Filed Under Rule 424(b)(3)
File No. 33-48128
PRICING SUPPLEMENT NO. 39 DATED MARCH 8, 1994
To Prospectus dated June 2, 1992 and
Prospectus Supplement dated July 24, 1992)
E. I. DUPONT DE NEMOURS AND COMPANY
MEDIUM-TERM NOTES, SERIES F
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
(FLOATING RATE)
DSE-CUSIP: 26353V BJ7
Face Amount: $64,400,000 Net Proceeds to Company: $64,303,400
Issue Price: 100% Specified Currency: U.S. Dollars
Original Issue Date: March 17, 1994 Determination Agent: Merrill Lynch,
Pierce, Fenner & Smith Incorporated
Stated Maturity: March 17, 1995 Form: [X] Book-Entry
[ ] Certificated
Interest Rate: 4.25%
Interest Payment Dates: September 17, 1994 and March 17, 1995
Minimum Denominations: $1,000
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Redemption: [X] The Notes cannot be redeemed prior to the Stated Maturity.
[ ] The Notes may be redeemed prior to the Stated Maturity.
Initial Redemption Date:
Initial Redemption Price:
Annual Redemption Price Reduction:
Repayment: [X] The Notes cannot be repaid prior to the Stated Maturity.
[ ] The Notes may be repaid prior to the Stated Maturity.
Initial Repayment Date:
Initial Repayment Price:
Annual Repayment Price Reduction:
Discount Note: [ ] Yes [X] No
Total Amount of OID:
Yield to Maturity:
Initial Accrual Period OID:
Principal Discount or Commission: 0.150% Agent: Merrill Lynch, Pierce,
Fenner & Smith Incorporated
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DESCRIPTION OF NOTES
The following description of the particular terms of the Notes
described herein (which are Indexed Notes) supplements, and to the extent
inconsistent therewith replaces, the descriptions of the general terms and
provisions of the Notes set forth in the accompanying Prospectus Supplement
and of the Debt Securities set forth in the accompanying Prospectus, to
which descriptions reference is hereby made. All terms used but not defined
herein which are defined in the accompanying Prospectus or Prospectus
Supplement shall have the meanings therein assigned to them.
Payment of Interest
The Notes will bear interest at the fixed rate per annum stated
above. Interest will be payable on September 17, 1994 and at Stated
Maturity.
Payment of Principal
The principal amount of a Note payable at Stated Maturity shall be
the greater of (i) zero and (ii) an amount determined by the Determination
Agent on the Reference Date based on the following formula:
15% X Face Amount X [1 + Dur1 X (7.10% - CAD5)] +
15% X Face Amount X [1 + Dur2 X (7.38% - CAD7)] +
15% X Face Amount X [1 + Dur3 X (7.11% - AUD5)] +
15% X Face Amount X [1 + Dur4 X (7.35% - AUD10)] +
40% X Face Amount X [1 + Dur5 X (4.27% - JPY7)]
See "Description of Notes--Certain Definitions" for the definition
of certain terms used in the foregoing formula.
The principal amount of a Note payable at Stated Maturity thus
will be determined with reference to the five and seven-year offered side
Canadian Dollar swap rates, the five and ten-year offered side Australian
Dollar swap rates and the seven-year offered side Japanese Yen swap rate,
but will never be less than zero. Depending on such rates on the Reference
Date, the principal amount payable at Stated Maturity will range from zero
to an amount in excess of the Face Amount. In the absence of manifest
error, the determination by the Determination Agent of the principal amount
payable at Stated Maturity shall be final and binding.
Certain Definitions
"AUD5" means the rate determined by the Determination Agent on the
Reference Date in accordance with the following provisions: AUD5 will be
determined on the basis of the offered side of the five-year Australian
Dollar swap rate which appears on the Telerate Page 42278 as of 11:00 A.M.,
London time. If such rate does not so appear on such page, the
Determination Agent will request each of the Reference Dealers to provide
the Determination Agent with its offered quotation for the five-year
Australian Dollar swap rate at approximately 11:00 A.M., London time, on the
Reference Date in an amount that is representative of a single transaction
for such Reference Dealer at such time. The Determination Agent will
disregard the highest and lowest of the five quotations and "AUD5" will be
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the arithmetic mean of the remaining three quotations. If fewer than five
but at least two such quotations are provided, the rate shall be the
arithmetic mean of the quotations without disregarding any quotations, and,
if fewer than two quotations are provided as requested, the rate will be
determined by the Determination Agent by such method as the Determination
Agent determines, in good faith, in its absolute discretion.
"AUD10" means the rate determined by the Determination Agent on
the Reference Date in accordance with the following provisions: AUD10 will
be determined on the basis of the offered side of the ten-year Australian
Dollar swap rate which appears on the Telerate Page 42278 as of 11:00 A.M.,
London time. If such rate does not so appear on such page, the
Determination Agent will request each of the Reference Dealers to provide
the Determination Agent with its offered quotation for the ten-year
Australian Dollar swap rate at approximately 11:00 A.M., London time, on the
Reference Date in an amount that is representative of a single transaction
for such Reference Dealer at such time. The Determination Agent will
disregard the highest and lowest of the five quotations and "AUD10" will be
the arithmetic mean of the remaining three quotations. If fewer than five
but at least two such quotations are provided, the rate shall be the
arithmetic mean of the quotations without disregarding any quotations, and,
if fewer than two quotations are provided as requested, the rate will be
determined by the Determination Agent by such method as the Determination
Agent determines, in good faith, in its absolute discretion.
"Australian Dollar swap rate" means, in general, a fixed per annum
rate of interest quoted on a 30/360 day basis and paid semi-annually that a
hypothetical fixed rate payor would be prepared to pay under an interest
rate swap or exchange agreement, and for which such payor would expect to
receive, in return, over the period of years specified, a floating rate of
interest equal to the then-prevailing six-month Australian Dollar LIBOR
rate.
"Telerate Page 42278" means the display page so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on
that service, or such other service as may be nominated as the information
vendor, for the purpose of displaying rates or prices relating to Australian
Dollar swap rates).
"CAD5" means the rate determined by the Determination Agent on the
Reference Date in accordance with the following provisions: CAD5 will be
determined on the basis of the offered side of the five year Canadian Dollar
swap rate which appears on the Telerate Page 42277 as of 11:00 A.M., London
time. If such rate does not so appear on such page, the Determination Agent
will request each of the Reference Dealers to provide the Determination
Agent with its offered quotation for the five-year Canadian Dollar swap rate
at approximately 11:00 A.M., London time, on the Reference Date in an amount
that is representative of a single transaction for such Reference Dealer at
such time. The Determination Agent will disregard the highest and lowest of
the five quotations and "CAD5" will be the arithmetic mean of the remaining
three quotations. If fewer than five but at least two such quotations are
provided, the rate shall be the arithmetic mean of the quotations without
disregarding any quotations, and, if fewer than two quotations are provided
as requested, the rate will be determined by the Determination Agent by such
method as the Determination Agent determines, in good faith, in its absolute
discretion.
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"CAD7" means the rate determined by the Determination Agent on the
Reference Date in accordance with the following provisions: CAD7 will be
determined on the basis of the offered side of the seven-year Canadian
Dollar swap rate which appears on the Telerate Page 42277 as of 11:00 A.M.,
London time. If such rate does not so appear on such page, the
Determination Agent will request each of the Reference Dealers to provide
the Determination Agent with its offered quotation for the seven-year
Canadian Dollar swap rate at approximately 11:00 A.M., London time, on the
Reference Date in an amount that is representative of a single transaction
for such Reference Dealer at such time. The Determination Agent will
disregard the highest and lowest of the five quotations and "CAD7" will be
the arithmetic mean of the remaining three quotations. If fewer than five
but at least two such quotations are provided, the rate shall be the
arithmetic mean of the quotations without disregarding any quotations, and,
if fewer than two quotations are provided as requested, the rate will be
determined by the Determination Agent by such method as the Determination
Agent determines, in good faith, in its absolute discretion.
"Canadian Dollar swap rate" means, in general, a fixed per annum
rate of interest quoted on an annual, 30/360 day basis and paid
semi-annually that a hypothetical fixed rate payor would be prepared to pay
under an interest rate swap or exchange agreement, and for which such payor
would expect to receive, in return, over the period of years specified, a
floating rate of interest equal to the then-prevailing six-month Canadian
Dollar LIBOR rate.
"Telerate Page 42277" means the display page so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on
that service, or such other service as may be nominated as the information
vendor, for the purpose of displaying rates or prices relating to Canadian
Dollar swap rates).
"JPY7" means the rate determined by the Determination Agent on the
Reference Date in accordance with the following provisions: JPY7 will be
determined on the basis of the offered side of the seven-year Japanese Yen
swap rate which appears on the Telerate Page 42283 as of 11:00 A.M., London
time. If such rate does not so appear on such page, the Determination Agent
will request each of the Reference Dealers to provide the Determination
Agent with its offered quotation for the seven-year Japanese Yen swap rate
at approximately 11:00 A.M. London time, on the Reference Date in an amount
that is representative of a single transaction for such Reference Dealer at
such time. The Determination Agent will disregard the highest and lowest of
the five quotations and "JPY7" will be the arithmetic mean of the remaining
three quotations. If fewer than five but at least two such quotations are
provided, the rate shall be the arithmetic mean of the quotations without
disregarding any quotations, and, if fewer than two quotations are provided
as requested, the rate will be determined by the Determination Agent by such
method as the Determination Agent determines, in good faith, in its absolute
discretion.
"Japanese Yen swap rate" means, in general, a fixed per annum rate
of interest quoted on an annual, 30/360 day basis and paid semi-annually
that a hypothetical fixed rate payor would be prepared to pay under an
interest rate swap or exchange agreement, and for which such payor would
expect to receive, in return, over the period of years specified, a floating
rate of interest equal to the then-prevailing six-month Japanese Yen LIBOR
rate.
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"Telerate Page 42283" means the display page so designated on the
Dow Jones Telerate Service (or such dollar page as may replace that page on
that service, or such other service as may be nominated as the information
vendor, for the purpose of displaying rates or prices relating to Japanese
Yen swap rates).
"Determination Day" means any day, other than a Saturday or
Sunday, that is not a day on which banking institutions are authorized or
required by law or regulation to close in New York City and also is a day in
which dealings in deposits in Australian Dollars, Canadian Dollars and
Japanese Yen are transacted in the London interbank market.
"Reference Date" means the second Determination Day prior to
Stated Maturity.
"Reference Dealer" means any major bank or banking corporation in
London, selected in good faith by the Determination Agent, which will
provide offered quotations on the relevant swap rates.
"Dur1" means an amount equal to the formula:
(1 / CAD5) x [1 - (1 + (CAD5 / 2)) raised to the exponent (-10)].
"Dur2" means an amount equal to the formula:
(1 / CAD7) x [1 - (1 + CAD7 / 2)) raised to the exponent (-14)].
"Dur3" means an amount equal to the formula:
(1 / AUD5) x [1 - (1 + AUD5 / 2)) raised to the exponent (-10)].
"Dur4" means an amount equal to the formula:
(1 / AUD10) x [1 - (1 + (AUD10 / 2)) raised to the exponent (-20)].
"Dur5" means an amount equal to the formula:
(1 / JPY7 x [1 - (1 + JPY7 / 2)) raised to the exponent (-14)].
IMPORTANT INFORMATION
An investment in the Notes entails significant risks that are not
associated with a similar investment in other Debt Securities. Such risks
include, without limitation, the possibility of significant changes in
Canadian Dollar, Australian Dollar and Japanese Yen swap rates and in rates
of exchange between currencies and the possibility of the imposition or
modification of foreign exchange controls by either the United States or
foreign governments. Such risks generally depend on factors over which the
Company has no control. For example, the exchange rates between currencies
are at any moment a result of the supply of, and demand for, each currency.
Changes in swap rates result over time from the interaction of many factors
directly or indirectly affecting economic conditions in the United States,
Canada, Australia and Japan, as well as economic, military and political
developments in other countries. Of particular importance are exchange
rates, rates of inflation, interest rate levels, the balance of payments and
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the extent of government surpluses and deficits in the respective countries,
all of which are in turn sensitive to the monetary, fiscal and trade
policies pursued by the governments in such countries and in other countries
important to international trade and finance.
Also, sovereign governments use a variety of techniques, such as
intervention by a country's central bank or imposition of regulatory
controls or taxes, to affect the level of interest rates and exchange rates
of their currencies. Governments may also issue a new currency to replace
an existing currency or alter the exchange rate or relative exchange
characteristics by devaluation or revaluation of a currency. Thus, a
special risk in purchasing the Notes is that governmental actions could
interfere with or change theretofore freely determined currency valuations
and fluctuations in market forces. There will be no adjustment or change in
the terms of the Notes in the event that exchange rates should become fixed,
or in the event of any devaluation or revaluation or imposition of exchange
or other regulatory controls or taxes, or in the event of other developments
affecting the U.S. Dollar, the Canadian Dollar, the Australian Dollar or the
Japanese Yen or Canadian Dollar, Australian Dollar or Japanese Yen swap
rates.
THIS PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND
PROSPECTUS SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN THE
NOTES. THE COMPANY BELIEVES THAT THESE RISKS ARE POTENTIALLY TOO VARIABLE
TO ASCERTAIN AND DESCRIBE WITH ANY REASONABLE DEGREE OF CERTAINTY AND
INCORPORATING EVERY ECONOMIC, FINANCIAL, POLITICAL AND MILITARY
CIRCUMSTANCE, AMONG OTHER THINGS, WOULD BE IMPRACTICAL. PROSPECTIVE
INVESTORS SHOULD THEREFORE CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS
TO THE RISKS ENTAILED BY AN INVESTMENT IN THE NOTES. SUCH NOTES ARE NOT AN
APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH RESPECT TO
FOREIGN CURRENCY TRANSACTIONS.
SWAP RATES
The following table sets forth certain historical swap rates based
on (source) the last New York Business Day of the month indicated:
Seven- Seven-
Five-Year Year Five-Year Ten-Year Year
Canadian Canadian Australian Australian Japanese
Month-End Dollar Dollar Dollar Dollar Dollar
1989:
March 11.47886 11.25600% 15.15% 14.40% 5.30%
June 10.27216 10.29630 15.03 14.40 5.55
September 10.89918 10.83934 15.36 14.50 5.51
December 10.85457 10.75952 14.20 13.85 6.40
1990:
March 12.74270 12.44374 14.67 14.28 7.48
June 12.17936 11.96338 14.74 14.23 7.14
September 11.92693 11.99700 13.81 14.02 8.15
December 11.11007 10.97670 12.79 12.80 6.95
1991:
March 10.14572 10.23796 12.13 12.27 7.01
June 10.40687 10.62792 11.76 12.00 7.25
September 9.246721 9.323514 10.83 11.23 6.29
December 8.362758 8.536713 8.73 9.88 5.88
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Seven- Seven-
Five-Year Year Five-Year Ten-Year Year
Canadian Canadian Australian Australian Japanese
Month-End Dollar Dollar Dollar Dollar Dollar
1992:
March 9.358686 9.470033 10.02 10.44 5.86
June 8.130834 8.526567 8.43 9.45 5.61
September 8.077457 8.382866 8.93 9.48 5.11
December 8.304973 8.487182 8.72 9.40 4.99
1993:
March 7.570036 8.285028 7.42 8.09 4.84
June 7.159651 7.725555 7.03 7.70 4.89
September 6.753463 7.245875 6.65 7.12 4.09
December 5.881373 6.576602 6.48 6.97 3.26
On March 8, 1994, the Offered side swap rates as reported by
Bloomberg Financial Markets were as follows: five-year Canadian Dollar =
7.01%; seven-year Canadian Dollar = 7.30%; five-year Australian Dollar =
7.14%; ten-year Australian Dollar = 7.54%; and seven-year Japanese Yen =
4.39%.
The information presented in the above table is furnished as a
matter of information only. In recent years, Canadian Dollar, Australian
Dollar and Japanese Yen swap rates have been highly volatile and such
volatility may occur in the future. The fluctuations in the Canadian
Dollar, Australian Dollar and Japanese Yen swap rates that have occurred in
the past, however, are not necessarily indicative of fluctuations in the
rates that may occur over the term of the notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In addition to the consequences summarized in the Prospectus
Supplement under the heading "United States Taxation", set forth below is a
summary of certain United States Federal income tax consequences to original
Holders of the Notes that have purchased the Notes at their Issue Price.
The Federal income tax treatment of the payments on the Notes is
unclear because payment on the Notes at Stated Maturity is entirely
contingent. However, there are at least three possible alternative
approaches.
Under the first approach, interest payments made on September 17,
1994, and at Stated Maturity will be taxable to a Holder that is a United
States person (a "U.S. Holder") as ordinary income at the time they accrue
or are received, depending on the U.S. Holder's method of tax accounting.
At Stated Maturity a U.S. Holder will recognize short-term capital loss if
the amount paid with respect to a Note is less than the Note's Issue Price
and short-term capital gain or possibly ordinary income if the amount paid
is greater than the Issue Price.
Under the second approach, the payments of interest on
September 17, 1994, and at Stated Maturity will be treated as a non-taxable
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return of principal and reduce the U.S. Holder's tax basis (which initially
was the Issue Price). On the Stated Maturity, a U.S. Holder will recognize
ordinary income (treated as interest) to the extent the payment made by the
Company exceeds such U.S. Holder's tax basis and capital loss to the extent
it is less than such U.S. Holder's tax basis. In the case of non-U.S.
Holders, such interest will be treated as described in the Prospectus
Supplement under "Non-United States Persons". This approach is based on
existing proposed original issue discount regulations relating to contingent
payment debt obligations (the "Proposed Regulations"), which by their terms
apply to the Notes. However, the Proposed Regulations no longer appear to
reflect the IRS's current position with respect to contingent payment debt
obligations.
Under the third approach, accrual method U.S. Holders would accrue
original issue discount ("OID") into income, as described in the Prospectus
Supplement, based on the expected yield of the Note using a reasonable
estimate of the payment at Stated Maturity determined as of the end of a
taxable year or as of the issue date, or a market yield for the Note
determined as of the issue date. Such amounts would be subject to
subsequent adjustments to the extent that the estimate was incorrect. The
payments of interest on September 17, 1994, and at Stated Maturity will be
treated first as payments of OID to the extent of accrued OID at such time
and then as a return of principal and, therefore, such payments would not be
included in a U.S. Holder's income. Cash method U.S. Holders would apply
estimates in a similar fashion to that described in the Prospectus
Supplement under "United States Taxation--United States Holders--Short-Term
Notes" to determine the portion of interest received that was taxable. This
approach is based on proposed contingent payment debt regulations that were
announced by the IRS in January 1993 but subsequently withdrawn.
Although under the third approach any gain recognized on the sale
or exchange of a Note would be ordinary income, under the first and second
approaches, it is not clear whether any such gain recognized would be
ordinary income or capital gain, Any loss on the sale or exchange of a Note
would be a capital loss (except in some circumstances under the third
approach).
Backup Withholding. The rate of backup withholding has been
increased from 20% to 31%.
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