potential dilution of common stock equivalents.
The calculation of basic and diluted earnings per Newcourt Common Share for the
year ended December 31, 1998 excludes a non-recurring premium of $29.9 million
on the redemption of preferred securities. Including such premium in the
calculation of basic and diluted earnings per common share, basic earnings per
Newcourt Common Share and diluted earnings per Newcourt Common Share were $0.90
and $0.88, respectively. For purposes of these unaudited pro forma condensed
consolidated financial statements, pro forma consolidated basic earnings per
common share and diluted earnings per common share would have been $1.87 and
$1.85, respectively.
S-14
<PAGE> 15
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
FOR THE YEAR ENDED DECEMBER 31, 1998
5. ESTIMATED EFFECT OF PRO FORMA AMORTIZATION AND ACCRETION OF PURCHASE
ACCOUNTING ADJUSTMENTS
The following table summarizes the prospective estimated impact of the
amortization and accretion of the purchase accounting adjustments made in
connection with the Newcourt Acquisition on CIT's results of operations for the
years indicated (dollars in millions):
<TABLE>
<CAPTION>
EFFECT ON
FOR THE YEAR ENDED GOODWILL LOAN DEBT PRETAX INCOME
DECEMBER 31, AMORTIZATION AMORTIZATION ACCRETION (LOSS)
- ------------------ ------------ ------------ --------- -------------
<S> <C> <C> <C> <C>
1999............................... $ (55.2) $ (34.0) $ 87.5 $ (1.7)
2000............................... (55.2) (24.0) 60.0 (19.2)
2001............................... (55.2) (15.0) 32.5 (37.7)
2002............................... (55.2) (11.0) 7.5 (58.7)
2003............................... (55.2) (8.0) 12.5 (50.7)
2004 and thereafter................ (1,102.8) (8.0) 50.0 (1,060.8)
--------- ------- ------ ---------
Totals............................. $(1,378.8) $(100.0) $250.0 $(1,228.8)
========= ======= ====== =========
</TABLE>
6. NEWCOURT CREDIT GROUP INC. -- PRO FORMA RECLASSIFICATIONS AND CONVERSIONS
The following consolidated balance sheet and income statement schedules and
related footnotes set forth the conversion of Newcourt's historical financial
statements to U.S. dollars, as applicable, and to U.S. GAAP and the pro forma
reclassifications necessary to conform the financial statements to a reporting
basis consistent with CIT.
S-15
<PAGE> 16
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
---------------------------------------------------------------------
NEWCOURT
PRESENTED
NEWCOURT PRO FORMA ON CIT'S
BALANCE SHEET CATEGORY PRESENTATION(1) RECLASSIFICATIONS NOTE REPORTING BASIS
- ---------------------- --------------- ----------------- ---------- ---------------
(IN MILLIONS OF U.S. DOLLARS)
<S> <C> <C> <C> <C>
ASSETS:
Financing and leasing assets
Loans
Commercial.................... -- $ 4,969.0 (a) $ 4,969.0
Lease receivables................ -- 3,898.2 (a) 3,956.0
-- 57.8 (b) --
--------- ---------- ---------
Finance receivables........... -- 8,925.0 8,925.0
Reserve for credit losses........ -- (199.3) (a) (199.3)
--------- ---------- ---------
Net finance receivables....... -- 8,725.7 8,725.7
Operating lease equipment, net..... $ 2,161.3 (57.8) (b) 2,103.5
Commercial finance receivables held
for sale......................... 1,563.9 -- 1,563.9
Goodwill........................... 1,252.3 -- 1,252.3
Cash and cash equivalents.......... 310.8 -- 310.8
Other assets....................... -- 676.6 Sum of (c) 1,427.3
750.7 (a)
Finance assets held for
investment....................... 9,418.6 (9,418.6) Sum of (a) --
Investment in affiliated
companies........................ 253.4 (253.4) (c) --
Accounts receivable, prepaids and
other............................ 302.4 (302.4) (c) --
Property and equipment, net........ 120.8 (120.8) (c) --
Future income tax asset............ 206.0 (206.0) (d) --
--------- ---------- ---------
Total assets.................. $15,589.5 $ (206.0) $15,383.5
========= ========== =========
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Commercial paper................... -- $ 1,659.2 (e) $ 1,659.2
Variable rate senior notes......... -- 1,156.8 (e) 1,156.8
Fixed rate senior notes............ -- 9,030.4 (e) 9,030.4
--------- ---------- ---------
Total debt.................... -- 11,846.4 11,846.4
Accrued liabilities and payables... $ 682.4 -- 682.4
Deferred federal income taxes...... -- (206.0) (d) (206.0)
Debt............................... 11,846.4 (11,846.4) Sum of (e) --
--------- ---------- ---------
Total liabilities............. 12,528.8 (206.0) 12,322.8
--------- ---------- ---------
Share capital...................... 2,791.6 -- 2,791.6
Retained earnings.................. 269.1 -- 269.1
--------- ---------- ---------
Total stockholders'
equity................... 3,060.7 -- 3,060.7
--------- ---------- ---------
Total liabilities and
stockholders' equity..... $15,589.5 $ (206.0) $15,383.5
========= ========== =========
</TABLE>
S-16
<PAGE> 17
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1999
------------------------------------------------------------------
NEWCOURT
PRESENTED
NEWCOURT PRO FORMA ON CIT'S
INCOME STATEMENT CATEGORY PRESENTATION(1) RECLASSIFICATIONS NOTE REPORTING BASIS
------------------------- --------------- ----------------- ---------- ---------------
(IN MILLIONS OF U.S. DOLLARS)
<S> <C> <C> <C> <C>
Finance income.......................... -- $1,031.3 (f) $1,031.3
Interest expense........................ -- 407.5 (f) 407.5
Net finance and rental income........... $(206.9) (206.9) Sum of (f) --
------- -------- --------
Net finance income.................... 206.9 416.9 623.8
Securitization gains.................... 84.2 (84.2) (i) --
Syndication fees........................ 69.9 (69.9) (i) --
Fees and other income................... 166.8 38.2 (f) 268.2
154.1 Sum of (i)
(90.9) Sum of (k)
Gain on sale of automobile fleet leasing
businesses............................ -- 34.3 (k) 34.3
Gain on extinguishment of derivative
financial instruments................. -- 56.6 (k) 56.6
------- -------- --------
Operating revenues.................... 527.8 455.1 982.9
------- -------- --------
Salaries and general operating
expenses.............................. -- 13.1 (h) 389.2
376.1 Sum of (g)
Provision for credit losses............. -- 58.4 (f) 58.4
Depreciation on operating lease
equipment............................. -- 396.7 (f) 396.7
Goodwill amortization................... -- 23.2 (h) 23.2
Operating and administrative............ 193.9 (193.9) (g) --
Salaries and wages...................... 182.2 (182.2) (g) --
Goodwill amortization, depreciation and
other expenses........................ 36.3 (36.3) Sum of (h) --
------- -------- --------
Operating expenses.................... 412.4 $ 455.1 867.5
------- -------- --------
Income before provision for income
taxes.............................. 115.4 -- 115.4
Provision for income taxes.............. 46.1 -- 46.1
------- -------- --------
Net income............................ $ 69.3 -- $ 69.3
======= ======== ========
</TABLE>
S-17
<PAGE> 18
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------------------
NEWCOURT
PRO PRESENTED
NEWCOURT FORMA ON CIT'S
INCOME STATEMENT CATEGORY PRESENTATION(1) RECLASSIFICATIONS NOTE REPORTING BASIS
------------------------- --------------- ----------------- ---------- ---------------
(IN MILLIONS OF U.S. DOLLARS)
<S> <C> <C> <C> <C>
Finance income........................... -- $1,888.4 (f) $1,888.4
Interest expense......................... -- 657.9 (f) 657.9
Net finance and rental income............ $549.2 (549.2) Sum of (f)
------ -------- --------
Net finance income..................... 549.2 681.3 1,230.5
Gain on sale of finance assets........... 287.5 (287.5) (j) --
Fees and other income.................... 155.3 287.5 (j) 548.7
105.9 (f)
------ -------- --------
Operating revenues..................... 992.0 787.2 1,779.2
------ -------- --------
Salaries and general operating
expenses............................... -- 34.5 (h) 698.3
663.8 Sum of (g)
Provision for credit losses.............. -- 100.5 (f) 100.5
Depreciation on operating lease
equipment.............................. -- 686.7 (f) 686.7
Goodwill amortization.................... -- 44.4 (h) 44.4
Operating and administrative............. 365.2 (365.2) (g) --
Salaries and wages....................... 298.6 (298.6) (g) --
Goodwill amortization, depreciation and
other expenses......................... 78.9 (78.9) Sum of (h) --
------ -------- --------
Operating expenses..................... 742.7 $ 787.2 1,529.9
------ -------- --------
Income before provision for income
taxes............................... 249.3 -- 249.3
Provision for income taxes............... 91.5 -- 91.5
------ -------- --------
Net income............................. $157.8 -- $ 157.8
====== ======== ========
</TABLE>
- ---------------
(a) Finance assets held for investment has been reclassified to the line items
Commercial loans, Lease receivables, Reserve for credit losses and Other
assets (relating to interests in securitized receivables).
(b) Rental receivables, net, has been reclassified to the line item Lease
receivables.
(c) Investment in affiliated companies, Accounts receivable, prepaids and other,
and Property and equipment, net have been reclassified to the line item
Other assets.
(d) Future income tax asset has been reclassified to the line item Deferred
federal income taxes.
(e) Debt has been reclassified to the line items Commercial paper, Variable rate
senior notes and Fixed rate senior notes.
(f) Net finance and rental income has been reclassified to the line items
Finance income, Interest expense, Fees and other income, Provision for
credit losses, and Depreciation on operating lease equipment.
(g) Operating and administrative and Salaries and wages have been reclassified
to the line item Salaries and general operating expenses.
S-18
<PAGE> 19
THE CIT GROUP, INC. AND SUBSIDIARIES
AND NEWCOURT CREDIT GROUP INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND
FOR THE YEAR ENDED DECEMBER 31, 1998
(h) Goodwill amortization, depreciation and other expenses have been
reclassified to the line items Salaries and general operating expenses
(relating to depreciation on property and equipment and the amortization of
other intangibles) and Goodwill amortization.
(i) Securitization gains and Syndication fees have been reclassified to the line
item Fees and other income.
(j) Gain on sale of finance assets has been reclassified to Fees and other
income.
(k) Fees and other income has been reclassified to the line items Gain on sale
of automobile fleet leasing businesses and Gain on extinguishment of
derivative financial instruments.
(1) The unaudited consolidated financial statements of Newcourt as of and for
the six months ended June 30, 1999 and the audited consolidated statement of
income for the year ended December 31, 1998 were prepared in accordance with
Canadian GAAP. Financial statements for Newcourt prior to January 1, 1999
were reported in Canadian dollars. On January 1, 1999, Newcourt changed its
reporting currency to U.S. dollars. The primary differences between Canadian
and U.S. GAAP, as they relate to Newcourt's financial statements, are the
accounting treatment of securitizations and restructuring charges. For the
purposes of these unaudited pro forma condensed consolidated financial
statements (presented in U.S. dollars as described in Note 1(b)),
adjustments have been made to the balance sheet and income statements of
Newcourt as of and for the six months ended June 30, 1999 and for the year
ended December 31, 1998 to conform them to U.S. GAAP. The 1998 adjustments
are presented in Note 21 to the audited consolidated financial statements
included in Newcourt's Form 6-K for the year ended December 31, 1998. The
adjustments for the six months ended June 30, 1999 have been provided by
Newcourt management. The adjustments are summarized in the following table.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
INCOME STATEMENTS ENDED JUNE 30, 1999 ENDED DECEMBER 31, 1998
- ----------------- ------------------- -----------------------
(IN MILLIONS OF U.S. DOLLARS)
<S> <C> <C>
Net income as reported under Canadian GAAP... $ 97.7 $198.2
Differences in accounting for securitization
transactions (net of income taxes of $1.1
for the six months ended June 30, 1999 and
$7.1 for the year ended December 31,
1998)...................................... (4.0) (9.8)
Differences in accounting for Restructuring
Charge (net of income taxes of $11.3 for
the six months ended June 30, 1999 and
$19.5 for the year ended December 31,
1998)...................................... (14.8) (25.6)
Other (net of income taxes of $6.7 for the
six months ended June 30, 1999 and $1.6 for
the year ended December 31, 1998).......... (9.6) (5.0)
------ ------
Net income, as reported under U.S. GAAP...... $ 69.3 $157.8
====== ======
</TABLE>
At June 30, 1999 the cumulative effect of the difference between Canadian and
U.S. GAAP resulted in a decrease in Retained earnings of $42.0 million, which
was recorded as a decrease of $76.3 million to Accounts receivable, prepaids and
other and an increase to the Future income tax asset of $34.3 million.
S-19
<PAGE> 20
DESCRIPTION OF THE NOTES
You should read the following description of the particular terms of the 7.125%
notes and the floating rate notes in conjunction with the statements under
"Description of Debt Securities" in the prospectus dated September 23, 1999. If
this summary differs in any way from the "Description of Debt Securities" in the
prospectus, you should rely on this summary.
GENERAL
Our notes will be senior indebtedness issued under an indenture, dated as of
September 24, 1998 (the "Indenture") between CIT and The Bank of New York, as
trustee (the "Trustee"), and constitute a separate series of Debt Securities
under the Indenture. See "Description of Debt Securities" in the prospectus. We
will issue our notes in fully registered form and in denominations of $1,000 and
integral multiples thereof. Interest on the notes will accrue from October 6,
1999.
We will pay interest to the persons in whose names our notes are registered at
the close of business on the fifteenth day preceding the respective interest
payment date, at the respective annual rates set forth in this prospectus
supplement.
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 the permanent global note or
notes. See "Global Clearance and Settlement Procedures."
FIXED RATE INTEREST
The 7.125% notes will bear interest at the rate of 7.125% per annum. We will pay
interest on the 7.125% notes at maturity, upon earlier tax redemption, if
applicable, and semi-annually in arrears on the 15th day of each April and
October of each year beginning April 15, 2000.
We will compute interest on the 7.125% notes 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 the payment was due, and no interest will
accrue on the amount so payable for the period from and after that interest
payment date or the maturity date, as the case may be.
FLOATING RATE INTEREST
The floating rate notes will bear interest at a floating rate calculated with
reference to LIBOR at a per annum interest rate in effect for each day equal to
LIBOR plus 35 basis points (0.35%). We will pay interest on the floating rate
notes at maturity, upon earlier tax redemption, if applicable, and quarterly in
arrears on the 6th day of each January, April, July, and October of each year
beginning January 6, 2000. We will compute the interest on the basis of the
actual number of days during the relevant interest period and a 360-day year.
We will compute interest on the floating rate notes on a daily basis from and
including the last interest payment date to which interest has been paid (or
from and including the date of issue if no interest has been paid with respect
to the floating rate notes) to, but excluding, the applicable interest payment
date, or maturity date, as the case may be.
If any interest payment date for the floating rate notes (other than the
maturity date or the date of a tax redemption) would otherwise be a day that is
not a business day, then the interest payment date will be postponed to the
following date which is a business day, except if that business day falls in the
next succeeding calendar month, in which case the interest payment date will be
the immediately preceding business day. If the maturity date (or the date of a
tax redemption) of the floating rate notes falls on a day which is not a
business day, then we will make the required payment of principal, premium, if
any, and/or interest on the following day which is a business day as if it were
made on the date the payment was due. Interest will not accrue as a result of
this delayed payment.
As calculation agent, we will reset the rate of interest on the floating rate
notes quarterly on the
S-20
<PAGE> 21
6th day of January, April, July, and October. The initial interest rate for the
floating rate notes will be set on October 6, 1999, the first interest reset
date. If any of the interest reset dates for the floating rate notes is not a
business day, the interest reset date will be postponed to the next succeeding
business day, except that if that day is in the next succeeding calendar month,
in which case the interest reset date will be the immediately preceding business
day. The interest rate applicable to the floating rate notes will remain in
effect during each interest period, which will be the period from and including
the interest reset date to but excluding the next interest reset date or until
the maturity date, as the case may be.
We will determine the interest rate applicable to the floating rate notes on the
interest determination date, which is the second London Business Day prior to
the interest reset date. The interest rate determined on an interest
determination date will become effective on and as of the next interest reset
date. "London Business Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
As calculation agent, we will determine LIBOR according to the following
provisions:
LIBOR will be the rate for three-month deposits in U.S. dollars commencing on
the second London Business Day immediately following the interest determination
date that appears on Bridge Telerate, Inc. (or any successor service) on
Telerate Page 3750, for the purpose of displaying the London interbank offered
rates of major banks as of 11:00 A.M., London time, on that interest
determination date.
If the applicable LIBOR rate does not appear on Telerate Page 3750, or if
Telerate Page 3750 is unavailable, then, as the calculation agent, we will
determine LIBOR as follows:
- - We will select the principal London offices of four major banks in the London
interbank market. We will request each bank to provide its offered quotation
for deposits in U.S. dollars for a three-month maturity, commencing on the
second London Business Day immediately following the interest determination
date, to prime banks in the London interbank market at approximately 11:00
A.M., London time, on the interest determination date. These quotes will be
for deposits of at least $1 million and in a principal amount that is
representative for a single transaction in U.S. dollars in the market at that
time.
- - If at least two of these banks provide a quotation, we will compute LIBOR as
the arithmetic mean of the quotations.
- - If fewer than two of these banks provide a quotation, we will request from
three major banks in the City of New York at approximately 11:00 a.m., New
York City time, on the interest determination date, quotations for three-
month loans in U.S. dollars to leading European banks, commencing on the
second London Business Day immediately following the interest determination
date. These quotes will be for loans of at least $1 million and in a principal
amount that is representative for a single transaction in the market at that
time. We will compute LIBOR as the arithmetic mean of the quotations provided.
- - If none of these banks provides a quotation as mentioned, the rate of interest
will be the interest rate then in effect.
The interest rate payable on the floating rate notes will not be higher than the
maximum rate permitted by New York law as that law may be modified by United
States law of general application.
So long as the floating rate notes are listed on the Luxembourg Stock Exchange,
we will communicate to that exchange no later than the first day of the relevant
interest period and publish in accordance with "Notices" below the interest
period, the floating rate interest payment date, the floating interest rate, and
the amount of interest to be paid on the floating rate notes for each interest
period. Our calculations will, in the absence of manifest error, be conclusive
for all purposes and binding on the holders of the floating rate notes.
So long as floating rate notes are outstanding, there will at all times be a
calculation agent. We will appoint a bank, trust company, investment banking
firm or other financial institution to act as the calculation agent in the event
that
- - any acting calculation agent is unable or unwilling to act,
- - any acting calculation agent fails duly to establish the floating interest
rate, or
S-21
<PAGE> 22
- - we propose to remove the calculation agent.
REDEMPTION
Other than as discussed below under "Redemption Upon a Tax Event," the notes are
not redeemable prior to maturity and will not be entitled to any sinking fund.
We will redeem the notes at maturity at par.
INFORMATION CONCERNING THE TRUSTEE
From time to time, we may borrow from the Trustee. We and certain of our
subsidiaries may maintain deposit accounts and conduct other banking
transactions with the Trustee.
BOOK-ENTRY, DELIVERY AND FORM
GLOBAL NOTES. The notes will be issued in the form of one or more fully
registered global notes which will be deposited with, or on behalf of, the
Depositary and registered in the name of Cede & Co., the Depositary's nominee.
We do not expect to issue notes in definitive form. Beneficial interests in the
global notes will be represented through book-entry accounts of financial
institutions acting on behalf of beneficial owners as direct and indirect
participants in the Depositary. Investors may elect to hold interests in the
global notes through either the Depositary (in the United States) or Cedelbank
S.A. ("Cedel") or Morgan Guaranty Trust Company of New York, Brussels Office, as
operator of the Euroclear System ("Euroclear") (in Europe), if they are
participants of those systems, or indirectly through organizations which are
participants in those systems. Cedel and Euroclear will hold interests on behalf
of their participants through customers' securities accounts in Cedel's and
Euroclear's names on the books of their respective depositaries, which in turn
will hold the interests in customers' securities accounts in the depositaries'
names on the books of the Depositary. Citibank, N.A. will act as depositary for
Cedel and The Chase Manhattan Bank will act as depositary for Euroclear (in
those capacities, the "U.S. Depositaries"). Beneficial interests in the global
notes will be held in denominations of $1,000 and integral multiples thereof.
Except as set forth below, the global notes may be transferred, in whole and not
in part, only to another nominee of the Depositary or to a successor of the
Depositary or its nominee.
So long as the Depositary or its nominee is the registered owner of the global
notes, the Depositary or its nominee, as the case may be, will be considered the
sole owner or holder of our notes represented by the global notes for all
purposes under the Indenture. Except as provided below, owners of beneficial
interests in the global notes will not be entitled to have notes represented by
the global notes registered in their names, will not receive or be entitled to
receive physical delivery of notes in definitive form, and will not be
considered the owners or holders thereof under the Indenture.
TRANSFERS AND NOTICES. If you are not a direct participant or an indirect
participant in the Depositary and you wish to purchase, sell, or otherwise
transfer ownership of, or other interests in, notes, you must do so through a
direct participant or an indirect participant. The SEC has on file a set of the
rules applicable to the Depositary and its direct participants.
Purchases of notes under the Depositary's system must be made by or through
direct or indirect participants, which will receive a credit for the notes on
the Depositary's records. The ownership interest of each beneficial owner is in
turn to be recorded on the records of direct participants and indirect
participants. Beneficial owners will not receive written confirmation from the
Depositary of their purchase, but beneficial owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the direct participants or indirect
participants through which these beneficial owners entered into the transaction.
Transfers of ownership interests in the notes are to be accomplished by entries
made on the books of participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all notes deposited with the Depositary are
registered in the name of the Depositary's nominee, Cede & Co. The deposit of
notes with the Depositary and their registration in the name of Cede & Co. does
not change the beneficial ownership. The Depositary has no knowledge of the
actual beneficial owners of the notes. The Depositary's records reflect only the
identity of the direct participants to whose accounts the notes are credited,
which may or may not be the beneficial owners. The participants
S-22
<PAGE> 23
will remain responsible for keeping account of their holdings on behalf of their
customers.
The Depositary and the direct and indirect participants will send notices and
communications to direct and indirect participants and beneficial owners, as the
case may be, in accordance with the arrangements governing their relationships,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
PRINCIPAL AND INTEREST PAYMENTS. Principal and interest payments on notes
registered in the name of the Depositary or its nominee will be made to the
Depositary or its nominee, as the case may be, as the registered owner of the
global notes. None of CIT, the Trustee, any paying agent, or registrar for our
notes will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial interests in the global
notes or for maintaining, supervising, or reviewing any records relating to
those beneficial interests.
We expect that the Depositary or its nominee, upon receipt of any payment of
principal or interest, will credit the participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the global notes as shown on the records of the Depositary or its
nominee. We also expect that payments by participants to owners of beneficial
interest in the global notes held through these 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." The participants are responsible for the standing instructions
and customary practices governing beneficial interests.
ISSUANCE OF DEFINITIVE NOTES. We may issue notes in definitive form in exchange
for the global notes if:
- - the Depositary is at any time unwilling or unable to continue as depositary
and we do not appoint a successor Depositary within 90 days, we will issue
notes in definitive form;
- - we at any time and in our sole discretion determine not to have our notes
represented by the global notes; or
- - an event of default under the applicable Indenture shall have occurred and be
continuing, as described in the prospectus, and we, the applicable Trustee, or
the applicable Registrar and Paying Agent notify the Depositary that the
global note shall be exchangeable for definitive notes in registered form.
In any of these instances, an owner of a beneficial interest in the global notes
will be entitled to physical delivery in definitive form of notes represented by
the global notes equal in principal amount to its beneficial interest and to
have those notes registered in its name. Notes issued in definitive form will be
issued as registered notes in denominations of $1,000 and integral multiples
thereof, unless we otherwise specify. You may transfer our definitive notes by
presenting them for registration to the Registrar at its New York offices or to
the Luxembourg transfer agent, which will be Banque Nationale de Paris
Luxembourg S.A. ("Luxembourg Transfer Agent"), at its office. Notes presented
for registration must be duly endorsed by the holder or his attorney duly
authorized in writing, or accompanied by a written instrument or instruments of
transfer in form satisfactory to us or the Trustee duly executed by the holder
or his attorney duly authorized in writing. We may require you to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any exchange or registration of transfer of definitive notes.
If we issue definitive notes,
- - principal of and interest on our notes will be payable in the manner described
below,
- - the transfer of our notes will be registrable, and
- - our notes will be exchangeable for notes bearing identical terms and
provisions.
If we issue definitive notes, we will do so at the office of The Bank of New
York, the Paying Agent, including any successor paying agent and registrar for
our notes, currently located at 101 Barclay Street, 21st Floor, New York, New
York 10286 and at the office of Banque Nationale de Paris Luxembourg S.A. as the
Luxembourg paying agent (the "Luxembourg Paying Agent"), currently located at 24
Boulevard Royal, L-2952, Luxembourg. We will maintain a Luxembourg Transfer
Agent and a Luxembourg Paying Agent as long as the notes are listed on the
Luxembourg Stock Exchange.
S-23
<PAGE> 24
We may pay interest on definitive notes, other than interest at maturity or upon
redemption, by mailing a check to the address of the person entitled to the
interest as it appears on the security register at the close of business on the
record date corresponding to the relevant interest payment date.
Notwithstanding the foregoing, the Depositary, as holder of our notes, or a
holder of more than $1 million in aggregate principal amount of notes in
definitive form, may require the Paying Agent to make payments of interest,
other than interest due at maturity or upon redemption, by wire transfer of
immediately available funds into an account maintained by the holder in the
United States, by sending appropriate wire transfer instructions. The Paying
Agent must receive these instructions not less than ten days prior to the
applicable interest payment date.
The Paying Agent or the Luxembourg Paying Agent, as the case may be, will pay
the principal and interest payable at maturity or upon redemption by wire
transfer of immediately available funds against presentation of a note at the
office of the Paying Agent or the Luxembourg Paying Agent.
THE DEPOSITORY TRUST COMPANY. The Depositary has advised us that it 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 Securities Exchange Act of 1934. The Depositary holds
securities deposited with it by its participants and facilitates the settlement
of transactions among its participants in those securities through electronic
computerized 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 (including the
underwriters), banks, trust companies, clearing corporations, and certain other
organizations, some of whom (and/or their representatives) own the Depositary.
Access to the Depositary's book-entry system is also available to 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 Depositary has also advised us that its management is aware that some
computer applications, systems, and the like for processing data that depend on
calendar dates, including dates before, on and after January 1, 2000, may
encounter "Year 2000 problems." The Depositary has informed its participants and
other members of the financial community that it has developed and is
implementing a program so that its computer systems, as they relate to the
timely payment of distributions, including principal and interest payments, to
securityholders, book-entry deliveries, and settlement of trades within the
Depositary, continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, the Depositary's plan includes a testing phase, which is expected
to be completed within appropriate time frames.
The Depositary's ability to perform properly its services also depends upon
other parties, including but not limited to issuers, issuers' agents, third-
party vendors from whom the Depositary licenses software and hardware, and
third-party vendors on whom the Depositary relies for information or the
provision of services, including telecommunication and electrical utility
service providers, among others. The Depositary has informed its participants
and other members of the financial community that it is contacting, and will
continue to contact, third-party vendors from whom the Depositary acquires
services to impress upon them the importance of their services being Year 2000
compliant; and to determine the extent of their efforts for Year 2000
remediation, and, as appropriate, testing, of their services. In addition, the
Depositary is in the process of developing contingency plans it deems
appropriate.
The Depositary has advised us that the above information with respect to the
Depositary's Year 2000 efforts has been provided to its participants and other
members of the financial community for informational purposes only and is not
intended to serve as a representation, warranty, or contract modification of any
kind.
We believe that the sources from which the information in this section
concerning the Depositary and the Depositary's system has been ob-
S-24
<PAGE> 25
tained are reliable, but we take no responsibility for the accuracy of the
information.
CEDEL. Cedel advises that it is incorporated under the laws of Luxembourg as a
professional depositary. Cedel holds securities for its participating
organizations ("Cedel Participants") and facilitates the clearance and
settlement of securities transactions between Cedel Participants through
electronic book-entry changes in accounts of Cedel Participants, thereby
eliminating the need for physical movement of certificates. Cedel provides to
Cedel Participants, among other things, services for safekeeping,
administration, clearance, and settlement of internationally traded securities
and securities lending and borrowing. Cedel interfaces with domestic markets in
several countries. As a professional depositary, Cedel is subject to regulation
by the Luxembourg Monetary Institute. Cedel Participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations, and certain
other organizations and may include the Underwriters. Indirect access to Cedel
is also available to others, such as banks, brokers, dealers, and trust
companies that clear through or maintain a custodial relationship with a Cedel
Participant either directly or indirectly.
Distributions with respect to the notes held beneficially through Cedel will be
credited to cash accounts of Cedel Participants in accordance with its rules and
procedures, to the extent received by the U.S. Depositary for Cedel.
EUROCLEAR. Euroclear advises that it was created in 1968 to hold securities for
participants of Euroclear ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Euroclear includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance Systems S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers, and
other professional financial intermediaries and may include the Underwriters.
Indirect access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking corporation
which is a member bank of the Federal Reserve System. As such, it is regulated
and examined by the Board of Governors of the Federal Reserve System and the New
York State Banking Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator are
governed by the Terms and Conditions Governing Use of Euroclear, the related
Operating Procedures of the Euroclear System, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash within Euroclear, withdrawals of securities and cash from Euroclear, and
receipts of payments with respect to securities in Euroclear. All securities in
Euroclear are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts. The Euroclear Operator
acts under the Terms and Conditions only on behalf of Euroclear Participants and
has no record of or relationship with persons holding through Euroclear
Participants.
Distributions with respect to each series of notes held beneficially through
Euroclear will be credited to the cash accounts of Euroclear Participants in
accordance with the Terms and Conditions, to the extent received by the U.S.
Depositary for Euroclear. In the event definitive notes are issued, CIT will
appoint a paying agent and transfer agent in Luxembourg.
GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
Initial settlement for the notes will be made in immediately available funds.
Secondary market trading between participants in the Depositary will
S-25
<PAGE> 26
occur in the ordinary way in accordance with the Depositary's rules and will be
settled in immediately available funds using the Depositary's Same-Day Funds
Settlement System. Secondary market trading between Cedel Participants and/or
Euroclear Participants will occur in the ordinary way in accordance with the
applicable rules and operating procedures of Cedel and Euroclear and will be
settled using the procedures applicable to conventional eurobonds in immediately
available funds.
Cross-market transfers between persons holding directly or indirectly through
the Depositary on the one hand, and directly or indirectly through Cedel or
Euroclear Participants, on the other, will be effected in the Depositary in
accordance with the depositary rules on behalf of the relevant European
international clearing system by its U.S. Depositary. However, these
cross-market transactions will require delivery of instructions to the relevant
European international clearing system by the counterparty in that system in
accordance with its rules and procedures and within its established deadlines
(European time). If the transaction meets the settlement requirements, the
relevant European international clearing system will deliver instructions to its
U.S. Depositary to take action to effect final settlement on its behalf by
delivering or receiving notes in the Depositary and making or receiving payment
in accordance with normal procedures for same-day funds settlement applicable to
the Depositary. Cedel Participants and Euroclear Participants may not deliver
instructions directly to their respective U.S. Depositaries.
Because of time-zone differences, credits of notes received in Cedel or
Euroclear as a result of a transaction with a participant in the Depositary will
be made during subsequent securities settlement processing and dated the
business day following the Depositary settlement date. Credits or any
transactions in notes settled during this processing will be reported to the
relevant Euroclear or Cedel Participants on that following business day. Cash
received in Cedel or Euroclear as a result of sales of notes by or through a
Cedel Participant or a Euroclear Participant to a participant in the Depositary
will be received with value on the Depositary settlement date but will be
available in the relevant Cedel or Euroclear cash account only as of the
business day following settlement in the Depositary.
Although the Depositary, Cedel, and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of notes among participants of the
Depositary, Cedel, and Euroclear, they are under no obligation to perform or
continue to perform these procedures and these procedures may be discontinued at
any time.
PAYMENT OF ADDITIONAL AMOUNTS
Subject to the exceptions and limitations set forth below, we will pay as
additional interest on our notes additional amounts so that the net payment of
the principal of and interest on our notes to a person that is not a United
States Holder, after deduction for any present or future tax, assessment, or
governmental charge of the United States or a political subdivision or taxing
authority thereof or therein, imposed by withholding with respect to the
payment, will not be less than the amount that would have been payable had no
withholding or deduction been required.
Our obligation to pay additional amounts shall not apply:
(1) to a tax, assessment, or governmental charge that is imposed or
withheld solely because the holder, or a fiduciary, settlor, beneficiary,
member, or shareholder of the holder if the holder is an estate, trust,
partnership, or corporation, or a person holding a power over an estate or
trust administered by a fiduciary holder:
(a) is or was present or engaged in trade or business in the
United States or has or had a permanent establishment in the United
States;
(b) has a current or former relationship with the United States,
including a relationship as a citizen or resident thereof;
(c) is or has been a foreign or domestic personal holding
company, a passive foreign investment company, or a controlled foreign
corporation with respect to the United States or a corporation that
has accumulated earnings to avoid United States federal income tax or
a private foundation or other tax-exempt organization; or
S-26
<PAGE> 27
(d) is or was a "10-percent shareholder" of CIT as defined in
section 871(h)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"), or any successor provision;
(2) to any holder that is not the sole beneficial owner of our notes,
or a portion thereof, or that is a fiduciary or partnership, but only to
the extent that the beneficial owner, a beneficiary or settlor with respect
to the fiduciary, or a member of the partnership would not have been
entitled to the payment of an additional amount had the beneficial owner,
beneficiary, settlor, or member received directly its beneficial or
distributive share of the payment;
(3) to a tax, assessment, or governmental charge that is imposed or
withheld solely because the holder or any other person failed to comply
with certification, identification, or information reporting requirements
concerning the nationality, residence, identity, or connection with the
United States of the holder or beneficial owner of our notes, if, without
regard to any tax treaty, compliance is required by statute or by
regulation of the United States Treasury Department as a precondition to
exemption from any tax, assessment, or other governmental charge;
(4) to a tax, assessment, or governmental charge that is imposed other
than by withholding by CIT or a paying agent from the payment;
(5) to a tax, assessment, or governmental charge that is imposed or
withheld solely because of a change in law, regulation, or administrative
or judicial interpretation that becomes effective more than 15 days after
the payment becomes due or is duly provided for, whichever occurs later;
(6) to an estate, inheritance, gift, sales, excise, transfer, wealth,
or personal property tax or a similar tax, assessment, or governmental
charge;
(7) to any tax, assessment, or other governmental charge any paying
agent must withhold from any payment of principal of or interest on any
note, if the payment can be made without that withholding by any other
paying agent; or
(8) in the case of any combination of the above items.
Our notes are subject in all cases to any tax, fiscal, or other law or
regulation or administrative or judicial interpretation applicable. Except as
specifically provided under this heading "Payment of Additional Amounts" and
under the heading "-- Redemption Upon a Tax Event," we do not have to make any
payment with respect to any tax, assessment, or governmental charge imposed by
any government or a political subdivision or taxing authority.
REDEMPTION UPON A TAX EVENT
If:
- - we become or will become obligated to pay additional amounts as described
under the heading "-- Payment of Additional Amounts" as a result of any change
in, or amendment to, the laws (or any regulations or rulings promulgated
thereunder) of the United States (or any political subdivision or taxing
authority thereof or therein), or any change in, or amendments to, any
official position regarding the application or interpretation of those laws,
regulations, or rulings, which change or amendment is announced or becomes
effective on or after the date of this prospectus supplement, or
- - a taxing authority of the United States takes an action on or after the date
of this prospectus supplement, whether or not with respect to us or any of our
affiliates, that results in a substantial probability that we will or may be
required to pay additional amounts
then we may, at our option, redeem as a whole, but not in part, our notes on any
interest payment date on not less than 30 nor more than 60 calendar days' prior
notice, at a redemption price equal to 100% of their principal amount, together
with interest accrued thereon to the date fixed for redemption; provided that we
determine, in our business judgment, that the obligation to pay additional
amounts cannot be avoided by the use of reasonable measures available to us, not
including substitution of the obligor under our notes.
A redemption under the second bullet point above may not be made unless we shall
have received an opinion of independent counsel to the effect that an act taken
by a taxing authority of the United States results in a substantial probability
that we
S-27
<PAGE> 28
will or may be required to pay the additional amounts described herein under the
heading "-- Payment of Additional Amounts" and we shall have delivered to the
Trustee a certificate, signed by a duly authorized officer, stating that based
on that opinion we are entitled to redeem our notes pursuant to their terms.
NOTICES
Notices to holders of the notes will be published in authorized newspapers in
the City of New York, in London, and, so long as the notes are listed on the
Luxembourg Stock Exchange, in Luxembourg. It is expected that publication will
be made in the City of New York in The Wall Street Journal, in London in the
Financial Times, and in Luxembourg in a daily published newspaper, expected to
be the Luxemburger Wort. Any published notice shall be deemed to have been given
on the date of its publication or, if published more than once, on the date of
the first publication.
MATERIAL UNITED STATES TAX CONSIDERATIONS
Our counsel, Schulte Roth & Zabel LLP, has prepared the following summary which
describes the material United States federal income tax consequences of the
ownership and disposition of notes to initial holders of the notes purchasing
the notes at the public offering price set forth on the cover page of this
prospectus supplement. The discussion below is based on the Code, administrative
pronouncements, judicial decisions, and existing and proposed Treasury
regulations, and interpretations of the foregoing, changes to any of which
subsequent to the date of this prospectus supplement may affect the tax
consequences described herein. These statements address only the tax
consequences to initial holders holding notes as capital assets within the
meaning of section 1221 of the Code. They do not discuss all of the tax
consequences that may be relevant to holders in light of their particular
circumstances or to holders subject to special rules, such as certain financial
institutions, insurance companies, dealers in securities or foreign currencies,
United States Holders whose functional currency (as defined in Code Section 985)
is not the U.S. dollar, persons holding notes in connection with a hedging
transaction, "straddle," conversion transaction, or other integrated
transaction, traders in securities that elect to mark to market, or holders
liable for alternative minimum tax. Persons considering the purchase of the
notes should consult their tax advisors concerning the application of United
States federal income tax laws, as well as the laws of any state, local, or
foreign taxing jurisdictions, to their particular situations.
As used herein, a "United States Holder" of a note means a beneficial owner that
is for United States federal income tax purposes:
- - a citizen or resident of the United States,
- - a corporation, partnership, or other entity created or organized in or under
the laws of the United States or of any political subdivision thereof,
- - an estate the income of which is subject to United States federal income
taxation regardless of its source, or
- - a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust
or the trust has a valid election in effect under applicable Treasury
regulations to be treated as a United States person.
As used herein, the term "United States Alien Holder" means a beneficial owner
of a note that is, for United States federal income tax purposes,
- - a nonresident alien individual,
- - a foreign corporation,
- - a nonresident alien fiduciary of a foreign estate or trust, or
- - a foreign partnership one or more of the members of which is a nonresident
alien individual, a foreign corporation, or a nonresident alien fiduciary of a
foreign estate or trust.
S-28
<PAGE> 29
TAX CONSEQUENCES TO UNITED STATES HOLDERS
PAYMENTS OF INTEREST. Interest on a note will generally be taxable to a United
States Holder as ordinary interest income at the time it accrues or is received
in accordance with the United States Holder's method of accounting for federal
income tax purposes.
SALE, EXCHANGE OR RETIREMENT. Upon the sale, exchange or retirement of a note,
a United States Holder will recognize gain or loss equal to the difference
between the amount realized on the sale, exchange, or retirement of the note and
the holder's adjusted tax basis in the note. A United States Holder's adjusted
tax basis in a note will generally equal the cost of the note to the holder. The
amount realized excludes any amounts attributable to interest accrued between
interest payment dates which will be includible in income as interest in
accordance with the United States Holder's method of accounting if not
previously included in income. Any gain or loss will be capital gain or loss and
will be long-term capital gain or loss if at the time of the sale, exchange, or
retirement the note has been held for more than one year. Under current law, the
excess of net long-term capital gains over net short-term capital losses is
taxed at a lower rate than ordinary income for certain non-corporate taxpayers.
The distinction between capital gain or loss and ordinary income or loss is also
relevant for purposes of, among other things, the limitations on the
deductibility of capital losses.
TAX CONSEQUENCES TO UNITED STATES ALIEN HOLDERS
Under present United States federal tax law, and subject to the discussion below
concerning backup withholding:
(a) payments of principal, interest and premium on the notes by CIT or
our paying agent to any United States Alien Holder will be exempt from the
30% United States federal withholding tax, provided that:
- the holder does not own, actually or constructively, 10% or more of the
total combined voting power of all classes of stock of CIT entitled to
vote;
- the holder is not a controlled foreign corporation related, directly or
indirectly, to CIT through stock ownership; and
- the statement requirement set forth in section 871(h) or section 881(c)
of the Code has been fulfilled with respect to the beneficial owner, as
discussed below;
(b) a United States Alien Holder of a note will not be subject to
United States federal income tax on gain realized on the sale, exchange, or
retirement of the note, unless:
- the holder is an individual who is present in the United States for 183
days or more in the taxable year of the disposition and certain other
conditions are met; or
- the gain is effectively connected with the holder's conduct of a trade or
business in the United States; and
(c) a note held by an individual who is not, for United States estate
tax purposes, a resident or citizen of the United States at the time of his
death will not be subject to United States federal estate tax, provided
that the individual does not own, actually or constructively, 10% or more
of the total combined voting power of all classes of stock of CIT entitled
to vote and, at the time of the individual's death, payments with respect
to the note would not have been effectively connected to the conduct by the
individual of a trade or business in the United States.
The certification requirement referred to in subparagraph (a) will be fulfilled
if the beneficial owner of a note certifies on Internal Revenue Service ("IRS")
Form W-8, Form W-8BEN, or other successor form, under penalties of perjury, that
it is not a United States person and provides its name and address, and (i) the
beneficial owner files IRS Form W-8, Form W-8BEN, or other successor form with
the withholding agent or (ii) in the case of a note held on behalf of the
beneficial owner by a securities clearing organization, bank, or other financial
institution holding customers' securities in the ordinary course of its trade or
business, the financial institution files with the withholding agent a statement
that it has received the IRS Form W-8, Form W-8BEN, or other successor form from
the holder and furnishes the withholding agent with a copy thereof. With respect
to notes held by a foreign partnership, under current law, the IRS Form W-8 may
be provided by the foreign partnership. However,
S-29
<PAGE> 30
unless a foreign partnership has entered into a withholding agreement with the
IRS, for interest and disposition proceeds paid with respect to a note after
December 31, 2000, the foreign partnership will generally be required (and may
be permitted earlier), in addition to providing an intermediary IRS Form W-8IMY
or other successor form, to attach an appropriate certification by each partner.
Prospective investors, including foreign partnerships and their partners, should
consult their tax advisers regarding possible additional reporting requirements.
If a United States Alien Holder of a note is engaged in a trade or business in
the United States, and if interest on the note (or gain realized on its sale,
exchange, or other disposition) is effectively connected with the conduct of its
trade or business, the United States Alien Holder, although exempt from the
withholding tax discussed in the preceding paragraphs, will be subject to
regular United States income tax on its effectively connected income, generally
in the same manner as if it were a United States Holder. See "Tax Consequences
to United States Holders" above. In lieu of the certificate described in the
preceding paragraph, a holder will be required to provide to the withholding
agent a properly executed IRS Form 4224, Form W-8ECI, or other successor form to
claim an exemption from withholding tax. In addition, if a United States Alien
Holder is a foreign corporation, it may be subject to a 30% branch profits tax
(unless reduced or eliminated by an applicable treaty) on its earnings and
profits for the taxable year attributable to its effectively connected income,
subject to certain adjustments.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current United States federal income tax law, information reporting
requirements apply to certain payments of principal, premium, and interest made
to, and to the proceeds of sales before maturity by, non-corporate United States
Holders. In addition, a 31% backup withholding tax will apply if the
non-corporate United States Holder (i) fails to furnish its Taxpayer
Identification Number ("TIN") which, for an individual, is his Social Security
Number, (ii) furnishes an incorrect TIN, (iii) is notified by the IRS that it
has failed to properly report payments of interest and dividends, or (iv) under
certain circumstances, fails to certify, under penalty of perjury, that it has
furnished a correct TIN and has not been notified by the IRS that it is subject
to backup withholding for failure to report interest and dividend payments.
Holders should consult their tax advisers regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption if applicable.
Information reporting and backup withholding will not apply to payments made on
a note if the certifications required by Sections 871(h) and 881(c) as described
above are received, provided that CIT or our paying agent, as the case may be,
does not have actual knowledge that the payee is a United States person.
Under current Treasury regulations, payments on the sale, exchange, or other
disposition of a note made to or through a foreign office of a broker generally
will not be subject to information reporting or backup withholding. However, if
the broker is (i) a United States person, (ii) a controlled foreign corporation
for United States federal income tax purposes, (iii) a foreign person 50% or
more of whose gross income is effectively connected with a United States trade
or business for a specified three-year period, or (iv) in the case of payments
made after December 31, 2000, a foreign partnership with certain connections to
the United States, then information reporting will be required unless the broker
has in its records documentary evidence that the beneficial owner is not a
United States person and certain other conditions are met or the beneficial
owner otherwise establishes an exemption. Backup withholding may apply to any
payment that the broker is required to report if the broker has actual knowledge
that the payee is a United States person. Payments to or through the United
States office of a broker will be subject to backup withholding and information
reporting unless the beneficial owner certifies, under penalties of perjury,
that it is not a United States person or otherwise establishes an exemption.
Treasury regulations recently issued by the IRS, which are generally effective
for payments after December 31, 2000, make certain modifications to the
certification procedures applicable to a United States Alien Holder. United
States Alien Holders of notes should consult their tax advisers regarding the
application of information reporting and backup withholding in their particular
situations,
S-30
<PAGE> 31
the availability of an exemption therefrom, and the procedure for obtaining an
exemption, if available.
Any amounts withheld under the backup withholding rules will be allowed as a
credit against the holder's United States federal income tax liability and may
entitle that holder to a refund, provided that the required information is
furnished to the IRS.
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement,
dated September 29, 1999 (the "Underwriting Agreement"), among CIT, Chase
Securities Inc., Salomon Smith Barney Inc., and Credit Suisse First Boston
Corporation, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated, Warburg Dillon Read LLC, Banc
of America Securities LLC, Banc One Capital Markets, Inc., BNY Capital Markets,
Inc., First Union Capital Markets Corp., and J.P. Morgan Securities Inc.
(collectively, 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 prospectus.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
OF 7.125% OF FLOATING RATE
UNDERWRITER NOTES NOTES
- ----------- ---------------- ----------------
<S> <C> <C>
Chase Securities Inc........................................ $ 400,000,000 $200,000,000
Salomon Smith Barney Inc.................................... 400,000,000 200,000,000
Credit Suisse First Boston Corporation...................... 30,000,000 15,000,000
Lehman Brothers Inc. ....................................... 30,000,000 15,000,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......... 30,000,000 15,000,000
Morgan Stanley & Co. Incorporated........................... 30,000,000 15,000,000
Warburg Dillon Read LLC..................................... 30,000,000 15,000,000
Banc of America Securities LLC.............................. 10,000,000 5,000,000
Banc One Capital Markets, Inc............................... 10,000,000 5,000,000
BNY Capital Markets, Inc.................................... 10,000,000 5,000,000
First Union Capital Markets Corp............................ 10,000,000 5,000,000
J.P. Morgan Securities Inc.................................. 10,000,000 5,000,000
-------------- ------------
Total....................................................... $1,000,000,000 $500,000,000
============== ============
</TABLE>
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 that price less a
concession not in excess of 0.200% of the principal amount of the 7.125% notes
and 0.150% of the principal amount of the floating rate notes. The Underwriters
may allow, and these dealers may reallow, a concession to certain other dealers
not in excess of 0.150% of the principal amount of the 7.125% notes and 0.100%
of the principal amount of the floating rate notes. After the initial public
offering, the public offering price and these concessions may be changed from
time to time.
Although application has been made to list the notes on the Luxembourg Stock
Exchange, the notes are a new issue of securities with no established trading
market. The Underwriters have advised us 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. The trading market for the notes
may not be liquid.
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
S-31
<PAGE> 32
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. In that case, the Underwriters 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.
We expect that delivery of the notes will be made against payment therefor on or
about October 6, 1999, which is the fifth business day following the date hereof
(this settlement cycle being herein referred to as "T+5"). You should note that
the ability to settle secondary market trades of the notes effected on the date
of pricing and the next succeeding business day may be affected by the T+5
settlement.
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 and
its subsidiaries.
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.
OFFERING RESTRICTIONS
The notes are offered for sale in the United States and in jurisdictions outside
the United States, subject to applicable law.
Each of the Underwriters has agreed that it will not offer, sell, or deliver any
of the notes, directly or indirectly, or distribute this prospectus supplement
or prospectus or any other offering material relating to the notes, in or from
any jurisdiction except under circumstances that will, to the best of the
Underwriters' knowledge and belief, result in compliance with the applicable
laws and regulations and which will not impose any obligations on us except as
set forth in the Underwriting Agreement.
You may be required to pay stamp taxes and other charges in accordance with the
laws and practices of the country in which you purchase the notes. These taxes
and charges are in addition to the issue price set forth on the cover page.
UNITED KINGDOM
Each Underwriter has represented and agreed that it and each of its affiliates:
- - has not offered or sold and, prior to the expiry of the period of six months
from the time to closing, will not offer or sell any of the notes to persons
in the United Kingdom except to persons whose ordinary activities involve them
in acquiring, holding, managing, or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995;
- - has complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the notes
in, from or otherwise involving the United Kingdom; and
- - has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the notes
to a person who is of a kind described in Article 11(3) of the Financial
Services Act of 1986 (Investment Advertisements) (Exemptions) Order 1996 or is
a person to whom those documents may otherwise lawfully be issued or passed
on.
GERMANY
No selling prospectus (Verkaufsprospekt) has been or will be published in
respect of the notes and each Underwriter will be required to comply with the
German Securities Selling Prospectus Act (Wertpapier-Verkaufsprospektgesetz) of
December 13, 1990, as amended.
S-32
<PAGE> 33
THE NETHERLANDS
The notes are being issued under the Euro-securities exemption pursuant to
Article 6 of the Exemption Regulation (Vrijstellinsregeling Wet Toezicht
Effectenverkeer) of December 21, 1995, as amended, of The Netherlands'
Securities Market Supervision Act 1995 (Wet Toezicht Effectenverkeer) and
accordingly each Underwriter has represented and agreed that it has not publicly
promoted and will not publicly promote the offer or sale of the notes by
conducting a generalized advertising or cold-calling campaign within or outside
The Netherlands.
THE REPUBLIC OF FRANCE
The notes are being issued outside the Republic of France and each Underwriter
has represented and agreed that, in connection with their initial distribution,
it has not offered or sold and will not offer or sell, directly or indirectly,
any of the notes to the public in the Republic of France and that it has not
distributed and will not distribute or cause to be distributed to the public in
the Republic of France this prospectus supplement or any other offering material
relating to the notes.
JAPAN
The notes have not been and will not be registered under the Securities and
Exchange Law of Japan and each of the Underwriters and each of its affiliates
has represented and agreed that it has not offered or sold, and it will not
offer or sell, directly or indirectly, any of the notes in or to residents of
Japan or to any persons for reoffering or resale, directly or indirectly, in
Japan or to any resident of Japan, except pursuant to an exemption from the
registration requirements of the Securities and Exchange Law available
thereunder and in compliance with the other relevant laws and regulations of
Japan.
HONG KONG
Each of the Underwriters and each of its affiliates has represented and agreed
that it has not offered or sold, and it will not offer or sell, the notes by
means of any document to persons in Hong Kong other than persons whose ordinary
business it is to buy or sell shares or debentures, whether as principal or
agent, or otherwise in circumstances which do not constitute an offer to the
public within the meaning of the Hong Kong Companies Ordinance (Chapter 32 of
the Laws of Hong Kong).
LEGAL OPINIONS
The validity of the notes will be passed on for us by Schulte Roth & Zabel LLP,
New York, New York and for the Underwriters by Simpson Thacher & Bartlett, New
York, New York. Paul N. Roth, a founding partner of Schulte Roth & Zabel LLP, is
one of our directors.
GENERAL INFORMATION
We have applied to list the notes on the Luxembourg Stock Exchange. In
connection with the listing application, we have deposited the Certificate of
Incorporation and the By-laws of CIT and a legal notice relating to the issuance
of the notes prior to listing with Greffier en Chef du Tribunal d'Arrondissement
de et a Luxembourg, where you may obtain copies of these documents upon request.
So long as any of the notes are outstanding, we will make available, at the main
office of Banque Nationale de Paris Luxembourg S.A. in Luxembourg, copies of
these documents, this prospectus supplement, the prospectus, the Indenture, and
our current annual and quarterly reports, as well as all future annual reports
and quarterly reports. Banque Nationale de Paris Luxembourg S.A. will act as
intermediary between the Luxembourg Stock Exchange and CIT and the holders of
the notes. In addition, you may obtain free copies of the annual reports and
quarterly reports of CIT at this office.
Other than as disclosed or contemplated in this prospectus supplement or in the
documents incorporated in this prospectus supplement by reference, there has
been no material adverse change in the financial position of CIT since June 30,
1999.
Neither CIT nor any of its subsidiaries is involved in, or aware of any pending
or threatened, litigation, arbitration, or administrative proceedings
S-33
<PAGE> 34
relating to claims or amounts that are material in the context of the issuance
of the notes.
CIT's board of directors adopted resolutions relating to the issuance and sale
of the notes on September 8, 1999.
The notes, the Indenture, and the Underwriting Agreement are governed by, and
shall be construed in accordance with, the laws of the State of New York, United
States of America, applicable to agreements made and to be performed wholly
within such jurisdiction.
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
supplement. The most recent information that we file with the SEC automatically
updates and supersedes older information. We have previously filed the following
documents with the SEC and are incorporating them by reference into this
prospectus supplement:
1. Our Annual Report on Form 10-K for the year ended December 31,
1998;
2. Our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999 and June 30, 1999; and
3. Our Current Reports on Form 8-K dated January 28, 1999, February
22, 1999, March 8, 1999, March 22, 1999, April 27, 1999, May 10, 1999, May
17, 1999, June 14, 1999, July 30, 1999, August 5, 1999, August 18, 1999,
and September 22, 1999.
Until we have sold all of the debt securities which we are offering for sale
under this prospectus supplement and the prospectus, we will also incorporate by
reference all documents which we may file in the future pursuant to Section
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934.
We intend to use the net proceeds from the sale of the notes to provide
additional working funds for us and our subsidiaries. Initially, we will use the
proceeds to reduce short-term borrowings (currently represented by commercial
paper). Generally, we use the proceeds of our short-term borrowings primarily to
originate and purchase receivables in the ordinary course of our business. We
have not yet determined the amounts which we may use in connection with our
business or which we may furnish to our subsidiaries. From time to time, we may
also use the proceeds to finance the bulk purchase of receivables and/or the
acquisition of other finance-related businesses.
The notes have been accepted for clearance through Euroclear and Cedel. The
notes have been assigned the following identification numbers:
<TABLE>
<CAPTION>
EUROCLEAR AND CEDEL INTERNATIONAL SECURITY
COMMON CODE NO. IDENTIFICATION NUMBER (ISIN) CUSIP
------------------- ---------------------------- -----------
<S> <C> <C> <C>
7.125% notes....................... 010278040 US125577AD86 125577 AD 8
Floating rate notes................ 010282934 US125577AE69 125577 AE 6
</TABLE>
S-34
<PAGE> 35
PROSPECTUS
THE CIT GROUP, INC.
DEBT SECURITIES
We may issue up to an aggregate of $16,613,000,000 of debt securities in one or
more series with the same or different terms.
When we offer specific debt securities, we will disclose the terms of those debt
securities in a prospectus supplement that accompanies this prospectus. The
prospectus supplement may also add, update and modify information contained or
incorporated in this prospectus. BEFORE YOU MAKE YOUR INVESTMENT DECISION, WE
URGE YOU TO CAREFULLY READ THIS PROSPECTUS AND THE PROSPECTUS SUPPLEMENT
DESCRIBING THE SPECIFIC TERMS OF ANY OFFERING, TOGETHER WITH ADDITIONAL
INFORMATION DESCRIBED UNDER THE HEADING "WHERE YOU CAN FIND MORE INFORMATION."
These debt securities may be either senior or senior subordinated in priority of
payment and will be direct unsecured obligations.
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 the debt securities that we offer.
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 SEPTEMBER 23, 1999.
<PAGE> 36
WHERE YOU CAN FIND MORE 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 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.
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 older 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,
1998;
2. Our Quarterly Reports on Form 10-Q for the quarters ended March
31, 1999 and June 30, 1999; and
3. Our Current Reports on Form 8-K dated January 28, 1999, February
22, 1999, March 8, 1999, March 22, 1999, April 27, 1999, May 10, 1999, May
17, 1999, June 14, 1999, July 30, 1999, August 5, 1999, August 18, 1999,
and September 22, 1999.
Until we have sold all of the debt securities which we are offering for sale
under this prospectus, we will also incorporate by reference all documents which
we may file in the future pursuant to Section 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934.
We will provide without charge to each person who receives a prospectus,
including any beneficial owner, a copy of the information that has been
incorporated by reference in 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.
THE CIT GROUP, INC.
CIT is a leading diversified finance organization. We offer 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. We commenced operations in 1908 and have 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.
Our principal executive offices are located at 1211 Avenue of the Americas, New
York, New York 10036 and our telephone number is (212) 536-1390.
The Dai-Ichi Kangyo Bank, Limited holds approximately 43.9% of the voting power
and economic interest of our outstanding common stock.
Our business focus is commercial and consumer finance. We offer a broad array of
products to our customers, including loans and leases. We operate through three
business segments:
- - Equipment Financing and Leasing
- - Commercial Finance
- - Consumer
Each segment conducts its operations through strategic business units which
market its products and services to satisfy the financing needs of specific
customers, industries, and markets.
COMMERCIAL SEGMENTS
Our commercial operations 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 our 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 factor-
2
<PAGE> 37
ing, debtor-in-possession and turnaround financing, and acquisition and
expansion financing.
EQUIPMENT FINANCING AND LEASING
We conduct our Equipment Financing and Leasing operations through two strategic
business units:
- - The CIT Group/Equipment Financing offers secured equipment financing and
leasing and focuses on the broad distribution of its products through
manufacturers, dealers/distributors, intermediaries, and direct calling
efforts primarily with the construction, transportation, and machine tool
industries.
- - The CIT Group/Capital Finance offers secured equipment financing and leasing
and focuses on the direct marketing of customized transactions, particularly
operating leases, 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, including purchases of new
equipment, maintenance and repairs, residual value estimation, and remarketing
via releasing or sale. Equipment Financing's and Capital Finance's equipment and
industry expertise enable them to evaluate effectively residual value risk. For
example, Capital Finance can repossess commercial aircraft, if necessary, obtain
any required maintenance and repairs for repossessed aircraft, and recertify
repossessed aircraft with appropriate authorities. We manage the equipment,
residual value, and the risk of equipment remaining idle for extended periods of
time or in amounts that could materially impact profitability by locating
alternative equipment users or purchasers.
Equipment Financing
Equipment Financing is the largest of our strategic business units with total
financing and leasing assets of $9.6 billion at June 30, 1999, representing
38.0% of our 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
June 30, 1999, 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 June 30, 1999 included many
different types of equipment, including construction, transportation,
manufacturing equipment and business aircraft.
Equipment Financing originates business through direct calling on customers and
through relationships with manufacturers, dealers/distributors, and
intermediaries which 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 $4.6 billion at June 30,
1999, which represented 18.0% of our total financing and leasing assets. Capital
Finance specializes in customized leasing and secured financing, including
operating leases, single investor leases, equity portions of leveraged leases,
sale and leaseback arrangements, as well as loans secured by equipment 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. This provides 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;
- - currently maintains relationships with several leading railcar manufacturers;
and
3
<PAGE> 38
- - has a significant direct calling effort on all railroads and rail shipping 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, plastic
pellets and cement;
- - 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.
Capital Finance also has a fleet of locomotives on lease to U.S. railroads.
Capital Finance generates new business through:
- - direct calling efforts with equipment end-users and borrowers, including major
airlines, railroads, and shippers;
- - relationships with aerospace, railcar, and other manufacturers; and
- - intermediaries and other referral sources.
COMMERCIAL FINANCE
At June 30, 1999, the financing and leasing assets of our Commercial Finance
segment totaled $6.0 billion, representing 23.7% of total financing and leasing
assets. We conduct our Commercial Finance operations through three strategic
business units, all of which focus on accounts receivable and inventories as the
primary source of security for their lending transactions.
- - The CIT Group/Business Credit, which provides secured financing primarily to
middle-market to larger-sized borrowers.
- - The CIT Group/Credit Finance, which provides secured financing primarily to
smaller-sized to middle-market borrowers.
- - The CIT Group/Commercial Services, which provides secured financing as well as
factoring and receivable/collection management products to companies in
apparel, textile, furniture, home furnishings, and other industries.
Business Credit
Financing and leasing assets of Business Credit totaled $1.7 billion at June 30,
1999 and represented 6.6% of our 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.
Clients use these loans primarily for growth, expansion, acquisitions,
refinancings, and debtor-in-possession and turnaround financings. Business
Credit sells and purchases participation interests in these 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 Credit originates business 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 $1.1 billion at June 30,
1999 and represented 4.3% of our 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. These
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 these loans to other lenders and purchases participation interests in similar
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
4
<PAGE> 39
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.
Credit Finance originates business through the sales and regional offices as
well as 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
Commercial Services had total financing and leasing assets of $3.2 billion at
June 30, 1999, which represented 12.7% of our total financing and leasing
assets. Commercial Services offers a full range of domestic and international
customized credit protection, lending, and outsourcing services that include
working capital and term loans, factoring, receivable management outsourcing,
bulk purchases of accounts receivable, import and export financing, and letter
of credit programs.
Commercial Services provides financing to clients through the purchase of
accounts receivables owed to clients by their customers 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." A
factoring client who sells a receivable pays a factoring fee which is
commensurate with the underlying degree of credit risk and recourse. This
factoring fee is 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 those
advances (in addition to any factoring fees) and satisfying any 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 sources.
CONSUMER
Our consumer business is focused primarily on home equity lending and on retail
sales financing secured by recreation vehicles, manufactured housing and
recreational boats. The CIT Group/ Consumer Finance business unit offers home
equity loans. The CIT Group/Sales Financing business unit offers sale financing
for consumer products sold through dealers. Sales Financing also provides
contract servicing for securitization trusts and other third parties through a
centralized Asset Service Center. 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
The financing and leasing assets of Consumer Finance aggregated $2.4 billion at
June 30, 1999 and represented 9.6% of our total financing and leasing assets.
The managed assets of Consumer Finance were $2.9 billion at June 30, 1999, or
10.3% 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. Consumer Finance primarily originates, purchases,
and sells loans secured by first or second liens on detached, single family
residential properties. Customers borrow 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 primarily originates loans through brokers, as well as on a
direct marketing basis and through correspondents.
We believe that the network of Consumer Finance offices, located in most major
U.S. markets, enables us to provide a competitive, extensive product offering
complemented by high levels of
5
<PAGE> 40
service delivery. Through experienced lending professionals and automation,
Consumer Finance provides rapid turnaround time from application to loan
funding. Rapid turnaround time is critical to brokers with whom Consumer Finance
has business relationships.
Sales Financing
The financing and leasing assets of Sales Financing aggregated $2.6 billion at
June 30, 1999 and represented 10.3% of our total financing and leasing assets.
The managed assets of Sales Financing were $5.2 billion at June 30, 1999, or
18.4% of total managed assets. Sales Financing provides nationwide retail
financing for the purchase of new and used recreation vehicles, manufactured
housing, and recreational boats. Sales Financing began providing wholesale
inventory financing to manufactured housing and recreational boat dealers
utilizing its dealer and manufacturer relationships in 1997 and to recreation
vehicle dealers in 1998. Sales Financing originates loans predominately through
recreation vehicle, manufactured housing, and recreational boat dealer,
manufacturer, and broker relationships.
Servicing
The Asset Service Center centrally services and collects substantially all of
our 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 June 30, 1999, the consumer finance servicing
portfolio included $0.8 billion of finance receivables serviced for third
parties.
Securitization Program
We generally fund our operations through offerings of commercial paper and
medium-term and longer term notes in the capital markets. In an effort to
broaden funding sources and to provide an additional source of liquidity, we
established a securitization program in 1992 to access periodically the public
and private asset backed securitization markets. Our securitization program
currently includes consumer loans secured by recreation vehicles, recreational
boats, and residential real estate. We have sold $5.2 billion of finance
receivables since we began the asset backed securitization program, and the
remaining pool balance at June 30, 1999 was $3.1 billion, or 10.9% of our total
managed assets.
Under a typical asset backed securitization, we sell a "pool" of secured loans
to a special purpose entity. The special purpose entity, in turn, issues
certificates and/or notes which are collateralized by the loan pool and which
entitle the holders thereof to participate in certain loan pool cash flows. We
retain the servicing of the securitized loans, for which we earn a servicing
fee. We also participate 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, we estimate the "residual" cash
flows to be received over the life of the securitization, record the present
value of these cash flows as an interest-only receivable (a retained interest in
the securitization), and recognize a gain. The interest-only receivable is then
amortized through earnings over the estimated life of the related loan pool.
In estimating residual cash flows and the value of the related interest-only
receivables, we make a variety of financial assumptions, including loan pool
credit losses, prepayment speeds, and discount rates. These assumptions are
empirically supported by both our historical experience and anticipated trends
relative to the particular products securitized. After recording the
interest-only receivables, we regularly review these assets to determine if the
valuations are impaired. These reviews are performed on a disaggregated basis.
We calculate fair values of interest-only receivables by using current and
anticipated credit losses, prepayment speeds, and discount rates, which we then
compare to our carrying values. Our interest-only receivables had a carrying
value at June 30, 1999 of $187.5 million, which approximated fair value.
EQUITY INVESTMENTS
The CIT Group/Equity Investments, our capital investing unit, originates and
participates in merger and acquisition transactions, purchases private equity
and equity-related securities, and arranges transaction financing. Equity
Investments also invests in emerging growth opportunities in
6
<PAGE> 41
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 $91.7 million at June 30,
1999.
COMPETITION
Our markets are highly competitive and are characterized by competitive factors
that vary based upon product and geographic region. Competitors include captive
and independent finance companies, commercial banks and thrift institutions,
industrial banks, leasing companies, manufacturers, and vendors. Insurance
companies and bank holding companies have formed substantial national financial
services networks that compete with us. On a local level, community banks,
smaller independent finance companies, and mortgage companies are competitive
forces. Some competitors have substantial local market positions. Many of our
competitors are large companies that have substantial capital, technological,
and marketing resources. Some of these competitors are larger than us and may
have access to capital at a lower cost than we do. Also, our competitors include
businesses that are not related to bank holding companies. These competitors may
engage in activities such as short-term equipment rental and servicing, which
are not permitted activities for us. Competition has been enhanced in recent
years by a strong economy and growing marketplace liquidity. The markets for
most of our products are characterized by a large number of competitors.
However, with respect to some of our products, competition is more concentrated.
We compete primarily on the basis of pricing, terms, and structure. From time to
time, our competitors seek to compete aggressively on the basis of these
factors, and we may lose market share to the extent we are unwilling to match
competitor pricing and terms in order to maintain interest margins and/or credit
standards.
Other primary competitive factors include industry experience and client service
and relationships. In addition, demand for our products with respect to certain
industries, such as the commercial airline industry, will be affected by demand
for that industry's services and products and by industry regulations.
REGULATION
The Dai-Ichi Kangyo Bank, Limited, or "DKB," is a bank holding company within
the meaning of the Bank Holding Company Act of 1956. DKB is registered as a bank
holding company with the Federal Reserve. Since DKB owns approximately 43.9% of
our common stock, we are subject to certain provisions of the Bank Holding
Company Act and are subject to examination by the Federal Reserve. In general,
the Bank Holding Company 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." Our current principal business activities constitute permissible
activities for a nonbank subsidiary of a bank holding company. We cannot engage
in new activities or acquire securities or assets of another company unless:
- - the new activity or the activity of the other company is one that the Federal
Reserve has determined to be closely related to banking; and
- - we have obtained the approval of the Federal Reserve to engage in that
activity or to acquire the securities or assets of the other company.
To obtain the Federal Reserve's approval, we or DKB must submit an application
to the Federal Reserve that provides information both about the proposed
activity or acquisition and about the financial condition and operations of DKB
and CIT.
In addition to the Bank Holding Company Act, Japanese banking laws and
regulations also affect our permissible activities because of DKB's ownership of
our common stock.
We have entered into a regulatory agreement with DKB in order to facilitate
DKB's compliance with applicable U.S. and Japanese banking laws and regulations.
This regulatory agreement prohibits us from engaging in any new activity or
entering into any transaction for which prior approval, notice, or filing is
required under these laws and regulations, unless we or DKB obtains the required
approval, we or DKB gives prior notice, or we or DKB makes the required filings.
This regulatory agreement also prohibits us from engaging in any
7
<PAGE> 42
activity that would cause DKB, CIT or any affiliate of DKB or CIT to violate any
of these laws or regulations. If, at any time, DKB determines that any of our
activities are prohibited by these laws and regulations, we are required to take
all reasonable steps to cease those activities.
Two of our subsidiaries are investment companies organized under Article XII of
the New York Banking Law. New York's banking laws govern the activities of these
subsidiaries and state banking regulators examine these subsidiaries. New York's
banking laws also require that any person or entity seeking to purchase
"control" of us would be required to apply for and obtain the prior approval of
the New York Superintendent of Banks. "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 our voting stock.
Our operations 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. Among other things, these laws, regulations, and decisions:
- - regulate credit granting activities;
- - establish maximum interest rates, finance charges, and other charges;
- - regulate customers' insurance coverages;
- - require disclosures to customers;
- - govern secured transactions; and
- - set collection, foreclosure, repossession, and claims handling procedures and
other trade practices.
Our 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 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 state laws, policies, and principles may limit our 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 us 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
federal preemption. Loans may also be subject to other federal laws, including:
- - the Federal Truth-in-Lending Act and the related Federal Reserve Regulation Z,
which require certain disclosures to borrowers and other parties regarding
loan terms and regulate certain practices with respect to those loans;
- - the Real Estate Settlement Procedures Act and the related Housing and Urban
Development Regulation X, which require certain disclosures to borrowers and
other parties regarding certain loan terms and regulate certain practices with
respect to these loans;
- - the Equal Credit Opportunity Act and the related Federal Reserve Regulation B,
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;
- - the Fair Credit Reporting Act, which regulates the use and reporting of
information related to a borrower's credit experience; and
- - 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 federal laws may limit our ability
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,
8
<PAGE> 43
in addition, could subject us to damages and administrative sanctions.
This federal and state regulation is primarily for the benefit and protection of
our customers and not for the benefit of investors. This regulation could limit
our discretion in operating our 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 we
charge will not rise to state maximum levels, any of which could adversely
affect our business or results of operations. The Federal Reserve has the
authority to restrict our ability 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 CIT and its
subsidiaries. The data for the years ended December 31, 1998, 1997 and 1996 were
obtained from CIT's audited consolidated financial statements contained in CIT's
1998 Annual Report on Form 10-K. The data for the years ended December 31, 1995
and 1994 were obtained from audited consolidated statements of CIT that are not
incorporated by reference in this prospectus. The data for the six months ended
June 30, 1999 and 1998 were obtained from CIT's unaudited condensed consolidated
financial statements contained in CIT's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999. This summary should be read in conjunction with the
financial information of CIT included in the reports referred to under "Where
You Can Find More Information." Results for the six month period ended June 30,
1999 are not necessarily indicative of operating results that may be expected
for a full year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
----------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- ------ -------- -------- -------- -------- --------
(DOLLAR AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Finance income........................ $1,095.9 $970.8 $2,015.1 $1,824.7 $1,646.2 $1,529.2 $1,263.8
Interest expense...................... 554.1 502.4 1,040.8 937.2 848.3 831.5 614.0
-------- ------ -------- -------- -------- -------- --------
Net finance income.................... 541.8 468.4 974.3 887.5 797.9 697.7 649.8
Fees and other income................. 139.5 127.1 255.4 247.8 244.1 184.7 174.4
Gain on Sale of Equity interest
acquired in loan workout............ -- -- -- 58.0 -- -- --
-------- ------ -------- -------- -------- -------- --------
Operating revenue..................... 681.3 595.5 1,229.7 1,193.3 1,042.0 882.4 824.2
-------- ------ -------- -------- -------- -------- --------
Salaries and employee benefits........ 133.3 121.8 245.4 253.5 223.0 193.4 185.8
General operating expenses............ 88.7 83.9 172.4 174.9 170.1 152.3 152.1
-------- ------ -------- -------- -------- -------- --------
Salaries and general operating
expenses............................ 222.0 205.7 417.8 428.4 393.1 345.7 337.9
Provision for credit losses........... 45.7 44.4 99.4 113.7 111.4 91.9 96.9
Depreciation on operating lease
equipment........................... 115.3 78.7 169.5 146.8 121.7 79.7 64.4
Minority interest in subsidiary trust
holding solely debentures of the
company............................. 9.6 9.6 19.2 16.3 -- -- --
-------- ------ -------- -------- -------- -------- --------
Operating Expenses.................... 392.6 338.4 705.9 705.2 626.2 517.3 499.2
-------- ------ -------- -------- -------- -------- --------
Income before provision for income
taxes............................... 288.7 257.1 523.8 488.1 415.8 365.1 325.0
Provision for income taxes............ 100.5 91.7 185.0 178.0 155.7 139.8 123.9
-------- ------ -------- -------- -------- -------- --------
Net income............................ $ 188.2 $165.4 $ 338.8 $ 310.1 $ 260.1 $ 225.3 $ 201.1
======== ====== ======== ======== ======== ======== ========
</TABLE>
9
<PAGE> 44
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,
------------ ------------------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratios of Earnings to Fixed Charges................ 1.51x 1.50x 1.49x 1.51x 1.49x 1.44x 1.52x
</TABLE>
We have computed the ratios of earnings to fixed charges in accordance with
requirements of the SEC'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 a subsidiary trust
holding solely debentures of CIT, and the portion of rentals considered to
represent an appropriate interest factor.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this prospectus and any supplements are "forward-looking,"
in that they do not discuss historical fact but instead note future
expectations, projections, intentions, or other items relating to the future.
These forward-looking statements include those made in documents incorporated in
this prospectus by reference.
Forward-looking statements are subject to known and unknown risks,
uncertainties, and other factors that may cause our actual results or
performance to differ materially from those contemplated by the forward-looking
statements. Many of those factors are noted in conjunction with the forward-
looking statements in the text. Other important factors that could cause actual
results to differ include:
- - The results of our efforts to implement our business strategy. Failure to
fully implement our business strategy might result in decreased market
penetration, adverse effects on results of operations, and other adverse
results.
- - The effect of economic conditions and the performance of our borrowers.
Economic conditions in general or in particular market segments could impact
the ability of our borrowers to operate or expand their businesses, which
might result in decreased performance or repayment of their obligations or
reduced demand for additional financing needs.
- - Actions of our competitors and our ability to respond to those actions. We
seek to remain competitive without sacrificing prudent lending standards.
Doing business under those standards becomes more difficult, however, when
competitors offer financing with less stringent criteria. We seek to maintain
credit quality at the risk of growth in assets, if necessary.
- - The cost of our capital. That cost depends on many factors, some of which are
beyond our control, such as our portfolio quality, ratings, prospects, and
outlook.
- - Changes in government regulations, tax rates, and similar matters. For
example, government regulations could significantly increase the cost of doing
business or could eliminate certain tax advantages of some of our financing
products.
- - Necessary technological changes, including those addressing "Year 2000" data
systems issues, may be more difficult, expensive or time consuming than
anticipated.
- - Costs or difficulties related to integration of acquisitions.
- - Other risks detailed in our other SEC reports or filings.
We do not intend to update forward-looking information to reflect actual results
or changes in assumptions or other factors that could affect those statements.
We cannot predict your risk in relying on forward-looking statements in light of
the many factors that could affect their accuracy.
10
<PAGE> 45
USE OF PROCEEDS
We intend to use the net proceeds from the sale of any debt securities to
provide additional working funds for us and our subsidiaries. Initially, we will
use the proceeds to reduce short-term borrowings (currently represented by
commercial paper). Generally, we use the proceeds of our short-term borrowings
primarily to originate and purchase receivables in the ordinary course of our
business. We have not yet determined the amounts which we may use in connection
with our business or which we may furnish to our subsidiaries. From time to
time, we 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
Any debt securities that we issue will be issued in fully registered form. This
prospectus and the prospectus supplement will describe the terms of the debt
securities.
The debt securities that we issue will constitute either Superior Indebtedness
or Senior Subordinated Indebtedness. From time to time, we may issue senior debt
securities (the "Senior Securities") in one or more separate series of debt
securities. We will issue each series of Senior Securities under separate
indentures, each substantially in the form of a global indenture (each of these
indentures or supplemental indentures is referred to as a "Senior Indenture" and
collectively as the "Senior Indentures"). We will enter into each Senior
Indenture with a banking institution organized under the laws of the United
States or one of the states thereof (a "Senior Trustee").
From time to time, we may also issue senior subordinated debt securities (the
"Senior Subordinated Securities") as one or more separate series of debt
securities. We will issue each series of Senior Subordinated Securities under
one or more separate indentures, each substantially in the form of a global
indenture (each of these indentures and supplemental indentures is referred to
as a "Senior Subordinated Indenture" and collectively as the "Senior
Subordinated Indentures"). We will enter into each Senior Subordinated Indenture
with a banking institution organized under the laws of the United States or one
of the states thereof (a "Senior Subordinated Trustee").
From time to time, we may issue Senior Subordinated Securities which are
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.
We sometimes refer to the Senior Indentures and the Senior Subordinated
Indentures as the "Indentures," and the Senior Trustees and the Senior
Subordinated Trustees as the "Trustees."
Our Indentures. We have filed a form of global Senior Indenture and a form of
global Senior Subordinated Indenture as exhibits to the registration statement
of which this prospectus is a part. You should refer to particular provisions of
an Indenture for its defined terms. In order to understand our disclosure
concerning the Indentures, you should refer to the detailed provisions of each
Indenture.
Limitations on Indebtedness. The terms of the Senior Indentures do not limit
the amount of debt securities or other unsecured Superior Indebtedness which we
may issue. The terms of the Senior Indentures also do not limit the amount of
subordinated debt, secured or unsecured, which we may issue. The terms of some
of the Senior Subordinated Indentures may limit the amount of debt securities or
other unsecured Senior Subordinated Indebtedness which we may issue or limit the
amount of Junior Subordinated Indebtedness which we may issue. For a description
of these limitations, see "Description of Debt Securities -- Restrictive
Provisions" at page 13. At June 30, 1999, approximately $200 million of Senior
Subordinated Indebtedness was issued and outstanding. At June 30, 1999, under
the most restrictive provisions of the Senior Subordinated Indentures, we could
issue up to approximately $2.6 billion of additional Senior Subordinated
Indebtedness.
Separate Series. We may issue the debt securities in one or more separate
series of Senior Securities or Senior Subordinated Securities. Debt securities
in a particular series may have different maturities or different purchase
prices.
Original Issue Discount. Debt securities bearing no interest or a below market
interest rate when issued are known as original issue discount securities. We
will offer any original issue discount
11
<PAGE> 46
securities which we issue at a discount (which may be substantial) below their
stated principal amount. You should refer to the prospectus supplement for a
description of federal income tax consequences and other special considerations
applicable to original issue discount securities.
Particular Terms of Offered Debt Securities. You should refer to the prospectus
supplement for a description of the particular terms of any debt securities that
we offer for sale. The following are some of the terms of these debt securities
that we will describe in the prospectus supplement:
- - designation, total principal amount and authorized denominations;
- - percentage of principal amount at which debt securities will be issued;
- - maturity date or dates;
- - interest rate or rates (which may be fixed or variable) per annum, the method
of determining the interest rate or rates, and any original issue discount;
- - payment dates for interest and principal and the provisions for accrual of
interest;
- - provisions for any sinking, purchase, or other comparable fund;
- - any redemption terms;
- - designation of the place where registered holders of debt securities may be
paid, or may transfer or redeem debt securities;
- - designation of any foreign currency (including composite currencies) in which
the debt securities may be issued or paid and any terms under which a holder
of debt securities may elect to be paid in a different currency than the
currency of the debt securities;
- - any index which may be used to determine the amounts of principal, interest,
or any other payment due on the debt securities; and
- - designation of the debt securities as Senior Securities or Senior Subordinated
Securities.
Payment. We will make all payments due on debt securities, less any applicable
withholding taxes, at the office of CIT or its agent maintained for this purpose
in New York, New York. However, at our option, we may pay interest, less any
applicable withholding taxes, by mailing a check to the address of the person
entitled to the interest as their name and address appear on our register. (See
Section 2.04 of the Indentures).
Transfer of Debt Securities. A registered holder of debt securities, or a
properly authorized attorney of the holder, may transfer these debt securities
at our office or our agent's office. The prospectus supplement will describe the
location of these offices. We will not charge the holder a fee for any transfer
or exchange of debt securities. But we may require the holder to pay a sum
sufficient to cover any tax or other governmental charge in connection with a
transfer or exchange. (See Section 2.06 of the Indentures).
Certain Defined Terms.
"Indebtedness" 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 on a balance sheet and in any event includes
all debt and other similar monetary obligations, whether direct or guaranteed.
"Superior Indebtedness" means all of our Indebtedness that is not by its terms
subordinate or junior to any of our other indebtedness. The Senior Securities
will constitute Superior Indebtedness.
"Senior Subordinated Indebtedness" means all of our Indebtedness that is
subordinate only to Superior Indebtedness. The Senior Subordinated Securities
will constitute Senior Subordinated Indebtedness.
"Junior Subordinated Indebtedness" means all Indebtedness of CIT that is
subordinate to both Superior Indebtedness and Senior Subordinated Indebtedness.
SENIOR SECURITIES
The Senior Securities will be direct, unsecured obligations of CIT. Senior
Securities will constitute Superior Indebtedness issued with equal priority to
the other Superior Indebtedness. At June 30, 1999, CIT's consolidated unaudited
balance sheet reflected approximately $14.0 billion of outstanding Superior
Indebtedness.
The Senior Securities will be senior to all Senior Subordinated Indebtedness,
including the Senior
12
<PAGE> 47
Subordinated Securities. At June 30, 1999, CIT's consolidated balance sheet
reflected $200 million outstanding Senior Subordinated Indebtedness and no
outstanding Junior Subordinated Indebtedness.
SENIOR SUBORDINATED SECURITIES
The Senior Subordinated Securities will be direct, unsecured obligations of CIT.
CIT will pay principal, premium, if any, and interest on the Senior Subordinated
Securities only after the prior payment in full of all Superior Indebtedness of
CIT, including the Senior Securities.
In the event of any insolvency, bankruptcy, or similar proceedings, the holders
of Superior Indebtedness will be paid in full before any payment is made on the
Senior Subordinated Securities. An event of default under or acceleration of
Superior Indebtedness does not in itself trigger the payment subordination
provisions applicable to Senior Subordinated Securities. However, if the Senior
Subordinated Securities are declared due and payable before maturity due to a
default, the holders of the Senior Subordinated Securities will be entitled to
payment only after Superior Indebtedness is paid in full.
Due to these subordination provisions, if we become insolvent, the holders of
Superior Indebtedness may recover a higher percentage of their investment than
the holders of the Senior Subordinated Securities. We intend that any Senior
Subordinated Securities will be in all respects equal in right of payment with
the other Senior Subordinated Indebtedness, including CIT's outstanding Senior
Subordinated Securities. We also intend that all Senior Subordinated Securities
will be superior in right of payment to all Junior Subordinated Indebtedness and
to all outstanding capital stock.
Senior Subordinated Securities of certain series may meet the requirements
necessary for that 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 we propose to issue Senior
Subordinated Securities which will qualify as Tier II Capital, then we will
disclose this in the prospectus supplement.
RESTRICTIVE PROVISIONS
Negative Pledge. Generally, the Indentures do not limit the amount of other
securities which we or our subsidiaries may issue. But each Indenture contains a
provision that we will not pledge or otherwise subject to any lien any of our
property or assets to secure indebtedness for money borrowed, incurred, issued,
assumed, or guaranteed by us, subject to certain exceptions (the "Negative
Pledge"). (See Section 6.04 of the Indentures).
Under the terms of the Negative Pledge, we are permitted to create the following
liens:
- - liens in favor of any of our subsidiaries;
- - purchase money liens;
- - liens existing at the time of any acquisition that we may make;
- - liens in favor of the United States, any state, or governmental agency or
department to secure obligations under contracts or statutes;
- - 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 us primarily for use
in the conduct of our business;
- - arrangements providing for our leasing of assets, which we have sold or
transferred with the intention that we will lease back these assets, if the
lease obligations would not be included as liabilities on our consolidated
balance sheet;
- - liens to secure non-recourse debt in connection with our leveraged or
single-investor or other lease transactions;
- - consensual liens created in our ordinary course of business that secure
indebtedness that would not be included in total liabilities as shown on our
consolidated balance sheet;
- - liens created by us in connection with any transaction that we intend to be a
sale of our property or assets;
- - liens on property or assets financed through tax-exempt municipal obligations;
13
<PAGE> 48
- - liens arising out of any extension, renewal, or replacement, in whole or in
part, of any financing permitted under the Negative Pledge, so long as the
lien extends only to the property or assets, with improvements, which
originally secured the lien; and
- - liens that secure certain other indebtedness which, in an aggregate principal
amount then outstanding, does not exceed 10% of our consolidated net worth.
See Section 6.04 of the Indentures for the provisions of the Negative Pledge.
In addition, in the Senior Subordinated Indentures, we have agreed not to
permit:
- - 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 our consolidated surplus (including retained earnings); or
- - 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 our consolidated
surplus (including retained earnings).
(See Senior Subordinated Indenture Section 6.05). Under the more restrictive of
these tests, as of June 30, 1999, we could issue up to approximately $2.6
billion of additional Senior Subordinated Indebtedness.
Restrictions on Mergers and Asset Sales. Subject to the provisions of the
Negative Pledge, the Indentures will not prevent us from consolidating or
merging with any other corporation or selling our assets as, or substantially
as, an entirety. However, if we are not the surviving corporation in a merger,
the surviving corporation must expressly assume our obligations under the
Indentures. Similarly, if we were to sell our assets as, or substantially as, an
entirety to another party, the purchaser must also assume our obligations under
the Indentures. (See Senior Indenture Section 15.01, Senior Subordinated
Indenture Section 16.01). The holders of at least a majority in principal amount
of the outstanding debt securities of any series may waive compliance with the
restrictions of the Negative Pledge. This waiver of compliance will bind all of
the holders of that series of debt securities. (See Senior Indenture Section
6.06, Senior Subordinated Indenture Section 6.07).
Other than these restrictions, the Indentures contain no additional provisions
limiting our ability to enter into a highly leveraged transaction.
MODIFICATION OF INDENTURE
Each Indenture contains provisions permitting us and the Trustee to amend,
modify, or supplement the Indenture or any supplemental indenture as to any
series of debt securities. Generally, these changes require the consent of the
holders of at least 66 2/3% of the outstanding principal amount of each series
of debt securities affected by the change.
Unanimous consent of the holders of a series of debt securities is required for
any of the following changes:
- - extending the maturity of that series of debt security, reducing the rate,
extending the time of payment of interest, or reducing any other payment due
under that series of debt security;
- - reducing the percentage of holders required to consent to any amendment or
modification for purposes of that series of debt security; or
- - modifying the rights, duties or immunities of the Trustee without the consent
of the Trustee.
(See Section 14.02 of the Indentures).
COMPUTATIONS FOR OUTSTANDING DEBT SECURITIES
In computing whether the holders of the requisite principal amount of
outstanding debt securities have taken action under an Indenture,
- - for an original issue discount security, we will use the amount of the
principal which would be due and payable as of that date, as if the maturity
of the debt had been accelerated due to a default; or
- - for a debt security denominated in a foreign currency or currencies, we will
use the U.S. dollar equivalent of the outstanding principal amount as of that
date, using the exchange rate in effect on the date of original issuance of
the debt security.
(See Section 1.02 of the Indentures).
14
<PAGE> 49
EVENTS OF DEFAULT
Each Indenture defines an "event of default" with respect to any series of debt
securities. An event of default under an Indenture is any one of the following
events which occurs with respect to a series of debt securities:
- - nonpayment for thirty days of any payment of interest when due;
- - nonpayment of any payment of principal of, and premium, if any, when due;
- - nonpayment of any sinking fund installment when due;
- - failure, after thirty days' appropriate notice, to perform any other covenant
in the Indenture (other than a covenant included in the Indenture solely for
the benefit of another series of debt securities);
- - certain events in bankruptcy, insolvency, or reorganization; or
- - nonpayment of interest on our indebtedness, including guaranteed indebtedness
(other than indebtedness which is subordinate), or nonpayment of any principal
on any of our indebtedness, after appropriate notice and expiration of any
applicable grace period.
(See Section 7.01 of the Indentures).
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 the Trustee considers that withholding notice is in the interests
of the holders of that series of debt securities. (See Section 11.03 of the
Indentures).
Generally, each Indenture provides that upon an event of default, the Trustee 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
that series to be due and payable. (See Section 7.02 of the Indentures).
However, with respect to any series of Senior Subordinated Securities considered
"Tier II," only certain events in bankruptcy, insolvency, or reorganization
would permit acceleration of the maturity of the indebtedness. The prospectus
supplement will indicate if the series of Senior Subordinated Securities covered
by that prospectus supplement will be "Tier II."
You should refer to the prospectus supplement for any original issue discount
securities for disclosure of the particular provisions relating to acceleration
of the maturity of indebtedness upon the occurrence of an event of default.
Within 120 days after the close of each fiscal year, we are required to file
with each Trustee a statement, signed by specified officers, stating whether or
not the specified officers have knowledge of any default, and, if so, specifying
each default, the nature of the default and what action, if any, has been taken
to cure the default. (See Senior Indenture Section 6.05, Senior Subordinated
Indenture Section 6.06).
Except in cases of default and acceleration, the Trustee is not under any
obligation to exercise any of its rights or powers under an Indenture at the
request of holders of debt securities, unless these holders offer the Trustee a
reasonable indemnity. (See Section 11.01 of the Indentures). As long as the
Trustee has this indemnity, 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 under the
Indenture or of exercising any trust or power conferred upon the Trustee. (See
Section 7.08 of the Indentures).
DEFEASANCE OF THE INDENTURE AND DEBT SECURITIES
We may, at any time, satisfy our obligations with respect to payments on any
series of debt securities by irrevocably depositing in trust with the Trustee
cash or U.S. Government Obligations (as defined in the Indenture) or a
combination thereof sufficient to make payments on the debt securities when due.
If we make this deposit in a sufficient amount, properly verified, then we would
discharge all of our obligations with respect to that series of debt securities
and the Indenture insofar as it relates to that series of debt securities
(except as otherwise provided in the Indenture). In the event of this
defeasance, holders of that series of debt securities would be able to look only
to the trust fund for payment on that series of debt securities until the date
of maturity or redemption. Our ability to defease debt securities of any series
using this trust fund is subject to certain tax, legal, and stock exchange
requirements. (See Sections 12.01, 12.02 and 12.03 of the Indentures).
15
<PAGE> 50
INFORMATION CONCERNING THE TRUSTEES
We may periodically borrow funds from any of the Trustees. We and our
subsidiaries may maintain deposit accounts and conduct other banking
transactions with any of the Trustees. A Trustee under a Senior Indenture or a
Senior Subordinated Indenture may act as trustee under any of CIT's other
indentures.
PLAN OF DISTRIBUTION
We may sell the debt securities being offered hereby:
- - directly to purchasers;
- - through agents;
- - to dealers; or
- - through an underwriter or a group of underwriters.
We may directly solicit offers to purchase debt securities. We may also solicit
offers through our agents. Unless otherwise indicated in the prospectus
supplement, any agent will be acting on a best efforts basis for the period of
its appointment (ordinarily five business days or less). Under our agreements
with agents, we may indemnify agents against certain civil liabilities,
including liabilities under the Securities Act of 1933.
We may also sell debt securities through a dealer as principal. The dealer may
then resell the debt securities to the public at varying prices to be determined
by the dealer at the time of resale. Under our agreements with dealers, we may
indemnify dealers against certain civil liabilities, including liabilities under
the Securities Act.
We may also use one or more underwriters to sell debt securities. Under our
agreements with underwriters, we may indemnify underwriters against certain
liabilities, including liabilities under the Securities Act. The names of the
underwriters and the terms of the debt securities will be set forth in the
prospectus supplement. When reselling debt securities to the public, the
underwriters will deliver the prospectus supplement and this prospectus to
purchasers of debt securities.
The underwriters, dealers, and agents may be deemed to be underwriters under the
Securities Act. Any discounts, commissions, or concessions that they receive
from us or any profit they make on the resale of debt securities may be deemed
to be underwriting discounts and commissions under the Securities Act. We will
disclose in the prospectus supplement any person who may be deemed to be an
underwriter and any compensation that we have paid to any underwriter. We may
have various other commercial relationships with our underwriters, dealers, and
agents.
If disclosed in the prospectus supplement, we may authorize underwriters and
agents to solicit offers by certain institutions to purchase offered debt
securities from us 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. Each contract will be for an amount not
less than, and unless we otherwise agree the aggregate principal amount of
offered debt securities sold pursuant to contracts will be not less nor more
than, the amounts stated in the prospectus supplement. We may authorize
underwriters and agents to enter into contracts with institutions including
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions, all
subject to our approval. Contracts will not be subject to any conditions except
that any purchase of debt securities by an institution pursuant to a contract
must be permitted under applicable laws. We will disclose in the prospectus
supplement any commission that we pay to underwriters and agents who sell debt
securities pursuant to contracts. Underwriters and agents will have no
responsibility in respect of the delivery or performance of contracts.
The place and time of delivery for the debt securities will be set forth in the
prospectus supplement.
16
<PAGE> 51
EXPERTS
Our consolidated balance sheets as of December 31, 1998 and 1997 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, 1998
have 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 KPMG LLP as
experts in accounting and auditing.
LEGAL OPINIONS
Our counsel, Schulte Roth & Zabel LLP, New York, New York is passing for us on
the validity of the debt securities to which this prospectus relates. Paul N.
Roth, a founding a partner of Schulte Roth & Zabel LLP, is one of our directors.
17
<PAGE> 52
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS. WE HAVE AUTHORIZED NO ONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION.
WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY LOCATION WHERE THE OFFER
IS NOT PERMITTED.
YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS, INCLUDING
INFORMATION INCORPORATED BY REFERENCE, IS ACCURATE AS OF ANY DATE OTHER THAN THE
DATE ON THE FRONT OF THE PROSPECTUS.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Where You Can Find More
Information....................... 2
The CIT Group, Inc.................. 2
Summary of Financial Information.... 9
Special Note Regarding
Forward-Looking Statements........ 10
Use of Proceeds..................... 11
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Debt Securities...... 11
Plan of Distribution................ 16
Experts............................. 17
Legal Opinions...................... 17
</TABLE>
<PAGE> 53
REGISTERED OFFICE OF THE ISSUER
THE CIT GROUP, INC.
1211 Avenue of the Americas
New York, New York 10036
AUDITORS OF THE ISSUER
KPMG LLP
150 JFK Parkway
Short Hills, New Jersey 07078
TRUSTEE, PAYING AGENT, TRANSFER AGENT AND REGISTRAR
THE BANK OF NEW YORK
101 Barclay Street
New York, New York 10286
LEGAL ADVISERS
<TABLE>
<S> <C>
To the Issuer To the Underwriters as to United States law
ERNEST D. STEIN, ESQ. SIMPSON THACHER & BARTLETT
1211 Avenue of the Americas 425 Lexington Avenue
New York, New York 10036 New York, New York 10017
</TABLE>
To the Issuers as to United States law and United States tax law
SCHULTE ROTH & ZABEL LLP
900 Third Avenue
New York, New York 10022
LUXEMBOURG LISTING AGENT AND LUXEMBOURG TRANSFER AGENT
BANQUE NATIONALE DE PARIS LUXEMBOURG S.A.
24 Boulevard Royal
L-2952 Luxembourg
CALCULATION AGENT
THE CIT GROUP, INC.
1211 Avenue of the Americas
New York, New York 10036
<PAGE> 54
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$1,500,000,000
THE CIT GROUP, INC.
$500,000,000 FLOATING RATE NOTES DUE OCTOBER 1, 2002
$1,000,000,000 7.125% NOTES DUE OCTOBER 15, 2004
[THE CIT GROUP LOGO]
------------
PROSPECTUS SUPPLEMENT
SEPTEMBER 29, 1999
------------
JOINT BOOK RUNNING MANAGERS:
CHASE SECURITIES INC. SALOMON SMITH BARNEY
------------
CREDIT SUISSE FIRST BOSTON LEHMAN BROTHERS MERRILL LYNCH & CO.
MORGAN STANLEY DEAN WITTER WARBURG DILLON READ LLC
------------
BANC OF AMERICA SECURITIES LLC BANC ONE CAPITAL MARKETS, INC.
BNY CAPITAL MARKETS, INC. FIRST UNION CAPITAL MARKETS CORP. J.P. MORGAN & CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
