<PAGE>
PROSPECTUS SUPPLEMENT FILED PURSUANT TO RULES 424(b)(2)
REGISTRATION NO. 333-01025
(TO PROSPECTUS DATED JUNE 11, 1996) REGISTRATION NO. 333-01025-01
$150,000,000
HOUSEHOLD FINANCIAL CORPORATION LIMITED
FLOATING RATE SENIOR NOTES DUE NOVEMBER 1, 2001
UNCONDITIONALLY GUARANTEED AS TO PAYMENT OF PRINCIPAL AND INTEREST BY
HOUSEHOLD INTERNATIONAL, INC.
----------------
The Notes will mature on November 1, 2001. Interest on the Notes is payable
quarterly on February 1, May 1, August 1 and November 1, commencing February
1, 1997. The interest rate in effect for the Interest Period commencing on
each Interest Reset Date will be LIBOR (as defined herein) plus 0.15%. The
Notes are not redeemable or repayable prior to maturity and do not provide for
any sinking fund. The Notes will be represented by a global security
registered in the name of a nominee of The Depository Trust Company, as
depositary. Beneficial interests in the Notes will be shown on, and transfers
thereof will be effected only through, records maintained by The Depository
Trust Company and its participants. Except as described herein, Notes in
definitive form will not be issued. See "Description of Notes" herein.
----------------
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 OR THE
PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND HOUSEHOLD
PUBLIC (1) COMMISSIONS (2) CANADA (1)(3)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note............................. 100.00% .45% 99.55%
- --------------------------------------------------------------------------------
Total................................ $150,000,000 $675,000 $149,325,000
- --------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from October 30, 1996.
(2) Household Canada and Household International have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(3) Before deduction of expenses payable by Household Canada estimated at
$225,000.
----------------
The Notes are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them, subject to approval of certain
legal matters by counsel. The Underwriters reserve the right to withdraw,
cancel or modify such offer and to reject orders in whole or in part. It is
expected that delivery of the Notes in book-entry form will be made through
the facilities of The Depository Trust Company on or about October 30, 1996
against payment therefor in immediately available funds.
----------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
CIBC WOOD GUNDY SECURITIES CORP.
----------------
The date of this Prospectus Supplement is October 25, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
----------------
DESCRIPTION OF NOTES
The following description of the terms of the Floating Rate Senior Notes due
November 1, 2001 (the "Notes") offered hereby (referred to in the Prospectus
as the "Offered Debt Securities") supplements, insofar as such description
relates to the Notes, the description of the Debt Securities set forth in the
Prospectus under the heading "Description of Debt Securities and Guarantees,"
to which description reference is hereby made.
GENERAL
The Notes will be issued in fully registered form only in denominations of
$1,000 and integral multiples thereof. The Notes will mature on November 1,
2001.
The Notes are not redeemable at the option of Household Canada prior to
maturity. The Notes will not be entitled to any sinking fund.
The Notes will be unconditionally guaranteed as to payment of principal and
interest by Household International.
The Notes will be issued under an Indenture dated as of May 15, 1993, among
Household Canada, Household International, as guarantor, and LaSalle National
Trust, N.A., as Trustee.
INTEREST
Interest Payment Dates. Interest on Notes will be payable quarterly on each
February 1, May 1, August 1 and November 1, commencing February 1, 1997 (each
an "Interest Payment Date"). Interest payable on each Interest Payment Date
will include interest accrued from and including October 30, 1996 or from and
including the most recent Interest Payment Date to which interest has been
paid or duly provided for to but excluding the next Interest Payment Date.
Interest payable prior to maturity will be payable to the person in whose name
a Note is registered at the close of business on the fifteenth calendar day of
the month next preceding an Interest Payment Date. The interest payment at
maturity will include interest accrued to but excluding the Maturity Date and
will be payable to the person to whom principal is payable.
"Interest Period" shall mean the period beginning on and including October
30, 1996 to but excluding the first Interest Payment Date and each successive
period from and including an Interest Payment Date to but excluding the next
Interest Payment Date. Interest shall be computed on the basis of the actual
number of days in the applicable Interest Period divided by 360.
"Interest Reset Date" means the first day of any Interest Period.
The "Spread" for each Interest Period will be 0.15%.
Interest Rate. The per annum rate of interest for each Interest Period will
be (i) LIBOR (as defined herein) on the second London Business Day preceding
the Interest Reset Date for such Interest Period (the "Interest Determination
Date") plus (ii) the Spread. "LIBOR" for each Interest Period will be
determined by the Company in accordance with the following provisions:
(i) On each Interest Determination Date, the Company will ascertain the
offered rate for three-month deposits in U.S. dollars in the London
interbank market, which appears on the Telerate Page 3750 as of 11:00 a.m.
(London time) on such Interest Determination Date.
S-2
<PAGE>
(ii) If such rate does not appear on the Telerate Page 3750, or the
Telerate Page 3750 is unavailable, the Company will request four major
banks in the London interbank market (the "Reference Banks") to provide the
Company with their offered quotation (expressed as a rate per annum) for
three-month deposits in U.S. dollars to leading banks in the London
interbank market, in a principal amount equal to an amount of not less than
$1 million that is representative for a single transaction in such market
at such time, at approximately 11:00 a.m. (London time) on the Interest
Determination Date. If at least two such quotations are provided, LIBOR in
respect of that Interest Determination Date will be the arithmetic mean of
such quotations.
(iii) If less than two of the Reference Banks provide the Company with
such offered quotations, LIBOR in respect to that Interest Determination
Date will be the arithmetic mean of the rates quoted by three major banks
in The City of New York selected by the Company at approximately 11:00
a.m., New York City time, on that Interest Determination Date for three-
month loans in U.S. dollars to leading European banks, in a principal
amount equal to an amount of not less than $1 million that is
representative for a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid by the Company
are not quoting as mentioned in this sentence, LIBOR will be LIBOR in
effect on such Interest Determination Date.
"London Business Day" means any day on which dealings in deposits in U.S.
dollars are transacted in the London interbank market.
The Paying Agent will not be responsible for determining the interest rates
applicable to any Note. All percentages resulting from any calculations will
be rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point (with five one-millionths of a percentage point being rounded
upward).
BOOK-ENTRY SYSTEM
The Notes will be represented by one or more global securities (the "Global
Security"). The Global Security will be deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of a
nominee of the Depositary. See "Description of Debt Securities and
Guarantees--Book-Entry System" in the Prospectus.
USE OF PROCEEDS
Household Canada will apply the net proceeds from the sale of the Notes to
its general funds to be used to fund investments in, or extensions of credit
to, its subsidiaries; to reduce other outstanding indebtedness (which may
include indebtedness owed to its affiliates, including Household
International); or to fund acquisitions of other companies or portfolios.
RATIOS OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for Household International and
Household Canada for the periods indicated below were as follows:
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------- ------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Household International and subsidiaries..... 1.48 1.40 1.47 1.41 1.38 1.19 1.10
Household Canada and subsidiaries............ 1.12 0.97 1.07 0.86 0.77 0.79 0.83
</TABLE>
For purposes of calculating the ratio, earnings consist of income from
continuing operations to which has been added income taxes and fixed charges.
For Household International, fixed charges consist of interest on all
indebtedness (including capitalized interest) and one-third of rental expense
(approximate portion representing interest). For Household Canada, fixed
charges consist of interest on all indebtedness (excluding capitalized
interest and one-third of rental expense); the respective ratios calculated on
a basis including capitalized interest and one-third of rental expense are
1.12, 0.97, 1.07, 0.86, 0.77, 0.79 and 0.83, respectively.
S-3
<PAGE>
CERTAIN TAX MATTERS
The following is a summary of the principal United States and Canadian
Federal income tax consequences with respect to the purchase, ownership and
disposition of a Note by a holder that is not a resident of Canada within the
meaning of the Income Tax Act (Canada) (the "ITA") and is a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof, or any estate or trust the income of which is
subject to United States Federal income taxation regardless of its source (a
"United States Holder"). This summary is based on facts as they exist and
laws, regulations, rulings and decisions in effect on the date hereof, all of
which are subject to change, and is included for general information only and
may not apply to all United States Holders. Prospective purchasers of Notes
should consult their own tax advisors in determining the United States,
Canadian and any other tax consequences to them of the purchase, ownership and
disposition of Notes or beneficial interests therein.
UNITED STATES TAXATION
Any interest paid on the Notes should be considered as foreign source income
for United States income tax purposes (including for purposes of computing a
holder's U.S. foreign tax credit limitation).
Upon the sale, exchange or redemption of a Note, a United States Holder will
recognize a gain or loss, if any, for United States Federal income tax
purposes equal to the difference between the amount realized on the sale,
exchange or redemption and the United States Holder's tax basis in the Note.
Such gain or loss generally will be capital gain or loss if the Note is held
as a capital asset.
A 31% backup withholding tax and an information reporting requirement is
applicable to certain non-corporate United States Holders with respect to
payments of principal and interest on, and the proceeds of the sale of, the
Notes unless such United States Holder makes certain written certifications
and provides certain identifying information in accordance with applicable
requirements or otherwise establishes an exemption. Any amounts withheld under
the backup withholding rules from a payment to a holder would be allowed as a
refund or a credit against such United States Holder's Federal income tax
provided that the required information is furnished to the United States
Internal Revenue Service.
CANADIAN TAXATION
This summary is based on the current provisions of the ITA and the
regulations thereunder, the understanding of Household Canada of the current
assessing and administrative practices of Revenue Canada, Customs, Excise and
Taxation ("Revenue Canada") and all specific proposals to amend the ITA and
the regulations thereunder publicly announced by the Minister of Finance prior
to the date hereof. This summary does not otherwise take into account or
anticipate changes in the law or in the assessment and administrative
practices of Revenue Canada, whether by judicial, governmental or legislative
decision or action, nor does it take into account tax legislation or
considerations of any province or territory of Canada or any jurisdiction
other than Canada. This summary is of a general nature only and is not
intended to be, and should not be interpreted as legal or tax advice to any
holder of Notes.
Interest payable by Household Canada on the Notes to initial holders who are
non-residents of Canada with whom Household Canada and Household International
are dealing at arm's length (within the meaning of the ITA) at the time of
making the payment will be exempt from non-resident withholding tax under the
ITA.
No other taxes on income (including taxable capital gains) will be payable
under the ITA in respect of the holding or disposition of the Notes, or the
receipt of interest thereon by holders who are not resident, nor deemed to be
resident, in Canada at any time when Notes are owned by such holders and who
do not use or hold and are not deemed to use or hold, the Notes in carrying on
business in Canada for purposes of the ITA. However, in certain circumstances,
holders who are non-resident insurers carrying on an insurance business in
Canada may be subject to tax under the ITA in respect of the holding or
disposition of the Notes, or the receipt of interest thereon.
S-4
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among Household Canada, Household International
and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc.
and CIBC Wood Gundy Securities Corp. (the "Underwriters"), Household Canada
has agreed to sell to the Underwriters, and the Underwriters have severally
agreed to purchase, the respective principal amounts of the Notes set forth
after their names below. The Underwriting Agreement provides that the
obligations of the Underwriters are subject to certain conditions precedent
and that the Underwriters will be obligated to purchase all of the Notes if
any are purchased.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT
----------- ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................... $ 75,000,000
Lehman Brothers Inc. ....................................... 50,000,000
CIBC Wood Gundy Securities Corp. ........................... 25,000,000
------------
Total................................................... $150,000,000
============
</TABLE>
The Underwriters have advised Household Canada that they propose initially
to offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such price
less a concession not in excess of .30% of the principal amount. The
Underwriters may allow and such dealers may reallow a discount not in excess
of .25% of the principal amount of the Notes to certain other dealers. After
the initial public offering, the public offering price, concession and
discount may be changed.
The Notes are a new issue of securities with no established trading market.
Household Canada has been advised by the Underwriters that they intend to make
a market in the Notes but they are not obligated to do so and may discontinue
such market-making at any time without notice. No assurance can be given,
however, as to whether a trading market in the Notes will develop or as to the
liquidity of any trading market for the Notes.
Household Canada and Household International have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
LEGAL OPINIONS
The legality of the Notes and the Guarantees will be passed upon by John W.
Blenke, Vice President--Corporate Law and Assistant Secretary for Household
International. As of the date of this Prospectus Supplement, Mr. Blenke is a
full-time employee and an officer of Household International and owns, and
holds options to purchase, shares of Common Stock of Household International.
Certain legal matters in connection with the Notes and the Guarantees will be
passed upon for the Underwriters by McDermott, Will & Emery, Chicago,
Illinois.
EXPERTS
The financial statements of Household Canada and its subsidiaries and the
financial statements of Household International and its subsidiaries
incorporated by reference in the Prospectus, to the extent and for the periods
indicated in its reports, have been audited by Arthur Andersen LLP,
independent public accountants, and are so incorporated by reference in
reliance upon the authority of said firm as experts in giving said reports.
S-5
<PAGE>
HOUSEHOLD FINANCIAL CORPORATION LIMITED
SENIOR NOTES
AND
WARRANTS TO PURCHASE SENIOR NOTES
HOUSEHOLD INTERNATIONAL, INC.
GUARANTOR
Household Financial Corporation Limited ("Household Canada") from time to
time may offer one or more series of unsecured senior notes ("Debt
Securities") and warrants ("Warrants") to purchase Debt Securities (the Debt
Securities and Warrants being hereinafter collectively called the
"Securities") having an aggregate initial offering price of up to
U.S.$400,000,000, or the equivalent thereof if any of the Securities are
denominated in a foreign currency or a foreign currency unit. All Debt
Securities will be unconditionally guaranteed as to payment of principal,
premium, if any, and interest by Household International, Inc. ("Household
International"). The guarantees of the Debt Securities (the "Guarantees") will
constitute unsecured obligations of Household International and will rank on a
parity with other unsecured senior indebtedness of Household International.
The Debt Securities will be offered as separate series in amounts, at prices
and on terms to be determined at the time of sale and to be set forth in
supplements to this Prospectus ("Prospectus Supplement"). The Debt Securities
and Warrants may be sold for U.S. dollars, foreign currencies or foreign
currency units, and the principal of and any interest on the Debt Securities
may be payable in U.S. dollars, foreign currencies or foreign currency units.
Unless otherwise specified in the Prospectus Supplement, the Debt Securities
will be issued only in denominations of U.S.$100,000, or the equivalent
thereof, or any amount in excess thereof which is an integral multiple of
U.S.$1,000. The specific designation, aggregate principal amount, the currency
or currency unit for which the Securities may be purchased, the currency or
currency unit in which the principal and any interest is payable, the rate (or
method of calculation) and time of payment of any interest, authorized
denominations, maturity, offering price, any redemption terms or other
specific terms of the Securities in respect of which this Prospectus is being
delivered will be set forth in the Prospectus Supplement. With regard to the
Warrants, if any, in respect of which this Prospectus is being delivered, the
Prospectus Supplement sets forth a description of the Debt Securities for
which each Warrant is exercisable and the offering price, if any, exercise
price, duration, detachability and other terms of the Warrants.
Household Canada may sell Securities through underwriting syndicates led by
one or more managing underwriters or through one or more underwriting firms
acting alone, to or through dealers, acting as principals for their own
account or as agents, and also may sell Securities directly to other
purchasers. See "Plan of Distribution". The names of any underwriters or
agents involved in the sale of the Securities in respect to which this
Prospectus is being delivered and their compensation will be set forth in the
Prospectus Supplement.
----------------
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.
THESE SECURITIES HAVE NOT BEEN AND WILL NOT BE QUALIFIED FOR SALE UNDER THE
SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY THEREOF.
ACCORDINGLY, THESE SECURITIES MAY NOT BE OFFERED OR SOLD IN CANADA
OR ANY PROVINCE OR TERRITORY THEREOF AND THIS DOCUMENT DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THESE SECURITIES IN CANADA OR ANY PROVINCE OR
TERRITORY THEREOF.
----------------
THE DATE OF THIS PROSPECTUS IS JUNE 11, 1996.
<PAGE>
AVAILABLE INFORMATION
Household Canada and Household International have filed with the Securities
and Exchange Commission (the "Commission") a combined registration statement
on Form F-3 and Form S-3, respectively, (collectively, the "Registration
Statement," which term encompasses any amendments thereof) under the
Securities Act of 1933, as amended, with respect to the Securities and the
Guarantees offered hereby. 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. Statements or extracts presented in this Prospectus
from financial statements, contracts, agreements or other documents included
as an exhibit to the Registration Statement are not necessarily complete. With
respect to each such financial statement, contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is
hereby made to the exhibit for a more complete description of the matter
involved. All information concerning Household Canada contained herein has
been furnished by Household Canada and all information concerning Household
International has been furnished by Household International.
Household Canada and Household International are subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith file applicable reports,
proxy statements and other information with the Commission. Such reports,
proxy statements 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 the
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661
and Seven World Trade Center, 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. In addition, reports, proxy statements and other material
concerning Household International can be inspected at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, and the
Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 60605.
Although Household International is not required to send a copy of its
latest Annual Report to Shareholders to holders of the Securities, Household
International will, upon request, send to any holder of Securities a copy of
its latest Annual Report to Shareholders, as filed with the Commission, which
contains financial information that has been examined and reported upon, with
an opinion expressed, by independent certified public accountants.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by Household Canada (File No. 33-
62842) and Household International (File No. 1-8198) with the Commission
pursuant to the Exchange Act and are incorporated herein by reference and made
a part of this Prospectus:
(a) Household International's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995;
(b) Household International's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996;
(c) Two Household International Current Reports on Forms 8-K, each dated
January 25, 1996 and a Current Report on Form 8-K, dated June 3, 1996;
(d) Household Canada's Annual Report on Form 40-F for the fiscal year
ended December 31, 1995; and
(e) Household Canada's Quarterly Report filed on Form 6-K for the month
of March 1996.
All documents filed by Household International or Household Canada, as the
case may be, with the Commission pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this
2
<PAGE>
Prospectus and prior to the termination of the offering of the Securities
shall be deemed to be incorporated herein by reference and made a part of this
Prospectus from the date of filing of such documents (including any Form 6-K
hereafter filed by Household Canada which indicates it is being incorporated
herein by reference). 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.
Household International 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
(without exhibits other than exhibits specifically incorporated by reference).
Requests should be directed to:
Household International, Inc.
2700 Sanders Road
Prospect Heights, Illinois 60070
Attention: Office of the Secretary
Telephone: 847-564-5000
HOUSEHOLD INTERNATIONAL
Household International was formed in 1981 as a holding company for various
subsidiaries which operated in the financial services, manufacturing,
transportation and merchandising industries. In 1985 Household International
initiated a restructuring program that resulted in the disposition of its
merchandising, transportation and manufacturing businesses. This has enabled
Household International to focus its resources in the financial services
industry. Household International's principal executive office is located at
2700 Sanders Road, Prospect Heights, Illinois 60070 (telephone: 847-564-5000).
Through subsidiaries, such as Household Finance Corporation ("HFC"),
Household Bank, f.s.b., Household Bank (Nevada), National Association,
Household Retail Services, Inc., Household Canada, and HFC Bank plc, Household
International offers numerous consumer finance products, including home equity
credit lines, revolving and closed-end unsecured personal loans, private label
credit cards, and VISA* and MasterCard* credit cards. Also, in conjunction
with its consumer finance business, and where applicable laws permit,
Household International makes credit life, credit accident and health and
household contents insurance available to its customers.
The ongoing commercial finance operations of Household International are
generally administered by Household Commercial Financial Services, Inc.
("Household Commercial"), a subsidiary of HFC. Products offered by Household
Commercial include loan and lease financing to businesses for capital
equipment, including aircraft and other transportation equipment, and
specialized secured corporate loans. In addition, Household Commercial also
invests in publicly issued or privately placed term preferred stocks of
unaffiliated entities.
HOUSEHOLD FINANCIAL CORPORATION LIMITED
Household Financial Corporation Limited ("Household Canada"), formerly
Household Securities Limited, was incorporated by Letters Patent on September
9, 1947, pursuant to a predecessor to the Business Corporations Act (Ontario).
Household Canada changed its name from Household Securities Limited to
Household Financial Corporation Limited on August 13, 1975 when a Certificate
and Articles of Amendment were issued. Household
- --------
*VISA and MasterCard are registered trademarks of VISA, USA, Inc. and
MasterCard International Incorporated, respectively.
3
<PAGE>
Canada is a wholly-owned subsidiary of Household Global Funding, Inc., which
is a wholly-owned subsidiary of Household International. The registered and
principal office of Household Canada is at 100 Sheppard Avenue East, Suite
1000, North York, Ontario, M2N 6N7 (telephone: 416-250-3400).
Household Canada is a holding company which co-ordinates the activities of,
arranges the funding of, and furnishes administrative services for its
operating subsidiaries. Household Canada and its predecessors have been
involved in the consumer finance business in Canada for over 65 years.
Household Canada offers a diversified range of consumer financial services to
the Canadian public through a network of retail branches. These services
include consumer loans, retail finance, revolving credit and the acceptance of
deposits. They are offered by Household Canada through four principal
operating subsidiaries: Household Finance Corporation of Canada, Household
Realty Corporation Limited, Merchant Retail Services Limited and Household
Trust Company. In 1991, a decision was made by Household Canada to no longer
offer commercial mortgages and a liquidation strategy in respect of the
commercial mortgage lending portfolio was implemented. In 1995, Household
Canada discontinued its conventional first mortgage lending operations and
disposed of the majority of its portfolio.
The enforcement by investors of civil liabilities under the federal
securities laws may be affected adversely by the fact that Household Canada is
incorporated or organized under the laws of Canada, that some or all of its
officers and directors may be residents of Canada and that all or a
substantial portion of the assets of Household Canada and of those persons may
be located outside the United States.
USE OF PROCEEDS
Household Canada will apply the net proceeds from the sale of the Securities
to its general funds to be used for general corporate purposes, including to
fund investments in, or extensions of credit to, its operating subsidiaries;
to reduce other outstanding indebtedness (which may include indebtedness owed
to its affiliates, including Household International); or to fund acquisitions
of other companies or portfolios.
RATIOS OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for Household International and
Household Canada for the periods indicated below were as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
31, YEAR ENDED DECEMBER 31,
------------- ------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Household International and
subsidiaries........................... 1.45 1.37 1.47 1.41 1.38 1.19 1.10
Household Canada and subsidiaries....... 1.00 0.94 1.07 0.86 0.77 0.79 0.83
</TABLE>
For purposes of calculating the ratio, earnings consist of income from
continuing operations to which has been added income taxes and fixed charges.
For Household International, fixed charges consist of interest on all
indebtedness (including capitalized interest) and one-third of rental expense
(approximate portion representing interest). For Household Canada, fixed
charges consist of interest on all indebtedness (excluding capitalized
interest and one-third of rental expense); the respective ratios calculated on
a basis including capitalized interest and one-third of rental expense are
1.00, 0.94, 1.07, 0.86, 0.77, 0.79 and 0.83, respectively.
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
The following description of the Debt Securities and Guarantees sets forth
certain general terms and provisions of the Debt Securities and Guarantees to
which any Prospectus Supplement may relate. The particular terms of the Debt
Securities offered by any Prospectus Supplement (the "Offered Debt
Securities") and the extent to which such general terms and provisions may
apply to the Offered Debt Securities will be described in the Prospectus
Supplement relating to such Offered Debt Securities.
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GENERAL
The Offered Debt Securities will constitute unsecured senior debt of
Household Canada, will rank on a parity with other unsecured senior debt of
Household Canada and will be unconditionally guaranteed as to payment of
principal, interest and premium, if any, by Household International. The
Offered Debt Securities will be issued under one of two indentures specified
elsewhere herein (the "Indentures"). Copies of the Indentures are filed as
exhibits to the Registration Statement which registers the Securities and the
Guarantees with the Commission. The following summaries do not purport to be
complete and, where particular provisions of the Indentures are referred to,
such provisions, including definitions of certain terms, are incorporated by
reference as part of such summaries, which are qualified in their entirety by
such reference.
The Indentures provide that Debt Securities may be issued thereunder from
time to time in one or more series and do not limit the aggregate principal
amount of the Debt Securities, except as may be otherwise provided with
respect to any particular series of Offered Debt Securities.
Unless otherwise indicated in the Prospectus Supplement with respect to any
particular series of Offered Debt Securities, the Debt Securities will be
issued in definitive registered form without coupons, will be exchangeable for
authorized denominations and will be transferable at any time or from time to
time. No charge will be made to any Holder for any exchange or registration of
transfer except for any tax or governmental charge incident thereto. The Debt
Securities of any series may be issued in whole or in part in the form of one
or more global securities that will be deposited with, or on behalf of, a
Depositary. See "Book-Entry System" below.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for the following terms and other
information to the extent applicable with respect to the Offered Debt
Securities: (1) the title of the Offered Debt Securities; (2) any limit on the
aggregate principal amount of the Offered Debt Securities; (3) the price
(expressed as a percentage of the aggregate principal amount thereof)
Household Canada will be paid for the Offered Debt Securities and the initial
offering price, if any, at which the Offered Debt Securities will be offered
to the public; (4) the currency, currencies or currency units for which the
Offered Debt Securities may be purchased and the currency, currencies or
currency units in which the principal of and any interest on such Offered Debt
Securities may be payable; (5) the date or dates on which the Offered Debt
Securities will mature; (6) the rate or rates (which may be fixed or variable)
per annum at which the Offered Debt Securities will bear interest, if any; (7)
the date from which such interest, if any, on the Offered Debt Securities will
accrue, the dates on which such interest, if any, will be payable, the date on
which payment of such interest, if any, will commence and the Regular Record
Dates for such Interest Payment Dates, if any; (8) the dates, if any, on which
and the price or prices at which the Offered Debt Securities will, pursuant to
any mandatory sinking fund provisions, or may, pursuant to any optional
sinking fund or purchase fund provisions, be redeemed by Household Canada, and
the other detailed terms and provisions of such sinking and/or purchase funds;
(9) the date, if any, after which and the price or prices at which the Offered
Debt Securities may, pursuant to any optional redemption provisions, be
redeemed at the option of Household Canada or of the Holder thereof and the
other detailed terms and provisions of such optional redemption; (10) the
securities exchange, if any, on which the Offered Debt Securities will be
listed; and (11) additional provisions, if any, with respect to the Offered
Debt Securities. With respect to Offered Debt Securities sold through dealers
acting as agents, however, the maturities and interest rates of such Offered
Debt Securities may be established by Household Canada from time to time and,
if not set forth in the Prospectus Supplement relating thereto, will be made
available through such dealers.
If any of the Debt Securities are sold for foreign currencies or foreign
currency units or if the principal of or any interest on any series of Debt
Securities is payable in foreign currencies or foreign currency units, the
restrictions, elections, tax consequences, specific terms and other
information with respect to such issue of Debt Securities and such currencies
or currency units will be set forth in the Prospectus Supplement relating
thereto.
Debt Securities may be issued as Original Issue Discount Securities to be
offered and sold at a discount below their stated principal amount. "Original
Issue Discount Securities" means any Debt Securities that
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provide for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the maturity thereof upon the
occurrence of an Event of Default and the continuance thereof. As used in the
following summary of certain terms of the Debt Securities, the term "principal
amount" means, in the case of any Original Issue Discount Security, the amount
that would then be due and payable upon acceleration of the maturity thereof,
as specified in such Debt Securities.
BOOK-ENTRY SYSTEM
If so indicated in the Prospectus Supplement with respect to any series of
Offered Debt Securities, such Offered Debt Securities will be represented by
one or more global securities (the "Global Security"). The Global Security
will be deposited with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of a nominee of the Depositary.
Except under circumstances described below, such Offered Debt Securities will
not be issuable in definitive form.
The Depositary has advised Household Canada, Household International and any
underwriters, dealers or agents named in the applicable Prospectus Supplement
as follows: the Depositary is a limited-purpose trust company organized under
the laws of the State of New York, 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 Securities Exchange Act of 1934. The Depositary was created to hold
securities of its participants and to facilitate the clearance and settlement
of securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations, some of
which (and/or their representatives) own the Depositary. Access to the
Depositary's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies, that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Upon the issuance of the Global Security, the Depositary will credit on its
book-entry registration and transfer system the accounts of participants with
the respective principal amounts of the Offered Debt Securities represented by
the Global Security. Ownership of beneficial interests in the Global Security
will be limited to persons that have accounts with the Depositary or its
nominee ("participants") or persons that may hold interests through
participants. Ownership of beneficial interests in the Global Security will be
shown on, and the transfer of that ownership will be effected only through,
records maintained by the Depositary or its nominee (with respect to interests
of participants) and on the records of participants (with respect to interests
of persons other than participants). The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in the Global Security.
So long as the Depositary or its nominee is the registered owner of the
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Offered Debt Securities represented
by the Global Security for all purposes under the Indenture. Except as
provided below, owners of beneficial interests in the Global Security will not
be entitled to have Offered Debt Securities represented by the Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Offered Debt Securities in definitive form and will not be
considered the owners or holders thereof under the Indenture.
Principal and interest payments on Offered Debt Securities registered in the
name of the Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Security.
None of Household Canada, Household International, the Trustee, any paying
agent or the registrar for the Offered Debt Securities will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in the Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
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Household Canada expects that the Depositary for the Offered Debt Securities
or its nominee, upon receipt of any payment of principal or interest, will
credit immediately participants' accounts with payments in amounts
proportionate to their respective beneficial interests in the principal amount
of the Global Security as shown on the records of the Depositary or its
nominee. Household Canada also expects that payments by participants to owners
of beneficial interests in the Global Security held through such participants
will be governed by standing instructions and customary practices, as is now
the case with securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such
participants.
If the Depositary is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed by Household Canada
within 90 days, Household Canada will issue Offered Debt Securities in
definitive form in exchange for the entire Global Security. In addition,
Household Canada may at any time and in its sole discretion determine not to
have the Offered Debt Securities represented by the Global Security and, in
such event, will issue Offered Debt Securities in definitive form in exchange
for the entire Global Security. In any such instance, an owner of a beneficial
interest in the Global Security will be entitled to physical delivery in
definitive form of Offered Debt Securities represented by the Global Security
equal in principal amount to such beneficial interest and to have such Offered
Debt Securities registered in its name. Offered Debt Securities so issued in
definitive form will be issued as registered Offered Debt Securities in
denominations of U.S. $100,000 or any amount in excess thereof which is an
integral multiple of U.S.$1,000, unless otherwise specified by Household
Canada.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Offered Debt Securities will be made by the underwriters,
dealers or agents in immediately available funds and all payments of principal
and interest thereon will be made by Household Canada in immediately available
funds.
GUARANTEES
Household International will unconditionally guarantee the due and punctual
payment of the principal of, premium, if any, and interest on the Debt
Securities when and as the same shall become due and payable, whether at
maturity, upon redemption or otherwise. The Guarantees are unsecured
obligations of Household International and will rank equally with all other
unsecured and unsubordinated obligations of Household International. The
Guarantees provide that in the event of a default in payment of principal,
premium, if any, or interest on a Debt Security, the Holder of the Debt
Security may institute legal proceedings directly against Household
International to enforce the Guarantee without first proceeding against
Household Canada. The Indentures provide that Household International may,
without the consent of any Holder, under certain circumstances assume all
rights and obligations of Household Canada under the Indentures with respect
to a series of Debt Securities. Upon such an assumption, Household Canada
shall be released from its liabilities with respect to such series of Debt
Securities. (Section 2.12)
Household International is principally a holding company whose primary
source of funds is dividends from its subsidiaries. Dividend distributions to
Household International from its banking and insurance subsidiaries may be
restricted by federal and state laws and regulations. Dividend distributions
from its foreign subsidiaries, including Household Canada, may also be
restricted by exchange controls of the country in which the subsidiary is
located. Also, as a holding company the rights of any creditors or
stockholders of Household International to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization will be subject
to the prior claims of the subsidiary's creditors, except to the extent that
Household International may itself be a creditor with recognized claims
against the subsidiary. Nevertheless, there are no restrictions that currently
materially limit Household International's ability to make payments to its
creditors at current levels nor are there any restrictions which Household
International reasonably believes are likely to limit materially such payments
in the future.
INDENTURES
Offered Debt Securities and the related Guarantees will be issued under (i)
an Indenture dated as of May 15, 1993, among Household Canada, Household
International and The Bank of New York, as Trustee, or (ii) an
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Indenture dated as of May 15, 1993, among Household Canada, Household
International and LaSalle National Trust, N.A., as Trustee.
Unless a different place is specified in the Prospectus Supplement with
respect to any particular series of Debt Securities, principal of and
interest, if any, on Debt Securities will be payable at the office or agency
of the respective Trustee or Paying Agent, if any, in either New York, New
York, with respect to the Indenture with The Bank of New York, or in Chicago,
Illinois, with respect to the Indenture with LaSalle National Bank; provided,
however, that payment of interest may be made at the option of Household
Canada by check or draft mailed to the person entitled thereto.
COVENANTS AGAINST CREATION OF PLEDGES OR LIENS
Household International. Household International covenants in the Indentures
that, with the exceptions listed below, it will not issue, assume or guarantee
any indebtedness for borrowed money secured by a mortgage, security interest,
pledge or lien ("security interest") of or upon any of its property, now owned
or hereafter acquired, unless the Guarantees, by supplemental indenture, are
effectively secured by such security interest equally and ratably with all
other indebtedness secured thereby for so long as such other indebtedness
shall be so secured. The term "indebtedness for borrowed money" does not
include any guarantee, cash deposit or other recourse obligation in connection
with the sale or discount by Household International or any of its
subsidiaries of finance or accounts receivable, trade acceptances, or other
paper arising in the ordinary course of its business.
The foregoing covenant does not apply to (a) security interests to secure
the payment of the purchase price on property, shares of capital stock, or
indebtedness acquired by Household International or the cost of construction
or improvement of such property or the refinancing of all or any part of such
secured indebtedness, provided that such security interests do not apply to
any other property, shares of capital stock, or indebtedness of Household
International; (b) security interests on property, shares of capital stock, or
indebtedness existing at the time of acquisition by Household International;
(c) security interests on property of a corporation which security interests
exist at the time such corporation merges or consolidates with or into
Household International or which security interests exist at the time of the
sale or transfer of all or substantially all of the assets of such corporation
to Household International; (d) security interests of Household International
to secure any of its indebtedness to a subsidiary; (e) security interests in
property of Household International in favor of the United States of America
or any state or agency or instrumentality thereof, or in favor of any other
country or political subdivision, to secure partial, progress, advance, or
other payments pursuant to any contract or statute or to secure any
indebtedness incurred for the purpose of financing all or any part of the
purchase price or the cost of construction of the property subject to such
security interests; (f) security interests on properties financed through tax
exempt municipal obligations, provided that such security interests are
limited to the property so financed; (g) security interests existing on May
15, 1993; and (h) any extension, renewal, refunding, or replacement (or
successive extensions, renewals, refundings, or replacements), in whole or in
part, of any security interest referred to in the foregoing clauses (a)
through (g) inclusive, provided, however, that the principal amount of
indebtedness secured in such extension, renewal, refunding, or replacement
does not exceed the principal amount of indebtedness secured at the time by
such security interest, and provided further, that such extension, renewal,
refunding, or replacement of such security interest is limited to all or part
of the property subject to such security interest so extended, renewed,
refunded, or replaced.
Notwithstanding the foregoing, Household International may, without equally
and rateably securing the Guarantees, issue, assume, or guarantee indebtedness
secured by a security interest not excepted pursuant to clauses (a) through
(h) above, if the aggregate amount of such indebtedness, together with all
other indebtedness of, or guaranteed by, Household International existing at
such time and secured by security interests not so excepted, does not at the
time exceed 10% of Household International's Consolidated Net Worth. As used
herein, "Consolidated Net Worth" shall mean the difference between Household
International's consolidated assets and consolidated liabilities as shown on
Household International's most recent audited consolidated financial
statements prepared in accordance with United States generally accepted
accounting principles. In addition, an
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arrangement with any person providing for the leasing by Household
International of any property, which property has been or is to be sold or
transferred by Household International to such person with the intention that
such property be leased back to Household International, shall not be deemed
to create any indebtedness secured by a security interest if the obligation
with respect to such lease would not be included as liabilities on a
consolidated balance sheet of Household International. The Holders of not less
than a majority in principal amount of the Debt Securities at the time
outstanding under an Indenture, on behalf of the Holders of all of the Debt
Securities issued under such Indenture, may waive compliance with the
foregoing covenant. (Section 4.04)
Household Canada. Household Canada covenants in the Indentures that, with
the exceptions listed below, it will not create, incur or assume any mortgage,
hypothecation, charge, security interest, lien, encumbrance, pledge or other
security ("security interest") upon the whole or any part of its undertaking
or property, real or personal, present or future, to secure any loan or other
indebtedness, present or future, for any money borrowed and premium and
interest with respect thereto ("Money Borrowed") or to secure any guarantee by
Household Canada of any loan or other indebtedness, present or future, for
Money Borrowed, nor will Household Canada permit any security interest
securing indebtedness of another corporation to extend to any assets of
Household Canada as a result of the amalgamation of Household Canada with, or
the sale of all or substantially all of Household Canada's assets to, such
other corporation or as a result of the purchase by Household Canada from such
other corporation of all or any part of its assets, unless, in either case,
the same security interest shall have been or shall as soon as reasonably
practicable thereafter be created in favor of and be extended equally to and
rateably with the Debt Securities then outstanding.
The foregoing covenant does not apply to (a) Household Canada issuing or
becoming liable on any Purchase Money Obligation (as defined below) or
creating or assuming any Purchase Money Mortgage (as defined below); (b) the
continuation of any security interest existing on the date of the Indentures;
(c) the assumption by Household Canada of any security interest on any
property, real or personal, in existence at the time of acquisition thereof;
(d) the continuation of any Purchase Money Mortgage existing on the date of an
amalgamation of Household Canada with, or the transfer of all or substantially
all of Household Canada's assets to, or the transfer to Household Canada of
all or any part of the other corporation's assets from, another corporation;
(e) any security interest for Money Borrowed of Household Canada, the amount
of which, when aggregated with the amount of all other Money Borrowed of
Household Canada and of its Subsidiaries (as defined below) then outstanding
in respect of which security interest has been given, excluding any security
interest pursuant to the other exceptions referred to herein, would not exceed
10% of Consolidated Shareholders' Equity (as defined below); (f) the giving of
security interest to secure the Senior Notes; or (g) any security interest not
related to the borrowing of money incurred or arising by operation of law in
the ordinary course of business.
As used herein, the following terms have the meanings ascribed to them in
this paragraph: "Consolidated Shareholders' Equity" shall mean at any time the
paid-in capital plus retained earnings, or minus deficit, as the case may be,
plus any other amount which in accordance with generally accepted accounting
principles would be classified as part of the shareholders' equity section of
a consolidated balance sheet of Household Canada and its Subsidiaries, all
determined in accordance with generally accepted accounting principles;
"Purchase Money Mortgage" shall mean any mortgage, charge, security interest,
pledge, lien, encumbrance or other security created, issued or assumed by
Household Canada to secure a Purchase Money Obligation, provided that such
mortgage, hypothecation, charge, security interest, pledge, lien, encumbrance
or other security is limited to the property acquired in connection with the
creation, issue or assumption of such Purchase Money Obligation and is
created, issued or assumed substantially concurrently with the acquisition of
such property except in the case of immoveable property on which fixed
improvements are constructed or installed in which case the same shall be
created or issued within a period of 18 months after the acquisition of such
property, and any extensions or renewals or replacements of any such Purchase
Money Mortgage upon the same property if the principal amount of the
indebtedness secured thereby at the time of such extension, renewal or
replacement is not increased; "Purchase Money Obligation" shall mean any
indebtedness assumed by Household Canada as part of, or issued or incurred to
provide Household Canada with funds to pay, the purchase price of moveable or
immoveable
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property acquired by Household Canada, provided that such indebtedness does
not exceed 100% of the purchase price of such property, and includes any
extension, renewal, replacement or refunding of any such Purchase Money
Obligation to the extent of the principal amount outstanding at the time of
such extension, renewal, replacement or refunding. In the case of immoveable
property so acquired, such terms shall include indebtedness issued or incurred
to provide Household Canada with funds to pay, or to reimburse Household
Canada for, the purchase price of such property and expenditures made for any
fixed improvements constructed or installed thereon within a period of 18
months after the acquisition thereof, provided such indebtedness does not
exceed 100% of the aggregate of such purchase price and of such expenditures;
"Subsidiary" shall mean any corporation at least a majority of the shares of
the Voting Stock (or the equivalent thereof, in the case of corporations
organized outside the United States of America) of which shall at the time be
owned, directly or indirectly, by Household International or by one or more
Subsidiaries thereof, or by Household Canada and one or more Subsidiaries
thereof; and "Voting Stock", as applied to the stock of any corporation, shall
mean stock of any class or classes (however designated) having ordinary voting
power for the election of a majority of the directors of such corporation,
other than stock having such power only by reason of the happening of a
contingency.
Household Canada has agreed to cause each of its Subsidiaries to abide by
the covenants noted above, subject to the same qualifications, provided that
Household Canada and its Subsidiaries are permitted to give security interests
to each other, to accept deposits and invest monies in investments which under
applicable law are required to be held in trust or otherwise made available
for the persons making such deposits, and to pledge assets to the Government
of Canada with respect to the sale of Canada Savings Bonds or other similar
activities. The Holders of not less than a majority in principal amount of the
Debt Securities at the time outstanding under an Indenture, on behalf of the
Holders of all of the Debt Securities issued under such Indenture, may waive
compliance with the foregoing covenant. (Section 3.07)
SATISFACTION, DISCHARGE AND DEFEASANCE OF THE INDENTURES AND DEBT SECURITIES
If there is deposited irrevocably with the Trustee as trust funds for the
benefit of the Holders of Debt Securities of a particular series, for the
purpose hereinafter stated, an amount, in money or the equivalent in
securities of the United States or securities the principal of and interest on
which is fully guaranteed by the United States, sufficient to pay the
principal, premium, if any, and interest, if any, on such series of Debt
Securities on the dates such payments are due in accordance with the terms of
such series of Debt Securities through their maturity, and if Household Canada
has paid or caused to be paid all other sums payable by it under the
applicable Indenture with respect to such series, then Household Canada will
be deemed to have satisfied and discharged the entire indebtedness represented
by such series of Debt Securities and all the obligations of Household Canada
and Household International under such Indenture with respect to such series,
except as otherwise provided in such Indenture. In the event of any such
defeasance, Holders of such Debt Securities will be able to look only to such
trust funds for payment of principal, premium, if any, and interest, if any,
on their Debt Securities (Section 7.03)
For federal income tax purposes, any such defeasance may be treated as a
taxable exchange of the related Debt Securities for an issue of obligations of
the trust or a direct interest in the cash and securities held in the trust.
In that case, Holders of such Debt Securities may recognize a gain or loss as
if the trust obligations or the cash or securities deposited, as the case may
be, had actually been received by them in exchange for their Debt Securities.
Such Holders thereafter would be required to include in income a share of the
income, gain or loss of the trust. The amount so required to be included in
income could be a different amount than would be includable in the absence of
defeasance. Prospective investors are urged to consult their own tax advisors
as to the specific consequences to them of defeasance. Any such defeasance may
also give rise to tax consequences under the Income Tax Act (Canada) to
Holders.
THE TRUSTEES
The Bank of New York and affiliates of LaSalle National Trust, N.A. provide
lines of credit to Household International or its subsidiaries in the normal
course of business. The Trustees act as such with respect to currently
outstanding series of debt securities under the respective Indentures and act
or may act as trustees from time to time under other indentures of Household
International or its subsidiaries.
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MODIFICATION OF INDENTURES
Each Indenture provides that the Holders of not less than a majority in
principal amount of each series of Debt Securities at the time outstanding
under such Indenture may enter into supplemental indentures for the purpose of
amending or modifying, in any manner, provisions of the Indenture or of any
supplemental indenture modifying the rights of Holders of such series of Debt
Securities. However, no such supplemental indenture,without the consent of the
Holder of each outstanding Debt Security affected thereby, shall, among other
things, (i) change the maturity of the principal of, or any installment of
interest on any Debt Security, or reduce the principal amount thereof or the
interest thereon or any premium payable upon the redemption thereof, or (ii)
reduce the aforesaid percentage of the Debt Securities, the consent of the
Holders of which is required for the execution of any such supplemental
indenture or for any waiver of compliance with any covenant or condition in
such Indenture. (Section 12.02)
Each Indenture may be amended or supplemented without the consent of any
Holder of Debt Securities under certain circumstances, including (i) to cure
any ambiguity, defect or inconsistency in the Indenture, any supplemental
indenture, or in the Debt Securities of any series; (ii) to evidence the
succession of another corporation to Household Canada or Household
International and to provide for the assumption of all the obligations of
Household Canada or Household International under the Indenture by such
corporation; (iii) to provide for uncertificated debt securities in addition
to certificated debt securities; (iv) to make any change that does not
adversely affect the rights of Holders of Debt Securities issued thereunder;
(v) to provide for a new series of Debt Securities; or (vi) to add to rights
to Holders of Debt Securities or add additional Events of Default. (Section
12.01)
SUCCESSOR ENTITY
Household International may not consolidate with or merge into, or transfer,
sell or lease its properties and assets as, or substantially as, an entirety
to another entity unless the successor entity is a corporation incorporated
within the United States and, after giving effect thereto, no default under
the Indenture shall have occurred and be continuing. Thereafter, except in the
case of a lease, all obligations of Household International under the
Indenture terminate. (Sections 11.01 and 11.02)
The Indentures do not contain any covenants specifically designed to protect
Holders of Debt Securities against a reduction in the creditworthiness of
Household International or Household Canada in the event of a highly leveraged
transaction.
EVENTS OF DEFAULT
Each Indenture defines the following as Events of Default with respect to
any series of Debt Securities: default for 30 days in the payment of any
interest upon any Debt Security of such series issued under such Indenture;
default in the payment of any principal of or premium on any such Debt
Security; default for 30 days in the deposit of any sinking fund or similar
payment for such series of Debt Securities; default for 60 days after notice
in the performance of any other covenant in the Indenture; certain defaults
for 30 days after notice in the payment of principal or interest, or in the
performance of other covenants, with respect to borrowed money under another
indenture in which the Trustee for such Debt Securities is trustee which
results in the principal amount of such indebtedness becoming due and payable
prior to maturity, which acceleration has not been rescinded or annulled; and
certain events of bankruptcy, insolvency or reorganization. Household Canada
and Household International are required to file with each Trustee annually an
Officers' Certificate as to the absence of certain defaults under the
Indenture. (Sections 8.01, 3.06 and 4.05)
If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, either the Trustee or the Holders
of not less than 25% in principal amount of the outstanding Debt Securities of
such series by notice as provided in the Indenture may declare the principal
amount of all the Debt Securities of such series to be due and payable
immediately. At any time after a declaration of acceleration with respect to
Debt Securities of any series has been made, but before a judgment or decree
for payment of money has been obtained by the Trustee, the Holders of not less
than a majority in principal amount of outstanding Debt Securities of such
series may, under certain circumstances, rescind or annul such declaration of
acceleration. (Section 8.02)
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The Holders of not less than a majority in principal amount of the
outstanding Debt Securities of each series may, on behalf of all Holders of
Debt Securities of such series, waive any past default under the Indenture and
its consequences with respect to Debt Securities of such series, except a
default (a) in the payment of principal of or premium, if any, or interest, if
any, on any Debt Securities of such series, or (b) in respect of a covenant or
provision of the Indenture which cannot be modified or amended without the
consent of the Holder of each outstanding Debt Security of such series
affected. (Section 8.13)
Each Indenture provides that the Trustee thereunder may withhold notice to
Holders of Debt Securities of any default (except in payment of the principal
of (or premium, if any) or interest on any Debt Security issued under such
Indenture or in the payment of any sinking fund or similar payment) if it
considers it in the interest of Holders of Debt Securities to do so. (Section
9.02)
Holders of Debt Securities may not enforce an Indenture except as provided
therein. (Section 8.07) Each Indenture provides that the Holders of a majority
in principal amount of the outstanding Debt Securities issued under such
Indenture have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or exercising any trust
or power conferred on the Trustee. (Section 8.12) The Trustee will not be
required to comply with any request or direction of Holders of Debt Securities
pursuant to the Indenture unless offered indemnity against costs and
liabilities which might be incurred by the Trustee as a result of such
compliance. (Section 9.03(e))
DESCRIPTION OF WARRANTS
Household Canada may issue, together with any Debt Securities offered by any
Prospectus Supplement or separately, Warrants for the purchase of other Debt
Securities. The Warrants are to be issued under warrant agreements (each a
"Warrant Agreement") to be entered into among Household Canada, Household
International and a bank or trust company, as warrant agent ("Warrant Agent"),
all as set forth in the Prospectus Supplement relating to the particular issue
of Warrants ("Offered Warrants"). A copy of the forms of Warrant Agreement,
including the form of warrant certificates representing the Warrants ("Warrant
Certificates"), reflecting the alternative provisions to be included in the
Warrant Agreements that will be entered into with respect to particular
offerings of Warrants, is filed as an exhibit to the Registration Statement.
The following summaries of certain provisions of the Warrant Agreement and the
Warrant Certificates do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the Warrant
Agreement and the Warrant Certificates, respectively, including the
definitions therein of certain terms.
GENERAL
The Prospectus Supplement will describe the terms of the Offered Warrants,
the Warrant Agreement relating to the Offered Warrants and the Warrant
Certificates representing the Offered Warrants, including the following: (1)
the designation, aggregate principal amount, and terms of the Debt Securities
purchasable upon exercise of the Offered Warrants; (2) the designation and
terms of any related Debt Securities with which the Offered Warrants are
issued and the number of Offered Warrants issued with each such Debt Security;
(3) the date, if any, on and after which the Offered Warrants and the related
Offered Debt Securities will be separately transferable; (4) the principal
amount of Debt Securities purchasable upon exercise of one Offered Warrant and
the price at which such principal amount of Debt Securities may be purchased
upon such exercise; (5) the date on which the right to exercise the Offered
Warrants shall commence and the date ("Expiration Date") on which such right
shall expire; (6) whether the Warrants represented by the Warrant Certificates
will be issued in registered or bearer form, and if registered, where they may
be transferred and registered; and (7) any other terms of the Offered
Warrants.
Warrant Certificates will be exchangeable on the terms specified in the
Prospectus Supplement for new Warrant Certificates of different denominations,
and Warrants may be exercised at the corporate trust office of the Warrant
Agent or any other office indicated in the Prospectus Supplement. Prior to the
exercise of their Warrants, holders of Warrants will not have any of the
rights of holders of the Debt Securities purchasable upon such exercise and
will not be entitled to payments of principal of, premium, if any, or
interest, if any, on the Debt Securities purchasable upon such exercise.
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EXERCISE OF WARRANTS
Each Offered Warrant will entitle the holder to purchase such principal
amount of Debt Securities at such exercise price as shall in each case be set
forth in, or be determinable as set forth in, the Prospectus Supplement
relating to the Offered Warrants by payment of such exercise price in full in
the manner specified in the Prospectus Supplement. Offered Warrants may be
exercised at any time up to the close of business on the Expiration Date set
forth in the Prospectus Supplement relating to the Offered Warrants. After the
close of business on the Expiration Date, unexercised Warrants will become
void.
Upon receipt of payment of the exercise price and the Warrant Certificate
properly completed and duly executed at the corporate trust office of the
Warrant Agent or any other office indicated in the Prospectus Supplement,
Household Canada will, as soon as practicable, forward the Debt Securities
purchasable upon such exercise. If less than all of the Warrants represented
by such Warrant Certificate are exercised, a new Warrant Certificate will be
issued for the remaining amount of Warrants.
PLAN OF DISTRIBUTION
Household Canada may sell the Securities in any of three ways: (i) through
underwriters or dealers; (ii) directly to a limited number of purchasers or to
a single purchaser; or (iii) through agents. The Prospectus Supplement will
set forth the terms of the offering of the Offered Debt Securities and any
Offered Warrants (collectively, the "Offered Securities"), including the name
or names of any underwriters, dealers or agents, the purchase price of the
Offered Securities and the proceeds to Household Canada from such sale, any
underwriting discounts and other items constituting underwriters'
compensation, and any discounts and commissions allowed or paid to dealers.
Any initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If the Offered Securities are sold through underwriters, the Prospectus
Supplement relating thereto will describe the nature of the obligation of the
underwriters to take the Offered Securities. The Offered Securities may be
offered to the public either through underwriting syndicates represented by
one or more managing underwriters or directly by one or more underwriting
firms acting alone. The underwriter or underwriters with respect to a
particular underwritten offering of Offered Securities will be named in the
Prospectus Supplement relating to such offering, and, if an underwriting
syndicate is used, the managing underwriter or underwriters will be set forth
on the cover of such Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement, the obligations of the underwriters to purchase the
Offered Securities will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all the Offered Securities if any
are purchased.
The Offered Securities may be sold directly by Household Canada or through
agents designated by Household Canada from time to time. Any agent involved in
the offer or sale of the Offered Securities in respect of which this
Prospectus is delivered will be named, and any commissions payable by
Household Canada to such agent will be set forth, in the Prospectus Supplement
relating thereto.
Underwriters and agents who participate in the distribution of the Offered
Securities may be entitled under agreements which may be entered into by
Household Canada or Household International to indemnification by Household
Canada and Household International against certain liabilities, including
liabilities under the Securities Act of 1933, or to contribution with respect
to payments which the underwriters or agents may be required to make in
respect thereof.
If so indicated in the Prospectus Supplement, Household Canada will
authorize underwriters, dealers or other persons acting as Household Canada's
agents to solicit offers by certain institutions to purchase Offered
Securities from Household Canada pursuant to contracts providing for payment
and delivery on a future date. Institutions with which such contracts may be
made include commercial and savings banks, insurance companies,
13
<PAGE>
pension funds, investment companies, educational and charitable institutions
and others, but in all cases such institutions must be approved by Household
Canada. The obligations of any purchaser under any such contract will not be
subject to any conditions except that (i) the purchase of the Offered
Securities shall not at the time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject, and (ii) if the Offered
Securities are also being sold to underwriters, Household Canada shall have
sold to such underwriters the Offered Securities not sold for delayed
delivery. The underwriters, dealers and such other persons will not have any
responsibility in respect to the validity or performance of such contracts.
There can be no assurance that a secondary market will be created for the
Offered Securities or, if it is created, that it will continue.
CERTAIN TAX MATTERS
The Prospectus Supplement will describe the material Canadian federal tax
consequences, if any, to an investor who is a citizen or resident of the
United States acquiring Securities, including whether payments of principal,
premium, if any, and interest will be subject to Canadian non-resident
withholding tax.
If interest or principal on the Securities is payable in a currency other
than United States dollars, or if an investor would be required to include
original issue discount in income as a result of holding Securities, the
Prospectus Supplement will contain a discussion of certain United States
Federal income tax consequences of acquiring, holding or disposing of such
Securities.
ERISA MATTERS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on employee benefit plans ("Plans") that are
subject to ERISA and on persons who are fiduciaries with respect to such
Plans. In accordance with the ERISA's general fiduciary requirements, a
fiduciary with respect to any such Plan who is considering the purchase of
Securities on behalf of such Plan should determine whether such purchase is
permitted under the governing Plan documents and is prudent and appropriate
for the Plan in view of its overall investment policy and the composition and
diversification of its portfolio. Other provisions of ERISA and Section 4975
of the Internal Revenue Code of 1986, as amended (the "Code") prohibit certain
transactions between a Plan and persons who have certain specified
relationships to the Plan ("parties in interest" within the meaning of ERISA
or "disqualified persons" within the meaning of Section 4975 of the Code).
Thus, a Plan fiduciary considering the purchase of Securities should consider
whether such a purchase might constitute or result in a prohibited transaction
under ERISA or Section 4975 of the Code.
Household Canada or Household International may be considered a "party in
interest" or a "disqualified person" with respect to many Plans that are
subject to ERISA. The purchase of Securities by a Plan that is subject to the
fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of Section 4975 of the Code (including individual retirement
accounts and other plans described in Section 4975(e)(1) of the Code) and with
respect to which Household Canada or Household International is a party in
interest or a disqualified person may constitute or result in a prohibited
transaction under ERISA or Section 4975 of the Code, unless such Securities
are "marketable obligations" (as defined in Section 407(e) of ERISA) or are
acquired pursuant to and in accordance with an applicable exemption, such as
Prohibited Transaction Class Exemption ("PTCE") 84-14 (an exemption for
certain transactions determined by an independent qualified professional asset
manager), PTCE 91-38 (an exemption for certain transactions involving bank
collective investment funds), PTCE 90-1 (an exemption for certain transactions
involving insurance company pooled separate accounts) or PTCE 95-60 (an
exemption for certain transactions involving insurance company general
accounts). ANY PENSION OR OTHER EMPLOYEE BENEFIT PLAN PROPOSING TO ACQUIRE ANY
SECURITIES SHOULD CONSULT WITH ITS COUNSEL.
14
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL 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 IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. 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.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Notes....................................................... S-2
Use of Proceeds............................................................ S-3
Ratios of Earnings to Fixed Charges........................................ S-3
Certain Tax Matters........................................................ S-4
Underwriting............................................................... S-5
Legal Opinions............................................................. S-5
Experts.................................................................... S-5
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Household International.................................................... 3
Household Financial Corporation Limited.................................... 3
Use of Proceeds............................................................ 4
Ratios of Earnings to Fixed Charges........................................ 4
Description of Debt Securities and Guarantees.............................. 4
Description of Warrants.................................................... 12
Plan of Distribution....................................................... 13
Certain Tax Matters........................................................ 14
ERISA Matters.............................................................. 14
</TABLE>
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$150,000,000
HOUSEHOLD FINANCIAL
CORPORATION LIMITED
FLOATING RATE SENIOR NOTES
DUE NOVEMBER 1, 2001
UNCONDITIONALLY GUARANTEED AS TO
PAYMENT OF PRINCIPAL AND INTEREST BY
HOUSEHOLD
INTERNATIONAL, INC.
-----------------------
PROSPECTUS SUPPLEMENT
-----------------------
MERRILL LYNCH & CO.
LEHMAN BROTHERS
CIBC WOOD GUNDY SECURITIES CORP.
OCTOBER 25, 1996
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