Filed pursuant to Rule 424(b)(3)
Registration No. 33-59989
PROSPECTUS
$50,000,000
AMERICAN FINANCIAL CORPORATION
9-3/4% Debentures Due April 20, 2004
This Prospectus relates to 9-3/4% Debentures due April 20, 2004
(the "Debentures") of American Financial Corporation ("AFC" or the
"Company"). The Debentures are unsecured obligations of the Company,
pay interest on April 20 and October 20 of each year, and may be
redeemed at the option of AFC, in whole or in part, at prices declining
each April 20 from 104.75% of principal amount in 1999 to 100% in 2002
and thereafter. The Debentures have no mandatory annual sinking fund
requirements prior to maturity. See "Description of Debentures".
Under an Indenture between AFC and Star Bank, National Association,
as Trustee, up to $750 million principal amount of Debentures are
authorized to be issued. The $50 million principal amount of Debentures
which are the subject of this Offering were issued to certain funds and
other accounts managed or advised by Fidelity Management and Research
Company ("Fidelity" and, with the actual funds and accounts holding the
Debentures, the "Selling Debentureholders"), in a private transaction in
May 1995. Approximately $203.8 million principal amount of Debentures
were issued in 1994 in an exchange offer for other AFC debentures then
outstanding. Additional Debentures may be issued in future exchange
offers or in other transactions. As of May 31, 1995, approximately
$253.8 million principal amount of the Debentures were outstanding.
The Debentures are listed on the Pacific and Cincinnati Stock
Exchanges and also trade in the over-the-counter market. See "Price
Range of Debentures".
The Debentures to which this Prospectus relates may be offered to
the public from time to time by the Selling Debentureholders. Fidelity
is one of the leading securities and investment advising firms serving
institutions, governments and individual investors in the United States.
See "The Selling Debentureholders".
The Company will receive none of the proceeds from the sale of the
Debentures by the Selling Debentureholders but will pay all of the
expenses of registration of the Debentures. The Debentures offered
hereby may be sold from time to time directly by the Selling
Debentureholders or through brokerage firms that may be deemed to be
underwriters, dealers or agents. See "Plan of Distribution". If
required, a Prospectus Supplement will be delivered setting forth the
aggregate principal amount of Debentures being offered hereby, the
<PAGE>
identity of Selling Debentureholders and the terms of the offering,
including the names of any brokerage firms that may be deemed to be
underwriters, dealers or agents; any discounts, commissions and other
items constituting compensation from Selling Debentureholders and any
discounts, concessions or commissions allowed or paid to dealers; any
indemnification by the Company of Selling Debentureholders or any
underwriter, dealer or agent against certain liabilities, including
liabilities under the Securities Act of 1933 (the "Securities Act"); and
the resulting net proceeds to Selling Debentureholders.
See "Investment Considerations" for a discussion of certain factors
that should be considered in connection with an investment in the
Securities offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is June 16, 1995.
-2-
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance
therewith files periodic reports and other information with the
Securities and Exchange Commission (the "Commission"). The Company has
filed a Registration Statement on Form S-3 (the "Registration
Statement") with the Commission under the Securities Act of 1933 (the
"Securities Act") with respect to the Offering. This Prospectus does
not contain all the information, exhibits and undertakings contained in
the Registration Statement, to which reference is hereby made.
Statements contained in this Prospectus as to the terms of any contract
or other document are not necessarily complete with respect to each such
contract, agreement or other document filed as an exhibit to the
Registration Statement. Reference is made to the exhibits for a more
complete description of the matter involved. Such reports, proxy and
information statements, the Registration Statement and other information
filed with the Commission by AFC may be inspected at and obtained from
the Commission at its public reference facilities at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at Suite 1400, 500 West Madison Avenue, Chicago, Illinois 60661,
and at 7 World Trade Center, 13th Floor, New York, New York 10048.
Copies of such material can also be obtained, at prescribed rates, by
mail from the Public Reference Section of the Commission at its
Washington, D.C. address set forth above. The Debentures are traded on
the Pacific and Cincinnati Stock Exchanges. Reports can be inspected at
the offices of the Pacific Stock Exchange at 115 Samsone St., 9th Floor,
San Francisco, California 94104, Attention: Records Department and at
the offices of the Cincinnati Stock Exchange at 400 S. LaSalle Street,
Chicago, Illinois 60605.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 1-7361)
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, as
amended (the "Annual Report").
2. The Company's Current Report on Form 8-K
dated April 7, 1995.
3. The Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1995
(the "Quarterly Report").
-3-
<PAGE>
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of this Offering shall be deemed to be incorporated by reference in this
Prospectus and to be a part of this Prospectus from the date of filing
thereof. Any statement contained in a document 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 such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. These documents are available
upon request from the Company at the address and phone number set forth
below.
The Company will provide without charge to each person to whom a
copy of this Prospectus is delivered, upon the written or verbal request
of any such person, a copy of any or all of the documents which have
been incorporated herein by reference, other than exhibits to such
documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests for such documents should be
directed to American Financial Corporation, One East Fourth Street,
Cincinnati, Ohio 45202, Attention: Treasurer, Telephone (513) 579-
2494.
-4-
<PAGE>
SUMMARY INFORMATION
This summary is qualified by the more detailed information and
financial statements appearing elsewhere, or incorporated by reference,
in this Prospectus.
The Company
American Financial Corporation ("AFC") is a holding company
operating through wholly-owned and majority-owned subsidiaries and other
companies in which it holds significant minority ownership interests.
These companies operate in a variety of financial businesses, including
property and casualty insurance, annuities, and portfolio investing. In
nonfinancial areas, these companies have substantial operations in the
food products industry and radio and television broadcasting. AFC was
incorporated as an Ohio corporation in 1955. Its address is One East
Fourth Street, Cincinnati, Ohio 45202 and its phone number is (513)
579-2121.
On March 23, 1995, shareholders of American Premier Underwriters,
Inc. ("APU") approved the merger of AFC with a newly-formed subsidiary
of American Premier Group, Inc. ("American Premier"). The merger was
completed on April 3, 1995 (the "Merger"). American Premier was formed
to own 100% of the common stock of both AFC and APU. In the Merger,
Carl H. Lindner and members of his family who owned 100% of the common
stock of AFC exchanged their AFC common stock for approximately 55% of
American Premier voting common stock. Former shareholders of APU
received the other 45% of American Premier's voting common stock. AFC
and its subsidiaries own approximately 18.7 million shares of American
Premier common stock which, as long as AFC is owned by American Premier,
generally will not be eligible to vote.
Shareholders of American Premier approved a proposal to change its
corporate name to "American Financial Group, Inc." at its annual meeting
held on June 6, 1995.
-5-
<PAGE>
The Offering
Issue $50,000,000 principal amount of 9-3/4%
Debentures due April 20, 2004
Interest Payment Dates April 20 and October 20
Optional Redemption The Debentures may be redeemed at the
option of the Company, in whole or in
part, at prices declining each April 20
from 104.75% of principal amount in 1999
to 100% in 2002 and thereafter.
Use of Proceeds The Company will not receive any proceeds
from the sale of Debentures offered hereby
by the Selling Debentureholders.
Listing The Debentures are listed on the Pacific
and Cincinnati Stock Exchanges and trade
on the Pacific Stock Exchange under the
symbol "AFIZ.P".
-6-
<PAGE>
Summary Historical Financial Information
The following table sets forth certain data (dollars in millions)
and should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in
the Annual Report and the Quarterly Reports. Results for interim
periods are not necessarily indicative of results to be expected for the
year.
<TABLE>
<CAPTION>
Three Months
Ended
March 31, Years Ended December 31,
1995 1994 1994 1993 1992 1991 1990
<S> <C><C> <C> <C> <C> <C> <C>
Operations Statement Data (1):
Total Revenues . . . . . . . . . . . . . $553 $524 $2,103 $ 2,721 $ 3,929 $ 5,219 $ 7,761
Earnings (Loss) From Continuing
Operations Before Income Taxes . . . . 39 35 44 262 (145) 119 49
Earnings (Loss) From:
Continuing Operations . . . . . . . . 30 27 19 225 (162) 56 (9)
Discontinued Operations . . . . . . . -- -- -- -- -- 16 3
Extraordinary Items . . . . . . . . . . -- (16) (17) (5) -- -- 28
Cumulative Effect of Accounting Change -- -- -- -- 85 -- --
Net Earnings (Loss) . . . . . . . . . . . . 30 11 2 220 (77) 72 22
Ratio of Earnings to Fixed Charges (2) . . 1.84 1.43 1.69 2.62 2.15 1.54 1.12
Ratio of Earnings to Fixed Charges
and Preferred Dividends (2) . . . . . 1.52 1.20 1.40 2.26 1.94 1.42 1.06
Balance Sheet Data (1):
Total Assets . . . . . . . . . . . . . . $10,858 $10,074 $10,550 $10,077 $12,389 $12,057 $11,500
Long-term Debt:
Parent Company . . . . . . . . . . . . 490 571 490 572 557 559 558
Subsidiaries . . . . . . . . . . . . . 633 492 617 482 1,452 1,549 2,432
Capital Subject to Mandatory Redemption . 3 41 3 49 28 82 77
Other Capital . . . . . . . . . . . . . . 459 481 396 537 280 262 256
-7-
<PAGE>
(1) Due to decreases in ownership percentages in 1993, 1992 and
1991, AFC ceased accounting for certain companies as
subsidiaries and began accounting for them as investees. AFC
had accounted for American Premier as a subsidiary from 1992
through the first quarter of 1993 due to AFC's ownership
exceeding 50%. As a result of these changes, income statement
and balance sheet components are not comparable. See Note B
of Notes to Financial Statements and "Management's Discussion
and Analysis - Results of Operations" in AFC's 1994 Form 10-K
incorporated herein by reference.
(2) Fixed charges are computed on a "total enterprise" basis. For
purposes of calculating the ratios, "earnings" have been
computed by adding to pretax earnings (excluding discontinued
operations) the fixed charges and the minority interest in
earnings of subsidiaries having fixed charges and deducting
(adding) the undistributed equity in earnings (losses) of
investees. Fixed charges include interest (excluding interest
on annuity policyholders' funds), amortization of debt
discount and expense, preferred dividend requirements of
subsidiaries and a portion of rental expense deemed to be
representative of the interest factor.
</TABLE>
-8-
<PAGE>
INVESTMENT CONSIDERATIONS
Prospective investors in the Debentures should consider
carefully all of the information set forth in this Prospectus including
the information in the documents incorporated by reference and, in
particular, should evaluate the specific factors set forth below for
risks involved with an investment in the Debentures.
Holding Company Structure, Dividend Restrictions
AFC is a holding company with almost all of its operations
being conducted by its subsidiaries. AFC has continuing expenditures
for administrative expenses and corporate services and, most
importantly, for the payment of principal and interest on borrowings and
for dividends on AFC preferred stock. AFC relies on dividends and tax
payments from its subsidiaries, borrowings from affiliates as well as
dividends from companies in which it has a significant investment for
funds to meet its obligations.
As of March 31, 1995, AFC had approximately $490 million of
indebtedness outstanding at the parent holding company level. It had
preferred stock outstanding at the same date which required annual
dividend payments of approximately $26 million. AFC subsidiaries had
additional indebtedness of approximately $633 million outstanding at
March 31, 1995. AFC has significant assets at the parent company level
but they are not sufficient to enable it to meet its ongoing needs for
cash without the receipt of dividends and tax payments from its
subsidiaries. Following completion of the Merger, an AFC subsidiary
repaid $187 million of borrowings under its multi-bank revolving credit
facility. Also, AFC redeemed all $133 million principal amount of its
12% Debentures due 1999 at par and all $52 million principal amount of
its 12-1/4% Debentures due 2003 at 102.5% of par on May 3, 1995. The
funds required for these repayments were borrowed from American Premier
under a subordinated credit agreement under which AFC can borrow up to
$675 million.
Generally over 90% of the dividends AFC has received from
subsidiaries have come from its principal insurance subsidiary, Great
American Insurance Company ("GAI"), which is domiciled in Ohio.
Payments of dividends by GAI and AFC's other insurance subsidiaries are
subject to various laws and regulations which limit the amount of
dividends that can be paid without prior approval. During 1993, the
State of Ohio revised its dividend law for Ohio-domiciled insurers.
Under the new law, the maximum amount of dividends which may be paid
-9-
<PAGE>
without either prior approval or expiration of a 30-day waiting period
without disapproval is the greater of statutory net income or 10% of
policyholders' surplus as of the preceding December 31, but only to the
extent of earned surplus as of the preceding December 31. Without such
approval, the maximum amount of dividends payable in 1995 from GAI based
on its 1994 policyholders surplus is approximately $95 million. The
maximum dividend permitted by law is not indicative of an insurer's
actual ability to pay dividends, which may be further constrained by
business and regulatory considerations, such as the impact of dividends
on surplus, which could affect an insurer's ratings, competitive
position, the amount of premiums that can be written, and the ability to
pay future dividends. Furthermore, the Ohio Insurance Department has
broad discretion to limit the payment of dividends by insurance
companies domiciled in Ohio.
Cyclicality of the Insurance Industry, Impact of Catastrophes
AFC's insurance subsidiaries operate in a highly competitive
industry that is affected by many factors which can cause significant
fluctuations in the results of operations. AFC's insurance operations
have been subject to operating cycles and losses from catastrophes. The
property and casualty insurance industry has historically been subject
to pricing cycles characterized by periods of intense competition and
lower premium rates (a "downcycle") followed by periods of reduced
competition, reduced underwriting capacity and higher premium rates (an
"upcycle"). The property and casualty insurance industry is currently
in an extended downcycle, which has lasted approximately eight years.
The underwriting results for AFC's property and casualty operations have
been adversely affected by this downcycle, particularly reflected in
soft pricing in certain standard commercial lines of business. AFC
believes that specialty lines of business will be less affected by
supply/pricing pressures during downcycles than other lines of property
and casualty insurance. Consequently, AFC believes that its emphasis
towards specialty lines programs, larger accounts and loss sensitive and
retrospectively rated policies will enhance its ability to achieve
improved operating results during both upcycles and downcycles.
As with other property and casualty insurers, AFC's operating
results can be adversely affected by unpredictable catastrophe losses.
AFC's insurance subsidiaries generally seek to reduce their exposure to
such events through individual risk selection and the purchase of
reinsurance. Major catastrophes in recent years included the Northridge
earthquake in Southern California and the winter storms in the South and
-10-
<PAGE>
Northeast in 1994; winter storms and flooding in the Midwest in 1993;
Hurricanes Andrew and Iniki, Chicago flooding and Los Angeles civil
disorder in 1992; Oakland fires in 1991; and Hurricane Hugo and the San
Francisco earthquake in 1989. Total net losses to AFC's insurance
operations from catastrophes were $51 million in 1994; $26 million in
1993; $42 millon in 1992; $22 million in 1991; and $13 million in 1990.
Ratings
A. M. Best Company, Inc. ("Best"), publisher of Best's
Insurance Reports, Property-Casualty, has given GAI its rating of "A"
(Excellent). Although some of the large insurance companies against
whom GAI competes have a higher rating, AFC believes that the current
rating is adequate to enable GAI to compete successfully. A downgrade
in the Best rating below A (Excellent) could adversely affect the
competitive position of GAI. Best's ratings are not designed for the
protection of investors and do not constitute recommendations to buy,
sell or hold any security.
AFC's Investment Portfolio
Approximately 94% of the bonds and redeemable preferred stocks
held by AFC were rated "investment grade" (credit rating of AAA to BBB-)
at March 31, 1995 and December 31, 1994, compared to less than 60% at
the end of 1988. Investment grade securities generally bear lower
yields and lower degrees of risk than those that are unrated or non-
investment grade.
At December 31, 1994, AFC held mortgage-backed securities,
consisting primarily of collateralized mortgage obligations ("CMOs"),
with a market value of $1.5 billion. At that date, interest only
(I/Os), principal only (P/Os) and other "high risk" CMOs represented
approximately eight-tenths of one percent of AFC's total mortgage-backed
securities. AFC invests primarily in CMOs which are structured to
minimize prepayment risk. In addition, the majority of CMOs held by AFC
were purchased at a discount to par value. AFC believes that the
structure and discounted nature of the CMOs will minimize the effect of
prepayments on earnings over the anticipated life of the CMO portfolio.
Substantially all of AFC's CMOs are rated "AAA" by Standard & Poor's
Corporation and are collateralized primarily by GNMA, FNMA or FHLMC
single-family residential pass-through certificates. The market in
which these securities trade is highly liquid. Aside from interest rate
risk, AFC does not believe a material risk (relative to earnings and
liquidity) is inherent in holding such investments.
-11-
<PAGE>
AFC has generally followed a practice of concentrating its
equity investments in a relatively limited number of issues rather than
maintaining relatively limited positions in a larger number of issues.
This practice permits concentration of attention on a limited number of
companies in relatively few industries, principally insurance,
utilities, financial services, food products, energy and communications.
Some of the investments, because of their size, may not be as readily
marketable as the typical small investment position. Alternatively, a
large equity position may be attractive to persons seeking to control or
influence the policies of a company and AFC's concentration in a
relatively small number of companies and industries may permit it to
identify investments with above average potential to increase in value.
Because of its significant ownership percentage of the voting stock of
several companies, AFC utilizes the equity method of accounting in
certain companies. This method results in AFC including in its results
its proportionate share of the investees' earnings and losses. At
December 31, 1994, AFC utilized the equity method of accounting with
respect to its investments of $526 million in American Premier; $237
million in Chiquita Brands International, Inc. ("Chiquita"); and $70
million in Citicasters Inc. ("Citicasters").
Adequacy of Loss Reserves
The insurance subsidiaries of AFC establish reserves to cover
their estimated liability for losses and loss adjustment expense with
respect to both reported and unreported claims as of the end of each
accounting period. By their nature, such reserves do not represent an
exact calculation of liabilities. Rather, except for reserves related
to environmental and asbestos type claims, such reserves are estimates
involving projections at a given time of management's expectations as to
the ultimate settlement and administration of claims. These
expectations are, in turn, based on facts and circumstances known at the
time, predictions of future events, estimates of future trends in the
severity and frequency of claims and judicial theories of liability as
well as inflation.
In recent years, AFC's insurance subsidiaries have increased
their premium writings in specialty commercial lines of business.
Estimation of loss reserves for many specialty commercial lines of
business is more difficult than for certain standard commercial lines
because claims may not become apparent for a number of years (such
period of time being referred to as the "tail"), and a relatively higher
proportion of ultimate losses is considered incurred but not reported.
As a result, variations in loss development are more likely in these
lines of business.
-12-
<PAGE>
AFC regularly reviews its reserving techniques and reserve
positions and believes that adequate provision has been made for loss
reserves. Nevertheless, there can be no assurance that currently
established reserves will prove adequate in light of subsequent actual
experience. Future earnings could be adversely impacted should future
loss development require increases in reserves previously established
for prior periods.
AFC's insurance subsidiaries face liabilities for asbestos and
environmental ("A&E") claims. A&E claims arise out of general liability
and commercial multi-peril policies issued by GAI prior to the early
1980's when providing coverage for A&E exposures was not specifically
contemplated by GAI's policies.
The insurance industry typically includes only claims relating
to polluted waste sites and asbestos in defining environmental
exposures. GAI extends its definition of A&E claims to include claims
relating to breast implants, repetitive stress on keyboards, DES (a drug
used in pregnancies years ago alleged to cause cancer and birth
defects), and other latent injuries.
Establishing reserves for A&E claims is subject to
uncertainties that are greater than those presented by other types of
claims. Factors contributing to those uncertainties include a lack of
historical data, long reporting delays, uncertainty as to the number and
identity of insureds with potential exposure, unresolved legal issues
regarding policy coverage, and the extent and times of any such
contractual liability. Courts have reached different and sometimes
inconsistent conclusions as to when the loss occurred and what policies
provide coverage, what claims are covered, whether there is an insured
obligation to defend, how policy limits are determined and other policy
provisions. Management believes these issues are not likely to be
resolved in the near future.
Based on known facts and current law, management believes that
its reserves for A&E claims are adequate.
-13-
<PAGE>
THE SELLING DEBENTUREHOLDERS
Each Selling Debentureholder is a portfolio of an investment
company registered under Section 8 of the Investment Company Act of
1940, as amended (collectively the "Selling Debentureholder Funds").
Fidelity Management & Research Company, a Massachusetts corporation and
an investment adviser registered under Section 203 of the Investment
Advisers Act of 1940 ("FMRC"), provides investment advisory services to
each of the Selling Debentureholder Funds, to certain other registered
investment companies and to certain other funds that are generally
offered to limited groups of investors. FMRC is a wholly-owned
subsidiary of FMR Corp., a Massachusetts corporation. The Selling
Debentureholders acquired the Debentures from the Company in a private
transaction on May 24, 1995.
<TABLE>
<CAPTION>
Beneficial Beneficial
Ownership of Debentures Ownership of Debentures
Before Offering* After Offering*
Percentage of Percentage of
Selling Principal Outstanding Principal Outstanding
Debentureholder Amount Debentures Amount Debentures
<S> <C> <C> <C> <C>
Fidelity Fixed Income Trust: $6,930,000 2.7% -0- --
Spartan High Income Fund
Fidelity Puritan Trust: $13,860,000 5.5% -0- --
Fidelity Puritan Fund
Fidelity Charles Street Trust: $13,860,000 5.5% -0- --
Fidelity Asset Manager
Fidelity Advisor Series II: $8,580,000 3.4% -0- --
Fidelity Advisor High Yield Fund
Variable Insurance Products Fund: $6,770,000 2.7% -0- --
High Income Portfolio
*Based on the aggregate principal amount of Debentures outstanding at
June 1, 1995 and assumes all Debentures offered are sold.
</TABLE>
In connection with this offering, AFC has agreed to indemnify
the Selling Debentureholders against certain liabilities under the
Securities Act of 1933, or to contribute to payments that the Selling
Debentureholders may be required to make in respect thereof.
-14-
<PAGE>
USE OF PROCEEDS
The Company will receive none of the proceeds of this
offering.
PLAN OF DISTRIBUTION
The sale or distribution of the Debentures may be effected
directly to purchasers by the Selling Debentureholders as principals or
through one or more underwriters, brokers, dealers or agents from time
to time (i) in one or more transactions on any exchange or in the over-
the-counter market, or (ii) in transactions otherwise than in such
markets. Any of such transactions may be effected at market prices
prevailing at the time of sale, at prices related to such prevailing
market prices, at varying prices determined at the time of sale or at
negotiated or fixed prices, in each case as determined by the Selling
Debentureholder or by agreement between the Selling Debentureholder and
underwriters, brokers, dealers or agents, or purchasers. If the Selling
Debentureholders effect such transactions by selling Debentures to or
through underwriters, brokers, dealers or agents, such underwriters,
brokers, dealers or agents may receive compensation in the form of
discounts, concessions or commissions from the Selling Debentureholders
or commissions from purchasers of Debentures for whom they may act as
agent (which discounts, concessions or commissions as to particular
underwriters, brokers, dealers or agents may be in excess of those
customary in the types of transactions involved). The Selling
Debentureholders and any brokers, dealers or agents that participate in
the distribution of the Debentures may be deemed to be underwriters, and
any profit on the sale of Debentures by them and any discounts,
concessions or commissions received by any such underwriters, brokers,
dealers or agents may be deemed to be underwriting discounts and
commissions under the Securities Act.
Under the securities laws of certain states, the Debentures
may be sold in such states only through registered or licensed brokers
or dealers. In addition, in certain states the Debentures may not be
sold unless the Debentures have been registered or qualified for sale in
such state or an exemption from registration or qualification is
available and is complied with.
The Company will pay all of the expenses incident to the
registration, offering and sale of the Debentures to the public
hereunder other than commissions, fees and discounts of underwriters,
brokers, dealers and agents. The Company has agreed to indemnify the
-15-
<PAGE>
Selling Debentureholders and any underwriters against certain
liabilities, including liabilities under the Securities Act. The
Company will not receive any of the proceeds from the sale of any of the
Debentures by the Selling Debentureholders.
PRICE RANGE OF DEBENTURES
As of May 31, 1995, approximately $253.8 million principal
amount of the Debentures were outstanding. The Debentures are listed on
the Pacific Stock Exchange ("PSE") and the Cincinnati Stock Exchange.
The following table shows for the periods indicated high and low closing
prices per $1,000 principal amount of the Debentures on the PSE. The
prices shown do not necessarily represent actual transactions.
High Low
1994
Second Quarter (1) $ 990 $ 930
Third Quarter 969 920
Fourth Quarter 950 875
1995
First Quarter 956 913
Second Quarter (Through May 31) 1,004 986
(1) The Debentures were originally issued
in April 1994.
-16-
<PAGE>
DESCRIPTION OF DEBENTURES
General
The Debentures are unsecured obligations of AFC and were
issued under an Indenture between AFC and Star Bank, National
Association as Trustee. The following statements are brief summaries of
certain provisions of the Indenture and do not purport to be complete.
The Indenture is on file with the Commission and references to the
Indenture are qualified in their entirety by express reference to the
Indenture.
The Indenture provides for the issuance of up to $750 million
principal amount of debentures of which approximately $50 million are
being offered hereby. Approximately $203.8 million principal amount of
Debentures were issued in 1994 in an exchange offer for other debt
securities of AFC then outstanding and $50 million to the Selling
Debentureholders on May 24, 1995. Additional Debentures may be issued
in future exchange offers or in other transactions. The Debentures are
issuable as registered debentures without coupons in denominations of
$1,000 and any multiple thereof. The Debentures are exchangeable and
transferable at the office of the transfer agent which the Company has
designated as Securities Transfer Company, One East Fourth Street,
Cincinnati, Ohio 45202. No service charge will be made for the
transfer or exchange of Debentures, but AFC may require payment of sums
sufficient to cover any tax or other governmental charge. (Sections
2.03 and 2.06 of the Indenture; further references to Sections are
references to the Indenture.)
Principal, Maturity and Interest
The Debentures bear interest at the rate of 9-3/4% per annum
payable semi-annually on April 20 and October 20 each year to holders of
record on the April 1 and October 1 next preceding the interest payment
date. Interest on the Debentures will accrue from April 20, 1995. They
will mature on April 20, 2004. Payments of principal and premium, if
any, and interest payable on redemption (other than interest payable on
April 20 and October 20) will be made at the office of the Paying Agent
in Cincinnati, Ohio, upon surrender of the Debentures. (Section 3.01)
-17-
<PAGE>
Optional Redemption
The Debentures will be redeemable after April 20, 1999 at the
option of AFC, as a whole or in part, on not less than 30 nor more than
60 days' written notice, at the following prices, expressed in
percentage of the principal amount, together with interest accrued to
the date fixed for redemption. If redeemed on or after April 20 of:
Redemption
Year Price
1999 104.75%
2000 103.25%
2001 101.75%
2002 and thereafter 100.00%
Redemptions will be made in $1,000 denominations with the
Trustee determining the particular debentures to be redeemed by lot at
its discretion. (Sections 4.01, 4.02 and 4.03)
No Sinking Fund
The Indenture contains no sinking fund provisions.
No Financial Covenants
The Indenture contains no provisions which restrict the
issuance of additional securities, the incurring of additional debt, the
declaration of dividends or the retirement of equity securities. The
Indenture does not require the maintenance of any particular ratios or
the creation or maintenance of reserves, nor does it contain any other
financial covenants.
The provisions of the Indenture would not necessarily afford
holders of the Debentures protection in the event of a highly leveraged
transaction, reorganization, restructuring, merger or similar
transaction which involves the Company and which may adversely affect
the holders.
Modification and Satisfaction of Indentures
The Indenture may be amended or supplemented by AFC and the
Trustee with the consent of the holders of not less than a majority in
principal amount of the debentures then outstanding; but no modification
of the terms of payment of principal or interest on the Debentures and
no modification impairing or reducing the percentage required for
modification will be effective against any holder without his consent.
(Section 9.02)
-18-
<PAGE>
The Indenture may be satisfied and discharged upon cancel-
lation of all the Debentures or, under certain conditions, upon deposit
with the Trustee of funds or securities sufficient therefor. (Section
8.01)
Limitations on Claims in Bankruptcy or on Acceleration Upon an Event of
Default
Under the Indenture, the Trustee or the holders of 25% of the
debentures may declare an acceleration if an Event of Default occurs and
is continuing, even if the bankruptcy of AFC does not result in or was
not the cause of the Event of Default. Under the terms of the
Indenture, should an acceleration be declared as a result of the
occurrence and continuation of an Event of Default absent bankruptcy,
the claim of a holder of Debentures is for the full principal amount of
the holder's debentures. (Section 6.02)
The amount that a holder would be able to recover from AFC,
under a bankruptcy or an event of default, may, however, be limited by
applicable law to the issue price (the market value at the time of
issuance) of the Debentures plus the portion of any original issue
discount which has been amortized.
Events of Default
The following events are defined in the Indenture as "Events
of Default": failure to pay principal or premium when due for 20 days;
failure to pay interest when due for 30 days; failure to perform any
other covenants in the Indenture for 90 days after notice; certain
events of bankruptcy, insolvency or reorganization of AFC; the
occurrence of an event of default in any other instrument under which
AFC has or may issue debt which has not been cured within 30 days after
notice of such default; or failure to pay any funded debt in excess of
$10,000,000 now existing or existing after the date of the Indenture
within 20 days after stated maturity. Upon the happening and during the
continuance of any Event of Default, the Trustee or the holders of at
least 25% in principal amount of the outstanding Debentures may declare
the principal and accrued interest of all debentures due and payable.
The Indenture provides that such declaration and its consequences may,
in certain events, be annulled by the holders of a majority in principal
amount of the outstanding debentures. (Article 6)
The Indenture provides that if a default occurs and is
continuing and is actually known to the Trustee, the Trustee shall,
within 90 days thereafter, give to the holders notice of all uncured
-19-
<PAGE>
defaults known to it (the term default to include the events specified
above without grace periods); provided that, except in the case of
default in payment of principal of or interest in respect of the
debentures, the Trustee shall be protected in withholding such notice if
it in good faith determines that the withholding of such notice is in
the interest of the holders. (Section 7.05)
AFC must furnish to the Trustee within 120 days after the end
of each fiscal year, a certificate of certain officers of AFC as to
whether such persons have knowledge of any default under the Indenture.
(Section 3.04)
The holders of a majority in aggregate principal amount of
outstanding Debentures will 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,
except that the Trustee shall not be so required to act unless
reasonable indemnity shall be offered against the costs, expenses and
liabilities of such act, or except as otherwise provided in the
Indenture. (Sections 6.05 and 7.01)
Trustee
The Trustee serves as trustee under indentures relating to
other debt of AFC and certain of its subsidiaries and affiliates and has
loans outstanding to certain subsidiaries and affiliates of AFC. The
Trustee has no other material relationship with AFC.
Authenticating Agent, Paying Agent, Registrar
Securities Transfer Company, an Ohio limited partnership,
Cincinnati, Ohio, has been designated by AFC as the Authenticating
Agent, Paying Agent, and Registrar for the debentures. AFC may change
the Authenticating Agent, Paying Agent and Registrar without prior
notice. AFC is the general partner of Securities Transfer Company and
subsidiaries and affiliates of AFC are limited partners. AFC or any of
its subsidiaries or affiliates may act in such capacities.
LEGAL MATTERS
Certain legal matters, including the validity of the
Debentures offered hereby, will be passed upon for the Company by
Keating, Muething & Klekamp.
-20-
<PAGE>
EXPERTS
The consolidated financial statements of AFC appearing in
AFC's Annual Report (Form 10-K) for the year ended December 31, 1994,
have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein
by reference. Such report is based in part on the reports of Deloitte &
Touche LLP, independent auditors, relating to the consolidated financial
statements of American Premier Underwriters, Inc. and of Deloitte &
Touche, independent auditors, relating to the consolidated financial
statements of General Cable Corporation. The financial statements
referred to above are included in reliance upon such reports given upon
the authority of such firms as experts in accounting and auditing.
-21-
<PAGE>
No person has been authorized to give any information or to make any
representations not contained in this Prospectus and, if given or made,
such information or representation must not be relied upon as having
been authorized by the Company or the Selling Debentureholders. This
Prospectus does not constitute an offer to sell or a solicitation of any
offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that
the information herein is correct as of any time subsequent to the date
hereof or that there has been no change in the affairs of the Company
since such date.
TABLE OF CONTENTS
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . 3
SUMMARY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 5
INVESTMENT CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . 9
THE SELLING DEBENTUREHOLDERS . . . . . . . . . . . . . . . . . . . 14
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . 15
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . 15
PRICE RANGE OF DEBENTURES . . . . . . . . . . . . . . . . . . . . 16
DESCRIPTION OF DEBENTURES . . . . . . . . . . . . . . . . . . . . 17
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 20
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
-22-
<PAGE>
AMERICAN
FINANCIAL
CORPORATION
$50,000,000
9-3/4% Debentures
due April 20, 2004
PROSPECTUS
-23-
