Pricing Supplement Dated October 21, 1997 Rule 424(b)(3)
(To Prospectus dated August 18, 1997 and File No. 333-32971
Prospectus Supplement dated August 19, 1997)
CPC International Inc.
Medium-Term Notes, Series F - Fixed Rate
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Principal Amount: $129,600,000 Interest Rate: 5.60%
Issue Price: $100,007,136 Original Issue Date: October 24, 1997
Agent's Discount or Stated Maturity Date: October 15, 2097
Commission: $1,125,080
Net Proceeds to Issuer: $98,882,056
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Interest Payment Dates: April 15 and October 15
Redemption:
/ / The Notes cannot be redeemed prior to the Stated Maturity Date.
/X/ The Notes may be redeemed prior to the Stated Maturity Date. See
"Other Provisions," below.
Initial Redemption Date:
Initial Redemption Percentage: %
Annual Redemption Percentage Reduction: % until Redemption
Percentage is 100% of the principal amount.
Optional Repayment:
/ / The Notes cannot be repaid prior to the Stated Maturity Date.
/X/ The Notes can be repaid prior to the Stated Maturity Date at the option
of CPC International Inc. See "Other Provisions," below.
Optional Repayment Date(s):
Repayment Prices: ________%
Currency:
Specified Currency:_____________________
(if other than U.S. dollars, see attached)
Authorized Denominations:
(Applicable only if (i) other than U.S. $1,000 or (ii) Specified
Currency is other than U.S. dollars)
Option to Receive Payments in Specified Currency: / / Yes / / No
(Applicable only if Specified Currency is other than U.S. dollars)
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Discount Note: /X/ Yes / / No
Total Amount of OID: $29,592,864 Yield to Maturity: 7.259%
Initial Accrual Period:
Indexed Note: Yes (see Other Provisions below) /X/ No
Amortizing Note: Yes (see Other Provisions below) /X/ No
Form: /X/ Book-Entry Certificated
Agent: /X/ Salomon Brothers Inc
/ / Merrill Lynch & Co.
/ / Other _________________
Agent acting in the capacity as indicated below:
/ / Agent /X/ Principal
If as principal:
/ / The Notes are being offered at varying prices related to
prevailing market prices at the time of resale.
/X/ The Notes are being offered at a fixed initial public offering
price of 77.166% of principal amount.
If as Agent:
The Notes are being offered at a fixed initial public offering
price of % of principal amount.
Exchange Rate Agent: N/A
Calculation Agent: N/A
Other Provisions:
Conditional Right to Shorten Maturity
CPC International Inc. ("CPC International" or the "Company") intends to
deduct interest paid on the Notes for United States federal income tax purposes.
However, there have been proposed tax law changes over the past year that, among
other things, would have prohibited an issuer from deducting interest payments
on debt instruments with a maturity of more than 40 years. While none of these
proposals has become law, there can be no assurance that similar legislation
affecting CPC International's ability to deduct interest paid on the Notes will
not be enacted in the future or that any such legislation would not have a
retroactive effective date.
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Upon the occurrence of a Tax Event (as defined below), CPC International
will have the right to shorten the maturity of the Notes to the minimum extent
required, in the opinion of nationally recognized independent tax counsel, such
that, after the shortening of the maturity, interest paid, or original issue
discount accrued, on the Notes will be deductible for United States federal
income tax purposes or, if such counsel is unable to opine definitively as to
such a minimum period, the minimum extent so required as determined in good
faith by the Board of Directors of CPC International, after receipt of an
opinion of such counsel regarding the applicable legal standards. There can be
no assurance that CPC International would not exercise its right to shorten the
maturity of the Notes upon the occurrence of such a Tax Event or as to the
period by which such maturity would be shortened. In the event that CPC
International elects to exercise its right to shorten the maturity of the Notes
on the occurrence of a Tax Event, CPC International will mail a notice of
shortened maturity to each holder of the Notes by first-class mail not more than
60 days after the occurrence of such Tax Event, stating the new maturity date of
the Notes. Such notice shall be effective immediately upon mailing. In addition,
in the event that the maturity of the Notes is shortened to the minimum extent
required, the principal amount of the Notes shall change to the New Redemption
Amount. The New Redemption Amount will be an amount equal to the Accreted Value
(as defined below), which will be determined as if the New Maturity Date were
the Specified Date (as defined below).
CPC International believes that the Notes should constitute indebtedness
for United States federal income tax purposes under current law and, in that
case, an exercise of its right to shorten the maturity of the Notes would not be
a taxable event to holders of the Notes for such purposes. Prospective investors
should be aware, however, that CPC International's exercise of its right to
shorten the maturity of the Notes will be a taxable event to holders of the
Notes for United States federal income tax purposes if the Notes are treated as
equity for United States federal income tax purposes before the maturity is
shortened, assuming that the Notes of shortened maturity are treated as debt for
such purposes.
"Tax Event" means that CPC International shall have received an opinion of
nationally recognized independent tax counsel to the effect that, as a result of
(a) any amendment to, clarification of, or change (including any announced
prospective amendment, clarification or change) in any law, or any regulation
thereunder, of the United States, (b) any judicial decision, official
administrative pronouncement, ruling (including the public release of any
technical advice memorandum or other private letter ruling), regulatory
procedure, notice or announcement, including any notice or announcement of
intent to adopt or promulgate any ruling, regulatory procedure or regulation
(any of the foregoing, an "Administrative or Judicial Action"), or (c) any
amendment to, clarification of, or change in any official position with respect
to, or any interpretation of (including any position taken in any Internal
Revenue Service audit or similar proceeding, in each event, involving CPC
International), an Administrative or Judicial Action or a law or regulation of
the United States that differs from the theretofore generally accepted position
or interpretation, in each case, occurring on or after October 21, 1997, there
is more than an insubstantial increase in the risk that interest paid by CPC
International, or original issue discount accrued, on the Notes is not, or will
not be, deductible, in whole or in part, by CPC International for United States
federal income tax purposes.
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Optional Redemption
The Notes will be redeemable as a whole at any time or in part from time to
time, at the option of CPC International, on not less than 30 or more than 60
days' notice mailed to holders thereof, at a redemption price equal to (A) the
greater of (i) 100% of the Accreted Value (as defined below) and (ii) the sum of
the present values of the Remaining Scheduled Payments, discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate plus 20 basis points, reduced by the
amount of accrued interest, if any, on the principal amount at maturity being
redeemed to the date of redemption, plus (B) accrued interest, if any, on the
principal amount at maturity being redeemed to the date of redemption.
In addition, if a Tax Event occurs and in the opinion of nationally
recognized independent tax counsel, there would, notwithstanding any shortening
of the maturity of the Notes, be more than an insubstantial risk that interest
paid by CPC International, or original issue discount accrued, on the Notes is
not, or will not be, deductible, in whole or in part, by CPC International for
United States federal income tax purposes, CPC International will have the
right, within 90 days following the occurrence of such Tax Event, to redeem the
Notes in whole (but not in part), on not less than 30 or more than 60 days'
notice mailed to holders of the Notes, at a redemption price equal to (A) the
greater of (i) 100% of the Accreted Value (as defined below) and (ii) the sum of
the present values of the Remaining Scheduled Payments, discounted to the
redemption date on a semiannual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Treasury Rate plus 35 basis points, reduced by the
amount of interest accrued thereon to such redemption date, plus (B) accrued
interest on the principal amount at maturity being redeemed to the date of
redemption.
"Accreted Value" as of any date (the "Specified Date") means the sum of the
present values of the Remaining Scheduled Payments, discounted to the Specified
Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day
months) at 7.259% per annum, which was the initial yield to maturity of the
Notes based on the initial public offering price of the Notes set forth on the
cover of this Pricing Supplement.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the remaining term
of the Notes. "Independent Investment Banker" means one of the Reference
Treasury Dealers appointed by CPC International.
"Comparable Treasury Price" means, with respect to any redemption date, (A)
the average of the Reference Treasury Dealer Quotations for such redemption
date, after excluding the highest and lowest of such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such Quotations. "Reference
Treasury Dealer Quotations" means, with respect to each Reference Treasury
Dealer and any redemption date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable Treasury Issue (expressed in each
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case as a percentage of its principal amount) quoted in writing to the Trustee
by such Reference Treasury Dealer as of 3:30 p.m., New York City time on the
third business day preceding such redemption date.
"Reference Treasury Dealer" means each of Salomon Brothers Inc and their
respective successors and three other nationally recognized investment banking
firms that are Primary Treasury Dealers specified from time to time by CPC
International; provided, however, that if any of the foregoing shall cease to be
a primary U.S. Government securities dealer in New York City (a "Primary
Treasury Dealer"), CPC International shall substitute therefor another
nationally recognized investment banking firm that is a Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each Note to be
redeemed, the remaining scheduled payments of the principal thereof and interest
thereon that would be due after the related redemption date but for such
redemption.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual equivalent yield to maturity (computed as of the
second business day immediately preceding such redemption date) of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date.
On and after the redemption date, interest will cease to accrue on the Note
or any portion thereof called for redemption. On or before any redemption date,
CPC International shall deposit with a paying agent (or the Trustee) money
sufficient to pay the redemption price of and accrued interest on the Notes to
be redeemed on such date. If less than all the Notes are to be redeemed, the
Notes to be redeemed shall be selected by the Trustee by such method as the
Trustee shall deem fair and appropriate.
Treatment of Original Issue Discount in an Event of Default
The Notes provide that in an Event of Default, the trustee or the holders
of at least 25% in aggregate principal amount of Notes could declare an
acceleration of the Notes. Upon such declaration, the Notes by their terms would
become due and payable at their full face amount, irrespective of any original
issue discount ("OID"). Nevertheless, under the U.S. Bankruptcy Code, unmatured
or unaccrued interest as of the date of the filing of a debtor's bankruptcy
petition is not allowed as a claim on unsecured debt (with certain exceptions).
OID on unsecured debt to the extent not accrued as of the date of an issuer's
bankruptcy filing is treated as unmatured interest, and therefore is not allowed
as a bankruptcy claim. Because of the issuance of the Notes at a purchase price
lower than their face amount, a bankruptcy court would be expected to regard
such Notes as OID notes. Holders of the Notes should therefore take into
consideration that the allowable amount of their bankruptcy claims relating to
the Notes in a subsequent bankruptcy filing of CPC International, if any, may be
expected to be not greater than the face amount of the Notes reduced by the
amount of unaccrued OID as of the date of the bankruptcy filing. Furthermore, it
is doubtful whether any court outside of the bankruptcy context would grant a
judgment against the Company for the full face amount of the Notes prior to
their maturity.
