Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-53299
333-53299-01
333-53299-02
333-53299-03
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE WITHOUT THE DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT AND
ACCOMPANYING PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 5, 1998
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 30, 1998
<TABLE>
<S> <C>
RATINGS:
STANDARD & POOR'S: "AAA"
MOODY'S: "AAA"
(SEE "RATINGS" HEREIN)
</TABLE>
$175,000,000
(ALABAMA POWER LOGO)
SERIES D % SENIOR INSURED QUARTERLY NOTES DUE SEPTEMBER 30, 2018
(IQ NOTES SM*)
---------------------
Interest on the Series D % Senior Insured Quarterly Notes due September
30, 2018 (the "Series D Senior Notes") at the rate of % per annum (the
"Securities Rate") will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (each, an "Interest Payment Date"),
commencing September 30, 1998. The Series D Senior Notes will be redeemable at
100% of the principal amount redeemed plus accrued interest to the redemption
date at the option of Alabama Power Company (the "Company") in whole or in part
on or after September 30, 2002. In addition, at the option of any deceased
Beneficial Owner's Representative (each as defined herein), interests in the
Series D Senior Notes are redeemable at 100% of their principal amount, plus
accrued interest, subject to certain limitations. See "Description of the Series
D Senior Notes -- Limited Right of Redemption upon Death of Beneficial Owner."
The Series D Senior Notes will be available for purchase in denominations of
$1,000 and any integral multiple thereof.
The Series D Senior Notes will be direct, unsecured and unsubordinated
obligations of the Company ranking pari passu with all other unsecured and
unsubordinated obligations of the Company. The Series D Senior Notes will be
effectively subordinated to all secured debt of the Company, including its first
mortgage bonds, aggregating approximately $2,426,000,000 outstanding at March
31, 1998. The Senior Note Indenture contains no restrictions on the amount of
additional indebtedness that may be incurred by the Company.
Payment of the principal of and interest on the Series D Senior Notes when
due will be insured by a financial guaranty insurance policy (the "Policy") to
be issued by MBIA Insurance Corporation (the "Insurer") simultaneously with the
delivery of the Series D Senior Notes.
MBIA
The Series D Senior Notes initially will be represented by a global
certificate or certificates registered in the name of The Depository Trust
Company ("DTC") or its nominee. Beneficial interests in the Series D Senior
Notes will be shown on, and transfers thereof will be effected only through,
records maintained by Participants (as defined herein) in DTC. Except as
described herein, Series D Senior Notes in certificated form will not be issued
in exchange for the global certificates. See "Description of the Series D Senior
Notes -- Book-Entry Only Issuance -- The Depository Trust Company."
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The Underwriters have severally agreed to purchase the Series D Senior Notes
at % of their principal amount ($ aggregate proceeds to the
Company, before deducting expenses payable by the Company estimated at
$ ), subject to the terms and conditions set forth in the Underwriting
Agreement.
The Underwriters propose to offer the Series D Senior Notes from time to
time for sale in one or more negotiated transactions, or otherwise, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. For further information with respect to
the plan of distribution and any discounts, commissions or profits on resale
that may be deemed underwriting discounts or commissions, see "Underwriting"
herein.
---------------------
The Series D Senior Notes are offered by the Underwriters, as named herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that delivery of the Series D
Senior Notes will be made in book-entry form only through the facilities of DTC
in New York, New York on or about August , 1998 against payment therefor in
immediately available funds.
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*IQ Notes is a service mark of Edward D. Jones & Co., L.P.
EDWARD D. JONES & CO., L.P. GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO. PRUDENTIAL SECURITIES INCORPORATED
---------------------
The date of this Prospectus Supplement is August , 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SERIES D SENIOR
NOTES OFFERED HEREBY, INCLUDING BY ENTERING STABILIZING BIDS, PURCHASING SERIES
D SENIOR NOTES TO COVER SYNDICATE SHORT POSITIONS AND IMPOSING PENALTY BIDS. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING" HEREIN.
SUMMARY OF OFFERING
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Capitalized terms not otherwise defined shall have
the meanings assigned in the Glossary.
The Company................ The Company is a corporation organized under the
laws of the State of Alabama on November 10, 1927,
by the consolidation of a predecessor Alabama Power
Company, Gulf Electric Company and Houston Power
Company. The Company has its principal office at
600 North 18th Street, Birmingham, Alabama 35291,
telephone (205) 257-1000. The Company is a wholly
owned subsidiary of The Southern Company.
The Company is a regulated public utility engaged
in the generation, transmission, distribution and
sale of electric energy within an approximately
44,500 square mile service area comprising most of
the State of Alabama.
Series D Senior Notes
Offered.................. The Company is offering $175,000,000 aggregate
principal amount of its Series D Senior Notes.
Interest on the Series D Senior Notes will be
payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year,
commencing on September 30, 1998.
Record Date................ The regular record date for each Interest Payment
Date will be the close of business on the 15th
calendar day prior to such Interest Payment Date.
Ranking.................... The Series D Senior Notes will be direct, unsecured
and unsubordinated obligations of the Company
ranking pari passu with all other unsecured and
unsubordinated obligations of the Company. The
Series D Senior Notes will be effectively
subordinated to all secured debt of the Company,
including its first mortgage bonds, aggregating
approximately $2,426,000,000 outstanding at March
31, 1998. The Senior Note Indenture contains no
restrictions on the amount of additional
indebtedness that may be incurred by the Company.
Company's Optional
Redemption............... The Series D Senior Notes will be redeemable by the
Company (in whole or in part), from time to time on
or after September 30, 2002, at 100% of the
principal amount to be redeemed plus accrued
interest to the redemption date. See "Description
of the Series D Senior Notes -- Optional
Redemption" herein.
Beneficial Owner's
Redemption Privilege..... At the option of any deceased Beneficial Owner's
Representative, interests in the Series D Senior
Notes are redeemable at 100% of their principal
amount, plus accrued interest, subject to the
maximum principal amounts of $25,000 per deceased
Beneficial Owner and $3,500,000 in the aggregate
for all deceased Beneficial Owners during the
initial period
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<PAGE>
ending September 1, 1999 and during each
twelve-month period thereafter. See "Description of
the Series D Senior Notes -- Limited Right of
Redemption upon Death of Beneficial Owner."
Insurance.................. Payment of the principal of and interest on the
Series D Senior Notes when due will be insured by
the Policy to be issued by the Insurer
simultaneously with the delivery of the Series D
Senior Notes. See "The Policy and the Insurer."
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1998, and as adjusted to reflect the transactions described in note
(1) below. The following data is qualified in its entirety by reference to and,
therefore, should be read together with the detailed information and financial
statements appearing in the documents incorporated herein by reference. See also
"Selected Information" in the accompanying Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
-------------------------------
ACTUAL AS ADJUSTED(1)
---------- ------------------
(THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Common Stock Equity......................................... $2,724,177 $2,754,177 45.8%
Cumulative Preferred Stock.................................. 255,512 255,512 4.2
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Company Junior
Subordinated Notes........................................ 297,000 297,000 4.9
Senior Notes................................................ 393,800 758,800 12.6
Other Long-Term Debt........................................ 2,149,726 1,951,726 32.5
---------- ---------- -----
Total, excluding amounts due within one year...... $5,820,215 $6,017,215 100.0%
========== ========== =====
</TABLE>
- ---------------
(1) Reflects (i) contributions to capital from The Southern Company in April
1998 in the amount of $30,000,000; (ii) the issuance in April 1998 of
$190,000,000 aggregate principal amount of Series C 7% Senior Notes due
March 31, 2048; (iii) the proposed redemption in September 1998 of the
outstanding $198,000,000 aggregate principal amount of First Mortgage Bonds,
8 1/2% Series due May 1, 2022; and (iv) the issuance of the Series D Senior
Notes.
USE OF PROCEEDS
The proceeds from the sale of the Series D Senior Notes, together with
other funds of the Company, will be applied by the Company to redeem in
September 1998 the $198,000,000 outstanding principal amount of its First
Mortgage Bonds, 8 1/2% Series due May 1, 2022. Such redemption is subject to the
Company's closing the sale of the Series D Senior Notes.
RECENT RESULTS OF OPERATIONS
For the twelve months ended June 30, 1998, "Operating Revenues," "Income
Before Interest Charges" and "Net Income After Dividends on Preferred Stock"
were $3,296,000,000, $723,400,000 and $415,786,000, respectively. In the opinion
of the management of the Company, the above amounts for the twelve months ended
June 30, 1998 reflect all adjustments (which were only normal recurring
adjustments) necessary to present fairly the results of operations for such
period. The "Ratio of Earnings to Fixed Charges" and the "Ratio of Earnings to
Fixed Charges Plus Preferred Dividend Requirements (Pre-Income Tax Basis)" for
the twelve months ended June 30, 1998 were 3.19 and 3.03, respectively.
S-3
<PAGE>
DESCRIPTION OF THE SERIES D SENIOR NOTES
Set forth below is a description of the specific terms of the Series D
Senior Notes. This description supplements, and should be read together with,
the description of the general terms and provisions of the Senior Notes set
forth in the accompanying Prospectus under the caption "Description of the
Senior Notes." The following description does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the description in
the accompanying Prospectus and the Senior Note Indenture (as defined therein).
GENERAL
The Series D Senior Notes will be issued as a series of Senior Notes under
the Senior Note Indenture. The Series D Senior Notes will be limited in
aggregate principal amount to $175,000,000.
The entire principal amount of the Series D Senior Notes will mature and
become due and payable, together with any accrued and unpaid interest thereon,
on September 30, 2018. The Series D Senior Notes are not subject to any sinking
fund provision.
INTEREST
Each Series D Senior Note shall bear interest at the Securities Rate from
the date of original issuance, payable quarterly in arrears on March 31, June
30, September 30 and December 31 of each year to the person in whose name such
Series D Senior Note is registered at the close of business on the fifteenth
calendar day prior to such payment date. The initial Interest Payment Date is
September 30, 1998. The amount of interest payable will be computed on the basis
of a 360-day year of twelve 30-day months. In the event that any date on which
interest is payable on the Series D Senior Notes is not a Business Day, then
payment of the interest payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
SPECIAL INSURANCE PROVISIONS OF THE SENIOR NOTE INDENTURE
Notwithstanding any other provision of the Senior Note Indenture, so long
as the Insurer is not in default under the Policy, the Insurer shall be entitled
to control and direct the enforcement of all rights and remedies with respect to
the Series D Senior Notes upon the occurrence and continuation of an Event of
Default.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Series D Senior Notes, in
whole or in part, without premium, from time to time, on or after September 30,
2002, upon not less than 30 nor more than 60 days' notice, at a Redemption Price
equal to 100% of the principal amount to be redeemed plus any accrued and unpaid
interest to the Redemption Date.
If notice of redemption is given as aforesaid, the Series D Senior Notes so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price together with any accrued interest thereon, and from and after
such date (unless the Company shall default in the payment of the Redemption
Price and accrued interest) such Series D Senior Notes shall cease to bear
interest. If any Series D Senior Note called for redemption shall not be paid
upon surrender thereof for redemption, the principal shall, until paid, bear
interest from the Redemption Date at the Securities Rate. See "Description of
the Senior Notes -- Events of Default" in the accompanying Prospectus.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), the Company or its
affiliates may, at any time and from time to time, purchase outstanding Series D
Senior Notes by tender, in the open market or by private agreement.
S-4
<PAGE>
LIMITED RIGHT OF REDEMPTION UPON DEATH OF BENEFICIAL OWNER
Unless the Series D Senior Notes have been declared due and payable prior
to their maturity by reason of an Event of Default (as defined in the
accompanying Prospectus), the Representative (as defined herein) of a deceased
Beneficial Owner (as defined herein) has the right to request redemption at par
of all or part of his interest, expressed in integral multiples of $1,000
principal amount, in the Series D Senior Notes for payment prior to maturity,
and the Company will redeem the same subject to the limitations that the Company
will not be obligated to redeem during the period from the original issuance of
the Series D Senior Notes through and including September 1, 1999 (the "Initial
Period"), and during any twelve-month period which ends on and includes each
September 1 thereafter (each such twelve-month period being hereinafter referred
to as a "Subsequent Period") (i) on behalf of a deceased Beneficial Owner any
interest in the Series D Senior Notes which exceeds an aggregate principal
amount of $25,000 or (ii) interests in the Series D Senior Notes in an aggregate
principal amount exceeding $3,500,000. A request for redemption may be initiated
by the Representative of a deceased Beneficial Owner at any time and in any
principal amount in integral multiples of $1,000. Representatives of deceased
Beneficial Owners must make arrangements with the Participant (as defined
herein) through whom such interest is owned in order that timely presentation of
redemption requests can be made by the Participant and, in turn, by DTC to the
Senior Note Indenture Trustee. If the Company, although not obligated to do so,
chooses to redeem interests of a deceased Beneficial Owner in the Series D
Senior Notes in the Initial Period or in any Subsequent Period in excess of the
$25,000 limitation, such redemption, to the extent that it exceeds the $25,000
limitation for any deceased Beneficial Owner, shall not be included in the
computation of the $3,500,000 aggregate limitation for such Initial Period or
such Subsequent Period, as the case may be, or for any succeeding Subsequent
Period.
Subject to the $25,000 and the $3,500,000 limitations, the Company will,
after the death of any Beneficial Owner, redeem the interest of the Beneficial
Owner in the Series D Senior Notes within 60 days following receipt by the
Senior Note Indenture Trustee of a Redemption Request (as defined herein). If,
during the Initial Period or any Subsequent Period, Redemption Requests exceed
the aggregate principal amount of interests in Series D Senior Notes required to
be redeemed, then such excess Redemption Requests will be applied to successive
Subsequent Periods, regardless of the number of Subsequent Periods required to
redeem such interests.
A request for redemption of an interest in the Series D Senior Notes may be
initiated by the personal representative or other person authorized to represent
the estate of a deceased Beneficial Owner or from a surviving joint tenant(s) or
tenant(s) by the entirety (each a "Representative"). The Representative shall
deliver a request to the Participant through whom the deceased Beneficial Owner
owned such interest, in form satisfactory to the Participant, together with
evidence of the death of the Beneficial Owner, evidence of the authority of the
Representative satisfactory to the Participant, such waivers, notices or
certificates as may be required under applicable state or federal law and such
other evidence of the right to such redemption as the Participant shall require.
The request shall specify the principal amount of the interest in the Series D
Senior Notes to be redeemed. The Participant shall thereupon deliver to DTC a
request for redemption substantially in the form attached as an exhibit to the
Senior Note Indenture (a "Redemption Request"), accompanied by the documents
submitted to the Participant as above provided, and DTC will forward the same to
the Senior Note Indenture Trustee. Documents accompanying Redemption Requests
shall be in form satisfactory to the Company. The Senior Note Indenture Trustee
may conclusively assume, without independent investigation, that the statements
contained in each Redemption Request are true and correct and shall have no
responsibility for reviewing any documents accompanying a Redemption Request.
The price to be paid by the Company for an interest in the Series D Senior
Notes to be redeemed pursuant to a request on behalf of a deceased Beneficial
Owner is one hundred percent (100%) of the principal amount thereof plus accrued
but unpaid interest to the date of payment. Subject to arrangements with DTC,
payment for interests in the Series D Senior Notes which are to be redeemed
shall be made to DTC upon presentation of Series D Senior Notes to the Senior
Note Indenture Trustee for redemption in the aggregate principal amount
specified in the Redemption Requests submitted to the Senior Note Indenture
Trustee by DTC which are to be fulfilled in connection with such payment. Any
acquisition of Series D Senior Notes by the Company other than by redemption at
the option of any Representative of a deceased Beneficial Owner
S-5
<PAGE>
shall not be included in the computation of either the $25,000 or the $3,500,000
limitation for the Initial Period or for any Subsequent Period.
Interest in the Series D Senior Notes held in tenancy by the entirety,
joint tenancy or tenants in common will be deemed to be held by a single
Beneficial Owner, and the death of a tenant in common, tenant by the entirety or
joint tenant will be deemed the death of a Beneficial Owner. The death of a
person who, during such person's lifetime, was entitled to substantially all of
the rights of a Beneficial Owner of an interest in the Series D Senior Notes
will be deemed the death of the Beneficial Owner, regardless of the recordation
of such interest on the records of the Participant, if such rights can be
established to the satisfaction of the Participant and the Company. Such
interest shall be deemed to exist in typical cases of nominee ownership,
ownership under the Uniform Gifts to Minors Act or the Uniform Transfers to
Minors Act, community property or other similar joint ownership arrangements,
including individual retirement accounts or Keogh [H.R.10] plans maintained
solely by or for the decedent or by or for the decedent and any spouse, and
trust and certain other arrangements where one person has substantially all of
the rights of a Beneficial Owner during such person's lifetime.
In the case of a Redemption Request which is presented on behalf of a
deceased Beneficial Owner and which has not been fulfilled at the time the
Company gives notice of its election to redeem the Series D Senior Notes, the
interests in the Series D Senior Notes which are the subject of such Redemption
Request shall not be eligible for redemption pursuant to the Company's option to
redeem but shall remain subject to redemption pursuant to such Redemption
Request.
Subject to the provisions of the immediately preceding paragraph, any
Redemption Request may be withdrawn upon delivery of a written request for such
withdrawal given to the Senior Note Indenture Trustee by DTC prior to payment
for redemption of the interest in the Series D Senior Notes by reason of the
death of a Beneficial Owner.
The Company is legally obligated to redeem Series D Senior Notes and
interests of Beneficial Owners therein properly presented for redemption
pursuant to a Redemption Request in accordance with and subject to the terms,
conditions and limitations of the Senior Note Indenture, as summarized above.
The Company's redemption obligation is not cumulative. Nothing in the Senior
Note Indenture, prohibits the Company from redeeming, in fulfillment of
Redemption Requests made pursuant to the Senior Note Indenture, Series D Senior
Notes or interests therein of Beneficial Owners in excess of the principal
amount the Company is obligated to redeem, nor does anything in the Senior Note
Indenture prohibit the Company from purchasing any Series D Senior Notes or
interests therein in the open market. However, the Company may not use any
Series D Senior Notes redeemed or purchased as described in the immediately
preceding sentence as a credit against its redemption obligation.
Because of the limitations of the Company's requirement to redeem, no
Beneficial Owner can have any assurance that its interest in the Series D Senior
Notes will be paid prior to maturity.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
DTC will act as the initial securities depositary for the Series D Senior
Notes. The Series D Senior Notes will be issued only as fully registered
securities registered in the name of Cede & Co., DTC's nominee. One or more
fully registered global Series D Senior Notes certificates will be issued,
representing in the aggregate the total principal amount of Series D Senior
Notes, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, 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 pursuant to the provisions of Section 17A of the 1934 Act. DTC holds
securities that its participants ("Participants") deposit with DTC. DTC also
facilitates the settlement among Participants of securities transactions, such
as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
S-6
<PAGE>
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc., and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Purchases of Series D Senior Notes within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Series D Senior
Notes on DTC's records. The ownership interest of each actual purchaser of
Series D Senior Notes ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Series D Senior
Notes. Transfers of ownership interests in the Series D Senior Notes are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Series D Senior Notes, except in the event that use
of the book-entry system for the Series D Senior Notes is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Series D Senior
Notes. DTC's records reflect only the identity of the Direct Participants to
whose accounts such Series D Senior Notes are credited, which may or may not be
the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the Series D
Senior Notes are being redeemed, DTC will reduce the amount of the interest of
each Direct Participant in the Series D Senior Notes in accordance with its
procedures.
Although voting with respect to the Series D Senior Notes is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Series D Senior Notes. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Company as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Series D Senior
Notes are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Payments on the Series D Senior Notes will be made to DTC. DTC's practice
is to credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the account of customers registered in "street name," and will be the
responsibility of such Participant and not of DTC or the Company, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment to DTC is the responsibility of the Company, disbursement of such
payments to Direct Participants is the responsibility of DTC, and disbursement
of such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
Except as provided herein, a Beneficial Owner of a global Series D Senior
Note will not be entitled to receive physical delivery of Series D Senior Notes.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Series D Senior Notes. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of securities in definitive form. Such laws may impair the ability to
transfer beneficial interests in a global Series D Senior Note.
S-7
<PAGE>
DTC may discontinue providing its services as securities depositary with
respect to the Series D Senior Notes at any time by giving reasonable notice to
the Company. Under such circumstances, in the event that a successor securities
depositary is not obtained, Series D Senior Notes certificates will be printed
and delivered to the holders of record. Additionally, the Company may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary) with respect to the Series D Senior Notes. In that event,
certificates for the Series D Senior Notes will be printed and delivered to the
holders of record.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof. The Company has no
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
THE POLICY AND THE INSURER
The following information has been furnished by the Insurer for use in this
Prospectus Supplement. Reference is made to Appendix A for a specimen of the
Policy. No representation is made by the Company or any Underwriter as to the
accuracy or completeness of any such information.
The Policy unconditionally and irrevocably guarantees the full and complete
payment required to be made by or on behalf of the Company to the Paying Agent
or its successor of an amount equal to (i) the principal of (at the stated
maturity) and interest on, the Series D Senior Notes as such payments shall
become due but shall not be so paid (except that in the event of any
acceleration of the due date of such principal by reason of mandatory or
optional redemption or acceleration resulting from default or otherwise, the
payments guaranteed by the Policy shall be made in such amounts and at such
times as such payments of principal would have been due had there not been any
such acceleration); and (ii) the reimbursement of any such payment which is
subsequently recovered from any owner of the Series D Senior Notes pursuant to a
final judgment by a court of competent jurisdiction that such payment
constitutes an avoidable preference to such owner within the meaning of any
applicable bankruptcy law (a "Preference").
The Policy does not insure against loss of any prepayment premium which may
at any time be payable with respect to any Series D Senior Note. The Policy does
not, under any circumstance, insure against loss relating to: (i) optional or
mandatory redemptions; (ii) any payments to be made on an accelerated basis;
(iii) payments of the purchase price of the Series D Senior Notes upon tender by
an owner thereof; or (iv) any Preference relating to (i) through (iii) above.
The Policy also does not insure against nonpayment of principal of or interest
on the Series D Senior Notes resulting from the insolvency, negligence or any
other act or omission of the Paying Agent or any other paying agent for the
Series D Senior Notes.
Upon receipt of telephonic or telegraphic notice, such notice subsequently
confirmed in writing by registered or certified mail, or upon receipt of written
notice by registered or certified mail, by the Insurer from the Paying Agent or
any owner of a Series D Senior Note the payment of an insured amount for which
is then due, that such required payment has not been made, the Insurer on the
due date of such payment or within one Business Day after receipt of notice of
such nonpayment, whichever is later, will make a deposit of funds, in an account
with State Street Bank and Trust Company, N.A., in New York, New York, or its
successor, sufficient for the payment of any such insured amounts which are then
due. Upon presentment and surrender of such Series D Senior Notes or presentment
of such other proof of ownership of the Series D Senior Notes, together with any
appropriate instruments of assignment to evidence the assignment of the insured
amounts due on the Series D Senior Notes as are paid by the Insurer, and
appropriate instruments to effect the appointment of the Insurer as agent for
such owners of the Series D Senior Notes in any legal proceeding related to
payment of insured amounts on the Series D Senior Notes, such instruments being
in a form satisfactory to State Street Bank and Trust Company, N.A., State
Street Bank and Trust Company, N.A. shall disburse to such owners or the Paying
Agent payment of the insured amounts due on such Series D Senior Notes, less any
amount held by the Paying Agent for the payment of such insured amounts and
legally available therefor.
S-8
<PAGE>
The Policy is not covered by the Property/Casualty Insurance Security Fund
specified in Article 76 of the New York Insurance Law.
The Insurer is the principal operating subsidiary of MBIA Inc., a New York
Stock Exchange listed company. MBIA Inc. is not obligated to pay the debts of or
claims against the Insurer. The Insurer is domiciled in the State of New York
and licensed to do business in and subject to regulation under laws of all 50
states, the District of Columbia, the Commonwealth of Puerto Rico, the
Commonwealth of the Northern Mariana Islands, the Virgin Islands of the United
States and the Territory of Guam. The Insurer has two European branches, one in
the Republic of France and the other in the Kingdom of Spain. New York has laws
prescribing minimum capital requirements, limiting classes and concentrations of
investments and requiring the approval of policy rates and forms. State laws
also regulate the amount of both the aggregate and individual risks that may be
insured, the payment of dividends by the Insurer, changes in control and
transactions among affiliates. Additionally, the Insurer is required to maintain
contingency reserves on its liabilities in certain amounts and for certain
periods of time.
Effective February 17, 1998, MBIA Inc. acquired all of the outstanding
stock of Capital Markets Assurance Corporation ("CMAC") through a merger with
its parent CapMAC Holdings Inc. Pursuant to a reinsurance agreement, CMAC has
ceded all of its net insured risks (including any amounts due but unpaid from
third party reinsurers), as well as its unearned premiums and contingency
reserves, to the Insurer. MBIA Inc. is not obligated to pay the debts of or
claims against CMAC.
The consolidated financial statements of the Insurer, a wholly owned
subsidiary of MBIA Inc., and its subsidiaries as of December 31, 1997 and
December 31, 1996 and for each of the three years in the period ended December
31, 1997, prepared in accordance with generally accepted accounting principles,
included in the Annual Report on Form 10-K of MBIA Inc. for the year ended
December 31, 1997 and the consolidated financial statements of the Insurer and
its subsidiaries as of March 31, 1998 and for the three month periods ending
March 31, 1998 and March 31, 1997 included in the Quarterly Report on Form 10-Q
of MBIA Inc. for the period ending March 31, 1998 are hereby incorporated by
reference into this Prospectus Supplement and shall be deemed to be a part
hereof. Any statement contained in a document incorporated by reference herein
shall be modified or superseded for purposes of this Prospectus Supplement to
the extent that a statement contained herein or in any other subsequently filed
document which also is incorporated by reference herein modifies or supersedes
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus
Supplement.
All financial statements of the Insurer and its subsidiaries included in
documents filed by MBIA Inc. pursuant Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, subsequent to the date of this
Prospectus Supplement and prior to the termination of the offering of the Series
D Senior Notes shall be deemed to be incorporated by reference into this
Prospectus Supplement and to be a part hereof from the respective dates of
filing such documents.
S-9
<PAGE>
The tables below present selected financial information of the Insurer
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities ("SAP") and generally accepted
accounting principles ("GAAP").
<TABLE>
<CAPTION>
SAP
--------------------------
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(AUDITED) (UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
Admitted Assets................................... $5,256 $5,475
Liabilities....................................... 3,496 3,658
Capital and Surplus............................... 1,760 1,817
GAAP
--------------------------
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(AUDITED) (UNAUDITED)
(IN MILLIONS)
Assets............................................ $5,988 $6,196
Liabilities....................................... 2,624 2,725
Shareholder's Equity.............................. 3,364 3,471
</TABLE>
Copies of the financial statements of the Insurer incorporated by reference
herein and copies of the Insurer's 1997 year-end audited financial statements
prepared in accordance with statutory accounting practices are available,
without charge, from the Insurer. The address of the Insurer is 113 King Street,
Armonk, New York 10504. The telephone number of the Insurer is (914) 273-4545.
The Insurer does not accept any responsibility for the accuracy or
completeness of this Prospectus Supplement or any information or disclosure
contained herein, or omitted herefrom, other than with respect to the accuracy
of the information regarding the Policy and Insurer set forth under the heading
"The Policy and the Insurer," in Appendix A attached hereto and in the financial
statements incorporated herein by reference. Additionally, the Insurer makes no
representation regarding the Series D Senior Notes or the advisability of
investing in the Series D Senior Notes.
Moody's Investors Service, Inc. ("Moody's") rates the claims paying ability
of the Insurer "Aaa."
Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("S&P"), rates the claims paying ability of the Insurer "AAA."
Fitch IBCA, Inc. (formerly known as Fitch Investors Services, L.P.) rates
the claims paying ability of the Insurer "AAA."
The above ratings are not recommendations to buy, sell or hold the Series D
Senior Notes, and such ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of any of the
above ratings may have an adverse effect on the market price of the Series D
Senior Notes. The Insurer does not guaranty the market price of the Series D
Senior Notes nor does it guaranty that the ratings on the Series D Senior Notes
will not be revised or withdrawn.
RATINGS
It is anticipated that S&P and Moody's will assign the Series D Senior
Notes the ratings set forth on the cover page hereof conditioned upon the
issuance and delivery by the Insurer at the time of delivery of the Series D
Senior Notes of the Policy, insuring the timely payment of the principal of and
interest on the Series D Senior Notes. Such ratings reflect only the views of
such rating agencies, and an explanation of the significance of such ratings may
be obtained only from such rating agencies at the following addresses: Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10007; Standard &
Poor's, 25 Broadway, New York, New York 10004. There is no assurance that such
ratings will remain in effect for any period of time or that they will not be
revised downward or withdrawn entirely by said rating agencies if, in
S-10
<PAGE>
their judgment, circumstances warrant. Neither the Company nor any Underwriter
has undertaken any responsibility to oppose any proposed downward revision or
withdrawal of a rating on the Series D Senior Notes. Any such downward revision
or withdrawal of such ratings may have an adverse effect on the market price of
the Series D Senior Notes.
At present, each of such rating agencies maintains four categories of
investment grade ratings. They are for S&P -- AAA, AA, A and BBB and for
Moody's -- Aaa, Aa, A and Baa. S&P defines "AAA" as the highest rating assigned
to a debt obligation. Moody's defines "Aaa" as representing the best quality
debt obligation carrying the smallest degree of investment risk.
EXPERTS
The consolidated balance sheets of MBIA Insurance Corporation and
Subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of income, changes in shareholder's equity, and cash flows for each
of the three years in the period ended December 31, 1997, incorporated by
reference in this Prospectus Supplement, have been incorporated herein in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
See also "Experts" in the accompanying Prospectus.
S-11
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agrement, the
Company has agreed to sell to each of Edward D. Jones & Co., L.P. Goldman, Sachs
& Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Prudential
Securities Incorporated (the "Underwriters"), and each of the Underwriters has
severally agreed to purchase from the Company, the principal amount of the
Series D Senior Notes set forth opposite its name below:.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
SERIES D
NAME SENIOR NOTES
---- -------------------
<S> <C>
Edward D. Jones & Co., L.P. ................................
Goldman, Sachs & Co. .......................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
Prudential Securities Incorporated..........................
------------
Total............................................. $175,000,000
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters have committed, subject to the terms and conditions set forth
therein, to take and pay for all of the Series D Senior Notes offered hereby if
any of the Series D Senior Notes are purchased.
The Underwriters have advised the Company that they propose to offer the
Series D Senior Notes from time to time for sale in one or more negotiated
transactions, or otherwise, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Underwriters may effect such transactions by selling the Series D Senior Notes
to or through dealers, and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Underwriters and/or
the purchasers of the Series D Senior Notes for whom they may act as agent. The
Underwriters and any dealers that participate with the Underwriters in the
distribution of the Series D Senior Notes may be deemed to be underwriters, and
any discounts or commissions received by them and any profit on the resale of
the Series D Senior Notes by them may be deemed to be underwriting discounts or
commissions, under the 1933 Act.
The Company has agreed, during the period of 15 days from the date of the
Underwriting Agreement, not to sell, offer to sell, grant any option for the
sale of, or otherwise dispose of any Series D Senior Notes, any security
convertible into or exchangeable into or exercisable for Series D Senior Notes
or any debt securities substantially similar to the Series D Senior Notes
(except for the Series D Senior Notes issued pursuant to the Underwriting
Agreement), without the prior written consent of the Underwriters.
Prior to this offering, there has been no public market for the Series D
Senior Notes. The Underwriters have advised the Company that they intend to make
a market in the Series D Senior Notes. The Underwriters will have no obligation
to make a market in the Series D Senior Notes, however, and may cease market
making activities, if commenced, at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the 1933 Act.
In connection with this offering and in compliance with applicable law and
industry practice, the Underwriters may overallot or effect transactions which
stabilize, maintain or otherwise affect the market price of the Series D Senior
Notes at levels above those which might otherwise prevail in the open market,
including by entering stabilizing bids, purchasing Series D Senior Notes to
cover syndicate short positions and imposing penalty bids. A stabilizing bid
means the placing of any bid, or the effecting of any purchase, for the purpose
of pegging, fixing or maintaining the price of a security. Covering a syndicate
short position means placing a bid or effecting a purchase of a security on
behalf of the underwriting syndicate to reduce a short position created in
connection with the offering. Imposing a penalty bid means purchasing a security
in the open market to reduce the underwriting syndicate's short position or to
stabilize the price of the security and in
S-12
<PAGE>
connection therewith reclaiming the amount of the selling concession from the
underwriters and selling group members who sold such securities as part of the
offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might be in the absence of such purchases. The imposition of a
penalty bid might also have an effect on the price of a security to the extent
that it were to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Series D Senior Notes. In addition,
neither the Company nor any of the Underwriters makes any representation that
the Underwriters will engage in such transactions or that such transactions once
commenced will not be discontinued without notice.
The Underwriters engage in transactions with, and, from time to time, have
performed services for, the Company and its affiliates in the ordinary course of
business.
S-13
<PAGE>
GLOSSARY
1933 Act................... The Securities Act of 1933, as amended.
1934 Act................... The Securities Exchange Act of 1934, as amended.
Company.................... Alabama Power Company.
DTC........................ The Depository Trust Company, a "clearing
corporation" that initially will hold (through its
agents) a global certificate evidencing the Series
D Senior Notes.
Insurer.................... MBIA Insurance Corporation.
Interest Payment Dates..... March 31, June 30, September 30 and December 31 of
each year.
Policy..................... The financial guaranty insurance policy to be
issued by the Insurer covering the payment of the
principal of and interest on the Series D Senior
Notes when due.
Record Date................ The close of business on the 15th calendar day
prior to an Interest Payment Date.
Redemption Price........... 100% of the principal amount of the Series D Senior
Notes being redeemed, plus accrued and unpaid
interest thereon to the date of payment.
Securities Rate............ The per annum interest rate on the Series D Senior
Notes, as set forth on the cover page of this
Prospectus Supplement.
Senior Note Indenture...... The indenture pursuant to which the Company's
Series D Senior Notes will be issued.
Senior Note Indenture
Trustee.................... The trustee under the Senior Note Indenture;
initially, The Chase Manhattan Bank.
Series D Senior Notes...... The Series D % Senior Insured Quarterly Notes
due September 30, 2018 of the Company.
S-14
<PAGE>
APPENDIX A--FORM OF POLICY
<PAGE>
FINANCIAL GUARANTY INSURANCE POLICY
MBIA INSURANCE CORPORATION
ARMONK, NEW YORK 10504
[NUMBER]
MBIA Insurance Corporation (the "Insurer"), in consideration of the payment of
the premium and subject to the terms of this policy, hereby unconditionally and
irrevocably guarantees to any owner, as hereinafter defined, of the following
described obligations, the full and complete payment required to be made by or
on behalf of the Issuer to
or its successor (the "Paying Agent") of an amount equal to (i) the principal of
(either at the stated maturity or by any advancement of maturity pursuant to a
mandatory sinking fund payment) and interest on, the Obligations (as that term
is defined below) as such payments shall become due but shall not be so paid
(except that in the event of any acceleration of the due date of such principal
by reason of mandatory or optional redemption or acceleration resulting from
default or otherwise, other than any advancement of maturity pursuant to a
mandatory sinking fund payment, the payments guaranteed hereby shall be made in
such amounts and at such times as such payments of principal would have been due
had there not been any such acceleration); and (ii) the reimbursement of any
such payment which is subsequently recovered from any owner pursuant to a final
judgment by a court of competent jurisdiction that such payment constitutes an
avoidable preference to such owner within the meaning of any applicable
bankruptcy law. The amounts referred to in clauses (i) and (ii) of the preceding
sentence shall be referred to herein collectively as the "Insured Amounts."
"Obligations" shall mean:
[PAR]
[LEGAL NAME OF ISSUE]
Upon receipt of telephonic or telegraphic notice, such notice subsequently
confirmed in writing by registered or certified mail, or upon receipt of written
notice by registered or certified mail, by the Insurer from the Paying Agent or
any owner of an Obligation the payment of an Insured Amount for which is then
due, that such required payment has not been made, the Insurer on the due date
of such payment or within one business day after receipt of notice of such
nonpayment, whichever is later, will make a deposit of funds, in an account with
State Street Bank and Trust Company, N.A., in New York, New York, or its
successor, sufficient for the payment of any such Insured Amounts which are then
due. Upon presentment and surrender of such Obligations or presentment of such
other proof of ownership of the Obligations, together with any appropriate
instruments of assignment to evidence the assignment of the Insured Amounts due
on the Obligations as are paid by the Insurer, and appropriate instruments to
effect the appointment of the Insurer as agent for such owners of the
Obligations in any legal proceeding related to payment of Insured Amounts on the
Obligations, such instruments being in a form satisfactory to State Street Bank
and Trust Company, N.A., State Street Bank and Trust Company, N.A. shall
disburse to such owners, or the Paying Agent payment of the Insured Amounts due
on such Obligations, less any amount held by the Paying Agent for the payment of
such Insured Amounts and legally available therefor. This policy does not insure
against loss of any prepayment premium which may at any time be payable with
respect to any Obligation.
As used herein, the term "owner" shall mean the registered owner of any
Obligation as indicated in the books maintained by the Paying Agent, the Issuer,
or any designee of the Issuer for such purpose. The term owner shall not include
the Issuer or any party whose agreement with the Issuer constitutes the
underlying security for the Obligations.
Any service of process on the Insurer may be made to the Insurer at its offices
located at 113 King Street, Armonk, New York 10504 and such service of process
shall be valid and binding.
This policy is non-cancellable for any reason. The premium on this policy is not
refundable for any reason including the payment prior to maturity of the
Obligations.
This policy is not covered by the Property/Casualty Insurance Security Fund
specified in Article 76 of the New York Insurance Law.
IN WITNESS WHEREOF, the Insurer has caused this policy to be executed in
facsimile on its behalf by its duly authorized officer, this [DAY] day of
[MONTH, YEAR].
MBIA Insurance Corporation
-----------------------------
President
Attest:
-----------------------------
Assistant Secretary
<PAGE>
PROSPECTUS
$966,200,000
ALABAMA POWER COMPANY
SENIOR NOTES
JUNIOR SUBORDINATED NOTES
---------------------------
ALABAMA POWER CAPITAL TRUST III
ALABAMA POWER CAPITAL TRUST IV
ALABAMA POWER CAPITAL TRUST V
TRUST PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
ALABAMA POWER COMPANY
A SUBSIDIARY OF THE SOUTHERN COMPANY
---------------------------
Alabama Power Company, an Alabama corporation (the "Company"), may offer,
from time to time, (i) its senior notes (the "Senior Notes") in one or more
series or (ii) its junior subordinated notes (the "Junior Subordinated Notes")
in one or more series. The Senior Notes will be unsecured obligations of the
Company and will rank pari passu (equal in priority) with all other unsecured
and unsubordinated debt of the Company. The Junior Subordinated Notes will be
unsecured obligations of the Company and will be subordinate and junior in right
of payment to Senior Indebtedness (as defined herein) of the Company.
Alabama Power Capital Trust III, Alabama Power Capital Trust IV and Alabama
Power Capital Trust V, each a statutory business trust created under the laws of
the State of Delaware (individually, a "Trust" and collectively, the "Trusts"),
may offer, from time to time, trust preferred securities (collectively, the
"Preferred Securities") representing preferred undivided beneficial interests in
the assets of the respective Trusts. The Company will own all the common
securities (the "Common Securities" and, together with the Preferred Securities,
the "Trust Securities") representing common undivided beneficial interests in
the assets of the respective Trusts. The payment of periodic cash distributions
on the Preferred Securities of each Trust and payments on liquidation or
redemption with respect to such Preferred Securities, in each case to the extent
such Trust has funds legally and immediately available therefor, will be
guaranteed by the Company as described herein (individually, a "Guarantee" and
collectively, the "Guarantees"). See "Description of the Guarantees." The
Company's obligations under each Guarantee will be subordinate and junior in
right of payment to all of its other liabilities and will rank pari passu with
the most senior preferred stock of the Company. Concurrently with the issuance
by a Trust of its Preferred Securities, such Trust will invest the proceeds
thereof and of the Company's purchase of the Common Securities of such Trust in
a related series of Junior Subordinated Notes of the Company with terms
corresponding to the terms of such Trust's Preferred Securities. Junior
Subordinated Notes may subsequently be distributed pro rata to holders of the
Trust Securities of a Trust in connection with the termination of such Trust
upon the occurrence of certain events as may be described in an accompanying
Prospectus Supplement.
As described herein, the Company will, through each Guarantee, the
Subordinated Note Indenture, the Junior Subordinated Notes of the related
series, the related Trust Agreement and the related Agreement as to Expenses and
Liabilities, fully and unconditionally guarantee all of each Trust's obligations
with respect to its Preferred Securities.
Specific terms of the Senior Notes or the Junior Subordinated Notes of any
series or the Preferred Securities of any Trust in respect of which this
Prospectus is being delivered will be set forth in an accompanying Prospectus
Supplement with respect to such securities, which will describe, without
limitation and where applicable, the following: (a) in the case of Senior Notes
or Junior Subordinated Notes, the specific designation, aggregate principal
amount, denominations, maturity, interest payment dates, interest rate (or the
method of determining such rate), any redemption, exchange or sinking fund
provisions, and any other specific terms of the offering, and (b) in the case of
Preferred Securities, the specific designation, number of Preferred Securities,
liquidation amount per security, distribution rate (or the method of determining
such rate), dates on which distributions will be payable, voting rights, any
redemption, exchange or sinking fund provisions, and any other rights,
preferences, privileges, limitations and restrictions.
The Senior Notes, Junior Subordinated Notes and Preferred Securities may be
offered in amounts, at prices and on terms to be determined at the time of
offering; provided, however, that the aggregate initial public offering price of
all Senior Notes, Junior Subordinated Notes and Preferred Securities shall not
exceed $966,200,000.
The Prospectus Supplement relating to any series of Senior Notes, Junior
Subordinated Notes or Preferred Securities will contain information concerning
certain United States federal income tax considerations, if applicable to such
Senior Notes, Junior Subordinated Notes or Preferred Securities.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
The Senior Notes, Junior Subordinated Notes and Preferred Securities may be
sold directly, through agents, underwriters or dealers as designated from time
to time, or through a combination of such methods. See "Plan of Distribution."
If agents or any underwriters or dealers are involved in the sale of Senior
Notes, Junior Subordinated Notes or Preferred Securities in respect of which
this Prospectus is being delivered, the names of such agents, underwriters or
dealers and any applicable commissions or discounts will be set forth in or may
be calculated from the Prospectus Supplement with respect to such Senior Notes,
Junior Subordinated Notes or Preferred Securities.
---------------------------
June 30, 1998
<PAGE>
AVAILABLE INFORMATION
The Company and the Trusts have filed with the Securities and Exchange
Commission (the "Commission") a combined registration statement on Form S-3 (the
"Registration Statement," which term encompasses any amendments thereof and
exhibits thereto) under the Securities Act of 1933, as amended (the "1933 Act").
As permitted by the rules and regulations of the Commission, this Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto, to which reference is hereby made.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports and other information with the Commission. Such reports and other
information can be inspected and copied at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can also be obtained at prescribed rates by
writing to the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants including the Company that file electronically at
http://www.sec.gov. In addition, reports and other material concerning the
Company can be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005, on which Exchange certain of the Company's
securities are listed.
No separate financial statements of any Trust are included herein. The
Company considers that such statements would not be material to holders of the
Preferred Securities because each Trust has no independent operations and exists
for the sole purpose of investing the proceeds of the sale of its Trust
Securities in Junior Subordinated Notes.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission pursuant to the
1934 Act and are incorporated herein by reference and made a part of this
Prospectus:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(b) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998; and
(c) the Company's Current Reports on Form 8-K dated February 11, 1998,
February 20, 1998 and April 17, 1998.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated herein by reference and made a part of this Prospectus from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN THE
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE). SUCH REQUESTS SHOULD BE DIRECTED TO WILLIAM B. HUTCHINS, III,
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER, ALABAMA POWER
COMPANY, 600 NORTH 18TH STREET, BIRMINGHAM, ALABAMA 35291, TELEPHONE: (205)
257-2505.
2
<PAGE>
SELECTED INFORMATION
The following material, which is presented herein solely to furnish limited
introductory information regarding the Company, has been selected from, or is
based upon, the detailed information and financial statements appearing in the
documents incorporated herein by reference or elsewhere in this Prospectus, is
qualified in its entirety by reference thereto and, therefore, should be read
together therewith.
ALABAMA POWER COMPANY
Business......................... Generation, transmission, distribution and
sale of electric energy
Service Area..................... Approximately 44,500 square miles
comprising most of the State of Alabama
Service Area Population (1990
Census)........................ Approximately 3,224,000
Customers at December 31, 1997... 1,275,327
Generating Capacity at December
31, 1997 (kilowatts)........... 10,641,263
Sources of Generation during 1997
(kilowatt-hours)............... Coal (72%), Nuclear (19%), Hydro (8%), Oil
and Gas (1%)
Sources of Generation Estimated
for 1998 (kilowatt-hours)...... Coal (74%), Nuclear (18%), Hydro (7%), Oil
and Gas (1%)
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
12 MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------------------------------- MARCH 31,
1993 1994(2) 1995 1996 1997 1998(1)
---------- ---------- ---------- ---------- ---------- ----------
(THOUSANDS, EXCEPT RATIOS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues..... $3,007,609 $2,935,142 $3,024,774 $3,120,775 $3,149,111 $3,160,848
Income Before Interest
Charges.............. 606,093 592,540 625,850 625,354 643,142 656,171
Net Income After
Dividends on
Preferred Stock...... 346,494 356,338 360,894 371,490 375,939 384,173
Ratio of Earnings to
Fixed Charges(3)..... 3.45 3.75 3.45 3.57 3.31 3.29
Ratio of Earnings to
Fixed Charges Plus
Preferred Dividend
Requirements (Pre-
Income Tax
Basis)(4)............ 2.90 3.16 2.96 3.05 3.06 3.08
</TABLE>
(Notes on following page)
3
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<TABLE>
<CAPTION>
CAPITALIZATION (UNAUDITED) AS OF
MARCH 31, 1998
----------------------------------
ACTUAL AS ADJUSTED(5)
----------- --------------------
(THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Common Stock Equity......................................... $2,724,177 $2,724,177 39.0%
Cumulative Preferred Stock.................................. 255,512 255,512 3.7
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trusts Holding Company Junior
Subordinated Notes(6)..................................... 297,000 547,000 7.8
Senior Notes................................................ 393,800 1,050,000 15.1
Junior Subordinated Notes................................... -- 250,000 3.6
Other Long-Term Debt........................................ 2,149,726 2,149,726 30.8
---------- ---------- -----
Total, excluding amounts due within one year...... $5,820,215 $6,976,415 100.0%
========== ========== =====
</TABLE>
- ---------------
(1) See "Recent Results of Operations" herein.
(2) "Operating Revenues" for the year ended December 31, 1994, include an
adjustment due to a change in the estimating procedure for unbilled
kilowatt-hours and associated revenues.
(3) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Income Before Interest Charges" all income taxes deducted
therefrom and the debt portion of allowance for funds used during
construction, and (ii) "Fixed Charges" consist of "Net Interest Charges"
plus the debt portion of allowance for funds used during construction.
(4) In computing this ratio, "Preferred Dividend Requirements" represent the
before tax earnings necessary to pay such dividends, computed at the
effective tax rates for the applicable periods.
(5) Reflects (i) the issuance in April 1998 of $190,000,000 aggregate principal
amount of Series C 7% Senior Notes due March 31, 2048; and (ii) the
issuance of $250,000,000 of new Preferred Securities, $466,200,000 of new
Senior Notes and $250,000,000 of new Junior Subordinated Notes. Does not
reflect the potential redemption of any other outstanding securities with
proceeds from new security issuances. The pro forma amounts used in
connection with this capitalization table are assumed solely for the
purpose of this calculation and the amounts and types that will be
ultimately issued will depend upon market conditions prevailing at the time
of issuance.
(6) As described in this Prospectus, substantially all of the assets of the
respective Trusts will be the Junior Subordinated Notes of the Company, and
upon redemption of such debt, the related Preferred Securities will be
mandatorily redeemable.
ALABAMA POWER COMPANY
The Company is a corporation organized under the laws of the State of
Alabama on November 10, 1927, by the consolidation of the predecessor Alabama
Power Company, Gulf Electric Company and Houston Power Company. The predecessor
Alabama Power Company had a continuous existence since its incorporation in
1906. The principal executive offices of the Company are located at 600 North
18th Street, Birmingham, Alabama 35291, and the telephone number is (205)
257-1000.
The Company is a wholly owned subsidiary of The Southern Company, a holding
company registered under the Public Utility Holding Company Act of 1935. The
Company is engaged, within the State of Alabama, in the generation and purchase
of electricity and the distribution and sale of such electricity at retail in
over 1,000 communities (including Anniston, Birmingham, Gadsden, Mobile,
Montgomery and Tuscaloosa), and at wholesale to 15 municipally owned electric
distribution systems, 11 of which are served indirectly through sales to the
Alabama Municipal Electric Authority, and two rural distributing cooperative
associations. The Company also supplies steam service in downtown Birmingham.
The Company owns coal reserves near its Gorgas Steam Electric Generating Plant
and uses the output of coal from the reserves in its generating plants. It also
sells, and cooperates with dealers in promoting the sale of, electric
appliances.
The Company and one of its affiliates, Georgia Power Company ("GEORGIA"),
each own 50% of the common stock of Southern Electric Generating Company
("SEGCO"). SEGCO owns generating units with an aggregate capacity of 1,019,680
kilowatts at the Ernest C. Gaston Steam Plant ("Plant Gaston") on the
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<PAGE>
Coosa River near Wilsonville, Alabama. The Company and GEORGIA are each entitled
to one-half of the capacity and energy of these units. The Company acts as
SEGCO's agent in the operation of SEGCO's units and furnishes coal to SEGCO as
fuel for its units. SEGCO also owns three 230,000 volt transmission lines
extending from Plant Gaston to the Georgia state line.
THE TRUSTS
Each Trust is a statutory business trust created under Delaware law
pursuant to the filing of a certificate of trust with the Delaware Secretary of
State on November 27, 1996, with respect to Alabama Power Capital Trust III and
Alabama Power Capital Trust IV, and November 18, 1997, with respect to Alabama
Power Capital Trust V. Each Trust's business is defined in a trust agreement,
executed by the Company, as Depositor, and the Delaware Trustee thereunder. This
trust agreement of each Trust will be amended and restated in its entirety
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part (the "Trust Agreement"). Each Trust Agreement
will be qualified as an indenture under the Trust Indenture Act of 1939, as
amended (the "1939 Act"). Each Trust exists for the exclusive purposes of (i)
issuing its Trust Securities representing undivided beneficial interests in the
assets of such Trust, (ii) investing the gross proceeds of its Trust Securities
in a related series of Junior Subordinated Notes, and (iii) engaging in only
those other activities necessary, appropriate, convenient or incidental thereto.
Each Trust's business and affairs will be conducted by its trustees, which
shall be appointed by the Company as the holder of the Common Securities: two
employees of the Company as Administrative Trustees; The Chase Manhattan Bank as
Property Trustee; and Chase Manhattan Bank Delaware as Delaware Trustee. The
Property Trustee of each Trust will act as the indenture trustee with respect to
such Trust for purposes of compliance with the provisions of the 1939 Act.
The principal place of business of each Trust shall be c/o the Company, 600
North 18th Street, Birmingham, Alabama 35291, telephone (205) 257-2505, Attn:
Treasurer.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a Trust for further information concerning such Trust.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trusts will be treated as
subsidiaries of the Company and, accordingly, the accounts of the Trusts will be
included in the consolidated financial statements of the Company. The Preferred
Securities will be presented as a separate line item in the consolidated balance
sheet of the Company, and appropriate disclosures concerning the Preferred
Securities, the Guarantees and the Junior Subordinated Notes will be included in
the notes to the consolidated financial statements. For financial reporting
purposes, the Company will record distributions payable on the Preferred
Securities as an expense.
USE OF PROCEEDS
Each Trust will invest the proceeds received from the sale of its Preferred
Securities in Junior Subordinated Notes. Except as may be otherwise described in
an applicable Prospectus Supplement, the net proceeds received by the Company
from such investment and any proceeds received from the sale of its Senior Notes
or other sales of its Junior Subordinated Notes will be used in connection with
its ongoing construction program, to pay scheduled maturities and/or refundings
of its securities, to repay short-term indebtedness to the extent outstanding
and for other general corporate purposes.
RECENT RESULTS OF OPERATIONS
For the twelve months ended March 31, 1998, "Operating Revenues", "Income
Before Interest Charges", and "Net Income After Dividends on Preferred Stock"
were $3,160,848,000, $656,171,000 and $384,173,000, respectively. In the opinion
of the management of the Company, the above amounts for the
5
<PAGE>
twelve months ended March 31, 1998 reflect all adjustments (which were only
normal recurring adjustments) necessary to present fairly the results of
operations for such period. The "Ratio of Earnings to Fixed Charges" and the
"Ratio of Earnings to Fixed Charges Plus Preferred Dividend Requirements
(Pre-Income Tax Basis)" for the twelve months ended March 31, 1998 were 3.29 and
3.08, respectively.
DESCRIPTION OF THE SENIOR NOTES
Set forth below is a description of the general terms of the Senior Notes.
The following description does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the Senior Note Indenture, dated
as of December 1, 1997, between the Company and The Chase Manhattan Bank, as
trustee (the "Senior Note Indenture Trustee"), as to be supplemented by a
supplemental indenture thereto establishing the Senior Notes of each series (the
Senior Note Indenture, as so supplemented, is hereinafter referred to as the
"Senior Note Indenture"), the forms of which are filed as exhibits to the
Registration Statement of which this Prospectus forms a part. The terms of the
Senior Notes will include those stated in the Senior Note Indenture and those
made a part of the Senior Note Indenture by reference to the 1939 Act. Certain
capitalized terms used herein are defined in the Senior Note Indenture.
GENERAL
The Senior Notes will be issued as unsecured senior debt securities under
the Senior Note Indenture and will rank pari passu with all other unsecured and
unsubordinated debt of the Company. The Senior Notes will be effectively
subordinated to all secured debt of the Company, including its first mortgage
bonds, aggregating approximately $2,429,000,000 outstanding at March 31, 1998.
The Senior Note Indenture does not limit the aggregate principal amount of
Senior Notes that may be issued thereunder and provides that Senior Notes may be
issued from time to time in one or more series pursuant to an indenture
supplemental to the Senior Note Indenture.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Senior Notes being offered
thereby: (i) the title of such Senior Notes; (ii) any limit on the aggregate
principal amount of such Senior Notes; (iii) the date or dates on which the
principal of such Senior Notes is payable; (iv) the rate or rates at which such
Senior Notes shall bear interest, if any, or any method by which such rate or
rates will be determined, the date or dates from which such interest will
accrue, the interest payment dates on which such interest shall be payable, and
the regular record date for the interest payable on any interest payment date;
(v) the place or places where the principal of (and premium, if any) and
interest, if any, on such Senior Notes shall be payable; (vi) the period or
periods within which, the price or prices at which and the terms and conditions
on which such Senior Notes may be redeemed, in whole or in part, at the option
of the Company; (vii) the obligation, if any, of the Company to redeem or
purchase such Senior Notes; (viii) the denominations in which such Senior Notes
shall be issuable; (ix) if other than the principal amount thereof, the portion
of the principal amount of such Senior Notes which shall be payable upon
declaration of acceleration of the maturity thereof; (x) any deletions from,
modifications of or additions to the Events of Default or covenants of the
Company as provided in the Senior Note Indenture pertaining to such Senior
Notes; (xi) whether such Senior Notes shall be issued in whole or in part in the
form of a Global Security; and (xii) any other terms of such Senior Notes.
The Senior Note Indenture does not contain provisions that afford holders
of Senior Notes protection in the event of a highly leveraged transaction
involving the Company.
EVENTS OF DEFAULT
The Senior Note Indenture provides that any one or more of the following
described events with respect to the Senior Notes of any series, which has
occurred and is continuing, constitutes an "Event of Default" with respect to
the Senior Notes of such series:
(a) failure for 10 days to pay interest on the Senior Notes of such
series, when due on an Interest Payment Date other than at maturity or upon
earlier redemption; or
6
<PAGE>
(b) failure to pay principal or premium, if any, or interest on the
Senior Notes of such series when due at maturity or upon earlier
redemption; or
(c) failure for three Business Days to deposit any sinking fund
payment when due by the terms of a Senior Note of such series; or
(d) failure to observe or perform any other covenant or warranty of
the Company in the Senior Note Indenture (other than a covenant or warranty
which has expressly been included therein solely for the benefit of one or
more series of Senior Notes other than such series) for 90 days after
written notice to the Company from the Senior Note Indenture Trustee or the
holders of at least 25% in principal amount of the outstanding Senior Notes
of such series; or
(e) certain events of bankruptcy, insolvency, or reorganization of the
Company.
The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Senior Note Indenture Trustee with respect to the Senior Notes of such series.
If a Senior Note Indenture Event of Default occurs and is continuing with
respect to the Senior Notes of any series, then the Senior Note Indenture
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of the Senior Notes of such series may declare the principal amount
thereof due and payable immediately by notice in writing to the Company (and to
the Senior Note Indenture Trustee if given by the holders), and upon any such
declaration such principal amount shall become immediately due and payable. At
any time after such a declaration of acceleration with respect to the Senior
Notes of any series has been made and before a judgment or decree for payment of
the money due has been obtained as provided in Article Five of the Senior Note
Indenture, the holders of not less than a majority in aggregate outstanding
principal amount of the Senior Notes of such series may rescind and annul such
declaration and its consequences if the default has been cured or waived and the
Company has paid or deposited with the Senior Note Indenture Trustee a sum
sufficient to pay all matured installments of interest and principal due
otherwise than by acceleration and all sums paid or advanced by the Senior Note
Indenture Trustee, including reasonable compensation and expenses of the Senior
Note Indenture Trustee.
The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series may, on behalf of the holders of all
the Senior Notes of such series, waive any past default with respect to such
series, except (i) a default in the payment of principal or interest or (ii) a
default in respect of a covenant or provision which under Article Nine of the
Senior Note Indenture cannot be modified or amended thereunder without the
consent of the holder of each outstanding Senior Note of such series affected
thereby.
REGISTRATION AND TRANSFER
The Company shall not be required to (i) issue, register the transfer of or
exchange Senior Notes of any series during a period of 15 days immediately
preceding the date notice is given identifying the Senior Notes of such series
called for redemption, or (ii) register the transfer of or exchange any Senior
Notes so selected for redemption, in whole or in part, except the unredeemed
portion of any Senior Note being redeemed in part.
PAYMENT AND PAYING AGENT
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of any Senior Notes will be made only against surrender to the
Paying Agent of such Senior Notes. Principal of and interest on Senior Notes
will be payable, subject to any applicable laws and regulations, at the office
of such Paying Agent or Paying Agents as the Company may designate from time to
time, except that, at the option of the Company, payment of any interest may be
made by wire transfer or by check mailed to the address of the person entitled
thereto as such address shall appear in the Security Register with respect to
the Senior Notes. Payment of interest on Senior Notes on any interest payment
date will be made to the person in whose name the Senior Notes (or predecessor
security) are registered at the close of business on the Record Date for such
interest payment (the fifteenth calendar day before such interest payment date).
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<PAGE>
Unless otherwise indicated in an applicable Prospectus Supplement, the
Senior Indenture Trustee will act as Paying Agent with respect to the Senior
Notes. The Company may at any time designate additional Paying Agents or rescind
the designation of any Paying Agents or approve a change in the office through
which any Paying Agent acts.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or interest on the Senior Notes of any series which remain
unclaimed at the end of two years after such principal or interest shall have
become due and payable will be repaid to the Company, and the holder of such
Senior Notes will thereafter look only to the Company for payment thereof.
MODIFICATION
The Senior Note Indenture contains provisions permitting the Company and
the Senior Indenture Trustee, with the consent of the holders of not less than a
majority in principal amount of the outstanding Senior Notes of each series
affected thereby, to modify the Senior Note Indenture or the rights of the
holders of the Senior Note of such series; provided, that no such modification
may, without the consent of the holder of each outstanding Senior Note affected
thereby, (i) change the stated maturity of the principal of, or any installment
of principal of or interest on, any Senior Note, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the method of calculating the rate of interest
thereon, or impair the right to institute suit for the enforcement of any such
payment on or after the stated maturity thereof (or, in the case of redemption,
on or after the redemption date), or (ii) reduce the percentage of principal
amount of the outstanding Senior Notes of any series, the consent of whose
holders is required for any such supplemental indenture, or the consent of whose
holders is required for any waiver (of compliance with certain provisions of the
Senior Note Indenture or certain defaults thereunder and their consequences)
provided for in the Senior Note Indenture, or (iii) modify any of the provisions
of the Senior Note Indenture relating to supplemental indentures, waiver of past
defaults, or waiver of certain covenants, except to increase any such percentage
or to provide that certain other provisions of the Senior Note Indenture cannot
be modified or waived without the consent of the holder of each outstanding
Senior Note affected thereby.
In addition, the Company and the Senior Note Indenture Trustee may execute,
without the consent of any holders of Senior Notes, any supplemental indenture
for certain other usual purposes, including the creation of any new series of
senior notes.
CONSOLIDATION, MERGER AND SALE
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such other corporation or person
expressly assumes, by supplemental indenture executed and delivered to the
Senior Note Indenture Trustee, the payment of the principal of (and premium, if
any) and interest on all the Senior Notes and the performance of every covenant
of the Senior Note Indenture on the part of the Company to be performed or
observed; (2) immediately after giving effect to such transactions, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have happened and be continuing; and (3) the Company
has delivered to the Senior Note Indenture Trustee an officers' certificate and
an opinion of counsel, each stating that such transaction complies with the
provisions of the Senior Note Indenture governing consolidation, merger,
conveyance, transfer or lease and that all conditions precedent thereto have
been complied with.
INFORMATION CONCERNING THE SENIOR NOTE INDENTURE TRUSTEE
The Senior Note Indenture Trustee, prior to an Event of Default with
respect to Senior Notes of any series, undertakes to perform, with respect to
Senior Notes of such series, only such duties as are specifically set forth in
the Senior Note Indenture and, in case an Event of Default with respect to
Senior Notes of any series has occurred and is continuing, shall exercise, with
respect to Senior Notes of such series, the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject to
such
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<PAGE>
provision, the Senior Note Indenture Trustee is under no obligation to exercise
any of the powers vested in it by the Senior Note Indenture at the request of
any holder of Senior Notes of any series, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which might be incurred
thereby. The Senior Note Indenture Trustee is not required to expend or risk its
own funds or otherwise incur any financial liability in the performance of its
duties if the Senior Note Indenture Trustee reasonably believes that repayment
or adequate indemnity is not reasonably assured to it.
The Chase Manhattan Bank, the Senior Note Indenture Trustee, also serves as
Subordinated Note Indenture Trustee, as Property Trustee and as Guarantee
Trustee. The Company and certain of its affiliates maintain deposit accounts and
banking relationships with The Chase Manhattan Bank. The Chase Manhattan Bank
also serves as trustee under other indentures pursuant to which securities of
the Company and affiliates of the Company are outstanding.
GOVERNING LAW
The Senior Note Indenture and the Senior Notes will be governed by, and
construed in accordance with, the internal laws of the State of New York.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Senior Note Indenture to a direct or indirect wholly-owned
subsidiary of the Company; provided, that, in the event of any such assignment,
the Company will remain primarily liable for all such obligations. Subject to
the foregoing, the Senior Note Indenture will be binding upon and inure to the
benefit of the parties thereto and their respective successors and assigns.
DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES
Set forth below is a description of the general terms of the Junior
Subordinated Notes. The following description does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Subordinated Note Indenture, dated as of January 1, 1997, between the Company
and The Chase Manhattan Bank, as trustee (the "Subordinated Note Indenture
Trustee"), as to be supplemented by a supplemental indenture thereto
establishing the Junior Subordinated Notes of each series (the Subordinated Note
Indenture, as so supplemented, is hereinafter referred to as the "Subordinated
Note Indenture"), the forms of which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part. The terms of the Junior
Subordinated Notes will include those stated in the Subordinated Note Indenture
and those made a part of the Subordinated Note Indenture by reference to the
1939 Act. Certain capitalized terms used herein are defined in the Subordinated
Note Indenture.
GENERAL
The Junior Subordinated Notes will be issued as unsecured junior
subordinated debt securities under the Subordinated Note Indenture. The
Subordinated Note Indenture does not limit the aggregate principal amount of
Junior Subordinated Notes that may be issued thereunder and provides that Junior
Subordinated Notes may be issued from time to time in one or more series
pursuant to an indenture supplemental to the Subordinated Note Indenture.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Junior Subordinated Notes
being offered thereby: (i) the title of such Junior Subordinated Notes; (ii) any
limit on the aggregate principal amount of such Junior Subordinated Notes; (iii)
the date or dates on which the principal of such Junior Subordinated Notes is
payable; (iv) the rate or rates at which such Junior Subordinated Notes shall
bear interest, if any, or any method by which such rate or rates will be
determined, the date or dates from which such interest will accrue, the interest
payment dates on which such interest shall be payable, and the regular record
date for the interest payable on any interest payment date; (v) the place or
places where the principal of (and premium, if any) and interest, if any, on
such Junior Subordinated Notes shall be payable; (vi) the period or periods
within which, the price or prices
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<PAGE>
at which and the terms and conditions on which such Junior Subordinated Notes
may be redeemed, in whole or in part, at the option of the Company; (vii) the
obligation, if any, of the Company to redeem or purchase such Junior
Subordinated Notes; (viii) the denominations in which such Junior Subordinated
Notes shall be issuable; (ix) if other than the principal amount thereof, the
portion of the principal amount of such Junior Subordinated Notes which shall be
payable upon declaration of acceleration of the maturity thereof; (x) any
deletions from, modifications of or additions to the Events of Default or
covenants of the Company as provided in the Subordinated Note Indenture
pertaining to such Junior Subordinated Notes; (xi) whether such Junior
Subordinated Notes shall be issued in whole or in part in the form of a Global
Security; (xii) the right, if any, of the Company to extend the interest payment
periods of such Junior Subordinated Notes; and (xiii) any other terms of such
Junior Subordinated Notes. The terms of each series of Junior Subordinated Notes
issued to a Trust will correspond to those of the related Preferred Securities
of such Trust as described in the Prospectus Supplement relating to such
Preferred Securities.
The Subordinated Note Indenture does not contain provisions that afford
holders of Junior Subordinated Notes protection in the event of a highly
leveraged transaction involving the Company.
SUBORDINATION
The Junior Subordinated Notes are subordinated and junior in right of
payment to all Senior Indebtedness (as defined below) of the Company. No payment
of principal of (including redemption payments, if any), or premium, if any, or
interest on (including Additional Interest (as defined herein)) the Junior
Subordinated Notes may be made if (a) any Senior Indebtedness is not paid when
due and any applicable grace period with respect to such default has ended with
such default not being cured or waived or otherwise ceasing to exist, or (b) the
maturity of any Senior Indebtedness has been accelerated because of a default,
or (c) notice has been given of the exercise of an option to require repayment,
mandatory payment or prepayment or otherwise. Upon any payment or distribution
of assets of the Company to creditors upon any liquidation, dissolution,
winding-up, reorganization, assignment for the benefit of creditors, marshalling
of assets or liabilities, or any bankruptcy, insolvency or similar proceedings
of the Company, the holders of Senior Indebtedness shall be entitled to receive
payment in full of all amounts due or to become due on or in respect of all
Senior Indebtedness before the holders of the Junior Subordinated Notes are
entitled to receive or retain any payment or distribution. Subject to the prior
payment of all Senior Indebtedness, the rights of the holders of the Junior
Subordinated Notes will be subrogated to the rights of the holders of Senior
Indebtedness to receive payments and distributions applicable to such Senior
Indebtedness until all amounts owing on the Junior Subordinated Notes are paid
in full.
The term "Senior Indebtedness" means, with respect to the Company, (i) any
payment due in respect of indebtedness of the Company, whether outstanding at
the date of execution of the Subordinated Note Indenture or thereafter incurred,
created or assumed, (a) in respect of money borrowed (including any financial
derivative, hedging or futures contract or similar instrument) and (b) evidenced
by securities, debentures, bonds, notes or other similar instruments issued by
the Company that, by their terms, are senior or senior subordinated debt
securities including, without limitation, all obligations under its indentures
with various trustees; (ii) all capital lease obligations; (iii) all obligations
issued or assumed as the deferred purchase price of property, all conditional
sale obligations and all obligations of the Company under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business and long-term purchase obligations); (iv) all obligations for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction; (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise; and (vi)
all obligations of the type referred to in clauses (i) through (v) above of
other persons secured by any lien on any property or asset of the Company
(whether or not such obligation is assumed by the Company), except for (1) any
such indebtedness that is by its terms subordinated to or pari passu with the
Junior Subordinated Notes and (2) any unsecured indebtedness between or among
the Company or its affiliates. Such Senior Indebtedness shall continue to be
Senior Indebtedness and be entitled to the benefits of the subordination
provisions contained in the Subordinated Note Indenture irrespective of any
amendment, modification or waiver of any term of such Senior Indebtedness.
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<PAGE>
The Subordinated Note Indenture does not limit the aggregate amount of
Senior Indebtedness that may be issued by the Company. As of March 31, 1998,
Senior Indebtedness of the Company aggregated approximately $2,574,000,000.
ADDITIONAL INTEREST
"Additional Interest" is defined in the Subordinated Note Indenture as (i)
such additional amounts as may be required so that the net amounts received and
retained by a holder of Junior Subordinated Notes (if the holder is a Trust)
after paying taxes, duties, assessments or governmental charges of whatever
nature (other than withholding taxes) imposed by the United States or any other
taxing authority will not be less than the amounts the holder would have
received had no such taxes, duties, assessments, or other governmental charges
been imposed; and (ii) any interest due and not paid on an interest payment
date, together with interest thereon from such interest payment date to the date
of payment, compounded quarterly, on each interest payment date.
CERTAIN COVENANTS
The Company covenants in the Subordinated Note Indenture, for the benefit
of the holders of each series of Junior Subordinated Notes, that, (i) if at such
time the Company shall have given notice of its election to extend an interest
payment period for such series of Junior Subordinated Notes and such extension
shall be continuing, (ii) if at such time the Company shall be in default with
respect to its payment or other obligations under the Guarantee with respect to
the Trust Securities, if any, related to such series of Junior Subordinated
Notes, or (iii) if at such time an Event of Default thereunder with respect to
such series of Junior Subordinated Notes shall have occurred and be continuing,
(a) the Company shall not declare or pay any dividend or make any distributions
with respect to, or redeem, purchase, acquire or make a liquidation payment with
respect to, any of its capital stock, and (b) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities (including guarantees other than the Guarantees)
issued by the Company which rank pari passu with or junior to the Junior
Subordinated Notes. None of the foregoing, however, shall restrict (i) any of
the actions described in the preceding sentence resulting from any
reclassification of the Company's capital stock or the exchange or conversion of
one class or series of the Company's capital stock for another class or series
of the Company's capital stock, or (ii) the purchase of fractional interests in
shares of the Company's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged.
The Subordinated Note Indenture further provides that, for so long as the
Trust Securities of any Trust remain outstanding, the Company covenants (i) to
directly or indirectly maintain 100% ownership of the Common Securities of such
Trust; provided, however, that any permitted successor of the Company under the
Subordinated Note Indenture may succeed to the Company's ownership of such
Common Securities, and (ii) to use its reasonable efforts to cause such Trust
(a) to remain a statutory business trust, except in connection with the
distribution of Junior Subordinated Notes to the holders of Trust Securities in
liquidation of such Trust, the redemption of all of the Trust Securities of such
Trust, or certain mergers, consolidations or amalgamations, each as permitted by
the related Trust Agreement, and (b) to otherwise continue to be classified as a
grantor trust for United States federal income tax purposes.
EVENTS OF DEFAULT
The Subordinated Note Indenture provides that any one or more of the
following described events with respect to the Junior Subordinated Notes of any
series, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Junior Subordinated Notes of such series:
(a) failure for 10 days to pay interest on the Junior Subordinated
Notes of such series, including any Additional Interest (as defined in
clause (ii) of the definition thereof in the Subordinated Note Indenture)
in respect thereof, when due on an Interest Payment Date other than at
maturity or upon earlier redemption; provided, however, that a valid
extension of the interest payment period by the Company shall not
constitute a default in the payment of interest for this purpose; or
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(b) failure for 10 days to pay Additional Interest (as defined in
clause (i) of the definition thereof in the Subordinated Note Indenture);
or
(c) failure to pay principal or premium, if any, or interest,
including Additional Interest (as defined in clause (ii) of the definition
thereof in the Subordinated Note Indenture), on the Junior Subordinated
Notes of such series when due at maturity or upon earlier redemption; or
(d) failure for three Business Days to deposit any sinking fund
payment when due by the terms of a Junior Subordinated Note of such series;
or
(e) failure to observe or perform any other covenant or warranty of
the Company in the Subordinated Note Indenture (other than a covenant or
warranty which has expressly been included therein solely for the benefit
of one or more series of Junior Subordinated Notes other than such series)
for 90 days after written notice to the Company from the Subordinated Note
Indenture Trustee or the holders of at least 25% in principal amount of the
outstanding Junior Subordinated Notes of such series; or
(f) certain events of bankruptcy, insolvency, or reorganization of the
Company.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Subordinated Note Indenture Trustee with respect to the Junior
Subordinated Notes of such series. If a Subordinated Note Indenture Event of
Default occurs and is continuing with respect to the Junior Subordinated Notes
of any series, then the Subordinated Note Indenture Trustee or the holders of
not less than 25% in aggregate outstanding principal amount of the Junior
Subordinated Notes of such series may declare the principal amount thereof due
and payable immediately by notice in writing to the Company (and to the
Subordinated Note Indenture Trustee if given by the holders), and upon any such
declaration such principal amount shall become immediately due and payable. At
any time after such a declaration of acceleration with respect to the Junior
Subordinated Notes of any series has been made and before a judgment or decree
for payment of the money due has been obtained as provided in Article Five of
the Subordinated Note Indenture, the holders of not less than a majority in
aggregate outstanding principal amount of the Junior Subordinated Notes of such
series may rescind and annul such declaration and its consequences if the
default has been cured or waived and the Company has paid or deposited with the
Subordinated Note Indenture Trustee a sum sufficient to pay all matured
installments of interest (including any Additional Interest) and principal due
otherwise than by acceleration and all sums paid or advanced by the Subordinated
Note Indenture Trustee, including reasonable compensation and expenses of the
Subordinated Note Indenture Trustee.
A holder of Preferred Securities may institute a legal proceeding directly
against the Company, without first instituting a legal proceeding against the
Property Trustee or any other person or entity, for enforcement of payment to
such holder of principal of or interest on the Junior Subordinated Notes of the
related series having a principal amount equal to the aggregate stated
liquidation amount of the Preferred Securities of such holder on or after the
due dates specified in the Junior Subordinated Notes of such series.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series may, on behalf of the
holders of all the Junior Subordinated Notes of such series, waive any past
default with respect to such series, except (i) a default in the payment of
principal or interest or (ii) a default in respect of a covenant or provision
which under Article Nine of the Subordinated Note Indenture cannot be modified
or amended thereunder without the consent of the holder of each outstanding
Junior Subordinated Note of such series affected thereby.
REGISTRATION AND TRANSFER
The Company shall not be required to (i) issue, register the transfer of or
exchange Junior Subordinated Notes of any series during a period of 15 days
immediately preceding the date notice is given identifying the Junior
Subordinated Notes of such series called for redemption, or (ii) register the
transfer of or exchange any
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Junior Subordinated Notes so selected for redemption, in whole or in part,
except the unredeemed portion of any Junior Subordinated Note being redeemed in
part.
PAYMENT AND PAYING AGENT
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of any Junior Subordinated Notes will be made only against
surrender to the Paying Agent of such Junior Subordinated Notes. Principal of
and interest on Junior Subordinated Notes will be payable, subject to any
applicable laws and regulations, at the office of such Paying Agent or Paying
Agents as the Company may designate from time to time, except that, at the
option of the Company, payment of any interest may be made by wire transfer or
by check mailed to the address of the person entitled thereto as such address
shall appear in the Security Register with respect to the Junior Subordinated
Notes. Payment of interest on Junior Subordinated Notes on any interest payment
date will be made to the person in whose name the Junior Subordinated Notes (or
predecessor security) are registered at the close of business on the Record Date
for such interest payment (the fifteenth calendar day before such interest
payment date).
Unless otherwise indicated in an applicable Prospectus Supplement, the
Subordinated Note Indenture Trustee will act as Paying Agent with respect to the
Junior Subordinated Notes. The Company may at any time designate additional
Paying Agents or rescind the designation of any Paying Agents or approve a
change in the office through which any Paying Agent acts.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or interest on the Junior Subordinated Notes of any series which
remain unclaimed at the end of two years after such principal or interest shall
have become due and payable will be repaid to the Company, and the holder of
such Junior Subordinated Notes will thereafter look only to the Company for
payment thereof.
MODIFICATION
The Subordinated Note Indenture contains provisions permitting the Company
and the Subordinated Note Indenture Trustee, with the consent of the holders of
not less than a majority in principal amount of the outstanding Junior
Subordinated Notes of each series affected thereby, to modify the Subordinated
Note Indenture or the rights of the holders of the Junior Subordinated Note of
such series; provided, that no such modification may, without the consent of the
holder of each outstanding Junior Subordinated Note affected thereby, (i) change
the stated maturity of the principal of, or any installment of principal of or
interest on, any Junior Subordinated Note, or reduce the principal amount
thereof or the rate of interest (including Additional Interest) thereon or any
premium payable upon the redemption thereof, or change the method of calculating
the rate of interest thereon, or impair the right to institute suit for the
enforcement of any such payment on or after the stated maturity thereof (or, in
the case of redemption, on or after the redemption date), or (ii) reduce the
percentage of principal amount of the outstanding Junior Subordinated Notes of
any series, the consent of whose holders is required for any such supplemental
indenture, or the consent of whose holders is required for any waiver (of
compliance with certain provisions of the Subordinated Note Indenture or certain
defaults thereunder and their consequences) provided for in the Subordinated
Note Indenture, or (iii) modify any of the provisions of the Subordinated Note
Indenture relating to supplemental indentures, waiver of past defaults, or
waiver of certain covenants, except to increase any such percentage or to
provide that certain other provisions of the Subordinated Note Indenture cannot
be modified or waived without the consent of the holder of each outstanding
Junior Subordinated Note affected thereby, or (iv) modify the provisions of the
Subordinated Note Indenture with respect to the subordination of the Junior
Subordinated Notes in a manner adverse to such holder.
In addition, the Company and the Subordinated Note Indenture Trustee may
execute, without the consent of any holders of Junior Subordinated Notes, any
supplemental indenture for certain other usual purposes, including the creation
of any new series of junior subordinated notes.
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CONSOLIDATION, MERGER AND SALE
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such other corporation or person
expressly assumes, by supplemental indenture executed and delivered to the
Subordinated Note Indenture Trustee, the payment of the principal of (and
premium, if any) and interest (including Additional Interest) on all the Junior
Subordinated Notes and the performance of every covenant of the Subordinated
Note Indenture on the part of the Company to be performed or observed; (2)
immediately after giving effect to such transactions, no Event of Default, and
no event which, after notice or lapse of time or both, would become an Event of
Default, shall have happened and be continuing; and (3) the Company has
delivered to the Subordinated Note Indenture Trustee an officers' certificate
and an opinion of counsel, each stating that such transaction complies with the
provisions of the Subordinated Note Indenture governing consolidation, merger,
conveyance, transfer or lease and that all conditions precedent thereto have
been complied with.
INFORMATION CONCERNING THE SUBORDINATED NOTE INDENTURE TRUSTEE
The Subordinated Note Indenture Trustee, prior to an Event of Default with
respect to Junior Subordinated Notes of any series, undertakes to perform, with
respect to Junior Subordinated Notes of such series, only such duties as are
specifically set forth in the Subordinated Note Indenture and, in case an Event
of Default with respect to Junior Subordinated Notes of any series has occurred
and is continuing, shall exercise, with respect to Junior Subordinated Notes of
such series, the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provision, the
Subordinated Note Indenture Trustee is under no obligation to exercise any of
the powers vested in it by the Subordinated Note Indenture at the request of any
holder of Junior Subordinated Notes of any series, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The Subordinated Note Indenture Trustee is not required to
expend or risk its own funds or otherwise incur any financial liability in the
performance of its duties if the Subordinated Note Indenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
The Chase Manhattan Bank, the Subordinated Note Indenture Trustee, also
serves as Senior Note Indenture Trustee, as Property Trustee and as Guarantee
Trustee. The Company and certain of its affiliates maintain deposit accounts and
banking relationships with The Chase Manhattan Bank. The Chase Manhattan Bank
also serves as trustee under other indentures pursuant to which securities of
the Company and affiliates of the Company are outstanding.
GOVERNING LAW
The Subordinated Note Indenture and the Junior Subordinated Notes will be
governed by, and construed in accordance with, the internal laws of the State of
New York.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Subordinated Note Indenture to a direct or indirect
wholly-owned subsidiary of the Company; provided, that, in the event of any such
assignment, the Company will remain primarily liable for all such obligations.
Subject to the foregoing, the Subordinated Note Indenture will be binding upon
and inure to the benefit of the parties thereto and their respective successors
and assigns.
DESCRIPTION OF THE PREFERRED SECURITIES
Each Trust may issue only one series of Preferred Securities having terms
described in the Prospectus Supplement relating thereto. The Trust Agreement of
each Trust will authorize the Administrative Trustees, on behalf of the Trust,
to issue the Preferred Securities of such Trust. The Preferred Securities of
each Trust will have such terms, including distributions, redemption, voting,
liquidation rights and such other preferred, deferral or other special rights or
such restrictions as shall be set forth in the Trust Agreement of such Trust.
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Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a Trust for specific terms, including (i) the distinctive
designation of such Preferred Securities; (ii) the number of Preferred
Securities issued by such Trust; (iii) the annual distribution rate (or method
of determining such rate) for Preferred Securities of such Trust and the date or
dates on which such distributions shall be payable; (iv) whether distributions
on such Preferred Securities shall be cumulative and, in the case of Preferred
Securities having cumulative distribution rights, the date or dates, or method
of determining the date or dates, from which distributions on such Preferred
Securities shall be cumulative; (v) the amount or amounts that shall be paid out
of the assets of such Trust to the holders of the Preferred Securities of such
Trust upon voluntary or involuntary dissolution, winding-up or termination of
such Trust; (vi) the obligation, if any, of such Trust to purchase or redeem
such Preferred Securities and the price or prices at which, the period or
periods within which, and the terms and conditions upon which such Preferred
Securities shall be purchased or redeemed, in whole or in part, pursuant to such
obligation; (vii) the voting rights, if any, of such Preferred Securities in
addition to those required by law, including the number of votes per Preferred
Security and any requirement for the approval by the holders of Preferred
Securities as a condition to specified action or amendments to the Trust
Agreement of such Trust; (viii) the rights, if any, to defer distributions on
the Preferred Securities by extending the interest payment period on the related
Junior Subordinated Notes; and (ix) any other relative rights, preferences,
privileges, limitations or restrictions of such Preferred Securities not
inconsistent with the Trust Agreement of such Trust or applicable law. All
Preferred Securities offered hereby will be guaranteed by the Company to the
extent set forth under "Description of the Guarantees." Any material United
States federal income tax considerations applicable to an offering of Preferred
Securities will be described in the Prospectus Supplement relating thereto.
DESCRIPTION OF THE GUARANTEES
Set forth below is a summary of information concerning the Guarantees that
will be executed and delivered by the Company for the benefit of the holders of
Preferred Securities of the respective Trusts from time to time. Each Guarantee
will be qualified as an indenture under the 1939 Act. The Chase Manhattan Bank
will act as indenture trustee under each Guarantee (the "Guarantee Trustee") for
purposes of the 1939 Act. The terms of the respective Guarantees will be those
set forth therein and those made part thereof by the 1939 Act. The following
summary does not purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to, the Guarantees,
the form of which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, and the 1939 Act. Each Guarantee will be held by
the Guarantee Trustee for the benefit of holders of the Preferred Securities to
which it relates.
GENERAL
Pursuant to each Guarantee, the Company will irrevocably and
unconditionally agree, to the extent set forth therein, to pay in full, to the
holders of the related Preferred Securities, the Guarantee Payments (as defined
herein), to the extent not paid by, or on behalf of, the related Trust,
regardless of any defense, right of set-off or counterclaim that the Company may
have or assert against any person. The following payments or distributions with
respect to the Preferred Securities of any Trust to the extent not paid or made
by, or on behalf of, such Trust will be subject to the Guarantee related thereto
(without duplication): (i) any accrued and unpaid distributions required to be
paid on the Preferred Securities of such Trust but if and only if and to the
extent that such Trust has funds legally and immediately available therefor,
(ii) the redemption price, including all accrued and unpaid distributions to the
date of redemption (the "Redemption Price"), with respect to any Preferred
Securities called for redemption by such Trust, but if and only to the extent
such Trust has funds legally and immediately available therefor, and (iii) upon
a dissolution, winding-up or termination of such Trust (other than in connection
with the distribution of Junior Subordinated Notes to the holders of Trust
Securities of such Trust or the redemption of all of the Preferred Securities of
such Trust), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Preferred Securities of such Trust to
the date of payment, to the extent such Trust has funds legally and immediately
available therefor, and (b) the amount of assets of such Trust remaining
available for distribution
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to holders of Preferred Securities of such Trust in liquidation of such Trust
(the "Guarantee Payments"). The Company's obligation to make a Guarantee Payment
may be satisfied by direct payment of the required amounts by the Company to the
holders of the related Preferred Securities or by causing the related Trust to
pay such amounts to such holders.
Each Guarantee will be a guarantee of the Guarantee Payments with respect
to the related Preferred Securities from the time of issuance of such Preferred
Securities, but will not apply to the payment of distributions and other
payments on such Preferred Securities when the related Trust does not have
sufficient funds legally and immediately available to make such distributions or
other payments. IF THE COMPANY DOES NOT MAKE INTEREST PAYMENTS ON THE JUNIOR
SUBORDINATED NOTES HELD BY THE PROPERTY TRUSTEE UNDER ANY TRUST, SUCH TRUST WILL
NOT MAKE DISTRIBUTIONS ON ITS PREFERRED SECURITIES.
SUBORDINATION
The Company's obligations under each Guarantee to make the Guarantee
Payments will constitute an unsecured obligation of the Company and will rank
(i) subordinate and junior in right of payment to all other liabilities of the
Company, including the Junior Subordinated Notes, except those obligations or
liabilities made pari passu or subordinate by their terms, (ii) pari passu with
the most senior preferred or preference stock now or hereafter issued by the
Company and with any guarantee now or hereafter entered into by the Company in
respect of any preferred or preference securities of any affiliate of the
Company, and (iii) senior to all common stock of the Company. The terms of the
Preferred Securities will provide that each holder of Preferred Securities by
acceptance thereof agrees to the subordination provisions and other terms of the
Guarantee related thereto. The Company has outstanding preferred stock that
ranks pari passu to the Guarantees and common stock that ranks junior to the
Guarantees. See "Selected Information -- Selected Financial Information."
Each Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
the guarantor to enforce its rights under the guarantee without first
instituting a legal proceeding against any other person or entity).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially and adversely
affect the rights of holders of the related Preferred Securities (in which case
no consent will be required), each Guarantee may be amended only with the prior
approval of the holders of not less than 66 2/3% in liquidation amount of such
outstanding Preferred Securities. The manner of obtaining any such approval of
holders of the Preferred Securities will be as set forth in an accompanying
Prospectus Supplement. All guarantees and agreements contained in each Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the holders of the related
Preferred Securities then outstanding.
TERMINATION
Each Guarantee will terminate and be of no further force and effect as to
the related Preferred Securities upon full payment of the Redemption Price of
all such Preferred Securities, upon distribution of Junior Subordinated Notes to
the holders of such Preferred Securities, or upon full payment of the amounts
payable upon liquidation of the related Trust. Each Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
holder of the related Preferred Securities must restore payment of any sums paid
with respect to such Preferred Securities or under such Guarantee.
EVENTS OF DEFAULT
An event of default under each Guarantee will occur upon the failure by the
Company to perform any of its payment obligations thereunder. The holders of a
majority in liquidation amount of the Preferred Securities to which any
Guarantee relates have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under such Guarantee. Any holder of the
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related Preferred Securities may institute a legal proceeding directly against
the Company to enforce its rights under such Guarantee without first instituting
a legal proceeding against the Guarantee Trustee or any other person or entity.
The holders of a majority in liquidation amount of Preferred Securities of any
series may, by vote, on behalf of the holders of all the Preferred Securities of
such series, waive any past event of default and its consequences.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of any event of default with
respect to any Guarantee and after the curing or waiving of all events of
default with respect to such Guarantee, undertakes to perform only such duties
as are specifically set forth in such Guarantee and, in case an event of default
has occurred, shall exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs. Subject to such
provisions, the Guarantee Trustee is under no obligation to exercise any of the
powers vested in it by any Guarantee at the request of any holder of the related
Preferred Securities, unless offered reasonable indemnity against the costs,
expenses and liabilities which might be incurred thereby.
The Chase Manhattan Bank, the Guarantee Trustee, also serves as Property
Trustee, as Senior Note Indenture Trustee and as Subordinated Note Indenture
Trustee. The Company and certain of its affiliates maintain deposit accounts and
banking relationships with The Chase Manhattan Bank. The Chase Manhattan Bank
serves as trustee under other indentures pursuant to which securities of the
Company and affiliates of the Company are outstanding.
GOVERNING LAW
Each Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
THE AGREEMENTS AS TO EXPENSES AND LIABILITIES
Pursuant to an Agreement as to Expenses and Liabilities to be entered into
by the Company under each Trust Agreement, the Company will irrevocably and
unconditionally guarantee to each person or entity to whom each Trust becomes
indebted or liable the full payment of any indebtedness, expenses or liabilities
of such Trust, other than obligations of such Trust to pay to the holders of the
related Preferred Securities or other similar interests in such Trust the
amounts due such holders pursuant to the terms of such Preferred Securities or
such other similar interests, as the case may be.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED NOTES AND THE GUARANTEES
As long as payments of interest and other payments are made when due on
each series of Junior Subordinated Notes issued to a Trust, such payments will
be sufficient to cover distributions and payments due on the related Trust
Securities of such Trust primarily because (i) the aggregate principal amount of
each series of Junior Subordinated Notes will be equal to the sum of the
aggregate stated liquidation amount of the related Trust Securities; (ii) the
interest rate and interest and other payment dates on each series of Junior
Subordinated Notes will match the distribution rate and distribution and other
payment dates for the related Preferred Securities; (iii) the Company shall pay
for all costs and expenses of each Trust pursuant to the Agreements as to
Expenses and Liabilities; and (iv) each Trust Agreement provides that the
Securities Trustees thereunder shall not cause or permit the Trust to, among
other things, engage in any activity that is not consistent with the purposes of
the Trust.
Payments of distributions (to the extent funds therefor are legally and
immediately available) and other payments due on the Preferred Securities (to
the extent funds therefor are legally and immediately available) will be
guaranteed by the Company as and to the extent set forth under "Description of
the Guarantees." If the Company does not make interest payments on any series of
Junior Subordinated Notes, it is not expected that the related Trust will have
sufficient funds to pay distributions on its Preferred Securities. Each
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Guarantee is a guarantee from the time of its issuance, but does not apply to
any payment of distributions unless and until the related Trust has sufficient
funds legally and immediately available for the payment of such distributions.
If the Company fails to make interest or other payments on any series of
Junior Subordinated Notes when due (taking into account any extension period as
described in the applicable Prospectus Supplement), the Trust Agreement provides
a mechanism whereby the holders of the related Preferred Securities may appoint
a substitute Property Trustee. Such holders may also direct the Property Trustee
to enforce its rights under the Junior Subordinated Notes of such series,
including proceeding directly against the Company to enforce such Junior
Subordinated Notes. If the Property Trustee fails to enforce its rights under
any series of Junior Subordinated Notes, to the fullest extent permitted by
applicable law, any holder of related Preferred Securities may institute a legal
proceeding directly against the Company to enforce the Property Trustee's rights
under such series of Junior Subordinated Notes without first instituting any
legal proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, a holder of Preferred Securities may institute a
legal proceeding directly against the Company, without first instituting a legal
proceeding against the Property Trustee or any other person or entity, for
enforcement of payment to such holder of principal of or interest on Junior
Subordinated Notes of the related series having a principal amount equal to the
aggregate stated liquidation amount of the Preferred Securities of such holder
on or after the due dates specified in the Junior Subordinated Notes of such
series.
If the Company fails to make payments under any Guarantee, such Guarantee
provides a mechanism whereby the holders of the Preferred Securities to which
such Guarantee relates may direct the Guarantee Trustee to enforce its rights
thereunder. In addition, any holder of Preferred Securities may institute a
legal proceeding directly against the Company to enforce the Guarantee Trustee's
rights under the related Guarantee without first instituting a legal proceeding
against the Guarantee Trustee or any other person or entity.
Each Guarantee, the Subordinated Note Indenture, the Junior Subordinated
Notes of the related series, the related Trust Agreement and the related
Agreement as to Expenses and Liabilities, as described above, constitute a full
and unconditional guarantee by the Company of the payments due on the related
series of Preferred Securities.
Upon any voluntary or involuntary dissolution, winding-up or termination of
any Trust, unless Junior Subordinated Notes of the related series are
distributed in connection therewith, the holders of Preferred Securities of such
Trust will be entitled to receive, out of assets legally available for
distribution to holders, a liquidation distribution in cash as described in the
applicable Prospectus Supplement. Upon any voluntary or involuntary liquidation
or bankruptcy of the Company, the Property Trustee, as holder of the related
series of Junior Subordinated Notes, would be a subordinated creditor of the
Company, subordinated in right of payment to all Senior Indebtedness, but
entitled to receive payment in full of principal and interest, before any
stockholders of the Company receive payments or distributions. Because the
Company is guarantor under each Guarantee and has agreed to pay for all costs,
expenses and liabilities of each Trust (other than the Trust's obligations to
holders of the Preferred Securities) pursuant to the related Agreement as to
Expenses and Liabilities, the positions of a holder of Preferred Securities and
a holder of Junior Subordinated Notes of the related series relative to other
creditors and to stockholders of the Company in the event of liquidation or
bankruptcy of the Company would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Subordinated Note Indenture.
However, in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Junior Subordinated Notes
provide that no payments may be made in respect of the Junior Subordinated Notes
until such Senior Indebtedness has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on the
Junior Subordinated Notes of any series would constitute an Event of Default
under the Subordinated Note Indenture with respect to the Junior Subordinated
Notes of such series except that failure to make interest payments on the Junior
Subordinated Notes of such series will not be an Event of Default during an
extension period as described in the applicable Prospectus Supplement.
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PLAN OF DISTRIBUTION
The Company may sell the Senior Notes and the Junior Subordinated Notes and
the Trusts may sell the Preferred Securities in one or more of the following
ways from time to time: (i) to underwriters for resale to the public or to
institutional investors; (ii) directly to institutional investors; or (iii)
through agents to the public or to institutional investors. The Prospectus
Supplement with respect to each series of Senior Notes, Junior Subordinated
Notes or Preferred Securities will set forth the terms of the offering of such
Senior Notes, Junior Subordinated Notes or Preferred Securities, including the
name or names of any underwriters or agents, the purchase price of such Senior
Notes, Junior Subordinated Notes or Preferred Securities and the proceeds to the
Company or the applicable Trust from such sale, any underwriting discounts or
agency fees and other items constituting underwriters' or agents' compensation,
any initial public offering price, any discounts or concessions allowed or
reallowed or paid to dealers and any securities exchange on which such Senior
Notes, Junior Subordinated Notes or Preferred Securities may be listed.
If underwriters participate in the sale, such Senior Notes, Junior
Subordinated Notes or Preferred Securities will be acquired by the underwriters
for their own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale.
Unless otherwise set forth in the Prospectus Supplement, the obligations of
the underwriters to purchase any series of Senior Notes, Junior Subordinated
Notes or Preferred Securities will be subject to certain conditions precedent
and the underwriters will be obligated to purchase all of such series of Senior
Notes, Junior Subordinated Notes or Preferred Securities, if any are purchased.
Underwriters and agents may be entitled under agreements entered into with
the Company and/or the applicable Trust to indemnification against certain civil
liabilities, including liabilities under the 1933 Act. Underwriters and agents
may engage in transactions with, or perform services for, the Company in the
ordinary course of business.
Each series of Senior Notes, Junior Subordinated Notes or Preferred
Securities will be a new issue of securities and will have no established
trading market. Any underwriters to whom Senior Notes, Junior Subordinated Notes
or Preferred Securities are sold for public offering and sale may make a market
in such Senior Notes, Junior Subordinated Notes or Preferred Securities, but
such underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. The Senior Notes, Junior Subordinated Notes
or Preferred Securities may or may not be listed on a national securities
exchange.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Company and the Trusts by
Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel
to the Company and the Trusts. The validity of the Senior Notes, the Junior
Subordinated Notes, the Guarantees and certain matters relating thereto will be
passed upon on behalf of the Company by Balch & Bingham LLP, Birmingham,
Alabama, and by Troutman Sanders LLP, Atlanta, Georgia. Certain legal matters
will be passed upon for the Underwriters by Dewey Ballantine LLP, New York, New
York.
EXPERTS
The financial statements and schedules of the Company included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are incorporated herein in reliance upon the authority of
said firm as experts in accounting and auditing in giving said reports. With
respect to the Company's unaudited interim financial information for the periods
ended March 31, 1998 and 1997, included in the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998 and incorporated by reference
herein, Arthur Andersen LLP has applied limited procedures in accordance with
professional standards for review of such information. However, their
19
<PAGE>
separate reports thereon state that they did not audit and they do not express
an opinion on such interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures employed. In addition, the
accountants are not subject to the liability provisions of Section 11 of the
1933 Act for their reports on the unaudited interim financial information
because these reports are not "reports" or "parts" of the registration statement
prepared or certified by the accountants within the meaning of Sections 7 and 11
of said Act.
Statements as to matters of law and legal conclusions in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, relating to
titles to property of the Company under "Item 2 -- Properties -- Titles to
Property", and relating to the Company under "Item 1 -- Business -- Regulation",
"Item 1 -- Business -- Rate Matters" and "Item 1 -- Business -- Competition",
have been reviewed by Balch & Bingham LLP, general counsel for the Company, and
such statements are made upon the authority of such firm as experts.
20
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY OR THE INSURER SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary of Offering................... S-2
Capitalization........................ S-3
Use of Proceeds....................... S-3
Recent Results of Operations.......... S-3
Description of the Series D Senior
Notes............................... S-4
The Policy and the Insurer............ S-8
Ratings............................... S-10
Experts............................... S-11
Underwriting.......................... S-12
Glossary.............................. S-14
Appendix A............................ A-1
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
Selected Information.................. 3
Alabama Power Company................. 4
The Trusts............................ 5
Accounting Treatment.................. 5
Use of Proceeds....................... 5
Recent Results of Operations.......... 5
Description of the Senior Notes....... 6
Description of the Junior Subordinated
Notes............................... 9
Description of the Preferred
Securities.......................... 14
Description of the Guarantees......... 15
Relationship Among the Preferred
Securities, the Junior Subordinated
Notes and the Guarantees............ 17
Plan of Distribution.................. 19
Legal Matters......................... 19
Experts............................... 19
</TABLE>
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$175,000,000
(ALABAMA POWER LOGO)
SERIES D % SENIOR
INSURED QUARTERLY NOTES
DUE SEPTEMBER 30, 2018
(IQ NOTES(SM))
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PROSPECTUS SUPPLEMENT
---------------------
EDWARD D. JONES & CO., L.P.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PRUDENTIAL SECURITIES INCORPORATED
August , 1998
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