Registration No. 333-14459
Rule 424(b) (2)
PRICING SUPPLEMENT No. 38 Dated October 30, 1997 (To Prospectus dated
November 18, 1996)
$3,000,000,000
HOUSEHOLD FINANCE CORPORATION
Medium-Term Notes
Due Nine Months or More from Date of Issue
Principal Amount: $110,000,000
Price to Public: 100%
Proceeds to HFC: 100%
Issue Date: November 13, 1997
Stated Maturity: November 13, 2013
Callable by the Calculation Agent
on or after: See "Additional Terms - Call Option" and
"- Reset of Interest Rate for Fixed Rate
Periods"
Repayable at the Option of the
Holder on or after: See "Additional Terms - Put Option"
Initial Interest Rate: To be determined on November 11, 1997
Interest Rate Basis: Prior to November 13, 2001, LIBOR Telerate. On
and after November 13, 2001, see "Additional
Terms - Reset of Interest Rate for Fixed Rate
Periods".
Index Maturity: Three months
Spread or Spread Multiplier: Minus 0.40% (-40 basis points)
Interest Payment Dates: Prior to November 13, 2001, on the 13th of
February, May, August and November of each year,
commencing February 13, 1998. On and after
November 13, 2001, semi-annually on the 13th day
of May and November of each year. If any of
said days is not a Business Day, payments
shall be made on the next succeeding Business
Day.
Regular Record Date: The date ten (10) calendar days (whether or not
a Business Day) prior to each Interest Payment
Date or the Stated Maturity, as the case may be.
Interest Determination Date: See "Additional Terms - Reset of Interest Rate
for Fixed Rate Periods."
Interest Reset Date: See "Additional Terms - Reset of Interest Rate
for Fixed Rate Periods."
Agent: Morgan Stanley & Co. Incorporated
Agent's Commission or Discount: Not Applicable
Calculation Agent:Calculation Agent:Morgan Stanley & Co. Incorporated
ADDITIONAL TERMS
The Notes offered hereby are described in the Prospectus and this
Prospectus Supplement. The description of the particular terms of the Notes set
forth in this Pricing Supplement supplements, and to the extent inconsistent
therewith replaces, the description of the terms and provisions of the
"Description of Medium Term Notes" in the Prospectus. Capitalized terms used
but not defined herein shall have the meanings given such terms in such
Prospectus.
INTEREST RATES
During the period commencing with the Issue Date to but excluding November
13, 2001, the Notes outstanding will bear interest at a rate of three month
LIBOR less 40 basis points per annum. The interest rate will reset on the 13th
day of February, May, August and November of each year, subject to the Modified
Following Business Day Convention, as defined in the 1991 ISDA Definitions
published by the International Swaps and Derivatives Association, Inc. Prior to
November 13, 2001, interest will be paid quarterly on February 13th, May 13th,
August 13th, and November 13th of each year, commencing February 13, 1998, on an
Actual/360 day count basis subject to the Modified Following Business Day
Convention. On and after November 13, 2001 the Notes, if not Put to the Company
by the Holders, will bear interest at a fixed rate for a two year period, such
rate determined and reset every two years in the manner set forth under "- Reset
of Interest Rate for Fixed Rate Periods".
The Calculation Agent has the right, upon fifteen calendar days' notice,
to purchase all the Notes from the Holders of the Notes on November 13, 2001 and
then every two years thereafter (see "Call Option" as defined below). If the
Calculation Agent has not given the Call Notice (as defined below), then each
Holder has the right upon ten calendar days' notice to require Household Finance
Corporation (the "Company") to repurchase all of the Notes held by such Holder
on November 13, 2001 and then every two years thereafter (see "Put Option" as
defined below). If the Calculation Agent has provided the Call Notice or if any
Holder has not given the Put Notice (as defined below), then during the period
from and including November 13, 2001 and then every two years thereafter to but
excluding November 13, 2013, the Notes will be reset and bear interest at a
fixed rate calculated as described below (see "- Reset of Interest Rate for
Fixed Rate Periods" below).
CALL OPTION
The Calculation Agent has the right to repurchase all of the Notes in
whole on November 13, 2001, and each second November 13th thereafter
(biennially) until and including November 13, 2011 (each, a "Call Date"),
at a price equal to 100% of the principal amount thereof, plus accrued but
unpaid interest to but excluding such Call Date (the "Call Redemption Price")
by giving notice telephonically followed by written notice (the "Call Notice")
thereof to the Holders of the Notes or to the Final Dealer (as defined below).
In the event the Call Notice is timely given, the Holders of the Notes shall
sell the Notes to the Calculation Agent at the Call Redemption Price. Such
Call Notice shall be given no later than 10:00 a.m. (New York time) fifteen
calendar days prior to the Call Date.
In the event a Call Notice is delivered by the Calculation Agent the Call
Redemption Price shall be paid to each Holder in accordance with the procedures
described in such notice.
PUT OPTION
If the Call Notice has not been timely given, then each Holder has the
right to require the Company to repurchase all of the Notes of such Holder on
November 13, 2001 and each second November 13th thereafter (biennially) until
and including November 13, 2011 (each, a "Put Date") at a purchase price equal
to 100% of the principal amount thereof, plus accrued but unpaid interest to but
excluding such Put Date (the "Put Redemption Price"), by delivering written
notice thereof to the Company (the "Put Notice"). Such Put Notice shall be
given no later than 10:00 a.m. (New York time) ten calendar days prior to
such Put Date. In the event the Put Notice is timely given, upon surrender of
the appropriate Global Note to the Trustee, Holders shall receive the Put
Redemption Price.
RESET OF INTEREST RATE FOR FIXED RATE PERIODS
If the Calculation Agent has provided a Call Notice as set forth above
under "Call Option" or if any of the Holders of the Notes have not delivered a
Put Notice to the Company in accordance with the terms set forth under "Put
Option" above, ten calendar days prior to the Put Date, the Company and the
Calculation Agent shall undertake the following actions to calculate the fixed
rate of interest to be paid on the Notes from and including such Put Date to but
excluding the next Put Date (or, if there are no more Put Dates, to but
excluding Stated Maturity) (each such two year period, a "Fixed Rate Period").
All references to specific hours are references to prevailing New York time.
Each notice shall be given telephonically and shall be confirmed as soon as
possible by facsimile to each of the Calculation Agent and the Company. The
times set forth below are guidelines for action by the Company and the
Calculation Agent, and each shall use its best efforts to adhere to such times.
The Company shall use reasonable efforts to cause the Reference Dealers to take
all actions contemplated below in as timely a manner as possible.
(a)At 11:00 a.m., the Company shall provide to the Calculation Agent
the names of three financial institutions including the Calculation
Agent that deal in the Company's debt securities and have agreed to
participate as Reference Dealers in accordance with the terms set
forth below (the "Reference Dealers"), including acknowledging
in writing the Call Option of the Calculation Agent. For
each Reference Dealer, the Company will provide the name of and
telephone and facsimile numbers for one individual who will represent
such Reference Dealer.
(b) At 12:00 p.m. the Calculation Agent shall:
(i)provide to the Company the approximate 2-year U.S. Treasury bond
yield determined by the Calculation Agent at or about such time
(the "Designated Treasury Yield") based on the then current
2-year U.S. Treasury bond (the "Designated Treasury Bond"); and
(ii)calculate and provide to the Reference Dealers an approximate
price of the Notes which shall equal par plus the "Premium."
The Premium shall be calculated by taking the Treasury
Rate Difference applied over four semiannual periods from
the beginning of the applicable Fixed Rate Period to the
next Put Date (or, if there are no more Put Dates,
to the Stated Maturity), discounted at the Discount
Rate divided by two where:
"Treasury Rate Difference" means the difference between 5.90%
(the "Initial Treasury Yield") minus the Designated Treasury Yield;
and
"Discount Rate" means the Designated Treasury Yield.
(c)The Calculation Agent immediately thereafter shall contact each of
the Reference Dealers and request that each Reference
Dealer provide to the Calculation Agent the following
firm bid (which bid shall remain firm for 30 minutes):
(i)a firm bid (on an all-in basis), expressed as a spread (a
"Spread") to the Designated Treasury Bond
(using for such purposes, the Designated Treasury
Yield), at which time such Reference Dealer would purchase
Notes with a principal amount equal to the principal amount
of the Notes then outstanding, which are callable every
two years by the Calculation Agent and, if
not called, puttable every two years at the option
of the Holder of the Notes and are offered
at a price equal to par plus the Premium
for settlement on the Put Date.
(d)At 12:30 p.m., the following shall occur following receipt of the
bids requested in paragraph (c) above:
(i)the Calculation Agent shall determine the final Designated
Treasury Yield and calculate and provide to the Reference Dealers
the final price of the Notes, which shall equal par plus the
Premium (the "Final Price");
the Reference Dealer providing the lowest all-in Spread to the final
Designated Treasury Yield (the "Note Yield") shall be deemed the
"Final Dealer"; provided that in the event more than one Reference
Dealer provides the lowest all-in Spread, the Company shall
determine who shall Payment become the Final Dealer and provided
further that in any event the Calculation Agent has the right to
match the lowest all-in Spread and thereby become the Final
Dealer;
(iii)the Calculation Agent shall calculate and provide to
the Company the "Adjusted Coupon", which shall
be the semi-annual bond equivalent fixed coupon rate on the
Notes required to produce a semi-annual bond
equivalent yield on the Notes equal to the sum of
the Designated Treasury Yield and the Spread given a purchase
price of 100% plus the Premium and assuming redemption of the
Notes at par in two years;
(iv)the Interest Rate on the Notes shall be adjusted and shall equal,
effective from and including the applicable Put Date, to but
excluding the next Put Date or Stated Maturity Date, the
Adjusted Coupon, payable semi-annually each May 13th
and November 13th; and
(v)in the event the Calculation Agent has provided a Call Notice,
on the Call Date the Final Dealer shall purchase the Notes from
the Calculation Agent at the Final Price assuming the Note Yield
and the Adjusted Coupon (defined below).
If the Calculation Agent determines that (i) a Market Disruption Event (as
defined below) has occurred or (ii) two or more of the Reference Dealers have
failed to provide indicative or firm bids or offers in a timely manner
substantially as provided above, the steps contemplated above shall be delayed
until the next trading day on which there is no Market Disruption Event and no
such failure by two or more Reference Dealers. "Market Disruption Event" shall
mean any of the following: (i) a suspension or material limitation in trading
in securities generally on the New York Stock Exchange or the establishment of
minimum prices on such exchange; (ii) a general moratorium on commercial banking
activities declared by either federal or New York State authorities; (iii) an
outbreak or escalation of major hostilities involving the United States of
America or the declaration of a national emergency or war by the United States
of America; or (iv) any material disruption of the U.S. government securities
market, U.S. corporate bond market and/or U.S. federal wire system.
<PAGE>
U.S. FEDERAL INCOME TAX CONSIDERATIONS
PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE UNITED STATES FEDERAL INCOME TAX AND ANY OTHER TAX TREATMENT OF
THE NOTES.
The following summary of the principal United States federal income tax
consequences of ownership of the Notes deals only with a Note held as a capital
asset by an initial purchaser who is a United States Holder (as defined in the
Prospectus). It does not discuss the rules that may apply to special classes of
holders such as life insurance companies, tax-exempt organizations, banks,
dealers in securities, currencies or commodities, persons that hold Notes as a
hedge or hedges against interest rate risks or that are part of a straddle or
conversion transaction, or persons whose functional currency is not the U.S.
dollar. The summary is based on current provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), its legislative history, existing and proposed
regulations thereunder, published rulings and court decisions, all as in effect
on the date hereof and all subject to change at any time, perhaps with
retroactive effect.
The Notes will be subject to the special rules, set out in Treasury
Regulations (the "Regulations"), governing contingent payment debt obligations.
Under the Regulations, a United States Holder will be required annually to
include interest in income in respect of the Notes determined by reference to
(i) the annual yield the Company would pay, as of the Original Issue Date, on
a fixed rate note with no contingent payments, but with terms and conditions
otherwise comparable to those of the Notes (the "comparable yield") and (ii) a
"projected payment schedule" constructed for the Note (as described below).
Using this comparable yield and the projected payment schedule, rules are
applied that are similar to the rules that apply for accruing original issue
discount on a noncontingent debt instrument with that yield.
In certain taxable years, these rules will have the effect of requiring
United States Holders to include interest in income related to the Notes prior
to, and in excess of, the receipt of cash attributable to such income.
More specifically, the amount of interest includible in income for a
taxable year by a United States Holder will be the sum of the "daily portions"
of interest with respect to the Note for each day during the taxable year or
portion of the taxable year during which the United States Holder owns the
Note. The "daily portion" is determined by allocating to each day in any
"accrual period" a pro rata portion of the interest allocable to the accrual
period. The accrual period may be any length selected by a United States Holder
and may vary over the term of the Note so long as no accrual period is longer
than one year.
The amount of interest allocable to an accrual period and includible in
income is the product of the Note's "adjusted issue price" at the beginning of
such accrual period and the comparable yield (adjusted for the length of the
accrual period) described above. The "adjusted issue price" of the Note at the
start of any accrual period is the sum of the issue price of such Note plus the
accrued interest for each prior accrual period less any projected payments of
interest deemed received for the prior accrual period, determined in the manner
described below.
The amount of interest deemed received in any accrual period is based on
a "projected payment schedule" for the Notes, which the Company will construct.
The "projected payment schedule" is a hypothetical schedule for payments on the
Notes as of the issue date that would, if paid in the assumed amounts at the
assumed times, produce the comparable yield over the life of the Note (as
described above). To construct the projected payment schedule, the Company will
use the actual amounts and timing of payments that are known as of the issue
date. Projections of payments that are to be determined based upon the reset
mechanism will be based upon forward interest rates and similar market-based
information.
United States Holders are required to compute the difference between the
actual payments made on the Notes during a taxable year and the projected
payments for the year. If the actual payments made during the year exceed the
projected payments, the excess is added to the interest allocated to the accrual
period as computed using the comparable yield (described above). If the actual
payments are less than the projected payments, the difference first reduces the
amount of interest otherwise taken into account for the year computed using the
comparable yield, and any excess (the "excess negative adjustment") is treated
as an ordinary loss for the United States Holder to the extent of the interest
that was included in respect of the instrument in prior taxable years (as
reduced by previous negative adjustments). Any remaining excess
negative adjustment is carried forward and treated as a negative adjustment
for the succeeding taxable year. Any excess negative adjustment
carryforward not ultimately used to offset future interest
accruals effectively reduces the amount of gain, or increases the
amount of loss, realized at maturity or earlier redemption of the Notes.
The Company's comparable yield and projected payment schedule will be
available from the Treasury Department of the Company (Mail address: Household
Finance Corporation, 2700 Sanders Road, Prospect Heights, IL 60070, Attention:
Treasurer; via facsimile transmission (847) 564-6138. A United States Holder
is required to use the comparable yield and projected payment schedule
determined by the Company in determining its interest accruals in respect of
the Notes, unless such United States Holder timely discloses and justifies on
its federal income tax return the use of a different comparable yield and
projected payment schedule to the Internal Revenue Service.
THE COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE IS NOT PROVIDED FOR
ANY PURPOSE OTHER THAN THE DETERMINATION OF A U.S. HOLDER'S INTEREST ACCRUALS
IN RESPECT OF THE NOTES, AND THE COMPANY MAKES NO REPRESENTATION REGARDING THE
ACTUAL AMOUNT OF PAYMENTS WITH RESPECT TO THE NOTES, WHICH MAY BE LESS THAN THE
PROJECTED PAYMENTS.
Gain or loss at maturity upon sale or exchange, or earlier redemption of
the Notes will be determined by the difference, if any, between the amount
received by the United States Holder at such time and the projected amount of
such payment under the projected payment schedule. Any gain recognized by a
United States Holder at maturity, or upon sale or exchange, will be treated as
interest income, and any loss recognized by a United States Holder will be
treated as ordinary loss to the extent of the United States Holder's prior
interest inclusions (reduced by prior ordinary losses attributable to net
negative differences between actual contingent payments and projections of such
payments), and thereafter generally as capital loss.
In general, information reporting requirements will apply to all payments in
respect of a Note made within the United States to a non-corporate United States
Holder and "backup withholding" at a rate of 31% will apply to such payments if
the United States Holder fails to provide an accurate taxpayer identification
number or is notified by the Internal Revenue Service that it has failed to
report all interest and dividends required to be shown on its federal income tax
returns.
