<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 14, 1997.
REGISTRATION NO. 333-30167
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1 TO
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
NAVISTAR FINANCIAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2472404
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2850 WEST GOLF ROAD
ROLLING MEADOWS, ILLINOIS 60008
TELEPHONE: (847) 734-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
----------------
WILLIAM W. JONES, ESQ.
GENERAL COUNSEL
2850 WEST GOLF ROAD
ROLLING MEADOWS, ILLINOIS 60008
TELEPHONE: (847) 734-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPY TO:
KENNETH P. MORRISON, ESQ.
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
TELEPHONE: (312) 861-2000
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [_]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 14, 1997
PROSPECTUS
, 1997
LOGO
NAVISTAR FINANCIAL CORPORATION
OFFER TO EXCHANGE ITS 9% SENIOR SUBORDINATED NOTES DUE 2002, SERIES B FOR ANY
AND ALL OF ITS OUTSTANDING 9% SENIOR SUBORDINATED NOTES DUE 2002
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON AUGUST 26,
1997, UNLESS EXTENDED.
Navistar Financial Corporation, a Delaware corporation (the "Company") hereby
offers (the "Exchange Offer"), upon the terms and conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its 9% Senior
Subordinated Notes due 2002, Series B (the "Exchange Notes"), registered under
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 9% Senior Subordinated Notes due 2002 (the
"Old Notes"), of which $100,000,000 principal amount is outstanding. The form
and terms of the Exchange Notes are the same as the form and term of the Old
Notes except that (i) the Exchange Notes will bear a Series B designation, (ii)
the issuance of the Exchange Notes will have been registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (iii) holders of the Exchange Notes will
not be entitled to certain rights of holders of Old Notes under the
Registration Rights Agreement (as defined). The Exchange Notes will evidence
the same debt as the Old Notes (which they replace) and will be issued under
and be entitled to the benefits of the Indenture dated as of May 30, 1997 (the
"Indenture") by and among the Company and The Fuji Bank and Trust Company, as
trustee, governing the Old Notes. See "The Exchange Offer" and "Description of
the Notes." The Old Notes and the Exchange Notes are sometimes referred to
herein collectively as the "Notes."
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time on August 26, 1997,
unless extended by the Company in its sole discretion (such date, or such later
date to which the Exchange Offer may be extended, the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
See "The Exchange Offer."
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DESCRIPTION OF CERTAIN RISKS TO
BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER.
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 Notes mature on June 1, 2002. Interest on the Notes will accrue at a rate
of 9% per annum and will be payable semi-annually in arrears on June 1 and
December 1 of each year, commencing December 1, 1997. Upon a Change of Control
Triggering Event (as defined), the holders of the Notes shall have the right,
at the holder's option, to require the Company to redeem the Notes, in whole or
in part, at a redemption price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest to the redemption date.
(Cover page continued on following page)
<PAGE>
(Cover page continued)
The Notes are subordinated to all present and future Senior Indebtedness of
the Company (as defined). See "Description of the Notes." As of April 30,
1997, after giving effect to the consummation of the Initial Offering and the
application of the estimated net proceeds therefrom as set forth under "Use of
Proceeds," the Company would have had outstanding approximately $1,215.3
million of Indebtedness (as defined), all of which would be senior to the
Notes, except the 1998 Notes (as defined), which would be pari passu with the
Notes, and no Indebtedness which would be subordinated to the Notes.
The Old Notes were sold by the Company on May 30, 1997 to J.P. Morgan
Securities Inc., Chase Securities Inc. and NationsBanc Capital Markets, Inc.
(the "Initial Purchasers") in a transaction not registered under the
Securities Act in reliance upon an exemption under the Securities Act (the
"Initial Offering"). The Initial Purchasers subsequently placed the Old Notes
with (i) qualified institutional buyers in reliance upon Rule 144A under the
Securities Act, (ii) a limited number of institutional accredited investors
that agreed to comply with certain transfer restrictions and other conditions
and (iii) qualified buyers outside the United States in reliance upon
Regulation S under the Securities Act. Accordingly, the Old Notes may not be
reoffered, resold or otherwise transferred in the United States unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Exchange
Notes are being offered hereunder in order to satisfy the obligations of the
Company under the Registration Rights Agreement entered into by the Company
and the Initial Purchasers in connection with the Initial Offering (the
"Registration Rights Agreement"). See "The Exchange Offer."
Based upon an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters issued to
third parties, the Company believes that the Exchange Notes issued pursuant to
the Exchange Offer in exchange for Old Notes may be offered for resale, resold
and otherwise transferred by any holder thereof (other than any such holder
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such holder's business and such holder
has no arrangement or understanding with any person to participate in the
distribution of such Exchange Notes. See "The Exchange Offer--Resale of the
Exchange Notes." Holders of Old Notes wishing to accept the Exchange Offer
must represent to the Company, as required by the Registration Rights
Agreement, that such conditions have been met. Each broker-dealer (a
"Participating Broker-Dealer") that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of Exchange Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of 180 days
after the Expiration Date, it will make this Prospectus available to any
Participating Broker-Dealer for use in connection with any such resale
(provided that the Company receive notice from such Participating Broker-
Dealer of its status as a Participating Broker-Dealer within 30 days after the
consummation of the Exchange Offer). See "Plan of Distribution."
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter
is being used in connection with the Exchange Offer.
There has not previously been any public market for the Old Notes or the
Exchange Notes. The Company does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. See "Risk Factors--Absence of a Public Market
Could Adversely Affect the Value of Exchange Notes." Moreover, to the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected.
<PAGE>
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL OCTOBER 13, 1997 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER),
ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
The Exchange Notes will be available initially only in book-entry form and
the Company expects that the Exchange Notes issued pursuant to the Exchange
Offer will be represented by one or more Global Notes (as defined), which will
be deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in its name or in the name of Cede & Co., its nominee, except with
respect to institutional "accredited investors" (within the meaning of Rule
501 (a)(1), (2), (3) or (7) under the Securities Act) who will receive
Exchange Notes in certificated form. Beneficial interests in the Global Notes
will be shown on, and transfers thereof will be effected through, records
maintained by DTC and its participants. After the initial issuance of the
Global Notes, notes in certificated form will be issued in exchange for the
Global Notes only under limited circumstances as set forth in the Indenture.
See "Book-Entry; Delivery and Form."
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes "Forward-Looking Statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). All statements other than
Statements of Historical Facts included in this Prospectus, including, without
limitation, certain statements under the "Prospectus Summary," "Business of
Navistar Financial Corporation" and "Relationship with Navistar International
Transportation Corp." and located elsewhere or incorporated by reference
herein regarding the Company's, Navistar International Transportation Corp.'s
and Navistar International Corporation's financial position and business
strategy, may constitute forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to
have been correct. Important factors that could cause actual results to differ
materially from the Company's expectations ("Cautionary Statements") are
disclosed in this Prospectus, including, without limitation, in conjunction
with the forward-looking statements included in this Prospectus and under
"Risk Factors." All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements.
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Disclosure Regarding Forward-
Looking Statements............... i
Available Information............. ii
Incorporation of Certain
Information By Reference......... iii
Prospectus Summary................ 1
Risk Factors...................... 13
Use of Proceeds................... 17
Capitalization.................... 18
Selected Consolidated Financial
Data for the Company............. 19
Industry Segment Data for the
Company.......................... 22
Selected Consolidated Financial
Data for Navistar International
Corporation...................... 23
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business of Navistar Financial Corporation............................ 25
Statistical Data...................................................... 30
Relationship With Navistar International Transportation Corp.......... 33
Description of Other Financing Arrangements........................... 41
The Exchange Offer.................................................... 45
Description of the Notes.............................................. 53
Certain Federal Income Tax Consequences............................... 80
Plan of Distribution.................................................. 80
Legal Matters......................................................... 81
Experts............................................................... 81
</TABLE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-2 (the "Exchange Offer Registration Statement," which term shall encompass
all amendments, exhibits, annexes and schedules thereto) pursuant to the
Securities Act, and the rules and regulations promulgated thereunder, covering
the Exchange Offer contemplated hereby. This Prospectus does not contain all
the information set forth in the Exchange Offer Registration Statement. For
further information with respect to the Company and the Exchange Offer,
reference is made to the Exchange Offer Registration Statement. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Exchange
Offer Registration Statement, reference is made to the exhibit for a more
complete description of the document or matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. The
Company files periodic reports and other information required of the Exchange
Act. The Exchange Offer Registration Statement, including the exhibits
thereto, and periodic reports and other information filed by the Company with
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and inspected at the Commission's regional offices at 7 World
Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, Suite
1400, 500 West Madison Street, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The address of such site is
http://www.sec.gov.
In addition, the Company has agreed that, whether or not it is required to
do so by the rules and regulations of the Commission, for so long as any Notes
remain outstanding, it will furnish to the registered holders of the Notes
and, to the extent permitted by applicable law or regulation, file with the
Commission (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-
K if the Company was required to file such Forms, including for each a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereof
by the Company's independent certified public accountants and (ii) all reports
that would be required to be filed on Form 8-K if it were required to file
such reports. In addition, for so long as any of the Notes remain outstanding,
the Company has agreed to make available to any prospective purchaser of the
Notes or beneficial owner of the Notes, in connection with any sale thereof,
the information required by Rule 144A(d)(4) under the Securities Act.
This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents are available upon request from:
Corporate Treasurer, Navistar Financial Corporation, 2850
ii
<PAGE>
West Golf Road, Rolling Meadows, Illinois 60008, telephone: (847) 734-4000. In
order to ensure timely delivery of the documents, any request should be made
by August 19, 1997 (five business days prior to the Expiration Date).
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act (File No. 1-4146-1) are incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended October 31, 1996.
2. Quarterly Report on Form 10-Q for the fiscal quarter ended January 31,
1997.
3. Quarterly Report on Form 10-Q for the fiscal quarter ended April 30,
1997.
4. Current Report on Form 8-K as of May 27, 1997.
All reports and other documents filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, that indicate on the cover
page thereof that they are to be incorporated by reference, after the date of
this Prospectus and prior to the Expiration Date, shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of the
filing of such reports and documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein (or in any other subsequently filed document which also is incorporated
or deemed to be incorporated by reference herein) modifies or supersedes such
previous statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company's Annual Report on Form 10-K for the fiscal year ended October
31, 1996 (the "NFC 1996 10-K") and the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended April 30, 1997 (the "NFC April 1997 10-Q")
accompany this Prospectus as Appendix A and Appendix B, respectively.
iii
<PAGE>
PROSPECTUS SUMMARY
The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and financial statements
appearing elsewhere in this Prospectus, including Appendix A and Appendix B
hereto and the documents incorporated by reference in this Prospectus. Unless
the context otherwise requires or as otherwise specified herein, all references
herein to "Navistar Financial," "NFC" or the "Company" refer to Navistar
Financial Corporation and its subsidiaries. The fiscal years of Navistar
International Corporation and its two principal operating subsidiaries, the
Company and Navistar International Transportation Corp., end on October 31.
Fiscal years are identified herein according to the calendar year in which they
end. For example, the fiscal year ended October 31, 1996 is referred to as
"fiscal 1996."
THE COMPANY
Navistar Financial Corporation was incorporated in Delaware in 1949 and is a
wholly owned subsidiary of Navistar International Transportation Corp.
("Transportation"), which is wholly owned by Navistar International Corporation
("Navistar"). The Company provides wholesale, retail, and to a lesser extent,
lease financing in the United States for sales of new and used trucks sold by
Transportation and Transportation's dealers ("Transportation Dealers"). The
Company also finances wholesale accounts and selected retail accounts
receivable of Transportation. Sales of new and used products (including
trailers) of other manufacturers are also financed regardless of whether
designed or customarily sold for use with Transportation's truck products. The
Company provided wholesale financing for 94% and 93% of the new truck units
sold by Transportation to Transportation Dealers in the United States during
fiscal 1996 and fiscal 1995, respectively, and 95% and 94% for the six months
ended April 30, 1997 and 1996, respectively. The Company also provided retail
financing in fiscal 1996 for approximately 16% of the new truck units sold by
Transportation and Transportation Dealers compared to approximately 14% in
fiscal 1995, and approximately 13% and 18% for the six months ended April 30,
1997 and 1996, respectively. The Company's wholly owned insurance subsidiary,
Harco National Insurance Company ("Harco"), provides commercial physical damage
and liability insurance coverage to Transportation Dealers and retail
customers, and the general public through the independent insurance agency
system. In fiscal 1996, the Company had revenues of $252.8 million and EBITDA
(as defined) of $169 million. See "Business of Navistar Financial Corporation."
The Company's principal office is located at 2850 West Golf Road, Rolling
Meadows, Illinois 60008, and its telephone number is (847) 734-4000.
NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
Transportation manufactures and markets medium and heavy duty trucks,
including school buses, mid-range diesel engines and service parts primarily in
the United States and Canada as well as in selected export markets.
Transportation offers a full line of diesel-powered products under the
"International" brand name in the common carrier, private carrier,
government/service, leasing, construction, energy/petroleum and student
transportation markets. Transportation has been the market leader in the United
States and Canada combined medium and heavy duty truck market in each of its
last 16 fiscal years and had a combined market share of 27.5% in fiscal 1996.
Transportation markets its truck products and service parts through the
largest retail organization in North America specializing in medium and heavy
trucks, which at April 30, 1997 included 953 dealers and retail outlets.
Service and customer support are also supplied at these locations. In the
United States and Canada, Transportation operates seven regional parts
distribution centers which allow 24-hour availability and same day shipment of
the parts most frequently requested by dealers and customers. In 1996,
Transportation established a
1
<PAGE>
distribution network in Mexico to better serve that growing market.
Transportation builds a family of mid-range diesel engines for use in its
medium trucks, school buses and selected heavy truck models and for sale to
original equipment manufacturers in the United States and Canada.
Transportation is the leading supplier of such engines in the 160-300
horsepower range. Transportation also provides financing and insurance for
Transportation Dealers and retail customers through the Company.
In fiscal 1996, Transportation adopted and began to implement a five-point
truck strategy designed to improve operating performance and increase
profitability. Specifically, this strategy is designed to enable
Transportation's truck division to achieve its part in Navistar's goal of
generating an average of 17.5% after tax return on equity over a business
cycle. The principal components of this strategy include:
. Reduce Product Complexity. Transportation believes that it can increase
manufacturing efficiency and improve product quality by reducing the
complexity of its product offerings. Historically, thousands of options
and a separate chassis design were offered for each truck model
manufactured by Transportation, which led to significant manufacturing
inefficiencies. In 1996, Transportation introduced a new ordering program
known as Diamond Spec(TM) for its premium conventional heavy duty trucks.
Under this program, Transportation rationalized the number of possible
option combinations by developing pre-packaged option groups which are
arranged under 11 categories (i.e., engine, chassis, electrical system)
based upon the most popular preferences of its customers. Transportation
also combined the chassis for three models offered in this premium
conventional product category into one chassis. This standardization of
option and chassis groups is expected to lead to significant operating
cost savings from increased manufacturing efficiency and better pricing
for purchased components. In addition, Transportation believes that this
program will result in an overall improvement in product quality and
shorter and more reliable delivery times.
. Increase Manufacturing Efficiency. Transportation believes that it can
achieve significant improvements in manufacturing efficiency by focusing
each of its principal truck manufacturing facilities on producing a
single type of truck model. To this end, Transportation transferred the
production of its stripped chassis from its Springfield, Ohio facility to
its Conway, Arkansas facility in fiscal 1996, in order to achieve
efficiencies in the production of medium duty trucks. Similarly,
Transportation established a joint venture with SST Truck Company, which
will focus on the production of the highly-complex Paystar(R) severe
service trucks, thereby permitting Transportation's Chatham, Ontario
facility to concentrate on manufacturing premium conventional heavy duty
trucks.
. Emphasize Product Development. Transportation believes that each of its
current truck models are equal to or exceed those of its competitors in
terms of satisfying its customers' needs. Nevertheless, Transportation
intends to continue to enhance and expand its current product offerings
in an effort to provide trucks that better satisfy its customers'
changing demands. In fiscal 1996, Transportation introduced the
International 9100 conventional truck to replace its 8200 heavy duty
regular conventional truck and made significant improvements to its
premium conventional models. In fiscal 1997 and fiscal 1998, a series of
model improvements are expected to be introduced for Transportation's
premium conventional heavy duty truck models.
. Expand Operations in Mexico. Transportation believes that there are
significant opportunities to increase sales of both trucks and engines in
Mexico and in other selected markets. During 1996, Transportation
significantly expanded its direct presence in Mexico by establishing a
dealer network with 24 locations and a parts distribution center and by
arranging for production at a contract manufacturer. In addition,
Navistar's Board approved the construction of a manufacturing facility to
be located near Monterey, Mexico. This medium duty and heavy duty truck
facility is anticipated to cost approximately $167 million and to begin
production in 1998. Its capacity will be 65 units per day on one shift.
Transportation believes that its Mexican operations will enable it to
expand into other Latin American countries, particularly as a result of
the favorable and cost effective trade agreements between Mexico and
other Latin American countries.
2
<PAGE>
. Establish Competitive Wage, Benefit and Productivity Levels. In 1996,
Transportation signed a new three-year collective bargaining agreement
with the Canadian Auto Workers (the "CAW"). Transportation expects to
achieve significant productivity gains as a result of favorable changes
in job classifications, work rules and training. Similarly,
Transportation intends to seek modifications to improve productivity
under its collective bargaining agreement with the United Automobile,
Aerospace & Agricultural Implement Workers of America (the "UAW"), which
is scheduled to expire on October 1, 1998.
THE INITIAL OFFERING
OLD NOTES............... The Old Notes were sold by the Company on May 30,
1997 to the Initial Purchasers pursuant to a Pur-
chase Agreement dated May 22, 1997 (the "Purchase
Agreement"). The Initial Purchasers subsequently
placed the Old Notes with (i) qualified institu-
tional buyers pursuant to Rule 144A under the Se-
curities Act, (ii) a limited number of institu-
tional accredited investors that agreed to comply
with certain transfer restrictions and other con-
ditions and (iii) qualified buyers outside the
United States in reliance upon Regulation S under
the Securities Act.
REGISTRATION RIGHTS Pursuant to the Purchase Agreement, the Company
AGREEMENT.............. and the Initial Purchasers entered into a Regis-
tration Rights Agreement dated as of May 30, 1997
(the "Registration Rights Agreement"), which
grants the holders of the Old Notes certain ex-
change and registration rights. The Exchange Of-
fer is intended to satisfy such exchange rights
which terminate upon the consummation of the Ex-
change Offer.
THE EXCHANGE OFFER
SECURITIES OFFERED...... $100,000,000 aggregate principal amount of 9% Se-
nior Subordinated Notes due June 1, 2002, Series
B, of the Company (the "Exchange Notes").
THE EXCHANGE OFFER...... $1,000 principal amount of Exchange Notes in ex-
change for each $1,000 principal amount of Old
Notes. As of the date hereof, $100,000,000 aggre-
gate principal amount of Old Notes are outstand-
ing. The Company will issue the Exchange Notes to
holders on or promptly after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no action letters issued
to third parties, the Company believes that Ex-
change Notes issued pursuant to the Exchange Of-
fer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any
holder thereof (other than any such holder which
is an "affiliate" of the Company within the mean-
ing of Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act, pro-
vided that such Exchange Notes are acquired in
the ordinary course of such holder's business and
that such holder does not intend to participate
and has no arrangement or understanding with any
person to participate in the distribution of such
Exchange Notes.
3
<PAGE>
Any Participating Broker-Dealer that acquired Old
Notes for its own account as a result of market-
making activities or other trading activities may
be a statutory underwriter. Each Participating
Broker-Dealer that receives Exchange Notes for
its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospec-
tus in connection with any resale of such Ex-
change Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a pro-
spectus, a Participating Broker-Dealer will not
be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented
from time to time, may be used by a Participating
Broker-Dealer in connection with resales of Ex-
change Notes received in exchange for Old Notes
where such Old Notes were acquired by such Par-
ticipating Broker-Dealer as a result of market-
making activities or other trading activities.
The Company has agreed that, for a period of 180
days after the Expiration Date, it will make this
Prospectus available to any Participating Broker-
Dealer for use in connection with any such resale
(provided that the Company receive notice from
such Participating Broker-Dealer of its status as
a Participating Broker-Dealer within 30 days af-
ter the consummation of the Exchange Offer). See
"Plan of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose
of participating, in a distribution of the Ex-
change Notes could not rely on the position of
the staff of the Commission enunciated in no-ac-
tion letters and, in the absence of an exemption
therefrom, must comply with the registration and
prospectus delivery requirements of the Securi-
ties Act in connection with any resale transac-
tion. Failure to comply with such requirements in
such instance may result in such holder incurring
liability under the Securities Act for which the
holder is not indemnified by the Company.
EXPIRATION DATE.........
5:00 p.m., New York City time, on August 26,
1997, unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer
is extended.
ACCRUED INTEREST ON THE
NEW NOTES AND THE OLD
NOTES..................
Each Exchange Note will bear interest from its
issuance date. Holders of Old Notes that are ac-
cepted for exchange will receive accrued interest
thereon to, but not including, the issuance date
of the Exchange Notes. Such interest will be paid
with the first interest payment on the Exchange
Notes to the holder of the Exchange Note. Inter-
est on the Old Notes accepted for exchange will
cease to accrue upon issuance of the Exchange
Notes.
CONDITIONS TO THE
EXCHANGE OFFER.........
The Exchange Offer is subject to certain custom-
ary conditions, which may be waived by the Compa-
ny. See "The Exchange Offer--Conditions."
PROCEDURES FOR
TENDERING OLD NOTES....
Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date the
accompanying Letter of Transmittal, or a facsim-
ile thereof or transmit an Agents' Message in
connection with a book-entry transfer, in accor-
dance with the instructions contained herein
4
<PAGE>
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile or such
Agent's Message, together with the Old Notes and
any other required documentation to the Exchange
Agent (as defined) at the address set forth here-
in. By executing the Letter of Transmittal or
Agent's Message, each holder will represent to
the Company that, among other things, the Ex-
change Notes acquired pursuant to the Exchange
Offer are being obtained in the ordinary course
of business of the person receiving such Exchange
Notes, whether or not such person is the holder,
that neither the holder nor any such other person
has any arrangement or understanding with any
person to participate in the distribution of such
Exchange Notes and that neither the holder nor
any such other person is an "affiliate," as de-
fined under Rule 405 of the Securities Act, of
the Company. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer" and "--Procedures
for Tendering."
UNTENDERED OLD NOTES.... Following the consummation of the Exchange Offer,
holders of Old Notes eligible to participate but
who do not tender their Old Notes will not have
any further exchange rights and such Old Notes
will continue to be subject to certain restric-
tions on transfer. Accordingly, the liquidity of
the market for such Old Notes could be adversely
affected.
CONSEQUENCES OF FAILURE
TO EXCHANGE............
The Old Notes that are not exchanged pursuant to
the Exchange Offer will remain restricted securi-
ties. Accordingly, such Old Notes may be resold
only (i) to the Company, (ii) pursuant to Rule
144A or Rule 144 under the Securities Act or pur-
suant to some other exemption under the Securi-
ties Act, (iii) outside the United States to a
foreign person pursuant to the requirements of
Rule 904 under the Securities Act, or (iv) pursu-
ant to an effective registration statement under
the Securities Act. See "The Exchange Offer--Con-
sequences of Failure to Exchange."
SHELF REGISTRATION If any holder of the Old Notes (other than any
STATEMENT.............. such holder which is an "affiliate" of the Com-
pany within the meaning of Rule 405 under the Se-
curities Act) is not eligible under applicable
securities laws to participate in the Exchange
Offer, and such holder has satisfied certain con-
ditions relating to the provision of information
to the Company for use therein, the Company has
agreed to register the Old Notes on a shelf reg-
istration statement (the "Shelf Registration
Statement") and use its best efforts to cause it
to be declared effective by the Commission as
promptly as practical on or after the consumma-
tion of the Exchange Offer. The Company has
agreed to maintain the effectiveness of the Shelf
Registration Statement for, under certain circum-
stances, a maximum of two years, to cover resales
of the Old Notes held by any such holders.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS......
Any beneficial owner whose Old Notes are regis-
tered in the name of a broker, dealer, commercial
bank, trust company or other nominee and who
wishes to tender should contact such registered
holder promptly and instruct such registered
holder to tender on such beneficial owner's be-
half. If such beneficial owner wishes to tender
on such owner's own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering its Old Notes, either
make appropriate arrangements
5
<PAGE>
to register ownership of the Old Notes in such
owner's name or obtain a properly completed bond
power from the registered holder. The transfer of
registered ownership may take considerable time.
The Company will keep the Exchange Offer open for
not less than thirty business days in order to
provide for the transfer of registered ownership.
GUARANTEED DELIVERY
PROCEDURES.............
Holders of Old Notes who wish to tender their Old
Notes and whose Old Notes are not immediately
available or who cannot deliver their Old Notes,
the Letter of Transmittal or any other documents
required by the Letter of Transmittal to the Ex-
change Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration Date
must tender their Old Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS....... Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration
Date.
ACCEPTANCE OF OLD NOTES
AND DELIVERY OF
EXCHANGE NOTES......... The Company will accept for exchange any and all
Old Notes which are properly tendered in the Ex-
change Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be de-
livered promptly following the Expiration Date.
See "The Exchange Offer--Terms of the Exchange
Offer."
FEDERAL INCOME TAX
CONSEQUENCES...........
The exchange pursuant to the Exchange Offer
should not be a taxable event for federal income
tax purposes. See "Certain Federal Income Tax
Consequences."
USE OF PROCEEDS......... There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange Offer.
EXCHANGE AGENT.......... The Fuji Bank and Trust Company.
THE EXCHANGE NOTES
GENERAL.................
The form and terms of the Exchange Notes are the
same as the form and terms of the Old Notes
(which they replace) except that (i) the Exchange
Notes bear a Series B designation, (ii) the Ex-
change Notes have been registered under the Secu-
rities Act and, therefore, will not bear legends
restricting the transfer thereof, and (iii) the
holders of Exchange Notes will not be entitled to
certain rights under the Registration Rights
Agreement, including the provisions providing for
an increase in the interest rate on the Old Notes
in certain circumstances relating to the timing
of the Exchange Offer, which rights will termi-
nate when the Exchange Offer is consummated. See
"The Exchange Offer--Purpose and Effect of the
Exchange Offer." The Exchange Notes will evidence
the same debt as the Old Notes and will be enti-
tled to the benefits of the Indenture. See "De-
scription of the Notes."
ISSUER.................. Navistar Financial Corporation.
MATURITY DATE........... June 1, 2002.
6
<PAGE>
INTEREST PAYMENT June 1 and December 1 of each year, commencing
DATES................... December 1, 1997.
SINKING FUND............ None.
RANKING.................
The Notes will be general obligations of the Com-
pany and will be subordinated to all existing and
future Senior Indebtedness of the Company (as de-
fined). The Notes will rank pari passu with all
existing and future senior subordinated Indebted-
ness of the Company, including the Company's ex-
isting 8 7/8% Senior Subordinated Notes due 1998
(the "1998 Notes"), and will rank senior to all
existing and future subordinated Indebtedness of
the Company. As a result of the restrictive cove-
nants contained in the Indenture pursuant to
which the Notes will be issued and pursuant to
the Credit Agreement (as defined), holders of the
Notes will initially be secured, subject to the
subordination provisions contained in the Inden-
ture, equally and ratably with the holders of the
Senior Indebtedness of the Company, by a lien on
substantially all of the assets of the Company.
Such lien and security interest is subject to re-
lease without prior notice to, or the consent of,
the holders of the Notes by agreement of at least
eighty-five percent of the lenders under the
Credit Agreement. As of April 30, 1997, after
giving effect to the consummation of the Initial
Offering and the application of the estimated net
proceeds therefrom as set forth under "Use of
Proceeds," the Company would have had outstanding
approximately $1,215.3 million of Indebtedness,
all of which would rank senior to the Notes, ex-
cept the 1998 Notes which would be pari passu
with the Notes, and no Indebtedness which would
be subordinated to the Notes. The Notes will be
effectively subordinated to all Indebtedness and
other obligations (including obligations to trade
and other creditors) of the subsidiaries of the
Company. As of April 30, 1997, the subsidiaries
of the Company had $11.4 million of other balance
sheet liabilities to third parties.
CHANGE OF CONTROL Upon a Change of Control Triggering Event, the
OFFER................... Company will, subject to certain conditions, make
an offer to purchase all outstanding Notes at a
purchase price of 101% of the principal amount
thereof plus accrued and unpaid interest to the
redemption date. The Credit Agreement imposes
certain limitations on the purchase of the Notes
upon a Change of Control Triggering Event. There
can be no assurance that upon a Change of Control
Triggering Event the Company will have sufficient
funds to purchase all or any portion of the
Notes.
CERTAIN COVENANTS....... The Indenture contains certain covenants that,
among other things, limit the ability of the Com-
pany or any of its subsidiaries to maintain or
incur indebtedness, create liens, enter into cer-
tain transactions with affiliates, or consummate
certain merger, consolidation or asset sale
transactions. In addition, the Company is re-
quired to maintain a Consolidated Fixed Charge
Coverage Ratio under the Indenture. These cove-
nants are subject to certain exceptions and qual-
ifications.
RISK FACTORS
Holders of the Old Notes should carefully consider the specific matters set
forth under "Risk Factors" as well as other information included in this
Prospectus before tendering the Old Notes in exchange for Exchange Notes.
7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA FOR THE COMPANY
The following consolidated financial data for the Company for each of the
five years ended October 31, 1996 and for the six months ended April 30, 1997
and 1996 has been derived from the Consolidated Financial Statements and notes
thereto contained in the NFC 1996 10-K and in the NFC April 1997 10-Q, which
accompany this Prospectus as Appendix A and Appendix B, respectively. Such
information is qualified in its entirety by, and should be read in conjunction
with the Consolidated Financial Statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in the NFC 1996 10-K and the NFC April 1997 10-Q.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
-------------- -----------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:(1)
Revenues.................... $115.4 $129.4 $252.8 $228.2 $210.8 $231.9 $228.3
------ ------ ------ ------ ------ ------ ------
Expenses:
Interest expense.......... 31.5 36.8 73.2 75.1 62.7 74.6 82.2
Provision for losses on
receivables.............. 1.2 2.7 9.3 2.6 2.3 1.5 3.6
Other expense, net(2)..... 45.6 48.5 89.8 91.8 90.6 106.8 96.1
------ ------ ------ ------ ------ ------ ------
Total expenses.......... 78.3 88.0 172.3 169.5 155.6 182.9 181.9
------ ------ ------ ------ ------ ------ ------
Income before taxes on
income..................... 37.1 41.4 80.5 58.7 55.2 49.0 46.4
Taxes on income............. 14.4 16.1 31.1 22.5 21.2 17.7 16.9
Cumulative effect of changes
in accounting policy, net
of income taxes(3)......... -- -- -- -- -- (8.8) --
------ ------ ------ ------ ------ ------ ------
Net income.................. 22.7 25.3 49.4 36.2 34.0 22.5 29.5
Dividends paid.............. 30.0 10.0 26.0 9.0 25.6 22.6 16.0
------ ------ ------ ------ ------ ------ ------
Net income retained..... $ (7.3) $ 15.3 $ 23.4 $ 27.2 $ 8.4 $ (0.1) $ 13.5
====== ====== ====== ====== ====== ====== ======
</TABLE>
- --------
Table continued on the following page
8
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA FOR THE COMPANY--(CONTINUED)
<TABLE>
<CAPTION>
AT APRIL 30, AT OCTOBER 31,
------------------ ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:(1)
Cash, cash equivalents
and marketable
securities............. $ 125.1 $ 131.7 $ 134.8 $ 134.7 $ 158.8 $ 159.5 $ 209.7
Finance receivables:
Retail notes and lease
financing............. 681.1 746.4 733.3 747.2 513.9 823.5 955.1
Wholesale notes........ 200.8 323.9 100.5 268.2 230.6 212.5 81.5
Accounts............... 358.2 298.6 371.4 365.9 357.7 245.1 204.3
-------- -------- -------- -------- -------- -------- --------
Total................. 1,240.1 1,368.9 1,205.2 1,381.3 1,102.2 1,281.1 1,240.9
Allowance for losses... (12.0) (10.4) (11.6) (10.4) (8.2) (10.9) (12.4)
-------- -------- -------- -------- -------- -------- --------
Finance receivables,
net.................... 1,228.1 1,358.5 1,193.6 1,370.9 1,094.0 1,270.2 1,228.5
Other assets............ 429.2 412.5 465.4 369.1 282.0 195.5 170.5
-------- -------- -------- -------- -------- -------- --------
Total assets.......... $1,782.4 $1,902.7 $1,793.8 $1,874.7 $1,534.8 $1,625.2 $1,608.7
======== ======== ======== ======== ======== ======== ========
Senior debt............. $1,112.8 $1,278.1 $1,205.8 $1,230.3 $ 991.5 $1,099.2 $1,123.1
Subordinated debt....... 100.0 100.0 100.0 100.0 100.0 100.0 94.9
Other liabilities....... 297.2 253.9 208.3 287.7 217.7 206.6 171.2
Shareowner's equity..... 272.4 270.7 279.7 256.7 225.6 219.4 219.5
-------- -------- -------- -------- -------- -------- --------
Total liabilities and
shareowner's equity.. $1,782.4 $1,902.7 $1,793.8 $1,874.7 $1,534.8 $1,625.2 $1,608.7
======== ======== ======== ======== ======== ======== ========
<CAPTION>
SIX MONTHS ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
------------------ ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN MILLIONS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:(1)
EBITDA(4)............... $ 79.4 $ 86.0 $ 169.0 $ 144.9 $ 126.6 $ 133.3 $ 135.1
Cash flow from (used in)
operations............. 17.9 (42.1) (28.5) 111.2 20.0 55.3 12.5
Cash flow from (used in)
investing activities... 0.1 (15.1) 94.8 (339.7) 107.8 (54.0) (98.0)
Cash flow from (used in)
financing activities... (21.9) 61.0 (62.5) 203.1 (133.4) (46.6) 148.7
Ratio of EBITDA to
interest expense....... 2.5x 2.3x 2.3x 1.9x 2.0x 1.8x 1.6x
Ratio of EBITDA to fixed
charges(5)............. 2.4 2.1 2.2 1.8 1.9 1.7 1.6
Ratio of earnings to
fixed charges(6)....... 2.1 2.0 2.0 1.7 1.8 1.6 1.6
Ratio of debt to equity. 4.5 5.1 4.7 5.2 4.8 5.5 5.5
Ratio of senior debt to
capital funds(7)....... 3.0 3.4 3.2 3.4 3.0 3.4 3.6
Net losses (recoveries)
as a percentage of
average gross balance
of all outstanding
receivables............ 0.04% 0.03% 0.14% (0.03)% 0.04% 0.03% 0.16%
Percentage of net income
to average shareowner's
equity................. N/A N/A 18.1% 15.0% 15.1% 10.3% 13.8%
</TABLE>
- --------
Footnotes appear on the following page
9
<PAGE>
NOTES TO SUMMARY CONSOLIDATED FINANCIAL DATA FOR THE COMPANY
(1) Certain prior year amounts have been reclassified to conform with the
presentation used in the Consolidated Financial Statements for the six
months ended April 30, 1997 included in Appendix B.
(2) Includes a contribution to the Supplemental Trust (as defined) of $3.7
million in July 1993.
(3) In the third quarter of 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 106, "Employer's Accounting for
Postretirement Benefits Other Than Pensions" ("SFAS 106") and SFAS No. 109,
"Accounting for Income Taxes" ("SFAS 109"), retroactive to November 1,
1992.
(4) EBITDA represents income from operations before the cumulative effect of
changes in accounting policy, interest expense, taxes on income and
depreciation and amortization expense. The Company believes EBITDA provides
additional information for measuring its ability to generate funds for
liquidity and capital requirements. This information is presented as a
supplement to the other data provided because it provides information which
the Company believes is useful for additional analysis. EBITDA should not
be considered in isolation or as a substitute for net income, cash flows
from operating activities and other consolidated operations or cash flow
statement data prepared in accordance with generally accepted accounting
principles or as a measure of the Company's profitability or liquidity.
(5) Calculated in accordance with the covenant regarding maintenance of
consolidated fixed charge coverage ratio contained in the Indenture. See
"Description of the Notes--Certain Covenants."
(6) The ratio of earnings to fixed charges is determined by dividing pretax
income from operations, adjusted for the cumulative effect of changes in
accounting policy, interest expense, debt expense amortization and the
portion of rental expense (25%) deemed representative of the interest
factor by the sum of interest expense, debt expense amortization and the
portion of rental expense deemed representative of the interest factor.
(7) Capital funds represent the sum of subordinated debt and shareowner's
equity.
10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA FOR NAVISTAR INTERNATIONAL CORPORATION
The following table sets forth summary consolidated financial data of
Navistar and its consolidated subsidiaries and is derived from Navistar's
consolidated financial statements and notes thereto. The summary financial data
set forth below is qualified in its entirety by, and should be read in
conjunction with, the Consolidated Financial Statements and notes thereto
included in Navistar's Annual Report to shareowners for the fiscal year ended
October 31, 1996 (the "Navistar 1996 Annual Report") and in Navistar's
Quarterly Report on Form 10-Q for the six months ended April 30, 1997 (the
"Navistar April 1997 10-Q").
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
-------------- --------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:(1)
Sales and revenues:
Sales of manufactured
products.............. $2,733 $2,785 $5,508 $6,125 $5,153 $4,510 $3,685
Finance and insurance
revenue(2)............ 88 101 197 167 152 181 177
Other income........... 26 26 49 50 32 30 35
------ ------ ------ ------ ------ ------ ------
Total sales and
revenues............. $2,847 $2,912 $5,754 $6,342 $5,337 $4,721 $3,897
====== ====== ====== ====== ====== ====== ======
Income (loss) before
income taxes(3)....... $ 73 $ 77 $ 105 $ 262 $ 158 $ (441) $ (145)
Income tax expense
(benefit)............. 28 29 40 98 56 (168) 2
------ ------ ------ ------ ------ ------ ------
Income (loss) of
continuing operations. 45 48 65 164 102 (273) (147)
Loss of discontinued
operations(4)......... -- -- -- -- (20) -- (65)
Cumulative effect of
changes in accounting
policy(5)............. -- -- -- -- -- (228) --
------ ------ ------ ------ ------ ------ ------
Net income (loss)...... $ 45 $ 48 $ 65 $ 164 $ 82 $ (501) $ (212)
====== ====== ====== ====== ====== ====== ======
<CAPTION>
AT APRIL 30, AT OCTOBER 31,
-------------- --------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets:
Manufacturing
operations........... $3,801 $3,840 $3,815 $4,018 $3,724 $3,645 $2,208
Financial services
operations........... 1,829 1,952 1,843 1,922 1,582 1,672 1,659
Eliminations.......... (426) (349) (332) (374) (259) (257) (240)
------ ------ ------ ------ ------ ------ ------
Total assets........ $5,204 $5,443 $5,326 $5,566 $5,047 $5,060 $3,627
====== ====== ====== ====== ====== ====== ======
Debt:
Manufacturing
operations........... $ 109 $ 125 $ 115 $ 127 $ 127 $ 175 $ 187
Financial services
operations........... 1,213 1,379 1,305 1,330 1,091 1,199 1,218
------ ------ ------ ------ ------ ------ ------
Total debt.......... $1,322 $1,504 $1,420 $1,457 $1,218 $1,374 $1,405
====== ====== ====== ====== ====== ====== ======
Shareowners' equity..... $ 959 $ 898 $ 916 $ 870 $ 817 $ 775 $ 338
====== ====== ====== ====== ====== ====== ======
</TABLE>
- --------
Table continued on the following page
11
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA FOR NAVISTAR INTERNATIONAL CORPORATION--
(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
------------- --------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------- ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
United States and Canadian
retail deliveries of
trucks and school buses.. 42,600 43,900 94,000 101,700 91,600 79,800 69,300
United States and Canadian
market share(6).......... 26.8% 26.2% 27.5% 26.7% 27.0% 27.6% 28.4%
Unit shipments:
Trucks................... 46,000 50,000 95,200 112,200 95,000 87,200 73,200
OEM engines.............. 89,300 78,500 163,200 154,200 130,600 118,200 97,400
Total manufacturing
operations debt as a
percent of total
manufacturing
capitalization........... 10.2% 12.2% 11.2% 12.7% 13.4% 18.4% 35.6%
</TABLE>
- --------
(1) Certain prior year amounts have been reclassified to conform with the
presentation used in the Consolidated Financial Statements for the six
months ended April 30, 1997 included in the Navistar April 1997 10-Q.
(2) Includes revenues of the Company as well as Navistar's other financial
services subsidiaries.
(3) Navistar contributed approximately 25.6 million shares of its Class B
common stock, valued at $513 million, to the Supplemental Trust (as
defined) in 1993.
(4) The 1994 loss of discontinued operations resulted from a $20 million charge
for environmental liabilities at production facilities of two formerly
owned businesses, Wisconsin Steel and Solar Turbine, Inc. The 1992 loss of
discontinued operations resulted from a $65 million charge for the
settlement of Navistar's obligation with the Pension Benefit Guaranty
Corporation.
(5) In the third quarter of 1993, Navistar adopted SFAS 106 and SFAS 109,
retroactive to November 1, 1992.
(6) Based on retail deliveries of medium duty trucks (Classes 5, 6 and 7),
including school buses, and heavy duty trucks (Class 8) in the United
States and Canada by Transportation and its dealers, compared to the
industry total in the United States and Canada of retail deliveries.
12
<PAGE>
RISK FACTORS
Holders of the Old Notes should carefully read this entire Prospectus,
including Appendices A and B hereto, the Navistar 1996 Annual Report, the
Navistar April 1997 10-Q and any other documents incorporated by reference
herein. Ownership of the Exchange Notes involves certain risks. The following
factors should be considered carefully in evaluating the Company and its
business before tendering the Old Notes in exchange for Exchange Notes. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. Actual results could differ materially from those discussed
herein. Factors that could cause or contribute to such differences include,
but are not limited to, those identified below as well as those discussed
elsewhere in this Prospectus.
DEPENDENCE ON TRANSPORTATION'S BUSINESS; RELATIONSHIP WITH TRANSPORTATION
As a wholly owned finance subsidiary of Transportation, the Company's level
of financing activity is substantially dependent on the volume of sales of
both Transportation and the Transportation Dealers. Any material reduction in
the amount of these sales could adversely affect the Company. In addition, the
financial condition of the Transportation Dealers is to varying degrees
dependent on the financial condition of Transportation. Any material change in
Transportation's financial condition could adversely affect certain
Transportation Dealers, which in turn could have an adverse effect on the
Company.
The highly competitive medium and heavy duty truck market in which
Transportation operates is subject to considerable volatility. It moves in
response to cycles in the overall business environment and is particularly
sensitive to the industrial sector, which generates a significant portion of
the freight tonnage hauled. Truck demand also depends on general economic
conditions, interest rates and fuel costs. Governmental regulation, especially
in the environmental and safety areas, has impacted and will continue to
impact trucking operations and efficiency and equipment specifications.
Transportation competes with domestic companies and well-capitalized foreign
controlled domestic manufacturers. The intensity of this competition, which is
expected to continue, results in price discounting and margin pressures
throughout the industry and adversely affects Transportation's ability to
increase unit prices. Many of Transportation's competitors have greater
financial resources than Transportation, which may place Transportation at a
competitive disadvantage in responding to substantial industry changes in such
factors as changes in governmental regulations that require major additional
capital expenditures. In addition, certain of Transportation's competitors may
have lower overall labor costs.
Pursuant to an agreement between Transportation and the Company,
Transportation currently pays to the Company an acquisition fee on new
equipment notes purchased from Transportation, which will be discontinued
after fiscal 1998. Pursuant to such agreement, Transportation paid the Company
$5.7 million in fiscal 1996. The maximum fee payable under such agreement will
be $3.7 million in fiscal 1997 and $1.7 million in fiscal 1998. If such fee
had not been received by the Company in fiscal 1996, its ratio of EBITDA to
interest expense would have declined from 2.3 to 2.2. During the last five
fiscal years, the largest such fee paid by Transportation to the Company was
$9.7 million.
The Company's and Transportation's credit ratings have historically been
linked because of their parent-subsidiary status, the importance to
Transportation of the Company's financing support for the sale of
Transportation's products and the significant portion of the Company's
business that relates to the financing of Transportation's sales. Currently,
Transportation's and the Company's credit ratings are below investment grade
and the Company cannot predict when or whether the ratings for
Transportation's or the Company's debt obligations will improve. See
"Relationship with Navistar International Transportation Corp."
Neither Navistar nor Transportation has any obligation with respect to the
Notes.
LIQUIDITY AND FUNDING OPERATIONS
The Company has significant liquidity requirements. The Company has
traditionally obtained the funds to provide financing to Transportation
Dealers and retail customers from sales of receivables, commercial paper,
13
<PAGE>
short- and long-term bank borrowings, medium- and long-term debt issues and
equity capital. In March 1995, ratings on the Company's debt were upgraded by
Moody's Investors Service, Inc. ("Moody's"). Moody's raised its ratings for
the Company's debt from Ba3 to Ba2 for senior debt and from B2 to B1 for
subordinated debt. In March 1995, Duff & Phelps confirmed its debt ratings of
BB+ for senior debt and BB for subordinated debt. In October 1993, ratings on
the Company's debt were reviewed by Standard and Poor's Corporation ("Standard
and Poor's"). Standard and Poor's raised its ratings for the Company's debt
from B- to BB for senior debt and from CCC to B+ for subordinated debt. The
Company's commercial paper is rated "not prime" by Moody's. These debt ratings
have made bank borrowings and sales of receivables the Company's most
economical sources of financing. Effective March 29, 1996, the Company amended
its revolving credit agreement with a group of banks (the "Credit Agreement")
extending its maturity date to March 2001 and increasing the commitment
thereunder to $925 million. Also effective March 29, 1996, the Company amended
and restated its asset backed commercial paper program (the "ABCP Program"),
to increase the amount available thereunder to $400 million and to extend the
termination date of the liquidity facility established thereunder to March
2001. At April 30, 1997, unused commitments under the Credit Agreement and the
ABCP Program were $440 million, of which $145 million provided funding backup
for the outstanding short-term debt, and the remaining $295 million, when
combined with unrestricted cash and cash equivalents, made $298 million
available to fund the Company's general operations. The terms and conditions
of the Credit Agreement, the Indenture and the agreements pursuant to which
certain of the Company's other indebtedness was issued impose restrictions
that affect, among other things, the ability of the Company and its
subsidiaries to incur debt, create liens, make certain investments and engage
in business activities unrelated to those in which the Company currently is
engaged. The terms of the Company's indebtedness also require the Company to
meet specified financial tests. See "Description of Other Financing
Arrangements."
The Company expects to incur additional short- and long-term debt in the
future. The nature and amounts of such indebtedness can be expected to vary
from time to time as a result of the volume of the Company's business, market
conditions and other factors. In addition, the Company expects to continue to
sell and securitize receivables. The Company has filed shelf registration
statements providing for the issuance from time to time of asset-backed
securities relating to retail notes and, as of April 30, 1997, had
approximately $2.0 billion of remaining shelf registration available ($1.5
billion as of May 7, 1997 as a result of the issuance of $500 million of
asset-backed securities on such date).
The Company believes that cash generated by its operations, borrowings under
the Credit Agreement and the ABCP Program and funds generated by sales,
securitizations of receivables and the placement of term debt are sufficient
to satisfy its cash needs. However, if cash provided by operations, bank
borrowings, continued sales of receivables and the placement of term debt do
not provide the necessary liquidity, the Company would be required to restrict
its financing of Transportation's products and Transportation Dealers. A
significant reduction in such financing support could have a material adverse
effect on both the Company and Transportation. In addition, an impairment of
the Company's ability to sell or securitize its receivables, a reduction in
Transportation's sales, and a variety of other factors could affect the
Company's ability to meet its debt obligations.
SUBORDINATION OF THE NOTES
The payment of the principal of, premium, if any, and interest on the Notes
will be subordinate in right of payment to the prior payment in full of all
Senior Indebtedness of the Company, whether outstanding at the date of the
Indenture or thereafter incurred. In the event of a default in the payment or
prepayment of the principal of, premium, if any, or interest on any Senior
Indebtedness of the Company, the Company is prohibited from making any payment
with respect to the principal of, premium, if any, or interest on the Notes
unless and until such default has been cured or waived or all Senior
Indebtedness of the Company has been discharged or paid in full. The Notes are
also effectively subordinated to all existing and future liabilities
(including liabilities owed to trade creditors) of the subsidiaries of the
Company to the extent of the assets of each subsidiary of the Company.
In addition, upon any payment or distribution of the Company's assets to its
creditors upon any dissolution, winding-up, liquidation, reorganization,
bankruptcy, insolvency, receivership or other proceedings relating to the
14
<PAGE>
Company, whether voluntary or involuntary, the holders of Senior Indebtedness
of the Company will be entitled to receive payment in full of all amounts due
thereon before the holders of the Notes will be entitled to receive any
payment with respect to the principal of, premium, if any, or interest on the
Notes. By reason of such subordination, in the event of the insolvency of the
Company, holders of the Notes may receive less, ratably, than holders of
Senior Indebtedness of the Company and other creditors of the Company, or may
recover nothing. See "Description of the Notes--Subordination and Ranking."
The Senior Indebtedness of the Company is secured by a perfected first
priority security interest in substantially all of the assets of the Company,
including a pledge of all of the stock of each subsidiary of the Company. If a
default occurs with respect to Senior Indebtedness of the Company, the holders
thereof will have the right to exercise the remedies available to a secured
creditor under applicable law and pursuant to the Senior Indebtedness of the
Company. The Senior Indebtedness of the Company will have a prior and superior
claim to the assets of the Company in the event of the disposition of such
assets (which will be at the sole discretion and control of the holders of
Senior Indebtedness of the Company). However, as a result of the restrictive
covenants contained in the Indenture and pursuant to the Credit Agreement,
holders of the Notes will initially be secured, subject to the subordination
provisions contained in the Indenture, equally and ratably with the holders of
the Senior Indebtedness by a lien on substantially all of the assets of the
Company and the proceeds thereof. Such lien and security interest is subject
to release without prior notice to, or consent of, the holders of the Notes.
Giving effect to the sale of the Old Notes and the application of the
estimated net proceeds therefrom as set forth under "Use of Proceeds," as of
April 30, 1997, the Company would have outstanding $1,215.3 million of
Indebtedness, all of which would rank senior to the Notes, except for the 1998
Notes which would be pari passu with the Notes, and no indebtedness which is
subordinate to the Notes.
POTENTIAL INFLUENCE OF SUPPLEMENTAL TRUST
In July 1993, Navistar restructured its postretirement health care and life
insurance benefits pursuant to a settlement agreement that resolved litigation
between Navistar and a class of its employees, retirees and collective
bargaining organizations, including the UAW, as lead class plaintiff (the
"Settlement Agreement"). The Settlement Agreement provides for, among other
things, that Navistar establish a Supplemental Benefit Trust (the
"Supplemental Trust") for the purpose of funding certain retiree and health
benefits under a Supplemental Benefit Program. The Supplemental Trust
currently holds approximately 24.3 million shares of Navistar's non-voting
Class B common stock. On June 30, 1998, the non-voting Class B common stock
held by the Supplemental Trust will convert into voting Common Stock, which is
the same class of stock held by Navistar's other shareowners. Based upon the
49.1 million shares of Common Stock outstanding as of March 10, 1997, the
Supplemental Trust would hold approximately 33% of Navistar's voting stock
upon conversion. During the time that the Supplemental Trust owns such shares
following such conversion, it is likely that the Supplemental Trust will be
able to have a significant influence over those matters submitted to a vote of
Navistar's shareowners, including the election of directors and approval of
certain significant corporate transactions. The first shareowners' meeting at
which the Supplemental Trust could hold such an ownership percentage of voting
stock is currently scheduled for March 1999. A committee of five members acts
as administrator of the Supplemental Benefit Program (the "Committee") and as
such has the power to direct the voting of the common stock held by the
Supplemental Trust. Two of the members of the Committee are designees of the
UAW, one is a retired management employee and two are from Navistar and are
not affiliated with the UAW. The Settlement Agreement provided for the
addition of two seats to Navistar's Board of Directors (currently comprised of
13 persons), which are elected by the Committee on behalf of the Supplemental
Trust.
LABOR RELATIONS
At October 31, 1996, approximately 66% of Transportation's 14,187 employees
were covered under various collective bargaining agreements. The UAW
represents 6,902 of Transportation's active employees in the United States
pursuant to a collective bargaining agreement that is scheduled to expire on
October 1, 1998. Transportation intends to seek modifications to improve
productivity under the collective bargaining agreement
15
<PAGE>
to be negotiated with the UAW. The CAW represents 1,476 of Transportation's
active employees in Canada pursuant to a collective bargaining agreement that
is scheduled to expire on October 24, 1999. Any prolonged work stoppage or
strike at any one of Transportation's principal manufacturing facilities could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Relationship with Navistar International
Transportation Corp.--Business of Transportation--Labor Relations."
PENSION AND POSTRETIREMENT HEALTH CARE OBLIGATIONS OF TRANSPORTATION
Transportation has significant underfunded pension obligations. At October
31, 1996, the net pension liability of Transportation's underfunded pension
plans was approximately $607 million, compared to $587 million at October 31,
1995. Transportation's long-term objective is to fund its entire accumulated
benefit obligation over the next 7 to 10 years with funds that are principally
generated by operations.
In the event Transportation's pension plans were terminated for any reason
and plan assets were insufficient to meet guaranteed liabilities, the Pension
Benefit Guaranty Corporation ("PBGC") may have a right to take over these
plans as their administrator and trustee. In this event, the actual present
value of guaranteed pension liabilities may be determined in a manner
different from that used by Transportation to determine its unfunded vested
pension liability. Subject to certain limitations, the PBGC would have a claim
against Transportation (and potentially the Company) to the extent that plan
assets were not sufficient to meet the actuarial present value of guaranteed
liabilities, which claim against the Company may by law, under certain
circumstances, be senior to that of the Notes.
In addition to providing pension benefits, Transportation provides health
care and life insurance for a majority of its retired employees and their
spouses and certain dependents. In 1993, a trust was established to partially
fund this postretirement health care liability. This trust is funded by
contributions from Transportation and the funds in the trust are invested
primarily in equity securities. Transportation is required to make a
contribution of $200 million to the trust on or prior to June 30, 1998.
Transportation believes that it will be able to make such contribution from
its cash on hand.
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE NOTES
The Old Notes were issued to, and the Company believes are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange
Offer, there has not been any public market for the Old Notes. The Old Notes
have not been registered under the Securities Act and will be subject to
restrictions on transferability to the extent that they are not exchanged for
Exchange Notes by holders who are entitled to participate in this Exchange
Offer. The holders of Old Notes (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) who are not eligible to participate in the Exchange Offer are entitled to
certain registration rights, and the Company is required to file a Shelf
Registration Statement with respect to such Old Notes. The Exchange Notes will
constitute a new issue of securities with no established trading market. The
Company does not intend to list the Exchange Notes on any national securities
exchange or seek the admission thereof to trading in the National Association
of Securities Dealers Automated Quotation System. The Initial Purchasers have
advised the Company that they currently intend to make a market in the
Exchange Notes, but they are not obligated to do so and may discontinue such
market making at any time. In addition, such market making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act and
may be limited during the Exchange Offer and the pendency of the Shelf
Registration Statement. Accordingly, no assurance can be given that an active
public or other market will develop for the Exchange Notes or as to the
liquidity of the trading market for the Exchange Notes. If a trading market
does not develop or is not maintained, holders of the Exchange Notes may
experience difficulty in reselling the Exchange Notes or may be unable to sell
them at all. If a market for the Exchange Notes develops, any such market may
be discontinued at any time.
If a public trading market develops for the Exchange Notes, future trading
prices of such securities will depend on many factors including, among other
things, prevailing interest rates, the Company's results of
16
<PAGE>
operations and market for similar securities. Depending on prevailing interest
rates, the market for similar securities and other factors, including the
financial condition of the Company, the Exchange Notes may trade at a discount
from their principal amount.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such
Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. The Company is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for exchange. Old Notes that are not tendered or are tendered but not
accepted will, following the consummation of the Exchange Offer, continue to
be subject to the existing restrictions upon transfer thereof, and, upon
consummation of the Exchange Offer certain registration rights with respect to
the Notes under the Registration Rights Agreement will terminate. In addition,
any holder of Old Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities, and if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. See "Plan
of Distribution." To the extent that Old Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered and tendered but
unaccepted Old Notes could be adversely affected. See "The Exchange Offer."
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights
Agreement. The Company will not receive any cash proceeds from the issuance of
the Exchange Notes offered hereby. In consideration for issuing the Exchange
Notes contemplated in this Prospectus, the Company will receive Old Notes in
like principal amount, the form and terms of which are the same as the form
and terms of the Exchange Notes (which replace the Old Notes), except as
otherwise described herein.
The net proceeds from the sale of the Old Notes was approximately $97.5
million after deduction of the underwriting compensation and certain other
expenses. The Company used the net proceeds to repurchase $6.0 million of its
outstanding 1998 Notes and to reduce outstanding indebtedness under the Credit
Agreement. The 1998 Notes mature on November 15, 1998 and bear interest at 8
7/8% per annum. The Credit Agreement matures in March 2001 and bears interest
at floating rates. See "Description of Other Financing Arrangements."
Affiliates of each of the Initial Purchasers are lenders under the Credit
Agreement and in such capacity received a portion of the net proceeds from the
sale of the Old Notes.
17
<PAGE>
CAPITALIZATION
The following table sets forth the historical capitalization of the Company
as of April 30, 1997 (including short-term indebtedness) and as adjusted to
give effect to the sale of the Old Notes and the application of the estimated
net proceeds therefrom to repurchase $6 million of its outstanding 1998 Notes
and to repay approximately $91.5 million in borrowings under the Credit
Agreement. After giving effect to the Initial Offering, the Company's cash
interest payments for fiscal 1996 would have increased by approximately $3
million. See "Use of Proceeds." The Old Notes surrendered in exchange for
Exchange Notes will be retired and canceled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any increase or
decrease in the indebtedness of the Company. As such, no effect has been given
to the Exchange Offer in the following capitalization table.
<TABLE>
<CAPTION>
AT APRIL 30, 1997
----------------------------
ACTUAL AS ADJUSTED
------------ --------------
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
SENIOR DEBT:
Credit Agreement(1)............................... $ 500.0 $ 408.5
Capital Lease Obligations......................... 68.0 68.0
ABCP Program(1)................................... 399.8 399.8
Short-term debt................................... 145.0 145.0
------------ ------------
Total senior debt............................... 1,112.8 1,021.3
SUBORDINATED DEBT:
8 7/8% Senior Subordinated Notes due 1998......... 100.0 94.0
Notes offered hereby.............................. -- 100.0
------------ ------------
Total debt...................................... 1,212.8 1,215.3
Shareowner's equity(2)............................ 272.4 272.4
------------ ------------
Total capitalization............................ $ 1,485.2 $ 1,487.7
============ ============
Ratio of debt to equity........................... 4.5x 4.5x
Ratio of senior debt to capital funds(3).......... 3.0 2.7
</TABLE>
- --------
(1) At April 30, 1997, unused commitments under the Credit Agreement and the
ABCP Program were $440 million, of which $145 million provided funding
backup for the outstanding short-term debt and the remaining $295 million,
when combined with unrestricted cash and cash equivalents, made $298
million available to fund the Company's general operations.
(2) At May 31, 1997, shareowner's equity was $280 million.
(3) Capital funds represent the sum of subordinated debt and shareowner's
equity.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA FOR THE COMPANY
The following selected consolidated financial data for the five-year period
ended October 31, 1996 was derived from the Company's consolidated financial
statements and notes thereto, which have been audited by Deloitte & Touche
LLP, independent auditors. The selected consolidated financial data for the
Company for the six months ended April 30, 1997 and 1996 was derived from
unaudited consolidated financial statements, which financial statements, in
the opinion of the Company, reflect all adjustments necessary for a fair
presentation of such information. Results for the interim periods are not
necessarily indicative of the results that might be expected for any other
interim period or for an entire year. This information should be read in
conjunction with the Consolidated Financial Statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the NFC 1996 10-K and the NFC April 1997 10-Q, which
accompany this Prospectus as Appendix A and Appendix B, respectively.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
-------------- ------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ -------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:(1)
Revenues:
Retail notes and lease
financing............... $ 51.9 $ 48.1 $ 97.7 $ 73.3 $ 71.4 $101.9 $ 100.7
Wholesale notes.......... 18.5 31.4 56.6 54.1 39.2 32.0 28.3
Accounts................. 14.3 12.8 26.6 29.2 22.2 17.5 14.8
Servicing fee income..... 10.1 10.6 20.5 18.3 17.3 10.6 8.6
Insurance premiums
earned.................. 16.5 21.1 42.0 44.6 51.1 57.4 59.9
Marketable securities.... 4.1 5.4 9.4 8.7 9.6 12.5 16.0
------ ------ ------ ------ ------ ------ -------
Total.................. 115.4 129.4 252.8 228.2 210.8 231.9 228.3
Expenses:
Cost of borrowing:
Interest expense....... 31.5 36.8 73.2 75.1 62.7 74.6 82.2
Other.................. 3.0 5.3 8.4 9.1 7.1 4.7 4.5
------ ------ ------ ------ ------ ------ -------
Total................ 34.5 42.1 81.6 84.2 69.8 79.3 86.7
Supplemental Trust
contribution............ -- -- -- -- -- 3.7 --
Credit, collection and
administrative.......... 14.5 13.8 28.2 27.9 25.9 26.1 26.8
Provision for losses on
receivables............. 1.2 2.7 9.3 2.6 2.3 1.5 3.6
Insurance claims and
underwriting............ 17.6 24.5 44.4 46.7 54.0 65.2 61.7
Other expense, net....... 10.5 4.9 8.8 8.1 3.6 7.1 3.1
------ ------ ------ ------ ------ ------ -------
Total.................. 78.3 88.0 172.3 169.5 155.6 182.9 181.9
------ ------ ------ ------ ------ ------ -------
Income before taxes on
income.................... 37.1 41.4 80.5 58.7 55.2 49.0 46.4
Taxes on income............ 14.4 16.1 31.1 22.5 21.2 17.7 16.9
Cumulative effect of
changes in accounting
policy, net of income
taxes(2).................. -- -- -- -- -- (8.8) --
------ ------ ------ ------ ------ ------ -------
Net income................. 22.7 25.3 49.4 36.2 34.0 22.5 29.5
Dividends paid............. 30.0 10.0 26.0 9.0 25.6 22.6 16.0
------ ------ ------ ------ ------ ------ -------
Net income retained...... $ (7.3) $ 15.3 $ 23.4 $ 27.2 $ 8.4 $ (0.1) $ 13.5
====== ====== ====== ====== ====== ====== =======
</TABLE>
- --------
Table continued on the following page
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA FOR THE COMPANY--(CONTINUED)
<TABLE>
<CAPTION>
AT APRIL 30, AT OCTOBER 31,
------------------ ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:(1)
Cash, cash equivalents
and marketable
securities............. $ 125.1 $ 131.7 $ 134.8 $ 134.7 $ 158.8 $ 159.5 $ 209.7
Finance receivables:
Retail notes and lease
financing............ 681.1 746.4 733.3 747.2 513.9 823.5 955.1
Wholesale notes....... 200.8 323.9 100.5 268.2 230.6 212.5 81.5
Accounts.............. 358.2 298.6 371.4 365.9 357.7 245.1 204.3
-------- -------- -------- -------- -------- -------- --------
Total............... 1,240.1 1,368.9 1,205.2 1,381.3 1,102.2 1,281.1 1,240.9
Allowance for losses.. (12.0) (10.4) (11.6) (10.4) (8.2) (10.9) (12.4)
-------- -------- -------- -------- -------- -------- --------
Finance receivables,
net.................... 1,228.1 1,358.5 1,193.6 1,370.9 1,094.0 1,270.2 1,228.5
Other assets............ 429.2 412.5 465.4 369.1 282.0 195.5 170.5
-------- -------- -------- -------- -------- -------- --------
Total assets........ $1,782.4 $1,902.7 $1,793.8 $1,874.7 $1,534.8 $1,625.2 $1,608.7
======== ======== ======== ======== ======== ======== ========
Senior debt............. $1,112.8 $1,278.1 $1,205.8 $1,230.3 $ 991.5 $1,099.2 $1,123.1
Subordinated debt....... 100.0 100.0 100.0 100.0 100.0 100.0 94.9
Other liabilities....... 297.2 253.9 208.3 287.7 217.7 206.6 171.2
Shareowner's equity..... 272.4 270.7 279.7 256.7 225.6 219.4 219.5
-------- -------- -------- -------- -------- -------- --------
Total liabilities
and shareowner's
equity............. $1,782.4 $1,902.7 $1,793.8 $1,874.7 $1,534.8 $1,625.2 $1,608.7
======== ======== ======== ======== ======== ======== ========
</TABLE>
- --------
Table continued on the following page
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA FOR THE COMPANY--(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
------------------ ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- --------- --------- --------- -------- --------
(UNAUDITED)
(IN MILLIONS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:(1)
EBITDA(3)............... $ 79.4 $ 86.0 $ 169.0 $ 144.9 $ 126.6 $ 133.3 $ 135.1
Cash flow from (used in)
operations............. 17.9 (42.1) (28.5) 111.2 20.0 55.3 12.5
Cash flow from (used in)
investing activities... 0.1 (15.1) 94.8 (339.7) 107.8 (54.0) (98.0)
Cash flow from (used in)
financing activities... (21.9) 61.0 (62.5) 203.1 (133.4) (46.6) 148.7
Ratio of EBITDA to
interest expense....... 2.5x 2.3x 2.3x 1.9x 2.0x 1.8x 1.6x
Ratio of EBITDA to fixed
charges(4)............. 2.4 2.1 2.2 1.8 1.9 1.7 1.6
Ratio of earnings to
fixed charges(5)....... 2.1 2.0 2.0 1.7 1.8 1.6 1.6
Ratio of debt to equity. 4.5 5.1 4.7 5.2 4.8 5.5 5.5
Ratio of senior debt to
capital funds(6)....... 3.0 3.4 3.2 3.4 3.0 3.4 3.6
Net losses (recoveries)
as a percentage of
average gross balance
of all outstanding
receivables............ 0.04% 0.03% 0.14% (0.03)% 0.04% 0.03% 0.16%
<CAPTION>
AT APRIL 30, AT OCTOBER 31,
------------------ ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- --------- --------- --------- -------- --------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
PORTFOLIO ANALYSIS:(7)
Serviced retail notes
and lease financing.... $2,333.0 $2,340.8 $ 2,383.2 $ 2,169.1 $ 1,743.2 $1,524.8 $1,387.9
Serviced wholesale
notes.................. 670.2 909.7 685.9 854.5 577.1 559.0 402.3
Accounts................ 358.2 298.6 371.4 365.9 357.7 245.1 204.3
-------- -------- --------- --------- --------- -------- --------
Total serviced
receivables............ 3,361.4 3,549.1 3,440.5 3,389.5 2,678.0 2,328.9 1,994.5
Less:
Sold retail notes....... (1,533.3) (1,479.1) (1,522.2) (1,302.6) (1,152.1) (600.3) (290.3)
Sold wholesale notes.... (400.0) (500.0) (500.0) (500.0) (300.0) (300.0) (274.3)
Subordinated interests
in trusts.............. (70.3) (86.4) (86.1) (86.7) (49.9) (54.4) (62.3)
Unearned finance
charges................ (117.7) (114.7) (127.0) (118.9) (73.8) (93.1) (126.7)
-------- -------- --------- --------- --------- -------- --------
Total finance
receivables............ $1,240.1 $1,368.9 $ 1,205.2 $ 1,381.3 $ 1,102.2 $1,281.1 $1,240.9
======== ======== ========= ========= ========= ======== ========
</TABLE>
- -------
(1) Certain prior year amounts have been reclassified to conform with the
presentation used in the Consolidated Financial Statements for the six
months ended April 30, 1997 included in Appendix B.
(2) In the third quarter of 1993, the Company adopted SFAS 106 and SFAS 109,
retroactive to November 1, 1992.
(3) EBITDA represents income from operations before the cumulative effect of
changes in accounting policy, interest expense, taxes on income and
depreciation and amortization expense. The Company believes EBITDA
provides additional information for measuring its ability to generate
funds for liquidity and capital requirements. This information is
presented as a supplement to the other data provided because it provides
information which the Company believes is useful for additional analysis.
EBITDA should not be considered in isolation or as a substitute for net
income, cash flows from operating activities and other consolidated
operations or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of the Company's
profitability or liquidity.
(4) Calculated in accordance with the covenant regarding maintenance of
consolidated fixed charge coverage ratio contained in the Indenture. See
"Description of the Notes--Certain Covenants."
(5) The ratio of earnings to fixed charges is determined by dividing pretax
income from operations, adjusted for the cumulative effect of changes in
accounting policy, interest expense, debt expense amortization and the
portion of rental expense (25%) deemed representative of the interest
factor by the sum of interest expense, debt expense amortization and the
portion of rental expense deemed representative of the interest factor.
(6) Capital funds represent the sum of subordinated debt and shareowner's
equity.
(7) Unless otherwise indicated, information is presented on the basis of gross
balances, which for retail notes include unearned finance charges.
Information presented regarding serviced receivables includes receivables
owned by the Company and receivables which the Company has sold but
continues to service.
21
<PAGE>
INDUSTRY SEGMENT DATA FOR THE COMPANY
<TABLE>
<CAPTION>
SIX MONTHS
ENDED APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
----------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Finance operations...... $ 94.9 $ 102.9 $ 201.6 $ 175.1 $ 150.6 $ 164.2 $ 155.5
Insurance operations.... 20.5 26.5 51.2 53.1 60.2 69.7 72.8
-------- -------- -------- -------- -------- -------- --------
Total revenues........ $ 115.4 $ 129.4 $ 252.8 $ 228.2 $ 210.8 $ 231.9 $ 228.3
======== ======== ======== ======== ======== ======== ========
INCOME BEFORE TAXES:
Finance operations...... $ 34.4 $ 39.7 $ 74.2 $ 53.1 $ 49.9 $ 47.9 $ 36.6
Insurance operations.... 2.7 1.7 6.3 5.6 5.3 1.1 9.8
-------- -------- -------- -------- -------- -------- --------
Total income before
taxes................ $ 37.1 $ 41.4 $ 80.5 $ 58.7 $ 55.2 $ 49.0 $ 46.4
======== ======== ======== ======== ======== ======== ========
<CAPTION>
AT APRIL 30, AT OCTOBER 31,
----------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED) (IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Finance operations...... $1,620.4 $1,737.1 $1,626.9 $1,701.9 $1,354.1 $1,473.5 $1,459.2
Insurance operations.... 162.0 165.6 166.9 172.8 180.7 151.7 149.5
-------- -------- -------- -------- -------- -------- --------
Total assets.......... $1,782.4 $1,902.7 $1,793.8 $1,874.7 $1.534.8 $1,625.2 $1,608.7
======== ======== ======== ======== ======== ======== ========
</TABLE>
22
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
FOR NAVISTAR INTERNATIONAL CORPORATION
The following selected consolidated financial data for Navistar for the
five-year period ended October 31, 1996 was derived from Navistar's
consolidated financial statements and notes thereto, which have been audited
by Deloitte & Touche LLP, independent auditors. The selected consolidated
financial data for Navistar for the six months ended April 30, 1997 and 1996
was derived from unaudited consolidated financial statements, which financial
statements, in the opinion of Navistar, reflect all adjustments necessary for
a fair presentation of such information. Results for the interim periods are
not necessarily indicative of the results that might be expected for any other
interim period or for an entire year. The selected financial data set forth
below should be read in conjunction with the Consolidated Financial Statements
and notes thereto included in the Navistar 1996 Annual Report and the Navistar
April 1997 10-Q.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
-------------- -------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------- ------- ------- ------- -------
(UNAUDITED)
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA:(1)
Sales and revenues:
Sales of manufactured
products............... $2,733 $2,785 $ 5,508 $ 6,125 $ 5,153 $ 4,510 $ 3,685
Finance and insurance
revenue(2)............. 88 101 197 167 152 181 177
Other income............ 26 26 49 50 32 30 35
------ ------ ------- ------- ------- ------- -------
Total sales and
revenues............. $2,847 $2,912 $ 5,754 $ 6,342 $ 5,337 $ 4,721 $ 3,897
====== ====== ======= ======= ======= ======= =======
Income (loss) before
income taxes(3)........ $ 73 $ 77 $ 105 $ 262 $ 158 $ (441) $ (145)
Income tax expense
(benefit).............. 28 29 40 98 56 (168) 2
------ ------ ------- ------- ------- ------- -------
Income (loss) of
continuing operations.. 45 48 65 164 102 (273) (147)
Loss of discontinued
operations(4).......... -- -- -- -- (20) -- (65)
Cumulative effect of
changes in accounting
policy(5).............. -- -- -- -- -- (228) --
------ ------ ------- ------- ------- ------- -------
Net income (loss)....... $ 45 $ 48 $ 65 $ 164 $ 82 $ (501) $ (212)
====== ====== ======= ======= ======= ======= =======
SELECTED BALANCE SHEET
DATA:
Assets:
Manufacturing
operations........... $3,801 $3,840 $ 3,815 $ 4,018 $ 3,724 $ 3,645 $ 2,208
Financial services
operations........... 1,829 1,952 1,843 1,922 1,582 1,672 1,659
Eliminations.......... (426) (349) (332) (374) (259) (257) (240)
------ ------ ------- ------- ------- ------- -------
Total assets........ $5,204 $5,443 $ 5,326 $ 5,566 $ 5,047 $ 5,060 $ 3,627
====== ====== ======= ======= ======= ======= =======
Debt:
Manufacturing
operations........... $ 109 $ 125 $ 115 $ 127 $ 127 $ 175 $ 187
Financial services
operations........... 1,213 1,379 1,305 1,370 1,091 1,199 1,218
------ ------ ------- ------- ------- ------- -------
Total debt.......... $1,322 $1,504 $ 1,420 $ 1,457 $ 1,218 $ 1,374 $ 1,405
====== ====== ======= ======= ======= ======= =======
Shareowners' equity..... $ 959 $ 898 $ 916 $ 870 $ 817 $ 775 $ 338
====== ====== ======= ======= ======= ======= =======
</TABLE>
- --------
Table continued on the following page
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
FOR NAVISTAR INTERNATIONAL CORPORATION--(CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
------------- --------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------- ------- ------- ------- ------
(UNAUDITED)
(IN MILLIONS OF DOLLARS, EXCEPT COMMON SHARE,
UNIT AND EMPLOYEE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Dividends paid, Series G
Preferred Stock.......... $ 14 $ 14 $ 29 $ 29 $ 58 $ -- $ 29
Capital expenditures...... 58 55 117 139 87 110 55
Engineering and research
expense.................. 62 64 129 113 97 94 92
Depreciation and
amortization............. 60 55 101 81 72 75 77
Average number of Common,
Class B Common and
dilutive common
equivalent shares
outstanding
(in millions)............ 73.7 73.8 73.8 74.3 74.6 34.9 25.3
Number of employees:
Worldwide................ 15,117 15,122 14,187 16,079 14,910 13,612 13,945
United States............ 12,702 13,309 12,445 13,852 12,792 11,934 12,390
OPERATING DATA:
United States and Canadian
retail deliveries of
trucks and school buses.. 42,600 43,900 94,000 101,700 91,600 78,900 69,300
United States and Canadian
market share(6).......... 26.8% 26.2% 27.5% 26.7% 27.0% 27.6% 28.4%
Unit shipments:
Trucks................... 46,000 50,000 95,200 112,200 95,000 87,200 73,200
OEM engines.............. 89,300 78,500 163,200 154,200 130,600 118,200 97,400
Total manufacturing
operations debt as a
percent of total
manufacturing
capitalization........... 10.2% 12.2% 11.2% 12.7% 13.4% 18.4% 35.6%
</TABLE>
- --------
(1) Certain prior year amounts have been reclassified to conform with the
presentation used in the Consolidated Financial Statements for the six
months ended April 30, 1997 included in the Navistar April 1997 10-Q.
(2) Includes revenues of the Company as well as Navistar's other financial
service subsidiaries.
(3) Navistar contributed approximately 25.6 million shares of its Class B
common stock, valued at $513 million, to the Supplemental Trust in 1993.
(4) The 1994 loss of discontinued operations resulted from a $20 million
charge for environmental liabilities at production facilities of two
formerly owned businesses, Wisconsin Steel and Solar Turbine, Inc. The
1992 loss of discontinued operations resulted from a $65 million charge
for the settlement of Navistar's obligation with the PBGC.
(5) In the third quarter of 1993, Navistar adopted SFAS 106 and SFAS 109,
retroactive to November 1, 1992.
(6) Based on retail deliveries of medium duty trucks (Classes 5, 6 and 7),
including school buses, and heavy duty trucks (Class 8) in the United
States and Canada by Transportation and its dealers, compared to the
industry total in the United States and Canada of retail deliveries.
24
<PAGE>
BUSINESS OF NAVISTAR FINANCIAL CORPORATION
Navistar Financial was incorporated in 1949 and is a wholly owned subsidiary
of Transportation, which is wholly owned by Navistar. The Company provides
wholesale, retail, and to a lesser extent, lease financing in the United
States for sales of new and used trucks sold by Transportation and
Transportation Dealers. The Company also finances wholesale accounts and
selected retail accounts receivable of Transportation. Sales of new and used
products (including trailers) of other manufacturers are also financed
regardless of whether designed or customarily sold for use with
Transportation's truck products. The Company provided wholesale financing for
94% and 93% of the new truck units sold by Transportation to Transportation
Dealers in the United States during fiscal 1996 and fiscal 1995, respectively,
and 95% and 94% for the six months ended April 30, 1997 and 1996,
respectively. The Company also provided retail financing in fiscal 1996 for
approximately 16% of the new truck units sold by Transportation and
Transportation Dealers compared to approximately 14% in fiscal 1995 and
approximately 13% and 18% for the six months ended April 30, 1997 and 1996,
respectively. Certain of the financial arrangements between Transportation and
the Company are governed by the terms of a master intercompany agreement dated
as of April 26, 1993 and as amended on September 30, 1996 (the "Master
Intercompany Agreement"). In fiscal 1996, the Company had revenues of $252.8
million and EBITDA of $169 million. See "Relationship with Navistar
International Transportation Corp."
The Company's wholly owned insurance subsidiary, Harco, provides commercial
physical damage and liability insurance coverage to Transportation Dealers and
retail customers, and the general public through the independent insurance
agency system. Revenues from Harco accounted for 20%, 23% and 29% of the
Company's revenues in fiscal years 1996, 1995 and 1994, respectively, and 18%
and 20% of the Company's revenues for the six months ended April 30, 1997 and
1996, respectively.
FINANCING OPERATIONS
The following is a summary of the types of financing operations undertaken
by the Company.
Wholesale Notes
The Company provides wholesale, or "floor plan" financing, to Transportation
Dealers through wholesale notes. Transportation Dealers issue wholesale notes
to finance their purchases of new and used trucks, buses, trailers, engines,
and, to a minor extent, service parts, from Transportation and other
manufacturers. The percentage of new Transportation trucks sold directly to
Transportation Dealers in the United States for which the Company provided
financing was approximately 95% and 94% for the first six months of fiscal
1997 and 1996, respectively, 94% for fiscal 1996, and 93% for fiscal years
1995 and 1994. Revenues from wholesale notes accounted for 22%, 24% and 19% of
the Company's revenues in fiscal years 1996, 1995 and 1994, respectively, and
16% and 24% of the Company's revenues for the six months ended April 30, 1997
and 1996, respectively.
The Company finances 100% of the wholesale invoice price of new vehicles,
including destination charges, 75% of the "as-is" appraised retail value of
used vehicles taken in trade by a Transportation Dealer or purchased by a
Transportation Dealer from an outside source, and 100% of the purchase price
or the Company's appraised value for used vehicles purchased by a
Transportation Dealer from Transportation's used truck centers or the
Company's inventory of repossessed vehicles. The Company obtains a new
wholesale note for each financed vehicle, either by purchasing it from
Transportation upon Transportation's sale of a vehicle to a Transportation
Dealer or by creating it pursuant to signature authority of the Transportation
Dealer. Each wholesale note is secured by the vehicle being financed. In
addition, most Transportation Dealers have granted a security interest in
their service parts purchased from Transportation to secure all of their
indebtedness to the Company and Transportation.
Wholesale notes for new trucks are due on the earlier of the sale of the
truck or a specified date (generally no later than 12 months from the first
day of the month following the date of shipment to the Transportation Dealer).
If such notes are not paid at the end of such period, the notes may be
extended, subject to the
25
<PAGE>
Transportation Dealer making a payment equal to 10% of the original principal
amount thereof, and an additional 10% payment each 90 days thereafter until
paid in full. However, the Company has the discretion to waive any such
curtailment payments. Interest is charged monthly on the wholesale notes on a
floating rate basis at a spread over the prime rate. Management believes that
the Company's wholesale note terms are generally comparable to those offered
by other truck manufacturers. Transportation supports the Transportation
Dealer's payment of interest on the wholesale notes related to new vehicles
through a variety of programs. See "Relationship with Navistar International
Transportation Corp.--Master Intercompany Agreement--Payment of Financing
Charges by Transportation."
The Company provides financing for used trucks acquired by a Transportation
Dealer on a floating rate basis at a spread over the prime rate. Wholesale
notes for used trucks are due on the earlier of the sale of the truck or a
specified date generally no later than six months from the date of financing.
These notes also may be extended subject to a required 10% principal payment
at initial maturity and every 90 days thereafter until paid in full. The
Company may in its discretion waive such curtailment payments.
The Company conducts annual detailed credit reviews of Transportation
Dealers and establishes credit guidelines based on sales volume, financial
strength, capitalization and general business capabilities. The Company
conducts more frequent reviews if it detects a weakening of the Transportation
Dealer's financial condition. Generally, the Company verifies Transportation
Dealers' inventories monthly for weaker dealers and less frequently for
stronger dealers.
Transportation is obligated under various agreements to repurchase new
Transportation trucks from a terminated Transportation Dealer at a price equal
to at least the value of the related wholesale notes. The proceeds of such
repurchases are applied to repay the balance of such Transportation Dealer's
outstanding wholesale notes. Used vehicles which are repossessed by the
Company are sold to the highest bidder, and the proceeds are paid to the
Company. The Company or its transferee bears all losses on wholesale notes
related to financed vehicles which have been sold "out of trust" by a
Transportation Dealer (which occurs when the proceeds of the sale have not
been used to repay the related wholesale notes) and wholesale notes related to
used vehicles.
Wholesale Accounts
Substantially all of Transportation's wholesale accounts receivable arising
from selling goods (primarily service parts) and providing services to
Transportation Dealers are purchased by the Company on account terms
established by Transportation. Transportation pays to the Company a floating
rate service charge on the average outstanding balance of such accounts.
Revenues from the financing of wholesale accounts accounted for 2% of the
Company's revenues for each of the six months ended April 30, 1997 and 1996,
and 2% of the Company's revenues in each of the 1996, 1995 and 1994 fiscal
years.
The Company bears the risk of loss with respect to wholesale accounts. In
most cases, the Company has a first priority lien on the Transportation
Dealer's parts inventory. In addition, if a Transportation Dealer's dealer
agreement terminates for any reason, Transportation is obligated under various
agreements to repurchase a portion of the Transportation Dealer's service
parts inventory at a prescribed price. The proceeds of such repurchase (and
the proceeds from the sale of the Transportation Dealer's remaining parts
inventory) are applied first to repay any indebtedness of the Transportation
Dealer to the Company (including indebtedness with respect to wholesale notes
and wholesale accounts) and second, to repay any indebtedness of the
Transportation Dealer to Transportation.
Retail Financings
The Company finances sales by Transportation and Transportation Dealers of
new and used trucks, buses, trailers and related equipment to retail customers
through retail loans and leases ("retail financings"). The Company's share of
the retail financings of new trucks manufactured by Transportation was
approximately 13%
26
<PAGE>
and 18% for the six months ended April 30, 1997 and 1996, respectively, and
approximately 16%, 14% and 15% for fiscal years 1996, 1995 and 1994,
respectively. Revenues from retail financings accounted for 39%, 32% and 34%
of the Company's revenues in fiscal years 1996, 1995 and 1994, respectively,
and 45% and 37% for the six months ended April 30, 1997 and 1996,
respectively.
Historically, the Company acquired most of its retail financings through
purchases of retail instalment sales contracts from Transportation and
Transportation Dealers, but it now originates retail financings by providing
retail loans or leases directly to retail customers. The retail loans made by
the Company generally are fixed rate obligations and are secured by the
trucks, buses, trailers and equipment financed thereby. Most of the retail
loans provide for equal monthly payments that fully amortize the amount
financed over the original term to maturity, although some retail loans have
balloon payments due at maturity or other payment terms. The leases originated
by the Company generally obligate the lessee to make fixed monthly rental
payments. The Company bears the residual risk on approximately 12% of the $74
million of residual value outstanding at April 30, 1997 on its serviced lease
portfolio; the remaining residuals are guaranteed by either the lessee, the
seller or Transportation.
Prior to making retail financing available to a customer, the Company
performs a credit evaluation of the customer and determines an appropriate
credit limit. The terms of retail financings are generally consistent with
industry practice with respect to minimum down payments, maximum maturities
and size of balloon payments.
Retail financings for new vehicles originated by Transportation Dealers may
contain an obligation of the dealer to pay the Company an amount equal to a
percentage of the unpaid principal balance or unrecovered equipment cost of a
defaulted retail financing if the Company repossesses the vehicle within a
specified time. The extent of a particular Transportation Dealer's obligation
is adjusted based on several factors, including the amount of retail
financings originated by the Transportation Dealer which are significantly
past due, a limitation of the dealer's liability for any single customer,
whether the financed vehicle was new or used, and participation by the
Transportation Dealer in a limited liability program with the Company. After
the Company repossesses a vehicle, the Transportation Dealer who originally
sold the vehicle may elect either to repurchase the vehicle for the unpaid
principal balance or unrecovered equipment cost of the related retail
financing, or to pay the applicable amount. For purposes hereof, all of the
Transportation Dealers' obligations described in this paragraph are referred
to as "Contractual Liability."
Approximately 37% of the aggregate principal amount of retail financings
serviced by the Company (including both owned and sold) as of April 30, 1997
has the benefit of Contractual Liability of the Transportation Dealer that
sold the related vehicle. However, the Company's recent experience is that
competitive conditions are causing it increasingly to waive Contractual
Liability when acquiring retail financings, and the extent and terms of
Contractual Liability will continue to be subject to change as market
conditions require.
For retail financings which have the benefit of Contractual Liability, the
Company establishes and retains a dealer reserve account to serve as
additional security for all of such Transportation Dealer's underlying
obligations. Monthly, the Company pays to such Transportation Dealer a portion
of the reserve credited to the Transportation Dealer's reserve account during
that month, and periodically the Company pays to such Transportation Dealer
the amount by which its reserve account exceeds a specified limit. Generally,
a Transportation Dealer's reserve account is not charged for repossession
losses, unless the Transportation Dealer has ceased doing business.
The Master Intercompany Agreement obligates Transportation to purchase (i)
new vehicles which were originally sold by Transportation Dealers, (ii)
certain used vehicles sold by Transportation Dealers under programs announced
by Transportation from time to time and (iii) new and used vehicles which were
originally sold by Transportation directly to the end-user, in each case if
the vehicle was financed by the Company and if the Company repossesses the
vehicle within 180 days of default (or longer in certain limited
circumstances). The purchase price is equal to the unpaid principal balance or
unrecovered equipment cost of the related defaulted receivable net of
Contractual Liability, if any. Transportation resells such vehicles in
accordance with its
27
<PAGE>
customary procedures. The foregoing obligations (the "Transportation Purchase
Obligations") in any fiscal year are limited to the extent that
Transportation's aggregate losses upon resale of such repossessed financed
vehicles in such year equal either (a) 10% of liquidations by the Company of
all outstanding retail financings which the Company or certain of the
Company's affiliates own or in which they have an economic interest during
such fiscal year, or (b) if the gross balance (including unrecovered equipment
cost) minus unearned interest of retail financings acquired by the Company
during such fiscal year is less than $50,000,000, then 10% of the gross
balance at the beginning of such fiscal year of all retail financings which
the Company or such affiliates own or in which they have an economic interest.
The Master Intercompany Agreement, which provides for Transportation Purchase
Obligations, may be amended from time to time, provided that such amendment is
not materially adverse to the Company. Such an amendment could, among other
things, (i) modify the Transportation Purchase Obligations relating to retail
financings then outstanding or (ii) otherwise modify, limit or eliminate the
Transportation Purchase Obligations.
The Company's net loss figures set forth under "Statistical Data--Credit
Loss Experience" and "--Retail Delinquencies and Net Losses" reflect the fact
that the Company had the benefit of Contractual Liability or Transportation
Purchase Obligations, or both ("Loss Protection"), on a substantial portion of
its retail financings. The Company applies the same underwriting standards to
the acquisition of retail financings without regard to whether Loss Protection
is provided. Based on its experience, the Company believes that there is no
material difference between the rates of delinquency and repossession on
retail financings with Loss Protection as compared to retail financings
without Loss Protection. However, the Company's net loss experience on retail
financings without Loss Protection is higher than that on retail financings
with Loss Protection because of the payments made to the Company by the
Transportation Dealers and Transportation. The Master Intercompany Agreement
also provides that Transportation may guarantee the residual value on leases
on a case by case basis.
Retail Accounts
The Company provides interim retail account financing for purchases from
Transportation by selected governmental agencies, major fleet customers and
original equipment manufacturers, all of which are preapproved for
creditworthiness by the Company prior to such purchases. A retail account
typically is open from the date on which a truck is shipped by Transportation
to the date on which the customer either pays the purchase price or enters
into permanent financing for the truck. Such interim financing is not secured
and its term generally does not exceed 90 days. Transportation pays a service
charge to the Company on the average outstanding balances of such accounts.
These service charges accounted for 9%, 11% and 9% of the Company's revenues
in fiscal years 1996, 1995 and 1994, respectively, and 10% and 8% of the
Company's revenues for the six months ended April 30, 1997 and 1996,
respectively.
COMPETITION AND REGULATION
The retail financing business is highly competitive. Competition exists
principally among banks, commercial financing companies, other captive finance
companies and leasing companies. A number of those institutions have
substantially greater financial resources than the Company and from time to
time are able to borrow, and thus offer customers financing, at lower rates
than the Company may be in a position to offer.
Neither the Company nor Transportation extend consumer credit as defined in
the Federal Consumer Credit Protection Act.
LIQUIDITY AND FUNDING OPERATIONS
The Company has significant liquidity requirements. The Company has
historically obtained the funds to provide financing to Transportation Dealers
and retail customers from sales of receivables, commercial paper, short- and
long-term bank borrowings, medium- and long-term debt issues and equity
capital, but it has recently relied almost entirely upon bank borrowings and
the securitization of receivables. A principal reason for this shift in
funding strategy is the Company's senior and subordinated debt ratings, which
are (and have been since
28
<PAGE>
at least March 1995) Ba2/B1 from Moody's, BB+/BB from Duff & Phelps and BB/B+
from Standard & Poor's. The Corporation's commercial paper is rated "not
prime" by Moody's.
The Corporation obtains funds on a short-term basis from the Credit
Agreement and the ABCP Program, and it obtains term funding through
securitizations of its wholesale notes and its retail loans and, to a lesser
extent, through sale-leasebacks of vehicles subject to leases. Each of these
financing arrangements is described in "Description of Other Financing
Arrangements." At April 30, 1997, unused commitments under the Credit
Agreement and the ABCP Program were $440 million, of which $145 million
provided funding backup for the outstanding short-term debt and the remaining
$295 million, when combined with unrestricted cash and cash equivalents, made
$298 million available to fund the Company's general operations.
The terms and conditions of the Credit Agreement, the Indenture, and the
agreements pursuant to which certain of the Company's other indebtedness was
issued impose restrictions that affect, among other things, the ability of the
Company and its subsidiaries to incur debt, create liens, pay dividends, make
certain investments and engage in business activities unrelated to those in
which the Company currently is engaged. The terms of the Company's
indebtedness also require the Company to meet specified financial tests. See
"Description of Other Financing Arrangements."
The Company expects to incur additional short- and long-term debt in the
future. The nature and amounts of such indebtedness can be expected to vary
from time to time as a result of the volume of the Company's business, market
conditions and other factors. In addition, the Company expects to continue to
securitize and sell receivables in the public and private markets. On May 7,
1997, the Company effected the sale of $500 million of asset-backed securities
backed by a pool of retail loan receivables. In fiscal 1997, the Company
expects to issue up to $200 million of asset-backed securities backed by its
wholesale notes. In addition, depending on market conditions, the Company may
repurchase additional amounts of the 1998 Notes.
HARCO NATIONAL INSURANCE COMPANY
Harco provides physical damage and liability insurance coverage to
Transportation Dealers and retail customers, and the general public through
the independent insurance agency system. Approximately 53%, 57% and 64% of
Harco's net earned premium revenues for fiscal years 1996, 1995 and 1994,
respectively, and 44% and 53% for the six months ended April 30, 1997 and
1996, respectively, were from truck physical damage and liability insurance
produced through independent agents. Net earned premium revenues were $42, $45
and $51 million for fiscal years 1996, 1995 and 1994, respectively, and $17
and $21 million for the six months ended April 30, 1997 and 1996,
respectively. Harco has a rating of "A" from A.M. Best & Co.
Harco's "Dealer Pack" program provides a broad multiple line package policy
designed for truck dealers and truck lease and rental companies. Truck
physical damage coverage is written for retail customers of the Company for
terms up to 60 months. Harco also provides physical damage insurance coverage
for equipment financed by the Company through wholesale notes.
Cash flow generated by Harco's insurance operations is used for investment.
The investment portfolio is managed by professional portfolio managers
following relevant regulations, and at April 30, 1997, consisted of investment
grade debt securities (85%) and equity securities (15%). Investment portfolio
duration is approximately matched to the estimated duration of Harco's
liabilities.
ASSET AND LIABILITY INTEREST RATE MATCHING
The Company manages interest rate sensitivity by seeking to match floating
rate assets with floating rate debt, primarily borrowings under the Credit
Agreement, and fixed rate assets with fixed rate debt, equity and floating
rate debt. The Company has, and expects to continue, to limit the amount of
fixed rate assets effectively
29
<PAGE>
funded with floating rate debt by selling retail receivables on a fixed rate
basis, and to a lesser extent, by utilizing derivative financial instruments.
The Company's corporate policy prohibits the use of derivatives for
speculative purposes.
DIVIDENDS
The Company paid ordinary dividends to Transportation of $26 million during
fiscal 1996 and paid ordinary dividends to Transportation of $30 million
during the six months ended April 30, 1997. The Company expects to continue
paying such dividends in order to maintain the Company's debt to equity ratio
consistent with industry standards and to maximize the Company's return on
equity.
The Company is limited in its ability to pay dividends as a result of
covenants under the Credit Agreement and the 1998 Notes on the Company's ratio
of indebtedness to tangible net worth and as a result of the covenant in the
Indenture described under "Description of the Notes--Certain Covenants--
Limitation on Indebtedness."
INCOME MAINTENANCE
The Credit Agreement and the Amended and Restated Parent's Side Agreement
dated as of November 8, 1994 (the "Side Agreement") between Navistar and
Transportation each require Transportation to assure that the Company's income
before interest expense and income taxes is maintained at not less than 125%
of total interest expense. No support payments have been required under these
agreements since 1984. See "Description of Other Financing Arrangements" and
"Relationship with Navistar International Transportation Corp.--Side
Agreement."
STATISTICAL DATA
GROSS FINANCINGS ACQUIRED
The following table shows the volume of gross acquisitions of the Company
during each of the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
----------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- -------- --------
In millions of dollars (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Wholesale notes......... $1,216.3 $1,491.5 $2,705.8 $2,979.4 $2,306.6 $1,977.6 $1,547.7
Retail financings
New.................... 430.5 550.4 1,064.1 1,075.0 861.9 730.0 591.8
Used................... 117.5 135.8 281.7 242.3 217.2 168.4 185.9
-------- -------- -------- -------- -------- -------- --------
Total................. $1,764.3 $2,177.7 $4,051.6 $4,296.7 $3,385.7 $2,876.0 $2,325.4
======== ======== ======== ======== ======== ======== ========
</TABLE>
30
<PAGE>
CREDIT LOSS EXPERIENCE
The following table provides information about the Company's loss experience
(on both a gross and net basis) during each of the periods indicated for its
serviced portfolio, which includes notes that have been sold:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
------------- --------------------------------------
1997 1996 1996(1) 1995 1994 1993 1992
------ ----- ------- ------ ----- ------ -----
In millions of dollars, except ratios (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net losses (recoveries):
Retail financings........... $ 0.8 $ 0.5 $ 5.1 $ 0.3 $0.6 $(0.1) $2.4
Wholesale notes............. (0.1) 0.1 (0.2) (0.9) 0.1 0.8 0.8
Accounts.................... -- -- -- (0.2) 0.2 -- --
------ ----- ------ ------ ----- ------ -----
Total..................... $ 0.7 $ 0.6 $ 4.9 $(0.8) $0.9 $ 0.7 $3.2
====== ===== ====== ====== ===== ====== =====
Net losses (recoveries) as a
percentage of liquidations
minus
net losses:
Retail financings........... 0.13% 0.11% 0.48% 0.03% 0.07% (0.01)% 0.27%
Wholesale notes............. (0.01) 0.00 (0.01) (0.03) 0.01 0.04 0.06
Total..................... 0.04 0.03 0.13 (0.02) 0.03 0.03 0.13
Net losses (recoveries) as a
percentage of average gross
balance of all outstanding
receivables:(2)
Retail financings........... 0.06% 0.05% 0.22% 0.02% 0.04% 0.00% 0.17%
Wholesale notes............. (0.02) 0.01 (0.02) (0.13) 0.03 0.16 0.20
Accounts.................... 0.00 0.00 0.00 (0.05) 0.08 0.00 0.00
Total................... 0.04 0.03 0.14 (0.03) 0.04 0.03 0.16
</TABLE>
- --------
(1) The information presented herein for the fiscal year ended October 31,
1996 includes the effect of the bankruptcy of one of the Company's largest
obligors, with obligations under retail financings covering approximately
720 vehicles.
(2) April 30 amounts have been annualized.
31
<PAGE>
RETAIL DELINQUENCIES AND NET LOSSES
The following table provides an analysis of the delinquencies and net losses
with respect to serviced retail financings during each of the periods
indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
-------------- ----------------------------------------
1997 1996 1996(1) 1995 1994 1993 1992
------ ------ ------- ------ ------ ------ ------
(UNAUDITED)
(IN MILLIONS OF DOLLARS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
NEW AND USED VEHICLE
CONTRACTS:
Gross balance of retail
financings outstanding
at end of period....... $2,420 $2,377 $2,468 $2,191 $1,752 $1,529 $1,385
Gross balance of retail
financings with
payments past due by
over 60 days as a
percentage of gross
balance outstanding at
end of period.......... 0.70% 0.76% 0.32% 0.10% 0.07% 0.09% 0.19%
Average gross balance of
retail financings...... $2,441 $2,271 $2,345 $1,917 $1,605 $1,419 $1,370
Net losses (recoveries):
The Company........... $ 0.8 $ 0.5 $ 5.1 $ 0.3 $ 0.6 $ (0.1) $ 2.4
Transportation(2)..... 3.6 2.0 9.5 0.6 0.6 4.8 8.3
------ ------ ------ ------ ------ ------ ------
Combined.............. $ 4.4 $ 2.5 $ 14.6 $ 0.9 $ 1.2 $ 4.7 $ 10.7
====== ====== ====== ====== ====== ====== ======
Liquidations minus net
losses................. $ 594 $ 504 $1,073 $ 881 $ 855 $ 747 $ 839
Net losses (recoveries)
as a percentage of
liquidations minus net
losses:
The Company........... 0.13% 0.11% 0.48% 0.03% 0.07% (0.01)% 0.27%
Transportation........ 0.61 0.38 0.89 0.07 0.07 0.64 1.00
Combined.............. 0.74 0.49 1.37 0.10 0.14 0.63 1.27
Net losses (recoveries)
as a percentage of
average gross
balance(3):
The Company........... 0.06% 0.05% 0.22% 0.02% 0.04% 0.00% 0.17%
Transportation........ 0.30 0.17 0.41 0.03 0.03 0.34 0.63
Combined.............. 0.36 0.22 0.63 0.05 0.07 0.34 0.80
Repossessions as a
percentage of average
gross balance(3)....... 3.37% 1.93% 3.08% 0.92% 0.93% 1.94% 3.61%
</TABLE>
- --------
(1) The information presented herein for the fiscal year ended October 31,
1996 includes the effect of the bankruptcy of one of the Company's largest
obligors, with obligations under retail financings covering approximately
720 vehicles. As adjusted to eliminate the impact of that obligor's
bankruptcy, the combined net losses (recoveries), the combined net losses
(recoveries) as a percentage of liquidations minus net losses, combined
net losses (recoveries) as a percentage of average gross balance and
repossessions as a percentage of average gross balance for the same period
would have been $4 million, 0.39%, 0.17% and 1.65%, respectively.
(2) Losses incurred by Transportation on disposal of units acquired from the
Company under the repurchase arrangements described in "Business of
Navistar Financial Corporation--Financing Operations--Retail Financings."
(3) April 30 amounts have been annualized.
32
<PAGE>
RELATIONSHIP WITH NAVISTAR INTERNATIONAL TRANSPORTATION CORP.
BUSINESS OF TRANSPORTATION
Navistar, through its wholly owned subsidiary Transportation, manufactures
and markets medium and heavy duty trucks, including school buses, mid-range
diesel engines and service parts primarily in the United States and Canada as
well as in selected export markets. Transportation is the industry market
share leader in the United States and Canada combined medium and heavy duty
truck market, offering a full line of diesel-powered products in the common
carrier, private carrier, government/service, leasing, construction,
energy/petroleum and student transportation markets. Transportation also
produces mid-range diesel engines for use in its medium duty trucks, school
buses, selected heavy duty truck models and for sale to original equipment
manufacturers in the United States and Canada. Transportation markets its
products through an extensive distribution network which as of April 30, 1997
included 953 North American dealer and distribution outlets. Service and
customer support are also supplied at these outlets.
The Medium and Heavy Duty Truck Industry
Transportation competes in the North American market for medium and heavy
duty trucks, including school buses, which includes weight classes 5 and above
(16,000 lbs. and over). This market is subject to considerable volatility as
it moves in response to cycles in the overall business environment and is
particularly sensitive to the industrial sector, which generates a significant
portion of the freight tonnage hauled. Government regulation has impacted and
will continue to impact trucking operations and efficiency and the
specifications of equipment.
The following table shows retail truck deliveries in the combined United
States and Canadian markets for the six months ended April 30, 1997 and 1996,
and each of the five years ended October 31, 1996, in thousands of units.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, FISCAL YEAR ENDED OCTOBER 31,
----------- -----------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Medium duty trucks and school buses... 68.0 69.3 145.8 151.8 134.2 122.5 118.3
Heavy duty trucks..................... 90.9 98.3 195.4 228.8 205.4 166.4 125.2
----- ----- ----- ----- ----- ----- -----
Total............................... 158.9 167.6 341.2 380.6 339.6 288.9 243.5
===== ===== ===== ===== ===== ===== =====
</TABLE>
- --------
Source: Based on monthly data published by the American Automobile
Manufacturers Associations ("AAMA") in the United States and Canada and other
sources.
The North American truck market is highly competitive. Major domestic
competitors include PACCAR, Ford and General Motors as well as foreign-
controlled domestic manufacturers, such as Freightliner, Mack and Volvo GM. In
addition, manufacturers from Japan (Hino, Isuzu, Nissan and Mitsubishi) are
competing in the United States and Canadian markets. The intensity of this
competitiveness, which is expected to continue, results in price discounting
and margin pressures throughout the industry. In addition to the influence of
price, market position is driven by product quality, engineering, styling and
utility and comprehensiveness of the distribution system.
Transportation Market Share
Transportation delivered 94,000 medium and heavy duty trucks, including
school buses, in North America in fiscal 1996, compared to a total of 101,700
for fiscal 1995, a decrease of 8% in overall units. During the six months
ended April 30, 1997, Transportation delivered 42,600 medium and heavy duty
trucks, including school buses, in North America, compared to 43,900 during
the six months ended April 30, 1996.
33
<PAGE>
The following table reflects Transportation's North American market shares:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED APRIL FISCAL YEAR
30, ENDED OCTOBER 31,
----------- -----------------
1997 1996 1996 1995
----- ----- -------- --------
<S> <C> <C> <C> <C>
PRODUCT CLASS:
Medium duty truck and school bus market....... 38.7% 39.1% 41.5% 39.2%
Heavy duty truck market (Class 8)............. 17.9 17.1 17.1 18.4
Combined medium and heavy duty truck and
school bus market............................ 26.8 26.2 27.5 26.7
</TABLE>
Transportation has maintained the leading combined market share in medium
and heavy duty trucks, including school buses, in the United States and Canada
in each of its last 16 fiscal years based on data obtained from the AAMA, the
United States Motor Vehicle Manufacturer's Association and R.L. Polk &
Company.
Business Strategy
In fiscal 1996, Transportation adopted and began to implement a five-point
truck strategy designed to improve operating performance and increase
profitability. Specifically, this strategy is designed to enable
Transportation's truck division to achieve its part in Navistar's goal of
generating an average of 17.5% after tax return on equity over a business
cycle. The principal components of this strategy include:
. Reduce Product Complexity. Transportation believes that it can increase
manufacturing efficiency and improve product quality by reducing the
complexity of its product offerings. Historically, thousands of options
and a separate chassis design were offered for each truck model
manufactured by Transportation, which led to significant manufacturing
inefficiencies. In 1996, Transportation introduced a new ordering
program known as Diamond Spec(TM) for its premium conventional heavy
duty trucks. Under this program, Transportation rationalized the number
of possible option combinations by developing pre-packaged option groups
which are arranged under 11 categories (i.e., engine, chassis,
electrical system) based upon the most popular preferences of its
customers. Transportation also combined the chassis for three models
offered in this premium conventional product category into one chassis.
This standardization of option and chassis groups is expected to lead to
significant operating cost savings from increased manufacturing
efficiency and better pricing for purchased components. In addition,
Transportation believes that this program will result in an overall
improvement in product quality and shorter and more reliable delivery
times.
. Increase Manufacturing Efficiency. Transportation believes that it can
achieve significant improvements in manufacturing efficiency by focusing
each of its principal truck manufacturing facilities on producing a
single type of truck model. To this end, Transportation transferred the
production of its stripped chassis from its Springfield, Ohio facility
to its Conway, Arkansas facility in fiscal 1996, in order to achieve
efficiencies in the production of medium duty trucks. Similarly,
Transportation established a joint venture with SST Truck Company, which
will focus on the production of the highly-complex Paystar(R) severe
service trucks, thereby permitting Transportation's Chatham, Ontario
facility to concentrate on manufacturing premium conventional heavy duty
trucks.
. Emphasize Product Development. Transportation believes that each of its
current truck models are equal to or exceed those of its competitors in
terms of satisfying its customers' needs. Nevertheless, Transportation
intends to continue to enhance and expand its current product offerings
in an effort to provide trucks that better satisfy its customers'
changing demands. In fiscal 1996, Transportation introduced the
International 9100 conventional truck to replace its 8200 heavy duty
regular conventional truck and made significant improvements to its
premium conventional models. In fiscal 1997 and fiscal 1998, a series of
model improvements are expected to be introduced for Transportation's
premium conventional heavy duty truck models.
. Expand Operations in Mexico. Transportation believes that there are
significant opportunities to increase sales of both trucks and engines
in Mexico and in other selected markets. During 1996, Transportation
significantly expanded its direct presence in Mexico by establishing a
dealer network
34
<PAGE>
with 24 locations and a parts distribution center and by arranging for
production at a contract manufacturer. In addition, Navistar's Board
approved the construction of a manufacturing facility to be located near
Monterey, Mexico. This medium duty and heavy duty truck facility is
anticipated to cost approximately $167 million and to begin production
in 1998. Its capacity will be 65 units per day on one shift.
Transportation believes that its Mexican operations will enable it to
expand into other Latin American countries, particularly as a result of
the favorable and cost effective trade agreements between Mexico and
other Latin American countries.
. Establish Competitive Wage, Benefit and Productivity Levels. In 1996,
Transportation signed a new three-year collective bargaining agreement
with the CAW. Transportation expects to achieve significant productivity
gains as a result of favorable changes in job classifications, work
rules and training. Similarly, Transportation intends to seek
modifications to improve productivity under its collective bargaining
agreement with the UAW, which is scheduled to expire on October 1, 1998.
Products
The following table illustrates the percentage of Transportation's
manufacturing sales by class of product based on dollar amount:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED APRIL FISCAL YEAR ENDED
30, OCTOBER 31,
----------- -----------------
1997 1996 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PRODUCT CLASS:
Medium duty trucks and school buses............ 34% 34% 35% 32% 32%
Heavy duty trucks.............................. 34 37 35 42 42
Service parts.................................. 14 13 14 12 14
Engines........................................ 18 16 16 14 12
----- ----- ----- ----- -----
Total.......................................... 100% 100% 100% 100% 100%
===== ===== ===== ===== =====
</TABLE>
Transportation manufacturers a full line of products in the common carrier,
private carrier, government/service, leasing, construction, energy/petroleum
and student transportation markets. Transportation offers diesel-powered
trucks and buses because of their improved fuel economy, ease of
serviceability and greater durability over gasoline-powered vehicles.
Transportation's heavy duty trucks generally use diesel engines purchased from
outside suppliers while its medium duty trucks are powered by a proprietary
line of mid-range diesel engines manufactured by Transportation. Based on
information published by R.L. Polk & Company, diesel-powered medium duty truck
shipments represented 87% of all medium duty truck shipments for
Transportation's fiscal year 1996 in the United States and Canada.
Transportation's truck and bus manufacturing operations in the United States
and Canada consist principally of the assembly of components manufactured by
its suppliers, although Transportation produces its own mid-range diesel truck
engines, sheet metal components (including cabs) and miscellaneous other
parts.
Engine and Foundry
Transportation builds diesel engines for use in its Class 5, 6 and 7 medium
duty trucks, school buses, selected Class 8 heavy duty truck models and for
sale to original equipment manufacturers in the United States and Canada.
Transportation also sells engines for industrial, agricultural and marine
applications. Transportation believes that its family of mid-range diesel
engines, each designed to provide superior performance in customer
applications, offers both low cost of ownership and excellent durability to
users.
Transportation has an agreement to supply its T444E electronically
controlled diesel engine to a domestic automotive company through the year
2000 for use in all of its diesel-powered light trucks and vans. Sales of the
35
<PAGE>
T444E to the automotive company accounted for approximately 87% of
Transportations's T444E sales in fiscal 1996. Shipments of V8 and I6 engines
to all original equipment manufacturers totaled a record 163,200 units in
fiscal 1996, an increase of 6% from the 154,200 units shipped in fiscal 1995.
Service Parts
Transportation's service parts program is vital to the maintenance of the
relationship with its customers and dealers. The sale of replacement parts
does not represent a separate and distinct business of Transportation.
Transportation's truck group makes decisions about the pricing of trucks and
replacement parts based upon a variety of factors which integrally link the
pricing and sale of replacement parts with the sale of medium and heavy duty
trucks, including school buses. The acceptable price for dealers and fleet
truck sales is determined by not only looking at the market price of the
individual trucks themselves, but also by analyzing the amount of future
replacement parts that will be purchased from Transportation over the truck's
life cycles and the total expected profit contribution, including future
replacement parts, expected to be realized on each sale. Accordingly, the
pricing of trucks and replacement parts are not independently determined.
Transportation recently introduced Fleet Charge(R) Gold to help customers
improve the way they manage their costs and continues to invest in business
systems to improve the processing of customer orders, speed delivery of parts
and link electronically with both customers and suppliers. In the United
States and Canada, Transportation operates seven regional parts distribution
centers, which allow it to offer 24-hour availability and same day shipment of
the parts most frequently requested by its customers.
Marketing and Distribution
United States and Canada Operations. Transportation's truck products are
distributed through the largest medium and heavy duty truck retail
organization in North America to virtually all key markets in the United
States and Canada. As part of its continuing program to adapt to changing
market conditions, Transportation has been assisting Transportation Dealers to
expand their operations to better serve their customers. Transportation's
truck distribution and service network in North America was composed of 953
dealer and retail outlets at April 30, 1997 and 957, 958 and 949 dealer and
distribution outlets at October 31, 1996, 1995 and 1994, respectively.
Included in these totals were 518, 504, 490 and 473 secondary and associate
locations at April 30, 1997 and October 31, 1996, 1995 and 1994, respectively.
Transportation has been rated first in the American Truck Dealers "Dealer
Attitude Survey" for each of the last two years. In 1996, Transportation
introduced its Customer Satisfaction Process, which is designed to focus
Transportation's entire dealer network on delivering measurable, continuous
improvements in customer service.
Retail Transportation Dealer activity is supported by five regional
operations in the United States and a general office in Canada. Transportation
has a national account sales group responsible for its 110 major national
account customers. Transportation's network of 13 used truck centers in the
United States provides sales and trade-in support to its dealers and national
account group, and markets all makes and models of reconditioned used trucks
to owner-operators and fleet buyers.
Mexican Operations. During 1996, Transportation significantly expanded its
direct presence in Mexico by establishing a dealer network with 24 locations
and a parts distribution center and by arranging for production at a contract
manufacturer. In addition, Navistar's Board approved the construction of a
manufacturing facility to be located near Monterey, Mexico. This medium and
heavy duty truck facility is anticipated to cost approximately $167 million
and to begin production in 1998. Its capacity will be 65 units per day on one
shift. Transportation believes that its Mexican operations will enable it to
expand into other Latin American countries, particularly as a result of the
favorable and cost effective trade agreements between Mexico and other Latin
American countries.
Other International Operations. Transportation exports trucks, components
and service parts to distributors and end-users in more than 75 countries.
International sales, excluding sales to Mexico, were $169
36
<PAGE>
million and $205 million for fiscal years 1996 and 1995, respectively, and $88
and $91 for the first six months of fiscal 1997 and 1996, respectively.
Transportation exported 3,824 trucks in fiscal 1996 and 4,944 trucks in fiscal
1995, excluding exports to Mexico and, cumulatively from fiscal 1992 through
fiscal 1996, was the leading exporter of Class 6-8 trucks from the United
States and Canada according to data provided by the AAMA.
Important Supporting Operations
Third Party Sales Financing Agreements. In the United States, Transportation
has an agreement with Associates Commercial Corporation to provide wholesale
financing to certain Transportation Dealers and retail financing to their
customers. This agreement expired as to retail financing on February 28, 1997
and is scheduled to expire as to wholesale financing on July 31, 1997.
Navistar International Corporation Canada has an agreement with a subsidiary
of General Electric Canadian Holdings Limited to provide financing for
Canadian Transportation Dealers and customers.
Foreign Insurance Subsidiary. Harbour Assurance Company of Bermuda Limited
("Harbour") offers a variety of programs to Navistar, including general
liability insurance, ocean cargo coverage for shipments to and from foreign
distributors and reinsurance coverage for various Transportation policies.
Harbour also writes minimal third party coverage and provides a variety of
insurance programs to Transportation, Transportation Dealers and customers.
Capital Expenditures and Research and Development
Transportation designs and manufactures its trucks and diesel engines to
meet or exceed specific industry requirements. New models are introduced and
improvements of current models are made, from time to time, in accordance with
operating plans and market requirements and not on a predetermined cycle.
Capital expenditures during the first six months of fiscal 1997 were $58
million compared with $55 million during the first six months of fiscal 1996.
The increase in expenditures for the first six months of fiscal 1997 was
primarily for machinery and tooling related to the new engine product programs
and construction of a new truck assembly facility. Capital expenditures
totaled $117 million, $139 million and $87 million during fiscal years 1996,
1995 and 1994, respectively. In general, such expenditures were used for truck
and engine development and ongoing facility maintenance programs.
Product development is an ongoing process at Transportation. Research and
development activities are directed toward the introduction of new products
and improvement of existing products and processes used in their manufacture.
Spending for research and development activities totaled $101 million, $91
million and $88 million for fiscal years 1996, 1995 and 1994, respectively.
Labor Relations
At October 31, 1996, approximately 66% of Transportation's 14,187 employees
were covered under various collective bargaining agreements. The UAW
represents 6,902 of Transportation's active employees in the United States
pursuant to a collective bargaining agreement that is scheduled to expire on
October 1, 1998. The CAW represents 1,476 of Transportation's active employees
in Canada pursuant to a new collective bargaining agreement entered into in
1996 that is scheduled to expire on October 24, 1999. The terms of this
agreement, including changes in work rules, job classifications and training
are expected to make production gains and quality increases possible.
Raw Materials and Energy Supplies
Transportation purchases raw materials, parts and components from numerous
outside suppliers but relies upon certain suppliers for a substantial number
of components for its truck products. Transportation's purchasing
centralization and strategies have been designed to improve access to the
lowest cost, highest quality sources of
37
<PAGE>
raw materials, parts and components, and to reduce inventory carrying
requirements. A portion of Transportation's requirements for raw materials and
supplies is filled by single source suppliers.
The impact of an interruption in supply would vary by commodity. Some parts
are generic to the industry while others are of a proprietary design requiring
unique tooling which would require time to recreate. However, Transportation's
exposure to a disruption in production as a result of an interruption of raw
materials and supplies is no greater than the industry as a whole. In order to
remedy any losses resulting from an interruption in supply, Transportation
maintains business interruption insurance for storms, fire and water damage.
While the Company believes that it has adequate assurances of continued
supply, the inability of a supplier to deliver could have an adverse effect on
production at certain of the Company's manufacturing locations.
Impact of Government Regulation
Truck and engine manufacturers continue to face increased governmental
regulation of their products, especially in the environmental and safety
areas. Transportation believes its products comply with all applicable
environmental and safety regulations.
Transportation incurred research and tooling costs to redesign its engine
product lines to meet United States Environmental Protection Agency ("EPA")
and California Air Resources Board ("CARB") emission standards effective for
the 1994 model year. Transportation faces additional costs through 1998 to
meet further tightening of these standards. In addition to the 1998 standards,
Transportation, along with other engine manufacturers, has signed a voluntary
agreement ("Statement of Principles") with the EPA and the CARB to achieve new
reductions in ozone-causing exhaust emissions by 2004. As a result of the
Statement of Principles, the EPA issued a Notice of Proposed Rulemaking
defining exhaust emission standards for the 2004 model year. A final rule is
expected in 1997. Transportation must also satisfy California's emission
standards in 2002 for engines used in medium-sized vehicles (which includes
vehicles up to 14,000 lbs. Gross Vehicle Weight Rating). Transportation
expects that its diesel engines will be able to meet all of these standards
within the required time-frame.
Emissions regulations in Canada and Mexico are similar, but not identical,
to the U.S. federal regulations. Although Canada's regulations impose
standards equivalent only to the U.S. standards for the 1990 model year,
diesel engine manufacturers, including Transportation, have voluntarily signed
several memorandums of understanding with the Canadian federal government,
agreeing to sell only engines meeting the 1994 U.S. emission standards in
model years 1995 to 1997. Canada has announced its intention to conform its
heavy-duty engine emission standards to the U.S. standards in 1998 and to
require low-sulfur diesel fuel beginning October 1, 1997. Mexico has adopted
the U.S. heavy diesel engine emission standards as of the 1994 model year but
has conditioned compliance on the availability of low-sulfur diesel fuel.
While Transportation has already proven its ability to meet the 2004 U.S.
standards, these proposed regulations have and will impose significant
research, design and tooling costs on Transportation and other diesel engine
manufacturers. Transportation's ability to comply with emissions requirements
which may be imposed in the future is an important element in maintaining and
improving Transportation's position in the diesel engine marketplace.
Significant capital and operating expenditures will be required to comply with
these emissions requirements.
Truck manufacturers are also subject to various noise standards imposed by
federal, state and local regulations. The engine is one of a truck's primary
noise sources, and Transportation therefore works closely with truck OEMs to
develop strategies to reduce engine noise. Transportation is also subject to
the National Traffic and Motor Vehicle Safety Act (the "Safety Act") and
Federal Motor Vehicle Safety Standards (the "Safety Standards") promulgated by
the National Highway Traffic Safety Administration. Transportation believes it
is in compliance with the Safety Act and the Safety Standards.
38
<PAGE>
Expenditures to comply with various environmental regulations relating to
the control of air, water and land pollution at production facilities and to
control noise levels and emissions from Transportation's products have not
been material except for two sites formerly owned by Transportation, Wisconsin
Steel in Chicago, Illinois, and Solar Turbine, Inc. in San Diego, California.
In 1994, Transportation recorded a $20 million after-tax charge as a loss of
discontinued operations for environmental liabilities and cleanup cost at
these two sites.
In addition, Transportation has been named a potentially responsible party
("PRP"), in conjunction with other parties, in a number of cases arising under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended. These cases involve sites which allegedly have been
contaminated by wastes from current or former Transportation locations. Based
on information available to Transportation, which in most cases consists of
data related to quantities and characteristics of material generated at or
shipped to each site as well as cost estimates from PRPs and/or federal or
state regulatory agencies for the cleanup of these sites, a reasonable
estimate is calculated of Transportation's share, if any, of the probable
costs and is provided for in the financial statements. These obligations
generally are recognized no later than completion of the remedial feasibility
study and are not discounted to their present value. Transportation believes
that, based on these calculations, its share of the potential costs for the
cleanup of each site, other than the Wisconsin Steel and Solar sites, will not
have a material effect on Transportation's financial results. Transportation
reviews its accruals on a regular basis.
Legal Proceedings
Transportation and its subsidiaries are subject to various other claims
arising in the ordinary course of business, and are parties to various legal
proceedings which constitute ordinary routine litigation incidental to the
business of Transportation and its subsidiaries. In the opinion of
Transportation's management, none of these proceedings or claims are material
to the business or the financial condition of Transportation and its
subsidiaries.
MASTER INTERCOMPANY AGREEMENT
The operating relationship between the Company and Transportation is
governed by the Master Intercompany Agreement.
Purchase of Notes and Accounts Receivable
The Master Intercompany Agreement requires that Transportation, with limited
exceptions, offer the Company all wholesale and retail notes and instalment
sales contracts which Transportation acquires in the regular course of its
business from sales of trucks and related equipment to Transportation Dealers
and customers. Such offers must be on terms which will (together with charges
made to others for financing services) afford reasonable compensation for the
financing services rendered by the Company to Transportation and
Transportation Dealers with respect to the sale of Transportation products and
used goods. The Company in turn has agreed, to the extent that it is able to
finance such purchases, that it will purchase all such receivables without
recourse except those, if any, as to which the risk of loss is unacceptable to
the Company.
Pursuant to the Master Intercompany Agreement, the Company also purchases
Transportation's wholesale accounts receivable from Transportation Dealers
arising out of Transportation's sales of goods (primarily parts) and services
to such dealers. The Company receives compensation from Transportation in the
form of a floating rate service charge for financing these accounts.
The Master Intercompany Agreement also provides that the Company will
purchase retail accounts receivable from Transportation that arise out of
Transportation's sales to retail customers. The Company receives a floating
rate service charge from Transportation for financing these accounts.
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Payment of Financing Charges by Transportation
Transportation currently provides floor plan financing assistance for
Transportation Dealers through various interest credits and interest payments.
Upon sale of a vehicle to a Transportation Dealer, Transportation currently
issues an interest credit to the dealer in order to support the Transportation
Dealer's cost of wholesale financing on the related wholesale note to the
Transportation Dealer. Transportation also currently pays interest on behalf
of a Transportation Dealer during the period that a financed vehicle is in
transit to the Transportation Dealer. Further, Transportation periodically
implements special sales programs pursuant to which it agrees to pay interest
on behalf of Transportation Dealers for an extended period of time. Pursuant
to the Master Intercompany Agreement, Transportation pays the amount of
interest owing on the wholesale notes during the in-transit and any interest
free periods directly to the Company.
Transportation currently pays the Company an acquisition fee on new
equipment wholesale notes purchased from Transportation, which will be
discontinued after fiscal 1998. Pursuant to such agreement, Transportation
paid the Company $5.7 million in fiscal 1996. The maximum fee payable under
such agreement will be $3.7 million in fiscal 1997 and $1.7 million in fiscal
1998. During the last five fiscal years, the largest such fee paid by
Transportation to the Company was $9.7 million.
Payments to Transportation for Administrative and Other Services
The Company pays a fee to Transportation for data processing and other
administrative services based on the actual cost of the services performed.
The Company paid Transportation service fees of $1.1 million for each of the
six months ended April 30, 1997 and 1996, and $2.4 million, $2.4 million and
$2.5 million for fiscal years 1996, 1995 and 1994, respectively.
TAX ALLOCATION AGREEMENT
Pursuant to the Tax Allocation Agreement effective October 1, 1981, as
subsequently amended and supplemented (the "Tax Allocation Agreement"), the
Company is required to pay to Transportation an amount equal to the amount the
Company and its subsidiaries would pay with respect to federal corporate
income taxes if the Company and its subsidiaries filed federal tax returns on
a consolidated basis as an affiliated group of corporations, notwithstanding
the fact that the affiliated group of corporations including Navistar and its
subsidiaries may not have any federal tax liability. The Tax Allocation
Agreement contains similar provisions regarding state income taxes for states
that permit the filing of consolidated returns.
SIDE AGREEMENT
The Side Agreement requires either Transportation or Navistar to hold and
own 100% of the outstanding voting stock of the Company (other than shares
held by directors of the Company as qualifying shares). The Side Agreement
also requires Transportation not to permit the Company's consolidated income
before income taxes, interest expense and dividends on preferred stock to be
less than 125% of the Company's consolidated interest expense and dividends on
preferred stock for any period of four fiscal quarters immediately preceding
the date of measurement.
Navistar and Transportation are permitted to amend or waive any or all of
the provisions of the Side Agreement with the written approval of the lenders
providing at least two-thirds of the commitment under the Credit Agreement.
The Indenture does not require that the Side Agreement be maintained.
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DESCRIPTION OF OTHER FINANCING ARRANGEMENTS
CREDIT AGREEMENT
In April of 1993, the Company entered into the Credit Agreement with a group
of banks, including Bank of America Illinois (formerly known as Continental
Bank National Association), Bank of Nova Scotia, The Chase Manhattan Bank
(formerly known as Chemical Bank), Morgan Guaranty Trust Company of New York
and NationsBank, N.A., as co-arrangers. Effective March 29, 1996, the Company
amended its Credit Agreement, extending the maturity date of such agreement to
March 2001. In addition, the commitment of the Credit Agreement was increased
to $925 million and a new pricing and fee schedule was established. The
Company's borrowing capacity under the Credit Agreement is determined through
an asset base calculation, which includes assets of both the Company and each
of its subsidiaries. Amounts outstanding under the Credit Agreement are
secured by all the assets of the Company, including a pledge of all of the
stock of each of the Company's subsidiaries.
Three interest rate options are available for borrowings under the Credit
Agreement: (i) Base Rate Loans, tied to the higher of the prime rate or the
sum of 1/2 of 1% plus the Federal Funds rate; (ii) CD Loans, based on the
prevailing Certificate of Deposit rate; and (iii) Euro-Dollar Loans, based on
the London interbank offered rate ("LIBOR"), in each case plus a margin based
on the Company's long-term credit rating.
The Credit Agreement includes a number of restrictive covenants. For
example, the Company is required to maintain (i) a consolidated tangible net
worth of at least $175 million and (ii) consolidated interest expense,
preferred stock dividends and consolidated income before income taxes that is
at least 125% of its fixed charges (consisting of consolidated interest
expense and preferred stock dividends). In addition, the Company's total
consolidated debt to consolidated tangible net worth may not exceed 7 to 1.
The Company may not transfer its accounts receivable or prepay subordinated
debt below $100 million (including the Notes), except in accordance with the
terms contained in the Credit Agreement.
In addition, the Credit Agreement requires the Company to hold all of the
outstanding stock of each of its subsidiaries. The Credit Agreement requires
that the Company perform all of its obligations under the Master Intercompany
Agreement, not consent to amendments or modifications thereof which would be
materially adverse to the Company (except in certain limited circumstances)
and enforce the Master Intercompany Agreement against Transportation in
accordance with its terms. The Company is prohibited from engaging in
transactions with affiliates (except in certain limited circumstances) that
are not in the ordinary course of business and on an arm's-length basis. The
Credit Agreement also requires that the Company maintain adequate loan loss
reserves and its current dealer guideline program.
The Credit Agreement restricts the Company's ability to enter new lines of
business, limits the types of investments that the Company may make and
contains a negative pledge which prevents the Company from incurring or
suffering to exist liens on its assets, except in certain limited
circumstances. The Company is required to invest its cash and cash equivalents
(subject to certain limited exceptions) in marketable securities at the close
of business on each business day. The Credit Agreement also contains customary
covenants regarding reporting, insurance, conduct of business, maintenance of
existence and compliance with laws.
Events of default under the Credit Agreement include: (i) failure to pay
principal or interest when due; (ii) breach of a covenant or representation or
warranty (subject to certain limited cure periods); (iii) default on other
indebtedness in excess of $1 million; (iv) failure of the Company or a special
purpose subsidiary of the Company to meet its obligations in excess of $1
million relating to the sale of receivables; (v) Transportation or Navistar
ceasing to own 100% of the Company; (vi) certain change of control events with
respect to Transportation or Navistar; (vii) certain events of bankruptcy
involving the Company, Transportation or Navistar; (viii) a judgment against
the Company over $1 million remaining unsatisfied and unstayed for over 30
days; and (ix) certain other events of default.
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Effective May 27, 1997, the Company amended its Credit Agreement to: (i)
permit the Company to lend up to $100 million to Transportation, secured by
Transportation's service parts and new and used truck inventories; (ii) give
the Company up to $50 million of credit in its asset base calculation for
Mexican retail and wholesale receivables funded by the Company; and (iii)
adjust the asset base calculation for certain of the Company's subsidiaries,
which will have the effect of increasing the Company's asset base calculation.
SECURITIZATION PROGRAMS
The Company presently utilizes securitizations to fund a substantial portion
of its acquisitions of wholesale notes and retail notes (together with lease
receivables, the "receivables"). The Company relies upon the securitization
market, which provides it with funding at rates that are much lower than the
Company could obtain through issuing its own unsecured or secured corporate
debt obligations. The Company anticipates continuing to utilize
securitizations to fund its acquisitions of wholesale notes and retail notes.
Wholesale Notes Securitization
Since 1990, the Company has securitized its wholesale notes. On a daily
basis, the Company sells all newly arising wholesale notes, except those which
are ineligible and those which exceed a dealer concentration level which is
set by the Company (subject to a contractual maximum), to Navistar Financial
Securities Corporation ("NFSC"), a wholly owned special purpose subsidiary of
the Company. NFSC in turn sells the wholesale notes to a trust, which
effectively reinvests collections on outstanding trust receivables in such
newly originated wholesale notes. NFSC retains an interest in the trust, a
portion of which is subordinated to the investor certificates. At April 30,
1997, NFSC's retained interest in the trust constituted $212.8 million, of
which $69.4 million was subordinated to claims of investor certificateholders.
Each class or series of investor certificates represents an undivided
ownership interest in the wholesale notes held by the trust. Upon the
commencement of amortization (which will occur on the earlier of the scheduled
amortization period commencement date or the occurrence of an early
amortization event), collections on outstanding trust receivables will be used
to pay down the invested amount on the amortizing class or series. Typical
amortization events for the two Series 1990-A classes and the Series 1995
certificates identified below include payment defaults, material breaches of
representations and warranties by NFSC following notice and a cure period,
bankruptcy of the Company, Transportation or NFSC, and failure to meet certain
pool performance tests.
The outstanding investor certificates have the following principal terms:
<TABLE>
<CAPTION>
INVESTED SCHEDULED AMORTIZATION/ACCUMULATION
CERTIFICATES ISSUED AMOUNT PERIOD COMMENCEMENT DATE
------------ ------------- ------------ -----------------------------------
<S> <C> <C> <C>
Series 1990-A, Class A-
2...................... December 1990 $100,000,000 December 1997
Series 1990-A, Class A-
3...................... December 1990 $100,000,000 December 1998
Series 1995-1........... June 1995 $200,000,000 November 2003
</TABLE>
Retail Notes Securitizations
Since 1993, the Company has securitized a significant portion of its retail
loans. Approximately twice a year, the Company sells a pool of retail loans,
certain monies due or received thereunder, security interests in the vehicles
and equipment financed thereby and certain other property (collectively, the
"Property") to Navistar Financial Retail Receivables Corporation, a wholly
owned special purpose subsidiary of the Company ("NFRRC"). Immediately
thereafter, NFRRC transfers such Property to a trust formed specifically for
such transaction in exchange for either asset-backed notes or certificates
issued by such trust. The Company retains the option under certain
circumstances to repurchase the remaining pool of retail loans of any trust
once monies due and payable thereunder constitute 10% or less of aggregate
amount due and payable under such retail loans when initially purchased by the
trust. NFRRC retains a residual interest in each trust.
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As of April 30, 1997, trusts formed by NFRRC have issued an aggregate
principal amount of approximately $3.3 billion of asset-backed securities.
Each class of asset-backed securities may have a different interest rate. At
April 30, 1997, asset-backed securities from eight securitized transactions
originated by NFRRC remained outstanding and had a remaining aggregate
principal balance of approximately $1.3 billion.
On May 7, 1997, NFRRC established the Navistar Financial 1997-A Owner Trust,
which issued $500,000,000 in asset-backed securities.
The Company periodically enters into forward interest rate contracts to
manage its exposure to fluctuations in funding costs from the anticipated
securitization and sale of retail loans. The Company locks into an interest
rate by entering into a forward contract on a U.S. Treasury security whose
terms approximate those used to determine the selling price of the anticipated
sale of receivables. Gains or losses incurred with the closing of these
agreements are included as a component of the gain or loss on sale of
receivables.
Asset-Backed Commercial Paper Program
The Company and Truck Retail Instalment Paper Corp., a wholly owned
subsidiary of the Company ("TRIP"), established NFC Asset Trust (the "ABCP
Trust") in late 1994 for the purpose of issuing asset-backed commercial paper.
As a condition to issuance, all commercial paper must be rated at least "A-1"
by Standard & Poor's Ratings Group and "P-1" by Moody's. The Company currently
may issue up to $400 million in face amount of commercial paper under the ABCP
Program. The ABCP Trust has also issued approximately $14 million of
subordinated certificates. At April 30, 1997, the ABCP Trust had outstanding
commercial paper of $387 million.
The Company currently uses the ABCP Program to warehouse its retail loans
pending a permanent securitization of such loans as described above. Generally
on a monthly basis, TRIP purchases retail loans from the Company and then
pledges such loans to the ABCP Trust as collateral for a loan. The ABCP Trust
funds such loan through the issuance of commercial paper. When the Company
effects a retail loan securitization, a portion of the proceeds are used to
purchase the retail loans from TRIP, which in turn uses such proceeds to repay
the loan to the ABCP Trust and obtain a release of the ABCP Trust's lien on
the retail loans.
To support the commercial paper program, the Company has arranged a
liquidity facility with a syndicate of banks. Loans under the liquidity
facility are available either to repay maturing commercial paper if sufficient
funds are not otherwise available or to fund loans to TRIP. The lenders
provide liquidity, not credit support, for the ABCP Trust. The lenders'
commitments under the liquidity facility terminate in March 2001.
The ABCP Trust's ability to make loans to TRIP, issue commercial paper and
borrow funds from the lenders are subject to a number of conditions, including
having a sufficient borrowing base (which is based on the retail loans pledged
by TRIP) and sufficient amounts being held in reserve accounts. The program
restricts the weighted average maturity and remaining maturities of commercial
paper, and it imposes diversification requirements and limitations on average
maturity on the portfolio of retail loans financed through the ABCP Trust. The
program will terminate upon the occurrence of events based on portfolio
performance, insolvency events related to the Company, TRIP and the ABCP
Trust, defaults under the applicable documents, termination of the lenders'
commitments and certain other events.
TRIP also has the option of selling retail loans to the ABCP Trust for long-
term funding up to the available amount of liquidity, but it does not
presently anticipate using the ABCP Trust for this purpose. In the future, the
Company and TRIP may seek the ability to finance wholesale notes and lease
receivables through the ABCP Trust.
Common Elements of Securitization Programs
The securitizations of wholesale notes and retail loans (collectively, the
"receivables") effected by the Company, including the ABCP Program, share a
number of structural features. In the first step of each
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securitization, the receivables are sold by the Company to its subsidiary
(NFSC, NFRRC or TRIP, as applicable) in a transaction intended to qualify as a
true sale under applicable law. Each of NFSC, NFRRC and TRIP is a special
purpose corporation ("SPC") whose activities are limited to participating in
the securitization and related transactions and each SPC is intended to be a
bankruptcy remote entity.
In the second step of each securitization, the SPC either (in the case of
NFSC and NFRRC) transfers its interest in the receivables to the related
trust, which purchases and holds the receivables, or (in the case of TRIP)
transfers a security interest in the receivables to the related trust, which
makes a loan to TRIP secured by the receivables. The purpose of these
structural features is to remove the receivables from the Company and to
isolate them in a special purpose entity, so that such receivables would not
constitute part of the Company's estate in the event of a bankruptcy of the
Company.
In all of these transactions, the Company retains interests in the trusts,
in the form of residual interests, spread accounts or rights to excess spread
on the receivables, which interests provide the initial level of protection to
investors against credit losses on the sold receivables. Each of these
securitizations would constitute a Qualified Securitization Transaction under
the Indenture.
In each securitization, the Company is appointed as the servicer of the
receivables. The Company can be replaced as servicer in any securitization
upon a material default in the performance of its duties. In each
securitization, the Company makes certain representations and warranties with
respect to the receivables it sells to an SPC, and the Company remains
obligated to repurchase receivables with respect to which such representations
or warranties are subsequently determined to be untrue.
The sales of receivables in the wholesale note securitization and the retail
loan owner trust securitizations constitute sales under generally accepted
accounting principles, with the result that the sold receivables are removed
from the Company's balance sheet and the investors' interests in the related
trust are not reflected as liabilities. However, the SPCs' interests in the
related trusts are reflected on the Company's consolidated balance sheet as
assets.
SALE-LEASEBACKS
In the first quarter of fiscal 1997, the Company effected two sale-
leasebacks of vehicles that were subject to retail leases with end users. The
aggregate value of the leased vehicles was approximately $75 million. In these
transactions, the Company transferred the vehicles to third party lessors and
leased the vehicles back from the lessors under a "head lease." In each
transaction, the Company pledged the associated retail leases to the lessors
as collateral for their obligations under the head leases. Each of the sale-
leasebacks would constitute a Capitalized Lease Obligation and a Qualified
Securitization Transaction under the Indenture. The Company may effect
additional sale-leasebacks in the future.
1998 NOTES
The 1998 Notes were issued pursuant to an indenture, dated as of November
15, 1993, between the Company and First Trust, N.A. (as successor to
Continental Bank, National Association), as Trustee (the "1998 Notes
Indenture"). The 1998 Notes are limited to $100 million aggregate principal
amount and mature on November 15, 1998. Interest on the 1998 Notes accrues at
a rate of 8 7/8% per annum and is payable on May 15 and November 15 of each
year. The 1998 Notes are not redeemable by the Company prior to maturity and
are not subject to any mandatory sinking fund payments. The Company used a
portion of the net proceeds of the Initial Offering to purchase $6.0 million
of its outstanding 1998 Notes. In addition, depending on market conditions,
the Company may repurchase additional amounts of the 1998 Notes.
The 1998 Notes Indenture contains certain covenants that, among other
things, limit the ability of the Company or any of its subsidiaries to
maintain or incur indebtedness, create liens, enter into certain transactions
with affiliates, or consummate certain merger, consolidation or asset sale
transactions. In addition, the Company
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is required to maintain a Consolidated Fixed Charge Coverage Ratio of at least
1.25 to 1.0 (as of the end of any fiscal quarter) under the 1998 Notes
Indenture, provided that such ratio will be reduced to 1.10 to 1.0 for any
fiscal quarter in which the 1998 Notes are rated investment grade. These
covenants are subject to certain exceptions and qualifications.
The 1998 Notes are general obligations of the Company and are subordinated
to all senior indebtedness of the Company (as defined in the 1998 Notes
Indenture). The 1998 Notes rank pari passu with all senior subordinated
indebtedness of the Company (including the Notes offered hereby) and rank
senior to subordinated indebtedness of the Company. As a result of the
restrictive covenants contained in the 1998 Notes Indenture and pursuant to
the Credit Agreement, holders of the 1998 Notes are secured, subject to the
subordination provisions contained in the Indenture, equally and ratably with
the holders of the Senior Indebtedness of the Company, by a lien on
substantially all of the assets of the Company. Such lien and security
interest is subject to release without prior notice to, or the consent of, the
holders of the 1998 Notes.
Upon a Change of Control Triggering Event (as defined in the 1998 Notes
Indenture), the Company will, subject to certain conditions, make an offer to
purchase all outstanding 1998 Notes at a purchase price of 101% of the
principal amount thereof plus accrued and unpaid interest to the redemption
date. The Credit Agreement imposes certain limitations on the purchase of the
1998 Notes upon a Change of Control Triggering Event.
RECEIVABLES PURCHASE AGREEMENT
Until November 1994, the Company sold retail notes from time to time to TRIP
pursuant to a Receivables Purchase Agreement with TRIP and a group of banks
(collectively, the "Purchasers"). TRIP in turn immediately resold such retail
notes to the Purchasers. This Receivables Purchase Agreement was terminated in
November 1994, when the Company started utilizing the ABCP Program. Each sale
of retail notes was made without recourse to the Company or TRIP, but the
Purchasers held back 10% to 12% of the purchase price to cover any losses on
such notes. Under the Receivables Purchase Agreement, the Company is
responsible for administering, servicing and collecting the retail notes sold
to the Purchasers. As of April 30, 1997, the Purchasers had a remaining
unrecovered net investment of approximately $19 million in retail notes, and
the holdback maintained by TRIP was approximately $9 million. The Company
anticipates repaying the Purchasers' unrecovered net investment of $15.8
million on or before June 30, 1997.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on May 30, 1997 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently placed the Old Notes with (i) qualified institutional buyers in
reliance on Rule 144A under the Securities Act, (ii) a limited number of
institutional accredited investors that agreed to comply with certain transfer
restrictions and other conditions and (iii) qualified buyers outside the
United States in reliance upon Regulation S under the Securities Act. As a
condition of the Purchase Agreement, the Company entered into the Registration
Rights Agreement with the Initial Purchasers pursuant to which the Company has
agreed, for the benefit of the holders of the Old Notes, at the Company's
cost, (i) to use its best efforts to file the Exchange Offer Registration
Statement within 60 days after the date of the original issue of the Old Notes
with the Commission with respect to the Exchange Offer for the Exchange Notes,
(ii) to use its best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 150 days
after the date of the original issuance of the Old Notes and (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
commence the Exchange Offer and use its best efforts to issue the Exchange
Notes on or prior to 180 days after the date of the original issuance of the
Old Notes. Upon the Exchange Offer Registration Statement being declared
effective, the Company will offer the Exchange Notes in exchange for surrender
of the Old Notes. The Company will keep the Exchange Offer open for not less
than 30 business days (or longer if required by applicable law) after the date
on which notice of the Exchange Offer is mailed to the holders of the Old
Notes. For each Old Note surrendered to the Company pursuant to the Exchange
Offer, the holder of such Old Note will receive an Exchange Note having a
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principal amount equal to that of the surrendered Old Note. Interest on each
Old Note will accrue from the last interest payment date on which interest was
paid on the Old Note or, if no interest has been paid on such Old Note, from
the date of its original issue to, but not including, the issuance date of the
Exchange Notes. Interest on each Exchange Note will accrue from the date of
its original issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the Exchange Notes will in general
be freely tradeable after the Exchange Offer without further registration
under the Securities Act. However, any purchaser of Old Notes who is an
"affiliate" of the Company or who intends to participate in the Exchange Offer
for the purpose of distributing the Exchange Notes (other than a broker-
dealer) (i) will not be able to rely on the interpretation of the staff of the
Commission, (ii) will not be able to tender its Old Notes in the Exchange
Offer and (iii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or transfer of
the Old Notes, unless such sale or transfer is made pursuant to an exemption
from such requirements.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Company in the Letter of Transmittal that (i) the Exchange Notes are to
be acquired by the holder or the person receiving such Exchange Notes, whether
or not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in distribution
of the Exchange Notes, (iii) the holder or any such other person has no
arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act, and (v) the holder or any such other person acknowledges
that if such holder or any other person participates in the Exchange Offer for
the purpose of distributing the Exchange Notes it must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the Exchange Notes and cannot rely on those no-
action letters. As indicated above, each Participating Broker-Dealer that
receives an Exchange Note for its own account in exchange for Old Notes must
acknowledge that it (i) acquired the Old Notes for its own account as a result
of market-making activities or other trading activities, (ii) has not entered
into any arrangement or understanding with the Company or any "affiliate" of
the Company (within the meaning of Rule 405 under the Securities Act) to
distribute the Exchange Notes to be received in the Exchange Offer and (iii)
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes. For a description of the
procedures for resales by Participant Broker-Dealers, see "Plan of
Distribution."
In the event that changes in the law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect such an
Exchange Offer, or if for any other reason the Exchange Offer is commenced and
not consummated within 225 days of the date of the original issuance of the
Old Notes, the Company will (i) file the Shelf Registration Statement covering
resales of the Old Notes; (ii) use its reasonable best efforts to cause the
Shelf Registration Statement to be declared effective under the Securities Act
and (iii) use its reasonable best efforts to keep effective the Shelf
Registration Statement until the earlier of (i) two years after the date of
the original issuance of the Old Notes or (ii) such time as all of the
applicable Old Notes have been sold thereunder. The Company will, in the event
of the filing of the Shelf Registration Statement, provide to each applicable
holder of the Old Notes copies of the prospectus which is a part of the Shelf
Registration Statement, notify each such holder when the Shelf Registration
Statement has become effective and take certain other actions as are required
to permit unrestricted resale of the Old Notes. A holder of the Old Notes that
sells such Old Notes pursuant to the Shelf Registration Statement generally
will be required to be named as a selling security holder in the related
prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions of the
Registration Rights Agreement which are applicable to such a holder (including
certain indemnification obligations). In addition, each holder of the Old
Notes will be required to deliver information to be used in connection with
the Shelf Registration Statement and to provide comments on the Shelf
Registration Statement within the time periods set forth in the Registration
Rights Agreement in order to have their Old Notes included in the Shelf
Registration Statement and to benefit from the provisions set forth in the
following paragraph.
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The Registration Rights Agreement provides that (i) the Company will file an
Exchange Offer Registration Statement with the Commission on or prior to 60
days after the date of the original issuance of the Old Notes with the
Commission, (ii) the Company will use its best efforts to have the Exchange
Offer Registration Statement declared effective by the Commission on or prior
to 150 days after the date of the original issuance of the Old Notes (iii)
unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Company will commence the Exchange Offer and use its
best efforts to issue on or prior to 180 days after the date of the original
issuance of the Old Notes, Exchange Notes in exchange for all Old Notes
tendered prior thereto in the Exchange Offer and (iv) if obligated to file the
Shelf Registration Statement, the Company will use its best efforts to file
the Shelf Registration Statement with the Commission in a timely fashion. If
(a) the Company fails to file any of the Registration Statements required by
the Registration Rights Agreement on or before the date specified for such
filing, (b) any of such Registration Statements is not declared effective by
the Commission on or prior to the date specified for such effectiveness, (c)
the Company fails to consummate the Exchange Offer within 180 days of the date
of the original issuance of the Old Notes, or (d) the Shelf Registration
Statement or the Exchange Offer Registration Statement is declared effective
but thereafter ceases to be effective during the periods specified in the
Registration Rights Agreement (each such event referred to in clauses (a)
through (d) above a "Registration Default"), the sole remedy available to
holders of the Old Notes will be the immediate assessment of Additional
Interest as follows: the per annum interest rate on the Old Notes will
increase by 0.25% and the per annum interest rate will increase by an
additional 0.25% for each subsequent 90-day period during which the
Registration Default remains uncured, up to a maximum additional interest rate
of 1.0% per annum in excess of 9% per annum. All Additional Interest will be
payable to holders of the Old Notes in cash on each June 1 and December 1,
commencing with the first such date occurring after any such Additional
Interest commences to accrue, until such Registration Default is cured. After
the date on which such Registration Default is cured, the interest rate on the
Old Notes will revert to 9% per annum.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and benefit from the provisions regarding
Additional Interest set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreement, a
copy of which is filed as an exhibit to the Exchange Offer Registration
Statement of which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue $1,000 principal amount
of Exchange Notes in exchange for each $1,000 principal amount of outstanding
Old Notes accepted in the Exchange Offer. Holders may tender some or all of
their Old Notes pursuant to the Exchange Offer. However, Old Notes may be
tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Old Notes except that (i) the Exchange Notes bear a Series B
designation and a different CUSIP Number from the Old Notes, (ii) the Exchange
Notes have been registered under the Securities Act and hence will not bear
legends restricting the transfer thereof and (iii) the holders of the Exchange
Notes will not be entitled to certain rights under the
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Registration Rights Agreement, including the provisions providing for an
increase in the interest rate on the Old Notes in certain circumstances
relating to the timing of the Exchange Offer, all of which rights will
terminate when the Exchange Offer is terminated. The Exchange Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits
of the Indenture.
As of the date of this Prospectus, $100,000,000 aggregate principal amount
of Old Notes were outstanding. The Company has fixed the close of business on
July 9, 1997 as the record date for the Exchange Offer for purposes of
determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware, or the Indenture in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
August 26, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under
"--Conditions" shall not have been satisfied, by giving oral or written notice
of such delay, extension or termination to the Exchange Agent or (ii) to amend
the terms of the Exchange Offer in any manner. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance. Holders
of Old Notes that are accepted for exchange will receive accrued interest
thereon to, but not including, the date of issuance of the Exchange Notes.
Such interest will be paid with the first interest payment on the Exchange
Notes on December 1, 1997 to the persons who are registered holders of the
Exchange Notes on November 15, 1997. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each June 1 and
December 1, commencing on December 1, 1997.
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PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal or transmit an Agent's
Message in connection with a book-entry transfer, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, or Agent's Message,
together with the Old Notes and any other required documents, to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date. To be
tendered effectively, the Old Notes, Letter of Transmittal or Agent's Message,
and other required documents must be completed and received by the Exchange
Agent at the address set forth below under "Exchange Agent" prior to 5:00
p.m., New York City time, on the Expiration Date. Delivery of the Old Notes
may be made by book-entry transfer in accordance with the procedures described
below. Confirmation of such book-entry transfer must be received by the
Exchange Agent prior to the Expiration Date.
The term "Agent's Message" means a message, transmitted by a book-entry
transfer facility to, and received by, the Exchange Agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the Old Notes that such participant has
received and agrees: (i) to participate in the Automated Tender Option Program
("ATOP"); (ii) to be bound by the terms of the Letter of Transmittal; and
(iii) that the Company may enforce such agreement against such participant.
By executing the Letter of Transmittal or Agent's Message, each holder will
make to the Company the representations set forth above in the third paragraph
under the heading "--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal or Agent's Message.
THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL OR AGENT'S
MESSAGE AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE
ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL,
HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member firm
of the Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such Old Notes with the
signature thereon guaranteed by an Eligible Institution.
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If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Old Notes at the book-entry transfer facility, The Depository Trust Company
(the "Book-Entry Transfer Facility"), for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Old Notes by causing such Book-Entry Transfer
Facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. Although delivery of the Old Notes may be
effected through book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility, unless an Agent's Message is received by the
Exchange Agent in compliance with ATOP, an appropriate Letter of Transmittal
properly completed and duly executed with any required signature guarantee and
all other required documents must in each case be transmitted to and received
or confirmed by the Exchange Agent at its address set forth below on or prior
to the Expiration Date, or, if the guaranteed delivery procedures described
below are complied with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old
Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Old Notes not properly tendered or any Old Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right in their sole
discretion to waive any defects, irregularities or conditions of tender as to
particular Old Notes. The Company's interpretation of the terms and conditions
of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be
cured within such time as the Issuer shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Old Notes, neither the Issuer, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) (or in the case of a book-entry
transfer, an Agent's Message) together with the certificate(s) representing
the Old Notes (or a confirmation of book-entry transfer of such Notes into
the Exchange Agent's account at the Book-Entry Transfer Facility), and any
other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) the certificate(s) representing all tendered Old Notes in proper form
for transfer (or a confirmation of book-entry transfer of such Old Notes
into the Exchange Agent's account at the Book-Entry Transfer
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Facility), together with a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message)
and all other documents required by the Letter of Transmittal are received
by the Exchange Agent upon five New York Stock Exchange trading days after
the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Old Notes to be withdrawn
(the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case
of Old Notes transferred by book-entry transfer, the name and number of the
account at the Book-Entry Transfer Facility to be credited), (iii) be signed
by the holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Old Notes register the transfer of such
Old Notes into the name of the person withdrawing the tender and (iv) specify
the name in which any such Old Notes are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes
so withdrawn will be deemed not to have been validly tendered for purposes of
the Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Old Notes so withdrawn are validly retendered. Any Old Notes which
have been tendered but which are not accepted for exchange will be returned to
the holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described above under "--Procedures for Tendering" at any time prior to the
Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange Exchange Notes for, any Old
Notes, and may terminate or amend the Exchange Offer as provided herein before
the acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the
ability of the Company to proceed with the Exchange Offer or any material
adverse development has occurred in any existing action or proceeding with
respect to the Company or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the sole judgment
of the Company, might materially impair the ability of the Company to
proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its sole discretion, deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the conditions
are not satisfied, the Company may (i) refuse to accept any Old Notes and
return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders to withdraw
such Old Notes (see "--Withdrawal of Tenders") or (iii) waive such unsatisfied
conditions with respect to the Exchange Offer and accept all properly tendered
Old Notes which have not been withdrawn.
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EXCHANGE AGENT
The Fuji Bank and Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed
to the Exchange Agent addressed as follows:
By Mail: Overnight Courier:
The Fuji Bank and Trust Company The Fuji Bank and Trust Company
Corporate Trust Department Corporate Trust Department
81st Floor 81st Floor
2 World Trade Center 2 World Trade Center
New York, New York 10048 New York, New York 10048
Attention: Thomas S. Moser Attention: Thomas S. Moser
Facsimile Transmission:
By Hand: (212) 321-2468
The Fuji Bank and Trust Company
Corporate Trust Department
81st Floor
2 World Trade Center
New York, New York 10048
Attention: Thomas S. Moser
Confirm by Telephone:
(212) 898-2543
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is face value, as reflected in the Company's accounting records
on the date of exchange. Accordingly, no gain or loss for accounting purposes
will be recognized by the Company. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old Notes are eligible for resale pursuant to Rule 144A,
to a person inside the United States whom the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance
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with Rule 144 under the Securities Act, or pursuant to another exemption from
the registration requirements of the Securities Act (and based upon an opinion
of counsel reasonably acceptable to the Company), (iii) outside the United
States to a foreign person in a transaction meeting the requirements of Rule
904 under the Securities Act, or (iv) pursuant to an effective registration
statement under the Securities Act, in each case in accordance with any
applicable securities laws of any state of the United States.
RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third
parties, the Company believes that a holder or other person who receives
Exchange Notes, whether or not such person is the holder (other than a person
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), in exchange for Old Notes in the ordinary course of business
and who is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, will be allowed to resell the Exchange
Notes to the public without further registration under the Securities Act and
without delivering to the purchasers of the Exchange Notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if
any holder acquires Exchange Notes in the Exchange Offer for the purpose of
distributing or participating in a distribution of the Exchange Notes, such
holder cannot rely on the position of the staff of the Commission enunciated
in such no-action letters or any similar interpretive letters, and must comply
with the registration and prospectus delivery requirements of the Securities
Act in connection with any resale transaction, unless an exemption from
registration is otherwise available. Further, each Participating Broker-Dealer
that receives Exchange Notes for its own account in exchange for Old Notes,
where such Old Notes were acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Company in the Letter of Transmittal that (i) the Exchange Notes are to
be acquired by the holder or the person receiving such Exchange Notes, whether
or not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act, and (v) the holder or any such other person acknowledges
that if such holder or other person participates in the Exchange Offer for the
purpose of distributing the Exchange Notes it must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the Exchange Notes and cannot rely on those no-
action letters. As indicated above, each Participating Broker-Dealer that
receives Exchange Notes for its own account in exchange for Old Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. For a description of the procedures for such resales by
Participating Broker-Dealers, see "Plan of Distribution."
DESCRIPTION OF THE NOTES
As used below in this "Description of the Notes" section, the "Company"
means Navistar Financial Corporation, but not any of its subsidiaries, unless
the context requires otherwise.
The Exchange Notes will be issued under an Indenture dated as of May 30,
1997 (the "Indenture") between the Company and The Fuji Bank and Trust
Company, as trustee (the "Trustee"). The terms of the Exchange Notes include
those stated in the Indenture and those made a part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended, as in effect on the
date of the Indenture (the "TIA"). The form and terms of the Exchange Notes
are the same as the form and terms of the Old Notes (which they replace)
except that (i)
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the Exchange Notes bear a Series B designation, (ii) the issuance of the
Exchange Notes have been registered under the Securities Act and, therefore,
the Exchange Notes will not bear legends restricting the transfer thereof, and
(iii) the holders of Exchange Notes will not be entitled to certain rights
under the Registration Rights Agreement, including the provisions providing
for an increase in the interest rate on the Old Notes in certain circumstances
relating to the timing of the Exchange Offer, which rights will terminate when
the Exchange Offer is consummated. The Exchange Notes are subject to all such
terms, and holders of the Exchange Notes ("Holders") are referred to the
Indenture and the TIA for a statement of such terms. The following summary of
the material provisions of the Notes does not purport to be complete and is
subject to, and is qualified in its entirety by reference to the Notes and all
provisions of the Indenture, including the definitions therein of certain
terms and all terms made a part of the Indenture by reference to the TIA. A
copy of the Indenture has been filed as an exhibit to the Exchange Offer
Registration Statement of which this Prospectus forms a part. Certain
definitions of terms used in the following summary are set forth under "--
Certain Definitions" below. The Old Notes and the Exchange Notes are sometimes
referred to herein collectively as the "Notes."
GENERAL
The Notes will be general senior subordinated obligations of the Company,
will mature on June 1, 2002 (the "Maturity Date"), and will be limited to an
aggregate principal amount of $100,000,000. The Notes will be issued in
denominations of $1,000 and integral multiples thereof in fully registered
form. The Notes are exchangeable and transfers thereof will be registrable
without charge therefor, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge in connection
therewith.
The Notes will accrue interest at 9% per annum from the date of issuance
thereof (the "Closing Date"), or from the most recent interest payment date to
which interest has been paid or duly provided for, and accrued and unpaid
interest will be payable semi-annually on June 1 and December 1 of each year
beginning December 1, 1997. Interest will be paid to the Person in whose name
a Note is registered at the close of business on the May 15 or November 15
immediately preceding the relevant interest payment date. Interest will be
computed on the basis of a 360-day year of twelve full 30-day months and, for
periods of less than one month, the actual number of days elapsed. Interest on
overdue principal and (to the extent permitted by law) on overdue installments
of interest will accrue at a rate of 9% per annum.
Initially, the Trustee will act as paying agent and registrar of the Notes.
The Company may change any paying agent and registrar without notice.
SUBORDINATION AND RANKING
The Indebtedness evidenced by the Notes will be subordinated to the prior
payment when due of the principal of, and premium, if any, and accrued and
unpaid interest on, all existing and future Senior Indebtedness of the
Company. The Notes will rank pari passu with the 1998 Notes and with all
existing and future senior subordinated Indebtedness of the Company, and will
rank senior to all existing and future subordinated Indebtedness of the
Company (other than the 1998 Notes and other than Indebtedness of the Company
that is subordinated solely to Senior Indebtedness of the Company).
Anything in any Notes to the contrary notwithstanding, the Indebtedness
evidenced by the Notes shall be subordinate and junior in right of payment, in
all respects, to all Senior Indebtedness of the Company. Without limiting the
effect of the foregoing, "subordinate" and "junior" as used in the Indenture
shall include within their meanings the following:
(i) in the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization or other similar proceedings in
connection therewith, relative to the Company or its creditors or its
property, and in the event of any proceedings for voluntary liquidation,
dissolution or other winding
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up of the Company, whether or not involving insolvency or bankruptcy
proceedings, then (A) all Senior Indebtedness of the Company shall first be
paid in full, or such payment be provided for, before any payment on
account of principal or interest is made upon the Indebtedness evidenced by
the Notes, and (B) in any such proceedings any payment or distribution of
any kind or character (including without limitation any distribution
realized from or attributable to any security interest of the Holders of
the Notes in property or assets of the Company), whether in cash or
property or securities which may be payable or deliverable in respect of
the Notes, shall be paid or delivered directly to the holders of such
Senior Indebtedness of the Company (or the representative or
representatives of such holders or the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior
Indebtedness of the Company shall have been issued) for application in
payment thereof, unless and until such Senior Indebtedness of the Company
shall have been paid in full or such payment shall have been provided for;
provided that (1) in the event that payment or delivery of such cash,
property or securities to the Holders of the Notes is authorized by an
order or decree giving effect, and stating in such order or decree that
effect is given, to the subordination of the Notes to Senior Indebtedness
of the Company, and made by a court of competent jurisdiction in a
reorganization proceeding under any applicable law, no payment or delivery
of such cash, property or securities payable or deliverable with respect to
the Notes need be made to the holders of Senior Indebtedness of the
Company, (2) no such delivery need be made of securities which are issued
pursuant to voluntary reorganization, dissolution, or liquidation
proceedings by the Company or by the Company as reorganized, if such
securities are subordinate and junior to the payment of all Senior
Indebtedness of the Company then outstanding to the same extent as the
Notes and (3) if, pursuant to the foregoing, a payment or delivery of cash,
property or securities is to be made to the holders of Senior Indebtedness
of the Company (or their representative or representatives or the trustee
or trustees under any indenture under which any instruments evidencing any
such Senior Indebtedness of the Company shall have been issued) from a
distribution realized from or attributable to any security interest of the
Holders of the Notes in property or assets of the Company, such payment or
delivery shall be made (x) first, to the holders of any Senior Indebtedness
of the Company (or their representative or representatives) secured equally
and ratably with the Holders of the Notes with respect to such property or
assets or to the trustee or trustees under any indenture under which any
instruments evidencing any of such Senior Indebtedness of the Company shall
have been issued, ratably according to the aggregate amounts remaining
unpaid on account of such Senior Indebtedness of the Company held or
represented by each, until such Senior Indebtedness of the Company shall
have been paid in full or such payment shall have been provided for and (y)
then, to the extent such payment or delivery shall not be required to pay
the Senior Indebtedness of the Company referred to in the foregoing clause
(x), to the other holders of Senior Indebtedness of the Company (or their
representative or representatives or the trustee or trustees under any
indenture under which any instruments evidencing any of such Senior
Indebtedness of the Company shall have been issued), ratably according to
the aggregate amounts remaining unpaid on account of such Senior
Indebtedness of the Company held or represented by each, until such Senior
Indebtedness of the Company shall have been paid in full or such payment
shall have been provided for;
(ii) no payment or prepayment of any principal, premium (if any) or
interest on account of and no repurchase, redemption or other retirement
(whether at the option of the Holder or otherwise) of the Notes shall be
made, if at the time of such payment, prepayment, repurchase, redemption or
retirement, or immediately after giving effect thereto, there shall exist a
default in the payment or prepayment of any Senior Indebtedness of the
Company;
(iii) in the event that any Note is declared due and payable because of
the occurrence of an Event of Default (under circumstances when the
provisions of the foregoing clause (i) shall not be applicable), the
Holders of the Notes shall be entitled to payment only after there shall
first have been paid in full the Senior Indebtedness of the Company
outstanding at the time such Note so becomes due and payable because of
such Event of Default, or provision for such payment shall have been made;
and
(iv) in the event that (A) any of the events described in clauses (i),
(ii) and (iii) occurs and (B) notwithstanding the provisions therein, any
payment or distribution of assets of the Company of any kind or character
(including any distribution realized from or attributable to any security
interest of the Holders of
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the Notes in property or assets of the Company), whether in cash, property
or securities, shall be received by the Holders of the Notes (or their
representative or representatives or the Trustee under the Indenture)
before all Senior Indebtedness of the Company shall have been paid in full,
or provision made for such payment in accordance with the terms of the
Senior Indebtedness of the Company, except as provided in subclauses (1)
and (2) of the proviso to clause (i) above, such payment or distribution
shall be held in trust for the benefit of, and shall be paid over or
delivered to, the holders of such Senior Indebtedness of the Company (or
their representative or representatives or to the trustee or trustees under
any indenture pursuant to which any instruments evidencing any of such
Senior Indebtedness of the Company shall have been issued), as their
respective interests may appear under said clauses (i), (ii) and (iii), for
application to the payment of all such Senior Indebtedness of the Company
remaining unpaid to the extent necessary to pay such Senior Indebtedness of
the Company in full in accordance with its terms, after giving effect to
any concurrent payment or distribution to the holders of such Senior
Indebtedness of the Company.
No present or future holder of Senior Indebtedness of the Company shall be
prejudiced in his right to enforce subordination of the Notes by any act or
failure to act on the part of the Company.
These provisions are solely for the purpose of defining the relative rights
of the holders of Senior Indebtedness of the Company on the one hand, and the
Holders of the Notes on the other hand, and nothing in the Indenture shall
impair, as between the Company and the Holder of any Note, the obligation of
the Company, which is unconditional and absolute, to pay to the Holder thereof
the principal, premium, if any, and interest thereon in accordance with its
terms, nor shall anything in the Indenture prevent the Holder of a Note from
exercising all remedies otherwise permitted by applicable law or under the
Indenture or any Note upon default under the Indenture or any Note, subject to
the rights, if any, under the subordination provisions in the Indenture of
holders of Senior Indebtedness of the Company to receive cash, property or
securities otherwise payable or deliverable to the Holders of the Notes.
If the Company fails to make any payment on the Notes when due or within any
applicable grace period, whether or not such failure is on account of the
subordination provisions referred to above, such failure would constitute an
Event of Default under the Indenture and would enable the Holders to
accelerate the maturity of the Notes. See "--Events of Default."
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are not holders of Senior Indebtedness of the
Company (other than the Holders or other equally subordinated obligations) may
recover less, ratably, than the holders of Senior Indebtedness of the Company
and may recover more, ratably, than the Holders of the Notes.
At April 30, 1997, the Company had approximately $1,112.8 million of
obligations outstanding which would constitute Senior Indebtedness of the
Company. Although the Indenture will restrict, but not prohibit, the
incurrence of Senior Indebtedness of the Company and other Indebtedness by the
Company and its Subsidiaries, the incurrence of significant amounts of
additional Indebtedness could have an adverse impact on the Company's ability
to service its Indebtedness, including the Notes. Moreover, the Indenture does
not impose any limitation on the incurrence by the Company or by any
Subsidiary of the Company of liabilities that are not Indebtedness under the
Indenture.
At April 30, 1997, after giving effect to the consummation of the Initial
Offering and the application of the estimated net proceeds therefrom as set
forth under "Use of Proceeds," there will be approximately $94.0 million of
Indebtedness of the Company which would be pari passu with the Notes and there
is no indebtedness subordinated to the Notes.
The Notes are effectively subordinated to all existing and future
liabilities (including liabilities owed to trade creditors) of the
Subsidiaries of the Company to the extent of the assets of each Subsidiary of
the Company. Any right of the Company to participate in any distribution of
the assets of its Subsidiaries upon the liquidation, reorganization or
insolvency thereof (and the consequent right of the Holders to benefit from
those assets) will
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be subject to the claims of creditors (including trade creditors) of such
Subsidiary, except to the extent that claims of the Company itself as a
creditor of such Subsidiary may be recognized, in which case the claims of the
Company would still be subordinate to any security interest in the assets of
such Subsidiary and any Indebtedness of such Subsidiary senior to that held by
the Company.
At the date of this Prospectus, the Notes would be solely the obligation of
the Company, and no Subsidiary of the Company would be obligated to the
Holders or obligated or required to pay any amounts due pursuant to the Notes
or make funds available therefor in the form of dividends or advances to the
Company. At April 30, 1997, the Subsidiaries of the Company had other
liabilities under generally accepted accounting principles (including trade
payables) to third parties of approximately $11.4 million. Such Indebtedness
includes various obligations not reported in the capitalization of the
Company, primarily current liabilities (other than short-term debt).
SINKING FUND
The Notes are not subject to any mandatory sinking fund.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control Triggering Event (the date of
each such occurrence being the "Change of Control Date"), the Company will
notify the Holders in writing of such occurrence and will make an offer to
purchase (the "Change of Control Offer"), on a Business Day (the "Change of
Control Payment Date") not earlier than 30 nor later than 60 days following
the date notification of the Change of Control Triggering Event is first
given, all Notes then outstanding at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to such
Change of Control Payment Date. Notice of a Change of Control Triggering Event
will be mailed by the Company to the Holders not more than 30 days after any
Change of Control Date.
None of the provisions relating to a purchase upon a Change of Control
Triggering Event are waivable by the Board of Directors of the Company. The
Company could, in the future, enter into certain transactions, including
certain recapitalizations of the Company, that would not constitute a Change
of Control Triggering Event with respect to the Change of Control purchase
feature of the Notes, but would increase the amount of Indebtedness
outstanding at such time. If a Change of Control Triggering Event were to
occur, there can be no assurance that the Company would have sufficient funds
to pay the redemption price for all Notes that the Company is required to
redeem. In the event that the Company were required to purchase outstanding
Notes pursuant to a Change of Control Offer, the Company expects that it would
need to seek third-party financing to the extent it does not have available
funds to meet its purchase obligations. However, there can be no assurance
that the Company would be able to obtain such financing.
With respect to the disposition of property or assets, the phrase "all or
substantially all" as used in the Indenture (including as set forth under "--
Merger, Consolidation, Etc." below) varies according to the facts and
circumstances of the subject transaction, has no clearly established meaning
under New York law (which governs the Indenture) and is subject to judicial
interpretation. Accordingly, in certain circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the property or assets of a
Person and therefore it may be unclear as to whether a Change of Control has
occurred and whether the Holders are subject to a Change of Control Offer.
The Company would be required to obtain a consent from the lenders under the
present terms of the Credit Agreement to incur any Indebtedness to repurchase
outstanding Notes pursuant to a Change of Control Offer and to make payments
to the Holders pursuant to such Change of Control Offer. In addition, the
Company's ability to repurchase Notes may be limited by other then-existing
borrowing agreements. There can be no assurance that the Company will be able
to obtain such a consent or a waiver of such limitations. A Change of Control
Triggering Event would result in an event of default under the Credit
Agreement and permit the holders
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of the Indebtedness of the Company thereunder to declare all amounts
outstanding thereunder to be immediately due and payable, and the rights of
the Holders to receive the Change of Control purchase price for the Notes or
any other amount due on the Notes would be subordinated to the rights of the
holders of Senior Indebtedness of the Company in the manner set forth in the
Indenture. See "--Subordination and Ranking" and "--Events of Default."
If an offer is made to redeem Notes as a result of a Change of Control
Triggering Event, the Company will comply with all tender offer rules under
state and Federal securities laws, including, but not limited to, Section
14(e) under the Exchange Act and Rule 14e-1 thereunder, to the extent
applicable to such offer.
The Change of Control redemption feature of the Notes may in certain
circumstances make more difficult or discourage a takeover of Navistar,
Transportation or the Company and, thus, the removal of incumbent management.
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
Limitation on Indebtedness. (a) The Company will not, and the Company will
not cause or permit any of its Subsidiaries to, incur or otherwise become or
be liable in respect of any Indebtedness (including, without limitation,
Acquired Indebtedness) other than:
(1) Senior Indebtedness of the Company and Indebtedness of Subsidiaries
of the Company, provided that the aggregate outstanding principal amount of
the sum of Senior Indebtedness of the Company plus Indebtedness of
Subsidiaries of the Company shall not at any time exceed 500% of the sum of
the aggregate outstanding principal amount of Subordinated Indebtedness
plus Consolidated Tangible Net Worth, except that such 500% shall be
increased to 525% of such sum during any part or all of any three
consecutive calendar months immediately succeeding six consecutive calendar
months during which such aggregate outstanding principal amount has not
exceeded 500% of such sum;
(2) Subordinated Indebtedness of the Company, provided that the aggregate
outstanding principal amount thereof shall not at the time of incurrence
exceed 100% of Consolidated Tangible Net Worth; and
(3) Indebtedness between the Company and any of its Subsidiaries and
Indebtedness between Subsidiaries of the Company so long as held by the
Company or any Subsidiary of the Company.
(b) Notwithstanding anything in the Indenture to the contrary, the
consummation of any Qualified Securitization Transaction shall not be deemed
to be the incurrence or maintenance of Indebtedness by the Company or by any
Subsidiary of the Company.
Maintenance of Consolidated Fixed Charge Coverage Ratio. The Company will
not permit its Consolidated Fixed Charge Coverage Ratio as of the end of any
of its fiscal quarters to be less than 1.25 to 1.0, provided that such ratio
shall be 1.10 to 1.0 for any fiscal quarter in which the Notes are rated
Investment Grade by both Rating Agencies on the last day of such fiscal
quarter.
Limitation on Senior Subordinated Indebtedness. The Company will not, and
the Company will not cause or permit any Subsidiary Guarantor to, directly or
indirectly, in any event incur any (a) Indebtedness that purports to be by its
terms (or by the terms of any agreement governing such Indebtedness) both
subordinate to any other Indebtedness of the Company or of such Subsidiary
Guarantor, as the case may be, and senior or superior in any right of payment
or interest to the Notes or the Subsidiary Guarantees, as the case may be, or
(b) Indebtedness which by its terms (or by the terms of any agreement
governing such Indebtedness) is subordinated to any other Indebtedness of the
Company or of such Subsidiary Guarantor, as the case may be (other than
Indebtedness of the Company or of such Subsidiary Guarantor, as the case may
be (including the Notes or the Subsidiary Guarantees, as the case may be),
that is subordinated solely to Senior Indebtedness of the Company or Guarantor
Senior Indebtedness of such Subsidiary Guarantor), unless such Indebtedness is
also by its terms (or by the terms of any agreement governing such
Indebtedness) made expressly subordinate to the Notes or the Subsidiary
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Guarantees, as the case may be, to the same extent and in the same manner as
such Indebtedness is subordinated pursuant to subordination provisions that
are most favorable to the holders of any other Indebtedness of the Company or
of such Subsidiary Guarantor, as the case may be.
Limitation on Liens. The Company will not, and will not cause or permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Liens
upon any of their respective properties or assets (including, without
limitation, any asset in the form of the right to receive payments, fees or
other consideration or benefits) whether owned on the Issue Date or acquired
after the Issue Date, other than (i) Liens granted by the Company on property
or assets of the Company securing Senior Indebtedness of the Company that is
permitted by the Indenture, provided that the Notes are secured equally and
ratably with such Senior Indebtedness subject to the provisions set forth
under "--Subordination and Ranking" above; (ii) Liens granted by the Company
on property or assets of the Company securing Indebtedness of the Company that
is permitted by the Indenture and that is pari passu with the Notes, provided
that the Notes are secured on an equal and ratable basis with such Liens;
(iii) Liens granted by the Company on property or assets of the Company
securing Indebtedness of the Company that is permitted by the Indenture and
that is subordinated to the Notes, provided that the Notes are secured by
Liens ranking prior to such Liens; (iv) Liens existing on the Issue Date
immediately after giving effect to the consummation of the offering of the
Notes and the application of the net proceeds therefrom as set forth under
"Use of Proceeds" above to the extent and in the manner such Liens are in
effect on the Issue Date, provided that the Notes are secured equally and
ratably with the Indebtedness of the Company outstanding under the Credit
Agreement subject to the provisions set forth under "--Subordination and
Ranking" above; (v) Permitted Liens; (vi) Liens in respect of Acquired
Indebtedness permitted by the Indenture, provided that the Liens in respect of
such Acquired Indebtedness secured such Acquired Indebtedness at the time of
the incurrence of such Acquired Indebtedness by the Company and such Liens and
the Acquired Indebtedness were not incurred by the Company or by the Person
being acquired or from whom the assets were acquired in connection with, or in
anticipation of, the incurrence of such Acquired Indebtedness by the Company,
and provided, further that such Liens in respect of such Acquired Indebtedness
do not extend to or cover any property or assets of the Company or of any
Subsidiary of the Company other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company; (vii) Liens granted by the Company or any
Subsidiary of the Company on property or assets of the Company or such
Subsidiary securing other Indebtedness permitted by the Indenture not to
exceed $2,000,000 in the aggregate; (viii) Liens granted in connection with
any Qualified Securitization Transaction; (ix) Liens arising from claims of
holders of Indebtedness against funds held in a defeasance trust for the
benefit of such holders; and (x) Liens granted by any Subsidiary of the
Company on property or assets of such Subsidiary securing Indebtedness of such
Subsidiary that is permitted by the Indenture; provided that the Company shall
cause any Subsidiary Guarantor that incurs such secured Indebtedness to secure
equally and ratably and on a parity with the Indebtedness of such Subsidiary
that is so secured such Subsidiary Guarantor's Subsidiary Guarantee.
Limitation on Payment Restrictions Affecting Subsidiaries. The Company will
not, and will not cause or permit any of its Subsidiaries to, directly or
indirectly, create or suffer to exist or allow to become effective any
consensual encumbrance or restriction of any kind on the ability of any such
Subsidiary to (i) pay dividends, in cash or otherwise, or make other payments
or distributions on its Capital Stock or any other equity interest or
participation in, or measured by, its profits, owned by the Company or by any
Subsidiary of the Company, or make payments on any Indebtedness owed to the
Company or to any Subsidiary of the Company; (ii) make loans or advances to
the Company or to any Subsidiary of the Company; or (iii) transfer any of
their respective property or assets to the Company or to any Subsidiary of the
Company, except for such encumbrances or restrictions existing under or by
reason of (A) applicable law or regulations; (B) customary provisions
restricting subletting or assignment of any lease governing a leasehold
interest of any Subsidiary of the Company; or (C) Indebtedness or any other
contractual requirements (including pursuant to any corporate governance
documents in the nature of a charter or by-laws) of a Securitization
Subsidiary arising in connection with a Qualified Securitization Transaction,
provided that any such encumbrances and restrictions apply only to such
Securitization Subsidiary.
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Limitation on Transactions with Affiliates. The Company will not, nor will
the Company cause or permit any of its Subsidiaries to (a) sell, lease,
transfer or otherwise dispose of any of its property or assets to, (b)
purchase any property or assets from, (c) make any Investment in, or (d) enter
into or amend or extend any contract, agreement or understanding with or for
the benefit of, any Affiliate of the Company or of any Subsidiary (an
"Affiliate Transaction"), other than Affiliate Transactions that are on terms
that are fair and reasonable to the Company or such Subsidiary of the Company
and that are no less favorable to the Company or such Subsidiary of the
Company than those that could be obtained in a comparable arm's length
transaction by the Company or such Subsidiary of the Company from an
unaffiliated party, provided that if the Company or any Subsidiary of the
Company enters into an Affiliate Transaction or series of Affiliate
Transactions involving or having an aggregate value of more than $10,000,000,
a majority of the Board of Directors of the Company shall, prior to the
consummation of such Affiliate Transaction, have determined in the reasonable
good faith judgment of such directors that such Affiliate Transaction meets
the foregoing standard. The foregoing restrictions shall not apply to (a) any
transaction between Wholly Owned Subsidiaries of the Company, or between the
Company and any Wholly Owned Subsidiary of the Company if such transaction is
not otherwise prohibited by the terms of the Indenture, (b) transactions
entered into pursuant to the terms of the Master Intercompany Agreement and
the Tax Allocation Agreement, (c) transactions entered into in the ordinary
course of business and (d) Qualified Securitization Transactions.
Limitation on Guarantees by Subsidiaries. The Company shall not cause or
permit any of its Subsidiaries, directly or indirectly, to guarantee the
payment of any Indebtedness of the Company or of any Subsidiary of the Company
unless such Subsidiary of the Company simultaneously executes and delivers a
supplemental indenture to the Indenture providing for the guarantee of payment
of the Notes by such Subsidiary of the Company and if any such guarantee is
given to any holders of Senior Indebtedness of the Company, such Subsidiary
Guarantor's Subsidiary Guarantee will be subordinated to Guarantor Senior
Indebtedness to the same extent and in the same manner as the Notes are
subordinated to Senior Indebtedness of the Company under the Indenture,
provided that no such guarantee of such other Indebtedness shall be permitted
by this provision unless (A) such guarantee of such other Indebtedness (1) is
unsecured, unless the Subsidiary Guarantee of such Subsidiary Guarantor is (I)
with respect to such Subsidiary Guarantor's guarantee of Senior Indebtedness
of the Company, secured equally and ratably with any Liens securing such
Subsidiary Guarantor's guarantee of such Senior Indebtedness, subject to the
provisions set forth under "--Subordination and Ranking" above, (II) with
respect to such Subsidiary Guarantor's guarantee of Indebtedness of the
Company ranking pari passu with the Notes, secured equally and ratably with
the Liens securing such Subsidiary Guarantor's guarantee of such pari passu
Indebtedness and (III) with respect to such Subsidiary Guarantor's guarantee
of Indebtedness of the Company that is subordinated to the Notes, secured on a
basis ranking prior to the Liens securing such Subsidiary Guarantor's
guarantee of such subordinated Indebtedness, (2) other than any guarantee by
such Subsidiary Guarantor of Senior Indebtedness of the Company incurred in
accordance with the Indenture, is not and does not purport to be senior or
superior in right of payment or otherwise to the Subsidiary Guarantee of such
Subsidiary Guarantor and (3) if such guarantee of such other Indebtedness is
of Indebtedness of the Company that is subordinated or junior to the Notes
(whether pursuant to its terms or by operation of law), is subordinated,
pursuant to a written agreement, to the Subsidiary Guarantee of such
Subsidiary Guarantor at least to the same extent and in the same manner as the
Subsidiary Guarantee of such Subsidiary Guarantor is (or would be if no
Guarantor Senior Indebtedness is then outstanding) subordinated to Guarantor
Senior Indebtedness, (B) the Subsidiary Guarantee of such Subsidiary Guarantor
is not subordinated or junior to any Indebtedness of such Subsidiary Guarantor
other than Guarantor Senior Indebtedness of such Subsidiary Guarantor and (C)
such Subsidiary of the Company waives, and agrees that it will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the
Company or any other Subsidiary of the Company as a result of any payment by
such Subsidiary of the Company under its Subsidiary Guarantee. Notwithstanding
the foregoing, any Subsidiary Guarantee shall provide by its terms that it
shall be automatically and unconditionally released and discharged upon either
(A) the unconditional release or discharge of such Subsidiary's guarantees of
all other Indebtedness of the Company (other than a release resulting from
payment under such Subsidiary's guarantees) or (B) any sale, exchange or
transfer, to any Person not an Affiliate of the Company, of all (but not less
than all) of the Capital Stock of such Subsidiary of the Company, or all or
substantially all of the assets of
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such Subsidiary of the Company, pursuant to a transaction which is in
compliance with all of the terms of the Indenture.
Limitation on Termination of Master Intercompany Agreement. The Company
shall not amend, modify, rescind, terminate or waive any of the provisions of
Article II.A.1 of the Master Intercompany Agreement (except to remove obsolete
references therein the removal of which would not be adverse to the Company)
or effect any other amendment of the Master Intercompany Agreement which would
materially and adversely affect the Company.
REPORTS
So long as any Note is outstanding, the Company will file with the
Commission and, within 15 days after it files them with the Commission, file
with the Trustee and mail or cause the Trustee to mail to the Holders at their
addresses as set forth in the register of the Notes copies of the annual
reports and of the information, documents and other reports which the Company
is required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act or which the Company would be required to file with the
Commission if the Company then had a class of securities registered under the
Exchange Act. In addition, the Company shall cause its annual report to
stockholder and any quarterly or other financial reports furnished to its
stockholder generally to be filed with the Trustee and mailed, no later than
the date such materials are mailed or made available to the Company's
stockholder, to the Holders at their addresses as set forth in the register of
Notes.
MERGER, CONSOLIDATION, ETC.
The Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of (and the Company will not cause or
permit any of its Subsidiaries to sell, assign, transfer, lease, convey or
otherwise dispose of) all or substantially all of the Company's and its
Subsidiaries' assets (determined on a consolidated basis for the Company and
its Subsidiaries) to, any Person or adopt a Plan of Liquidation unless: (i)
either (1) the Company shall be the surviving or continuing corporation or (2)
the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance,
transfer or lease the properties and assets of the Company and its
Subsidiaries substantially as an entirety or in the case of a Plan of
Liquidation, or Person to which assets of the Company and its Subsidiaries
have been transferred (x) shall be a corporation organized and validly
existing under the laws of the United States or any State thereof or the
District of Columbia and (y) shall expressly assume, by supplemental indenture
(in form and substance satisfactory to the Trustee), executed and delivered to
the Trustee, the due and punctual payment of the principal of, and premium, if
any, and interest on all of the Notes and the performance of every covenant of
the Notes and the Indenture on the part of the Company to be performed or
observed; (ii) immediately after giving effect to such transaction and the
assumption contemplated by clause (i)(2)(y) above (including giving effect to
any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company
(in the case of clause (1) of the foregoing clause (i)) or such Person (in the
case of clause (2) thereof) shall have a Consolidated Tangible Net Worth
(immediately after the transaction but prior to any purchase accounting
adjustments relating to such transaction) equal to or greater than the
Consolidated Tangible Net Worth of the Company immediately prior to such
transaction; (iii) immediately before and after giving effect to such
transaction and the assumption contemplated by clause (i)(2)(y) above
(including giving effect to any Indebtedness and Acquired Indebtedness
incurred or anticipated to be incurred in connection with or in respect of the
transaction) no Default and no Event of Default shall have occurred or be
continuing; (iv) the Company or such Person shall have delivered to the
Trustee (A) an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger, conveyance, transfer or lease or Plan of
Liquidation and, if a supplemental indenture is required in connection with
such transaction, such supplemental indenture, comply with this provision of
the Indenture and that all conditions precedent in the Indenture relating to
such transaction have been satisfied and (B) a certificate from the Company's
independent certified public accountants stating that the Company has made the
calculations required by clause (ii) above in accordance with the terms of
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the Indenture; and (v) each Subsidiary Guarantor, unless it is the other party
to the transaction, shall have by supplemental indenture confirmed that its
Subsidiary Guarantee shall apply, without alteration or amendment and in every
identical respect as its Subsidiary Guarantee applies on the date it was
granted under the Indenture to the obligations of the Company under the
Indenture and the Notes, to the obligations of the Company or such Person, as
the case may be, under the Indenture and the Notes after the consummation of
such transaction of the Company. Notwithstanding the foregoing, (x) a Wholly
Owned Subsidiary of the Company may consolidate with, or merge with or into,
or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, the Company or another Wholly Owned
Subsidiary of the Company without complying with clause (ii) of the above and
(y) a series of transactions involving the sale of Receivables or interests
therein by the Company or a Securitization Subsidiary in connection with a
Qualified Securitization Transaction shall not be deemed to be the sale of all
or substantially all of the Company's assets to the extent such transactions
are consummated in the ordinary course of business.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of
the Company, the Capital Stock of which constitutes all or substantially all
of the properties and assets of the Company, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
Upon any such consolidation, merger, conveyance, lease or transfer in
accordance with the foregoing, the successor Person formed by such
consolidation or into which the Company is merged or to which such conveyance,
lease or transfer is made will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture with the
same effect as if such successor had been named as the Company therein, and
thereafter (except in the case of a sale, assignment, transfer, lease,
conveyance or other disposition) the predecessor corporation will be relieved
of all further obligations and covenants under the Indenture and the Notes.
Each Subsidiary Guarantor, if any (other than any Subsidiary Guarantor whose
Subsidiary Guarantee is to be released in accordance with the terms of the
Subsidiary Guarantee and the Indenture in connection with any such
transaction), shall not, and the Company will not cause or permit any
Subsidiary Guarantor to, consolidate with or merge with or into any Person
unless (i) either (1) such Subsidiary Guarantor shall be the continuing or
surviving corporation or (2) the entity (if other than such Subsidiary
Guarantor) formed by such consolidation or into which such Subsidiary
Guarantor is merged shall be a corporation organized and validly existing
under the laws of the United States or any State thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture executed and
delivered to the Trustee and satisfactory to the Trustee, all of the
obligations of such Subsidiary Guarantor under the Notes and the Indenture;
(ii) immediately before and immediately after giving effect to such
transaction and all other transactions occurring as a result of or in
connection therewith (including, without limitation, the incurrence of any
Indebtedness or Acquired Indebtedness or the granting of any Lien), no Default
or Event of Default shall have occurred and be continuing; and (iii) the
Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel each stating that such consolidation or merger and such
supplemental indenture comply with the Indenture. The foregoing provisions of
this paragraph shall not be deemed to be a qualification or a limitation of
any of the provisions of the first paragraph of this "--Merger, Consolidation,
Etc." section.
SECURITY
The Notes are not independently entitled to security. However, as a result
of the provisions of "--Certain Covenants--Limitation on Liens" discussed
above and pursuant to the terms of the Credit Agreement, the principal of and
interest on the Notes initially will be secured, subject to the subordination
provisions contained in the Indenture, equally and ratably with the principal
of and interest on the 1998 Notes and with the indebtedness owing under the
Credit Agreement and certain other obligations of the Company, by a lien on
substantially all of the assets of the Company and the proceeds thereof. The
lien on such assets or proceeds in favor of the Notes will terminate,
automatically and without prior notice, however, in the event the lenders
under
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the Credit Agreement release their lien thereon. The lenders under the Credit
Agreement may amend the coverage or other terms of the Credit Agreement
relating to the lien without the consent of the Holders of the Notes.
Any payments or proceeds realized or to be realized by the Holders of the
Notes from any collateral securing the principal of and interest on the Notes
will be subject fully to the subordination provisions contained in the
Indenture. See "--Subordination and Ranking." In the event that payments of
principal of and interest on the Notes are subordinated to payments on Senior
Indebtedness of the Company, any payments or proceeds otherwise payable to the
Holders of Notes out of the collateral therefor instead shall, in accordance
with the subordination provisions of the Indenture, be applied, first, ratably
to all Senior Indebtedness of the Company that is secured equally and ratably
by such collateral, until such Indebtedness is paid in full; second, ratably
to all unsecured Senior Indebtedness of the Company, until such Indebtedness
is paid in full; and third, to the extent then available, ratably to the
principal of and interest on the Notes and any other subordinated Indebtedness
that is secured by such collateral (including the 1998 Notes). In addition,
liens, if any, filed with respect to the collateral before the issuance of the
Notes may result in a reduction in the proceeds realized from collateral
shared by the private lenders under the Credit Agreement, the Holders of the
Notes and the holders of the Company's 1998 Notes, as described above.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture:
(a) default in the payment of principal of, or premium, if any, on the
Notes when due at maturity, upon repurchase, upon acceleration or
otherwise, including, without limitation, failure of the Company to
repurchase the Notes on the date required following a Change of Control
Triggering Event, whether or not any such payment is prohibited by the
provisions described under "--Subordination and Ranking" above; or
(b) default in the payment of any installment of interest on the Notes
when due and continuance of such Default for 30 days or more, whether or
not such payment is prohibited by the provisions described under "--
Subordination and Ranking" above; or
(c) the Company fails to comply with the covenant described under
"Maintenance of Consolidated Fixed Charge Coverage Ratio" above and such
failure continues for 30 days or more, or fails to observe, perform or
comply with any of the provisions described under "--Merger, Consolidation,
Etc." above; or
(d) default (other than a default set forth in clauses (a), (b) and (c)
above) in the performance of, or breach of, any other covenant or warranty
of the Company or of any Subsidiary Guarantor in the Indenture, the Notes
or any Subsidiary Guarantee and failure to remedy such default or breach
within a period of 30 days after written notice from the Trustee or the
Holders of at least 25% in aggregate principal amount of the then
outstanding Notes; or
(e) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Subsidiary of the
Company (or the payment of which is guaranteed by the Company or any
Subsidiary of the Company), which default results in the acceleration of
such Indebtedness prior to its express maturity and the principal amount of
any such Indebtedness, together with the principal amount of any other such
Indebtedness the maturity of which has been so accelerated, aggregates
$25,000,000 or more and such acceleration has not been rescinded or
annulled or such Indebtedness discharged in full within 30 days; or
(f) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against the Company or any Subsidiary of the
Company or any of their respective property or assets in an aggregate
amount in excess of $25,000,000, which judgments, orders or decrees have
not been vacated, discharged, satisfied or stayed pending appeal within 30
days from the entry thereof and with respect to which legal enforcement
proceedings have been commenced; or
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(g) certain events of bankruptcy, insolvency or reorganization involving
the Company or any Material Subsidiary of the Company; or
(h) any Subsidiary Guarantee ceases to be in full force and effect (other
than in accordance with the terms of such Subsidiary Guarantee and the
Indenture and other than at any such time as and so long as such
Subsidiary's guarantee of all other Indebtedness of the Company and of the
Subsidiaries of the Company is no longer in full force and effect (unless
arising from the payment by such Subsidiary Guarantor under its guarantee
of such Indebtedness)) or is declared null and void or unenforceable or
found to be invalid (other than at any such time as and so long as such
Subsidiary Guarantor's guarantee of all other Indebtedness of the Company
and of the Company's Subsidiaries is declared null and void or
unenforceable or invalid (unless arising from payment by such Subsidiary
Guarantor under its guarantee of such Indebtedness)) or a Subsidiary
Guarantor denies its liability under its Subsidiary Guarantee (other than
by release of a Subsidiary Guarantor from its Subsidiary Guarantee in
accordance with the terms of the Indenture and the Subsidiary Guarantee and
other than at any such time and so long as such Subsidiary Guarantor denies
liability under its guarantee of all other Indebtedness of the Company and
of the Company's Subsidiaries (unless arising from payment by such
Subsidiary Guarantor under its guarantee of such Indebtedness)).
If an Event of Default (other than an Event of Default specified in clause
(g) above involving the Company) occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in aggregate
principal amount of the then outstanding Notes may, and the Trustee shall upon
the request of Holders of not less than 25% in aggregate principal amount of
the Notes then outstanding, declare the unpaid principal of, premium, if any,
and accrued and unpaid interest on all the Notes then outstanding to be due
and payable, by a notice in writing to the Company (and to the Trustee, if
given by Holders) and upon such declaration such principal amount, premium, if
any, and accrued and unpaid interest will become immediately due and payable,
notwithstanding anything contained in the Indenture or the Notes to the
contrary, but subject to the provisions limiting payment described in "--
Subordination and Ranking" above. If an Event of Default specified in clause
(g) above involving the Company occurs, all unpaid principal of, and premium,
if any, and accrued and unpaid interest on the Notes then outstanding will
ipso facto become due and payable, subject to the prior payment in full of all
Senior Indebtedness of the Company, without any declaration or other act on
the part of the Trustee or any Holder.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to the provisions of the Indenture relating
to the duties of the Trustee, the Trustee is under no obligation to exercise
any of its rights or powers under the Indenture at the request, order or
direction of any of the Holders, unless such Holders have offered to the
Trustee reasonable indemnity. Subject to all provisions of the Indenture and
applicable law, the Holders of a majority in aggregate principal amount of the
then outstanding Notes 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. The Trustee may
withhold from Holders notice of any continuing Default or Event of Default
(except a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes or that resulted from the failure of
the Company to comply with the provisions of "--Change of Control" or "--
Merger, Consolidation, Etc." above) if it determines that withholding notice
is in their interest. The Holders of a majority in aggregate principal amount
of the Notes then outstanding by notice to the Trustee may rescind an
acceleration and its consequences if all existing Events of Default (other
than the nonpayment of principal of and premium, if any, and interest on the
Notes which has become due solely by virtue of such acceleration) have been
cured or waived and if the recision would not conflict with any judgment or
decree. No such recision shall affect any subsequent Default or impair any
right consequent thereto.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding may, on behalf of the Holders of all the Notes, waive any past
Default or Event of Default under the Indenture and its consequences, except
Default in the payment of principal of or premium, if any, or interest on the
Notes or in respect of a covenant or provision of the Indenture which cannot
be modified or amended without the consent of all Holders.
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Under the Indenture, two officers of the Company are required to provide a
certificate to the Trustee promptly upon any such officer obtaining knowledge
of any Default or Event of Default (provided that such officers shall provide
such certification at least annually whether or not they know of any Default
or Event of Default) that has occurred and, if applicable, describe such
Default or Event of Default and the status thereof.
AMENDMENT, SUPPLEMENT AND WAIVER
From time to time, the Company, when authorized by a resolution of its Board
of Directors, and the Trustee, may, without the consent of the Holders, amend,
waive or supplement the Indenture or the Notes for certain specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies,
qualifying, or maintaining the qualification of, the Indenture under the TIA,
or making any change that does not adversely affect the rights of any Holder,
provided that the Company has delivered to the Trustee an Opinion of Counsel
stating that such change does not adversely affect the rights of any Holder.
Other amendments and modifications of the Indenture or the Notes may be made
by the Company, and the Trustee with the consent of the Holders of not less
than a majority of the aggregate principal amount of the Notes then
outstanding, provided that no such amendment or modification may, without the
consent of the Holder of each outstanding Note affected thereby: (i) reduce
the amount of Notes whose holders must consent to an amendment or waiver; (ii)
reduce the rate of, or extend the time for payment of, interest, including
defaulted interest, on any Note; (iii) reduce the principal of or premium on
or change the fixed maturity of any Note or alter the repurchase provisions
with respect thereto; (iv) make the principal of, or interest on, any Note
payable in money other than as provided for in the Indenture and the Notes;
(v) make any change in provisions relating to waivers of defaults, the ability
of Holders to enforce their rights under the Indenture or in the matters
discussed in these clauses (i) through (viii); (vi) waive a default in the
payment of principal of or interest on, or repurchase payment with respect to,
any Note, including, without limitation, a default to make a payment when
required upon a Change of Control Triggering Event; (vii) affect the ranking
of the Notes or any Subsidiary Guarantee or release any Subsidiary Guarantor
from its obligations under its Subsidiary Guarantee other than in accordance
with the Indenture; or (viii) after the Company's obligation to purchase the
Notes arises thereunder, amend, modify or change the obligation of the Company
to make and consummate a Change of Control Offer in the event of a Change of
Control Triggering Event or waive any default in the performance thereof or
modify any of the provisions or definitions with respect to any such offers.
No amendment or modification may adversely affect the rights of the holders
of Senior Indebtedness of the Company or holders of Guarantor Senior
Indebtedness unless the holders of such Senior Indebtedness consent to such
amendment or modification.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations of
the Company and of the Subsidiary Guarantors with respect to the outstanding
Notes ("defeasance"). Such defeasance means that the Company shall be deemed
to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, except for (i) the rights of holders of outstanding Notes
to receive payment in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due, (ii) the Company's
obligations to issue temporary Notes, register the transfer or exchange of any
Notes, replace mutilated, destroyed, lost or stolen Notes and maintain an
office or agency for payments in respect of the Notes, (iii) the rights,
powers, trusts, duties and immunities of the Trustee, and (iv) the defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to terminate its obligations with respect to certain
covenants that are set forth in the Indenture, some of which are described
under "--Certain Covenants" above, and any omission to comply with such
obligations shall not constitute a Default or an Event of Default with respect
to the Notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the holders of the Notes, cash in United States dollars, U.S. Government
Obligations, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a
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nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding Notes to
redemption or maturity; (ii) the Company shall have delivered to the Trustee
an opinion of counsel to the effect that the holders of the outstanding Notes
will not recognize income, gain or loss for Federal income tax purposes as a
result of such defeasance or covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if the act of such defeasance or covenant
defeasance had not occurred (in the case of defeasance, such opinion must
refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable Federal income tax laws); (iii) no Default or Event of
Default shall have occurred and be continuing immediately after giving effect
to such deposit; (iv) such defeasance or covenant defeasance shall not cause
the Trustee to have a conflicting interest with respect to any securities of
the Company; (v) such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement
or instrument to which the Company is a party or by which it is bound; (vi)
the Company shall have delivered to the Trustee an opinion of counsel to the
effect that (A) the trust funds will not be subject to any rights of holders
of Senior Indebtedness of the Company, including, without limitation, those
arising under the Indenture and (B) after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; and (vii) the Company shall have delivered to the Trustee an
officers' certificate and an opinion of counsel, each stating that all
conditions precedent under the Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions from the Company directing the Trustee to apply
such funds to the payment thereof at maturity; (ii) the Company has paid all
other sums payable under the Indenture by the Company; and (iii) the Company
has delivered to the Trustee an Officers' Certificate and an opinion of
counsel stating that all conditions precedent under the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.
GOVERNING LAW
The Indenture will provide that it, the Notes and the Subsidiary Guarantees
will be governed by, and construed in accordance with, the laws of the State
of New York but without giving effect to applicable principles of conflicts of
law to the extent that the application of the law of another jurisdiction
would be required thereby.
THE TRUSTEE
The Indenture will provide that, except during the continuance of an Event
of Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it by the Indenture,
and use the same degree of care and skill in its exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to
obtain payments of claims in certain cases or to realize on certain
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property received in respect of any such claim as security or otherwise.
Subject to the TIA, the Trustee will be permitted to engage in other
transactions, provided that if the Trustee acquires any conflicting interest
as described in the TIA, it must eliminate such conflict or resign.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the Notes will be issued in fully registered
form without interest coupons.
Notes sold in offshore transactions in reliance on Regulation S under the
Securities Act will initially be represented by a single, temporary global
Note in definitive, fully registered form without interest coupons (the
"Temporary Regulation S Global Note") and will be deposited with the Trustee
as custodian for the Depositary and registered in the name of a nominee of the
Depositary for the accounts of Euroclear System ("Euroclear") and Cedel,
Societe Anonyme ("Cedel"). The Temporary Regulation S Global Note will be
exchangeable for a single, permanent global note (the "Permanent Regulation S
Global Note," and, together with the Temporary Regulation S Global Note, the
"Regulation S Global Note") on or after July 9, 1997. Prior to the 40th day
after the later of the commencement of the Initial Offering and the Closing
Date, beneficial interests in the Temporary Regulation S Global Note may be
only held through Euroclear or Cedel, and any resale or other transfer of such
interests to U.S. persons shall not be permitted during such period unless
such resale or transfer is made pursuant to Rule 144A or Regulation S and in
accordance with the certification requirements described below.
Notes sold in reliance on Rule 144A will be represented by a single,
permanent global Note in definitive, fully registered form without interest
coupons (the "Restricted Global Note") and will be deposited with the Trustee
as custodian for and registered in the name of a nominee of the Depositary.
The Restricted Global Note and the Temporary Regulation S Global Note (and any
Notes issued in exchange therefor) will be subject to certain restrictions on
transfer set forth therein and will bear the legend regarding such
restrictions set forth under "Notice to Investors." Prior to the 40th day
after the later of the commencement of the Offering and the Closing Date, a
beneficial interest in the Temporary Regulation S Global Note may be
transferred to a person who takes delivery in the form of an interest in the
Restricted Global Note only upon receipt by the Trustee of a written
certification from the transferor to the effect that such transfer is being
made to a person whom the transferor reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A in a transaction meeting
the requirements of Rule 144A. Beneficial interests in the Restricted Global
Note may be transferred to a person who takes delivery in the form of an
interest in the Regulation S Global Note whether before, on or after such 40th
day, only upon receipt by the Trustee of a written certification to the effect
that such transfer is being made in accordance with Regulation S. After the
Exchange Notes have been issued pursuant to a registered exchange under the
Securities Act, all certification requirements with respect to the Notes will
cease. Any beneficial interest in one of the Global Notes that is transferred
to a person who takes delivery in the form of an interest in the other Global
Note will, upon transfer, cease to be an interest in such Global Note and
become an interest in the other Global Note and, accordingly, will thereafter
be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
Notes originally purchased by institutional accredited investors who are not
qualified institutional buyers ("Non-Global Purchasers") will be issued Notes
in registered form without coupons ("Certificated Notes"). Upon the transfer
of Certificated Notes initially issued to a Non-Global Purchaser either to a
qualified institutional buyer or in accordance with Regulation S, such
Certificated Notes will, unless the relevant Global Note has previously been
exchanged in whole for Certificated Notes, be exchanged for an interest in a
Global Note. For a description of the restrictions on transfer of Certificated
Notes, see "Notice to Investors."
The Global Notes
Upon the issuance of the Regulation S Global Note and the Restricted Global
Note (each a "Global Note" and together the "Global Notes"), the Depositary or
its custodian will credit, on its internal system, the respective principal
amount of the individual beneficial interests represented by such Global Note
to the accounts
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of persons who have accounts with such Depositary. Such accounts initially
will be designated by or on behalf of the Initial Purchasers. Ownership of
beneficial interests in a Global Note will be limited to persons who have
accounts with the Depositary ("participants") or persons who hold interests
through participants. Ownership of beneficial interests in a Global Note 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 the records of participants (with respect to interests of
persons other than participants).
Investors may hold their interests in the Regulation S Global Note directly
though Cedel or Euroclear, if they are participants in such systems, or
indirectly through organizations that are participants in such system.
Beginning 40 days after the later of the commencement of the Initial Offering
and the Closing Date (but not earlier), investors may also hold such interest
through organizations other than Cedel or Euroclear that are participants in
the Depositary's system. Cedel and Euroclear will hold interests in the
Regulation S Global Note on behalf of their participants through the
Depositary.
So long as the Depositary, or its nominee, is the registered holder of a
Global Note, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by such Global
Note for all purposes under the Indenture and the Notes. No beneficial owner
of an interest in a Global Note will be able to transfer that interest except
in accordance with the procedures provided for under "Notice to Investors," as
well as the Depositary's applicable procedures and, if applicable, those of
Euroclear and Cedel.
Payments of the principal of, and interest on, the Global Notes will be made
to the Depositary or its nominee, as the case may be, as the registered owner
thereof. None of the Company, the Trustee or any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that the Depositary or its nominee, upon receipt of any
payment of principal or interest in respect of a Global Note will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of the Depositary or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in
such Global Note 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 registered in the name of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in the Depositary will be effected in the
ordinary way in accordance with the Depositary rules and will be settled in
same-day funds.
The Depositary has advised the Company that it will take any action
permitted to be taken by a holder of Notes (including the presentation of
Notes for exchange as described below) only at the direction of one or more
participants to whose accounts an interest in the Global Notes is credited and
only in respect of such portion of the aggregate principal amount of Notes as
to which such participant or participants has or have given such direction.
The Depositary has advised the Company as follows: The Depositary is a
limited purpose trust company organized under the laws of the State of New
York, a "banking organization" within the meaning of New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the Uniform Commercial Code and a "Clearing Agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. The Depositary
was created to hold securities for its participants and facilitate the
clearance and settlement of securities transactions between participants
through electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and certain other organizations. Indirect access to the
Depositary system is 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 ("indirect participants").
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Although the Depositary, Euroclear and Cedel have agreed to the foregoing
procedures in order to facilitate transfers of interests in the Global Notes
among participants of the Depositary, Euroclear and Cedel, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by the Depositary,
Euroclear or Cedel or their respective participants or indirect participants
of their respective obligations under the rules and procedures governing their
operations.
Certificated Notes
If the Depositary is at any time unwilling or unable to continue as a
depositary for the Global Notes and a successor depositary is not appointed by
the Company within 90 days, the Company will issue certificated notes in
exchange for the Global Notes.
CERTAIN DEFINITIONS
"Acquired Indebtedness" of any specified Person means Indebtedness of any
other Person and its Subsidiaries existing at the time such other Person
merged with or into or became a Subsidiary of such specified Person or assumed
by the specified Person in connection with the acquisition of assets from such
other Person including, without limitation, Indebtedness of such other Person
and its Subsidiaries incurred by the specified Person in connection with or in
anticipation of (a) such other Person and its Subsidiaries being merged with
or into or becoming a Subsidiary of such specified Person or (b) such
acquisition by the specified Person.
"Affiliate" means, when used with reference to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, the referent Person, as the case may be. For the purposes
of this definition, "control" when used with respect to any specified Person
means the power to direct or cause the direction of management or policies of
the referent Person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative of the foregoing.
An "Associate" of, or a Person "associated" with, any Person, means (i) any
trust or other estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar
fiduciary capacity and (ii) any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.
"Capitalized Lease Obligation" means obligations under a lease that are
required to be classified and accounted for as capital lease obligations under
GAAP and, for purposes of the Indenture, the amount of such obligations at any
date shall be the capitalized amount of such obligations at such date,
determined in accordance with GAAP. The Stated Maturity of such obligation
shall be the date of the last payment of rent or any other amount due under
such lease prior to the first date upon which such lease may be terminated by
the lessee without penalty.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock, including
each class of Common or Preferred Stock of such Person, whether outstanding on
the Issue Date or issued after the Issue Date, and any and all rights,
warrants or options exchangeable for or convertible into such capital stock.
"Change of Control" means the occurrence of one or more of the following
events: (i) any "person" or "group" (as such terms are used in Section 13(d)
and 14(d) of the Exchange Act), other than employee or retiree benefit plans
or trusts sponsored or established by the Company or Transportation, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of (A) securities of Navistar representing 25%
or more of the combined voting power of Navistar's then outstanding Voting
Stock, (B) securities of the Company representing 49% or more of the combined
voting power of the Company's then
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outstanding Voting Stock or (C) securities of Transportation representing 50%
or more of the combined voting power of Transportation's then outstanding
Voting Stock; (ii) the following individuals cease for any reason to
constitute more than three-fourths of the number of directors then serving on
the Board of Directors of Navistar: individuals who, on the date hereof,
constitute the Board of Directors and any new director (other than a director
whose initial assumption of the office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of Navistar) whose
appointment or election by the Board of Directors or nomination for election
by the Company's stockholders was approved by the vote of at least two-thirds
( 2/3) of the directors then still in office or whose appointment, election or
nomination was previously so approved or recommended; (iii) the shareholders
of Navistar, of Transportation or of the Company shall approve any Plan of
Liquidation (whether or not otherwise in compliance with the provisions of the
Indenture); or (iv) the Company consolidates with or merges with or into
another Person, or the Company or any Subsidiary of the Company, directly or
indirectly, sells, assigns, conveys, transfers, leases or otherwise disposes
of, in one transaction or a series of related transactions, all or
substantially all of the property or assets of the Company and the
Subsidiaries of the Company (determined on a consolidated basis) to any
Person, or any Person consolidates with, or merges with or into, the Company,
in any such event pursuant to a transaction in which the outstanding Voting
Stock of the Company is converted into or exchanged for cash, securities or
other property, and, as a result of which, neither Navistar nor Transportation
has "beneficial ownership" (as set forth above), directly or indirectly of at
least 50% (fifty percent) of the combined voting power of the then outstanding
Voting Stock of the surviving or transferee corporation, provided that neither
(x) the merger of a Subsidiary of the Company into the Company or into any
Wholly Owned Subsidiary of the Company nor (y) a series of transactions
involving the sale of Receivables or interests therein in the ordinary course
of business by the Company or a Securitization Subsidiary in connection with a
Qualified Securitization Transaction, shall be deemed to be a Change of
Control.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Subsidiaries of
the Company, the Capital Stock of which constitutes all or substantially all
of the properties and assets of the Company, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
"Change of Control Triggering Event" means the occurrence of both (a) a
Change of Control and (b) a Ratings Event.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
"Consolidated EBITDA" for any Person means, for any period for which it is
to be determined, the sum of, without duplication, the amounts for such
period, taken as a single accounting period, of (i) Consolidated Net Income of
such Person and its Consolidated Subsidiaries for such period; (ii) cash
payments made to the Company during such period or within 30 days after such
period by Navistar or Transportation pursuant to the Amended and Restated
Parents' Side Agreement, as amended and restated as of November 4, 1994, among
the Company, Navistar and Transportation or any other similar agreement; and
(iii) only to the extent Consolidated Net Income has been reduced thereby, (A)
Consolidated Tax Expense of such Person and its Consolidated Subsidiaries for
such period; (B) Consolidated Interest Expense of such Person for such period;
and (C) all depreciation and amortization expense (including, without
limitation, amortization of capitalized debt issuance costs) and other non-
cash expenses (other than any non-cash item which requires the accrual of or a
reserve for cash charges for any future period and other than any non-cash
charge constituting an extraordinary item of loss) of such Person and its
Consolidated Subsidiaries for such period, less the amount of consolidated
non-cash items increasing Consolidated Net Income for such period, all as
determined on a consolidated basis in conformity with GAAP.
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"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of (a) the aggregate amount of Consolidated EBITDA of such
Person for the four full fiscal quarters ending on or immediately prior to the
date of measurement (such four full fiscal quarter period being referred to
herein as the "Four Quarter Period") to (b) the aggregate Consolidated Fixed
Charges of such Person for such Four Quarter Period.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum of, without duplication, the amounts for such period, taken as
a single accounting period, of (i) Consolidated Interest Expense; and (ii) the
product of (x) the amount of all dividend requirements (whether or not
declared) on Preferred Stock of such Person, whether in cash or otherwise
(except dividends payable in shares of Common Stock) paid, accrued or
scheduled to be paid or accrued during such period times (y) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current effective consolidated Federal, state, local and foreign tax rate
(expressed as a decimal number between 1 and 0) of such Person (as reflected
in the audited consolidated financial statements of such Person for the most
recently completed fiscal year).
"Consolidated Interest Expense" means, with respect to any Person for any
period, the aggregate of the interest expense (without deduction of interest
income) of such Person for such period, on a consolidated basis, as determined
in accordance with GAAP, including (a) all amortization of original issue
discount; (b) the interest component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person during such
period; (c) net cash costs under all Interest Rate Protection Agreements
(including amortization of fees); (d) all capitalized interest; (e) the
interest portion of any deferred payment obligations for such period; and (f)
25% (twenty-five percent) of the amount of all lease payments (other than
Capitalized Lease Obligations) paid, accrued and/or scheduled to be paid or
accrued by such Person during such period, provided that all amortization of
debt issuance costs shall be excluded in calculating Consolidated Interest
Expense.
"Consolidated Net Income" means, with respect to any Person for any period,
the consolidated net income (or deficit) of such Person and its Consolidated
Subsidiaries for such period, on a consolidated basis, as determined in
accordance with GAAP, provided that the net income of any other Person in
which the referent Person or any Subsidiary of the referent Person has a joint
interest with a third party (which interest does not cause the net income of
such other Person to be consolidated into the net income of the referent
Person in accordance with GAAP) shall be included only to the extent of the
amount that has been actually received by the referent Person or a Subsidiary
of the referent Person in the form of cash dividends or similar cash
distributions, and provided, further, that there shall be excluded (i) the net
income of any Person acquired in a "pooling of interests" transaction accrued
prior to the date it became a Subsidiary of the referent Person or is merged
into or consolidated with the referent Person or any Subsidiary of the
referent Person; (ii) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date; (iii)
any gain or loss, together with any related provisions for taxes, realized
upon the sale or other disposition (including, without limitation,
dispositions pursuant to sale-leaseback transactions) of any property or
assets which are not sold or otherwise disposed of in the ordinary course of
business (provided that sales of Receivables or interests therein pursuant to
Qualified Securitization Transactions shall be deemed to be in the ordinary
course of business) and upon the sale or other disposition of any Capital
Stock of any Subsidiary of the referent Person, (iv) any extraordinary gain or
extraordinary loss together with any related provision for taxes and any one
time gains or losses (including, without limitation, those related to the
adoption of new accounting standards) realized by the referent Person or any
of its Subsidiaries during the period for which such determination is made;
(v) income or loss attributable to discontinued operations (including, without
limitation, operations disposed of during such period whether or not such
operations were classified as discontinued); and (vi) in the case of a
successor to the referent Person by consolidation or merger or as a transferee
of the referent Person's assets, any earnings of the successor corporation
prior to such consolidation, merger or transfer of assets.
"Consolidated Stockholders' Equity" as of any date means with respect to any
Person the amount, determined in accordance with GAAP, by which the assets of
such Person and of its Wholly Owned Subsidiaries on a consolidated basis
exceed (a) the total liabilities of such Person and of its Wholly Owned
Subsidiaries on a consolidated basis, plus (b) any redeemable Preferred Stock
of such Person.
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"Consolidated Subsidiary" of any Person means a Subsidiary which for
financial reporting purposes is or, in accordance with GAAP, should be,
accounted for by such Person as a consolidated Subsidiary.
"Consolidated Tangible Net Worth" of a Person at any date means the sum of
(1) Consolidated Stockholders' Equity of such Person plus (2) such Person's
interest (proportionate to its equity interest) in the net worth of any Person
other than a Wholly Owned Subsidiary of the referent Person as of the date in
question, less (a) any revaluation or other write-ups subsequent to the Issue
Date in the book value of any asset owned by such Person or any Subsidiary of
such Person; (b) any amounts attributable to the cost of treasury stock and
the principal amount of any promissory notes receivable from the sale of
Capital Stock of such Person or of any of its Subsidiaries; and (c) all
unamortized debt discount and expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights, and other
intangible assets of such Person and its Subsidiaries.
"Consolidated Tax Expense" means, with respect to any Person for any period,
the aggregate of the U.S. Federal, state and local tax expense attributable to
taxes based on income and foreign income tax expenses of such Person and its
Consolidated Subsidiaries for such period (net of any income tax benefit)
payable with respect to such period pursuant to the Tax Allocation Agreement
or, if the Tax Allocation Agreement is no longer in effect or does not apply
to any such tax, determined in accordance with GAAP other than taxes (either
positive or negative) attributable to extraordinary or unusual gains or losses
or taxes attributable to sales or dispositions of assets.
"Credit Agreement" means the Amended and Restated Credit Agreement, dated as
of November 4, 1994, among the Company, the banks referred to therein and Bank
of America Illinois (formerly known as Continental Bank, N.A.), Bank of Nova
Scotia, The Chase Manhattan Bank (formerly known as Chemical Bank), Morgan
Guaranty Trust Company of New York and NationsBank, N.A., as co-arrangers, and
any refinancing, extension, renewal, modification, restatement or replacement
thereof (in whole or in part, and without limitation as to terms, conditions,
covenants and other provisions), as the same may be amended, supplemented or
otherwise modified from time to time.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of its Subsidiaries against fluctuations in currency values to
or under which the Company or any of its Subsidiaries is a party or a
beneficiary on the date of the Indenture or becomes a party or a beneficiary
thereafter.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default (as defined in the Indenture).
"Disqualified Capital Stock" means any Capital Stock that, other than solely
at the option of the issuer thereof, by its terms (or by the terms of any
security into which it is convertible or exchangeable) is, or upon the
happening of an event or the passage of time would be, required to be redeemed
or repurchased, in whole or in part, prior to the first anniversary of the
Maturity Date or has, or upon the happening of an event or the passage of time
would have, a redemption or similar payment due on or prior to the first
anniversary of the Maturity Date, or is convertible into or exchangeable for
debt securities at the option of the holder thereof at any time prior to the
first anniversary of the Maturity Date.
"Event of Default" has the meaning set forth under "--Events of Default"
herein.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any
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obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Indebtedness of such other Person (whether arising by virtue of
partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of
assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole
or in part), provided that the term "guarantee" shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"guarantee" used as a verb has a corresponding meaning.
"Guarantor Senior Indebtedness" means any guarantee incurred by a Subsidiary
Guarantor in accordance with the Indenture of Senior Indebtedness of the
Company incurred in accordance with the Indenture, whether such Indebtedness
is outstanding on the Issue Date or thereafter, provided that Guarantor Senior
Indebtedness expressly shall not include: (i) any Indebtedness of such
Subsidiary Guarantor whether outstanding on the Issue Date or thereafter
incurred that is, pursuant to its terms or the terms of any agreement relating
thereto, subordinated or junior to any other Indebtedness of such Subsidiary
Guarantor; (ii) any Indebtedness of such Subsidiary Guarantor whether
outstanding on the Issue Date or thereafter incurred that is, by its terms or
the terms of any agreement relating thereto, pari passu with or subordinated
or junior to such Subsidiary Guarantor's Subsidiary Guarantee; (iii) the
Subsidiary Guarantee of such Subsidiary Guarantor; (iv) any Indebtedness or
any other obligation of such Subsidiary Guarantor to any of such Subsidiary
Guarantor's Subsidiaries or to any of such Subsidiary Guarantor's Affiliates,
or to any joint venture in which such Subsidiary Guarantor has an interest;
(v) to the extent such may be deemed Indebtedness of such Subsidiary
Guarantor, any liability for Federal, state, local, foreign or other taxes
owed or owing by such Subsidiary Guarantor or by any of its Subsidiaries
(including pursuant to the Tax Allocation Agreement); (vi) to the extent such
may be deemed Indebtedness of such Subsidiary Guarantor, obligations of such
Subsidiary Guarantor incurred in connection with the purchase of goods,
assets, materials or services in the ordinary course of business or
representing amounts recorded as accounts payable, trade payables or other
current liabilities of such Subsidiary Guarantor on the books of such
Subsidiary Guarantor (other than the current portion of any long-term
Indebtedness of such Subsidiary Guarantor that but for this clause (vi) would
constitute Guarantor Senior Indebtedness of such Subsidiary Guarantor); (vii)
to the extent such may be deemed Indebtedness of such Subsidiary Guarantor,
any amount owed by such Subsidiary Guarantor to employees for services
rendered to such Subsidiary Guarantor or to any of its Subsidiaries; and
(viii) that portion of any Indebtedness which at the time of incurrence was
incurred in violation of the Indenture.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness
or other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred," "incurrable" and "incurring"
shall have meanings correlative to the foregoing), provided that the accrual
of interest (whether such interest is payable in cash or in kind) and the
accretion of original issue discount shall not be deemed an incurrence of
Indebtedness, provided, further, that (A) any Indebtedness or Capital Stock of
a Person existing at the time such Person becomes (after the Issue Date) a
Subsidiary (whether by merger, consolidation, acquisition or otherwise) of the
Company shall be deemed to be incurred or issued, as the case may be, by such
Subsidiary at the time it becomes a Subsidiary of the Company and (B) any
amendment, modification or waiver of any document pursuant to which
Indebtedness was previously incurred shall not be deemed to be an incurrence
of Indebtedness unless and then only to the extent such amendment,
modification or waiver increases the principal or premium thereof or interest
rate thereon (including by way of original issue discount).
"Indebtedness" means, with respect to any Person, at any date, any of the
following, without duplication, (i) any liability, contingent or otherwise, of
such Person (A) for borrowed money (whether or not the recourse of the lender
is to the whole of the assets of such Person or only to a portion thereof),
(B) evidenced by a note, bond, debenture or similar instrument or letters of
credit (including a purchase money obligation) or (C) for the
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payment of money relating to a Capitalized Lease Obligation or other
obligation (whether issued or assumed) relating to the deferred purchase price
of property, but excluding trade accounts payable of such Person arising in
the ordinary course of business; (ii) all conditional sale obligations and all
obligations under any title retention agreement (even if the rights and
remedies of the seller under such agreement in the event of default are
limited to repossession or sale of such property), but excluding trade
accounts payable of such Person arising in the ordinary course of business;
(iii) all obligations for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction entered into in the
ordinary course of business; (iv) all Indebtedness of others secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien (other than in connection with property
subject to a Qualified Securitization Transaction) on any asset or property
(including, without limitation, leasehold interests and any other tangible or
intangible property) of such Person, whether or not such Indebtedness is
assumed by such Person or is not otherwise such Person's legal liability,
provided that if the obligations so secured have not been assumed by such
Person or are otherwise not such Person's legal liability, the amount of such
Indebtedness for the purposes of this definition shall be limited to the
lesser of the amount of such Indebtedness secured by such Lien or the fair
market value of the assets or property securing such Lien; (v) all
Indebtedness of others (including all dividends of other Persons the payment
of which is) guaranteed, directly or indirectly, by such Person or that is
otherwise its legal liability or which such Person has agreed to purchase or
repurchase or in respect of which such Person has agreed contingently to
supply or advance funds; (vi) all Disqualified Capital Stock issued by such
Person with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends if any; and (vii) all obligations under Currency Agreements
and Interest Rate Protection Agreements. For purposes hereof, the "maximum
fixed repurchase price" of any Disqualified Capital Stock which does not have
a fixed repurchase price shall be calculated in accordance with the terms of
such Disqualified Capital Stock as if such Disqualified Capital Stock were
purchased on any date on which Indebtedness shall be required to be determined
pursuant to the Indenture, and if such price is based upon, or measured by,
the fair market value of such Disqualified Capital Stock, such fair market
value shall be determined reasonably and in good faith by the Board of
Directors of the issuer of such Disqualified Capital Stock. The amount of
Indebtedness of any Person at any date shall be the outstanding balance
without duplication at such date of all unconditional obligations as described
above and the maximum liability, upon the occurrence of the contingency giving
rise to the obligation, of any contingent obligations at such date, provided
that the amount outstanding at any time of any Indebtedness issued with
original issue discount is the full amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in accordance with GAAP.
"Interest Rate Protection Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate
collar agreement, interest rate hedge agreement or other similar agreement or
arrangement designed to protect a Person or any Subsidiary against
fluctuations in interest rates to or under which such Person or any Subsidiary
of such Person is a party or a beneficiary on the Issue Date or becomes a
party or a beneficiary thereafter.
"Investment" by any Person means any direct or indirect (i) loan, advance or
other extension of credit or capital contribution (by means of transfers of
cash or other property (valued at the fair market value thereof as of the date
of transfer) to others or payments for property or services for the account or
use of others, or otherwise other than in the ordinary course of business);
(ii) purchase or acquisition of Capital Stock, bonds, notes, debentures or
other securities or evidences of Indebtedness issued by any other Person
(whether by merger, consolidation, amalgamation or otherwise and whether or
not purchased directly from the issuer of such securities or evidences of
Indebtedness); (iii) guarantee or assumption of the Indebtedness of any other
Person; and (iv) all other items that would be classified as investments
(including, without limitation, purchases of assets outside the ordinary
course of business) on a balance sheet of such Person prepared in accordance
with GAAP. Investments shall exclude (a) transactions between the Company and
Transportation pursuant to the Master Intercompany Agreement and (b)
extensions of loans, trade credit and advances to customers and suppliers to
the extent made in the ordinary course of business.
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"Investment Grade" means (i) with respect to S&P any of the rating
categories from and including AAA to and including BBB- and (ii) with respect
to Moody's any of the rating categories from and including Aaa to and
including Baa3.
"Issue Date" means the date on which the Notes are originally issued under
the Indenture.
"Lien" means, with respect to any Person, any mortgage, pledge, lien,
encumbrance, easement, restriction, covenant, right-of-way, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property of such Person, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option, right of first refusal or other similar agreement to
sell, in each case securing obligations of such Person and any filing of or
agreement to give any financing statement under the Uniform Commercial Code
(or equivalent statute or statutes) of any jurisdiction but excluding any such
filing or agreement which reflects ownership by a third party of (i) property
leased to the referent Person or any of its Subsidiaries under a lease that is
not in the nature of a conditional sale or title retention agreement or (ii)
accounts, general intangibles or chattel paper sold to the referent Person).
"Master Intercompany Agreement" means the Master Intercompany Agreement
dated as of April 26, 1993 and as amended on September 30, 1996, between the
Company and Transportation as it may be amended, modified, supplemented or
restated from time to time in accordance with the terms of the Indenture.
"Material Subsidiary" means, at any date of determination, any Subsidiary of
the Company that, together with its Subsidiaries, (i) for the most recent
fiscal year of the Company accounted for more than 5% of the consolidated
revenues of the Company or (ii) as of the end of such fiscal year, was the
owner of more than 5% of the consolidated assets of the Company, all as set
forth on the most recently available consolidated financial statements of the
Company and its Consolidated Subsidiaries for such fiscal year prepared in
conformity with GAAP.
"Maturity Date" means June 1, 2002.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Navistar" means Navistar International Corporation, a Delaware corporation
and the parent of Transportation.
"1998 Notes" means the 8 7/8% Senior Subordinated Notes due 1998 of the
Company issued under an indenture dated as of November 15, 1993 between the
Company and First Trust, N.A. (as successor to Continental Bank, N.A.).
"Permitted Liens" means (a) Liens for taxes, assessments and governmental
charges (other than any Lien imposed by the Employee Retirement Income
Security Act of 1974, as amended) that are not yet delinquent or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and for which adequate reserves have been established or
other provisions have been made in accordance with generally accepted
accounting principles; (b) statutory mechanics', workmen's, materialmen's,
operators' or similar Liens imposed by law and arising in the ordinary course
of business for sums which are not yet due or are being contested in good
faith by appropriate proceedings promptly instituted and diligently conducted
and for which adequate reserves have been established or other provisions have
been made in accordance with generally accepted accounting principles; (c)
minor imperfections of, or encumbrances on, title that do not impair the value
of property for its intended use; (d) Liens (other than any Lien under the
Employee Retirement Income Security Act of 1974, as amended) incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (e)
Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, bankers' acceptances, surety and
appeal bonds, government contracts, performance and return of money bonds and
other obligations of a similar nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (f)
easements, rights-of-way, municipal and zoning ordinances and similar
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charges, encumbrances, title defects or other irregularities that do not
materially interfere with the ordinary course of business of the Company or of
any of its Subsidiaries; (g) Liens (including extensions and renewals thereof)
upon real or tangible personal property acquired after the Issue Date,
provided that (I) such Lien is created solely for the purpose of securing
Indebtedness that is incurred in accordance with the Indenture to finance the
cost (including the cost of improvement or construction) of the item of
property or assets subject thereto and such Lien is created prior to, at the
time of or within 90 days after the later of the acquisition, the completion
of construction or the commencement of full operation of such property, (II)
the principal amount of the Indebtedness secured by such Lien does not exceed
100% of such cost and (III) any such Lien shall not extend to or cover any
property or assets of the Company or of any Subsidiary of the Company other
than such item of property or assets and any improvements on such item; (h)
leases or subleases granted to others that do not materially interfere with
the ordinary course of business of the Company or of any Subsidiary of the
Company; (i) any interest or title of a lessor in the property subject to any
Capitalized Lease Obligation, provided that any transaction related thereto
otherwise complies with the Indenture; (j) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (k) Liens arising from
the rendering of a final judgment or order against the Company or any
Subsidiary of the Company that does not give rise to an Event of Default; (l)
Liens securing reimbursement obligations with respect to letters of credit
incurred in accordance with the Indenture that encumber documents and other
property relating to such letters of credit and the products and proceeds
thereof; (m) Liens in favor of the Trustee arising under the Indenture; (n)
any Lien existing on property, shares of stock or Indebtedness of a Person at
the time such Person becomes a Subsidiary of the Company or is merged with or
consolidated into the Company or a Subsidiary of the Company or at the time of
sale, lease or other disposition of the properties of any Person as an
entirety or substantially as an entirety to the Company or any Subsidiary of
the Company; (o) Liens on property of any Subsidiary of the Company to secure
Indebtedness for borrowed money owed to the Company or to another Subsidiary
of the Company; and (p) Liens in favor of the Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, estate, unincorporated organization or government or any agency or
political subdivision thereof.
"Plan of Liquidation" means, with respect to any Person, a plan (including
by operation of law) that provides for, contemplates or the effectuation of
which is preceded or accompanied by (whether or not substantially
contemporaneously) (i) the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the referent Person and (ii) the
distribution of all or substantially all of the proceeds of such sale, lease,
conveyance or other disposition and all or substantially all of the remaining
assets of the referent Person to holders of Capital Stock of the referent
Person.
"Preferred Stock" means, as applied to the Capital Stock of any Person, the
Capital Stock of such Person (other than the Common Stock of such Person) of
any class or classes (however designated) that ranks prior, as to the payment
of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding-up of such Person, to shares
of Capital Stock of any other class of such Person.
"Qualified Capital Stock" means, with respect to any Person, any Capital
Stock of such Person that is not Disqualified Capital Stock or convertible
into or exchangeable or exercisable for Disqualified Capital Stock.
"Qualified Securitization Transaction" means any transaction or series of
transactions that have been or may be entered into by the Company or any of
its Subsidiaries in connection with or reasonably related to a transaction or
series of transactions in which the Company or any of its Subsidiaries may
sell, convey or otherwise transfer to (i) a Securitization Subsidiary or (ii)
any other Person, or may grant a security interest in, any Receivables or
interests therein secured by the merchandise or services financed thereby
(whether such Receivables are then existing or arising in the future) of the
Company or any of its Subsidiaries, and any assets related thereto including,
without limitation, all security or ownership interests in merchandise or
services financed thereby, the proceeds of such Receivables, and other assets
which are customarily sold or in respect of which security interests are
customarily granted in connection with securitization transactions involving
such assets.
76
<PAGE>
"Rating Agency" means each of (i) S&P and (ii) Moody's.
"Ratings Event" means the occurrence, as of any date, within the 90 day
period (the "Initial Period") commencing on the date of public notice (the
"Public Notice") of the occurrence of a Change of Control (which period shall
be extended for a period not to exceed 90 days beyond the Initial Period if
within the Initial Period the rating of the Notes is under publicly announced
consideration of (x) a possible downgrade or (y) a possible upgrade by (i)
both Rating Agencies or (ii) either Rating Agency in the event that one of the
Rating Agencies has rated the Notes Investment Grade within the Initial Period
(such Initial Period as so extended being referred to as the "Evaluation
Period")) of any of the following events:
(1) In the event that the Notes are rated Investment Grade by both Rating
Agencies immediately prior to the Public Notice, the failure of the Notes
to be rated Investment Grade by either or both of the Rating Agencies; or
(2) In the event that the Notes are rated Investment Grade by one of the
Rating Agencies immediately prior to the Public Notice, the earlier to
occur of (A) the Notes failing to be rated Investment Grade by such Rating
Agency or (B) the lapse of the Evaluation Period and the failure of the
Notes to be rated Investment Grade by the other Rating Agency; or
(3) In the event that the Notes are not rated Investment Grade by both of
the Rating Agencies immediately prior to the Public Notice, the lapse of
the Evaluation Period and the failure of either or both of the Rating
Agencies to rate the Notes Investment Grade.
"Receivables" means any right of payment from or on behalf of any obligor,
whether constituting an account, chattel paper, instrument, general intangible
or otherwise, arising from the financing by the Company or any Subsidiary of
the Company of merchandise or services, and monies due thereunder, security or
ownership interests in the merchandise and services financed thereby, records
related thereto, and the right to payment of any interest or finance charges
and other obligations with respect thereto, proceeds from claims on insurance
policies related thereto, any other proceeds related thereto, and any other
related rights.
"Secured Obligations" means all Secured Obligations as defined in the
Security, Pledge and Trust Agreement between the Company and Bankers Trust
Company, as Trustee, dated as of April 26, 1993 (as it may be amended, the
"Security Agreement").
"Securitization Subsidiary" means a Wholly Owned Subsidiary of the Company
which engages in no activities other than those reasonably related to or in
connection with the entering into of securitization transactions and which is
designated by the Board of Directors of the Company (as provided below) as a
Securitization Subsidiary (a) no portion of the Indebtedness or any other
obligations (contingent or otherwise) of which (i) is guaranteed by the
Company or any other Subsidiary of the Company, (ii) is recourse to or
obligates the Company or any other Subsidiary of the Company in any way other
than pursuant to representations, warranties and covenants (including those
related to servicing) entered into in the ordinary course of business in
connection with a Qualified Securitization Transaction or (iii) subjects any
property or asset of the Company or any other Subsidiary of the Company,
directly or indirectly, contingently or otherwise, to any Lien or to the
satisfaction thereof, other than pursuant to representations, warranties and
covenants (including those related to servicing) entered into in the ordinary
course of business in connection with a Qualified Securitization Transaction,
(b) with which neither the Company nor any other Subsidiary of the Company (i)
provides any credit support or (ii) has any contract, agreement, arrangement
or understanding other than on terms that are fair and reasonable and that are
no less favorable to the Company or such Subsidiary than could be obtained
from an unrelated Person (other than, in the case of subclauses (i) and (ii)
of this clause (b), representations, warranties and covenants (including those
relating to servicing) entered into in the ordinary course of business in
connection with a Qualified Securitization Transaction and intercompany notes
relating to the sale of Receivables to such Securitization Subsidiary) and (c)
with which neither the Company nor any Subsidiary of the Company has any
obligation to maintain or preserve such Subsidiary's financial condition or to
cause such Subsidiary to achieve certain levels of operating results. Any such
designation by the Board of Directors of the Company shall be
77
<PAGE>
evidenced to the Trustee by filing with the Trustee a certified copy of the
resolutions of the Board of Directors of the Company giving effect to such
designation.
"Senior Indebtedness of the Company" means (a) Indebtedness of the Company
under the Credit Agreement, and, as long as the Security Agreement is in
effect, without duplication, all Secured Obligations, and (b) any other
Indebtedness incurred by the Company in accordance with the Indenture, whether
such Indebtedness is outstanding on the Issue Date or thereafter, provided
that Senior Indebtedness of the Company expressly shall not include: (i) any
Indebtedness of the Company or any Secured Obligation (whether outstanding on
the Issue Date or thereafter incurred) that is, pursuant to its terms or the
terms of any agreement relating thereto, subordinated or junior to any other
Indebtedness of the Company, (ii) any Indebtedness of the Company or any
Secured Obligation (whether outstanding on the Issue Date or thereafter
incurred) that is, by its terms or the terms of any agreement relating
thereto, pari passu with or subordinated or junior to the Notes, (iii) the
Notes, (iv) any Indebtedness or any other obligation of the Company to any of
the Company's Subsidiaries or to any of the Company's Affiliates, or to any
joint venture in which the Company has an interest, (v) to the extent such may
be deemed Indebtedness of the Company, any liability for Federal, state,
local, foreign or other taxes owed or owing by the Company or by any of its
Subsidiaries (including pursuant to the Tax Allocation Agreement), (vi) to the
extent such may be deemed Indebtedness of the Company, obligations of the
Company incurred in connection with the purchase of goods, assets, materials
or services in the ordinary course of business or representing amounts
recorded as accounts payable, trade payables or other current liabilities of
the Company on the books of the Company (other than the current portion of any
long-term Indebtedness of the Company that but for this clause (vi) would
constitute Senior Indebtedness of the Company), (vii) to the extent such may
be deemed Indebtedness of the Company, any amount owed by the Company to
employees for services rendered to the Company or to any of its Subsidiaries,
and (viii) that portion of any Indebtedness which at the time of incurrence is
incurred in violation of the Indenture.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc., and its successors.
"Stated Maturity" means, with respect to any security or Indebtedness of a
Person, the date specified therein as the fixed date on which any principal of
such security or Indebtedness is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase thereof at the option of the holder thereof).
"Subordinated Indebtedness" means the Notes, the 1998 Notes and any other
Indebtedness incurred, assumed or otherwise created by the Company pursuant to
an instrument or instruments providing expressly that such Indebtedness (i) is
subordinate in right of payment to the Notes or any other Indebtedness of the
Company or (ii) ranks pari passu with the Notes.
"Subsidiary" of any Person means (a) a corporation a majority of whose
Voting Stock is at the time, directly or indirectly, owned by such Person, by
one or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person or (b) any other Person (other than a trust formed
in connection with a Qualified Securitization Transaction) in which such
Person, a Subsidiary of such Person or such Person and one or more
Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof, have at least a majority ownership interest.
"Subsidiary Guarantee" means each Subsidiary Guarantee of the Notes issued
pursuant to "--Certain Covenants--Limitation on Guarantees by Subsidiaries"
above.
"Subsidiary Guarantor" means each Subsidiary of the Company that becomes a
guarantor of the Notes pursuant to "--Certain Covenants--Limitation on
Guarantees by Subsidiaries" above.
"Tax Allocation Agreement" means the Tax Allocation Agreement among Navistar
and its subsidiaries, effective as of October 1, 1981, as it has been and may
be amended and/or supplemented from time to time.
78
<PAGE>
"Transportation" means Navistar International Transportation Corp., a
Delaware corporation and the parent of the Company.
"Voting Stock" means, with respect to any Person, securities of any class or
classes of Capital Stock in such Person entitling the holders thereof (whether
at all times or only so long as no senior class of stock has voting power by
reason of any contingency) to vote in the election of members of the Board of
Directors or other governing body of such Person.
"Wholly Owned Subsidiary" means, with respect to any Person, any subsidiary
of such Person all the outstanding shares of Capital Stock (other than
directors' qualifying shares, if applicable) of which are owned directly by
such Person or another Wholly Owned Subsidiary of such Person.
79
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based on the current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), applicable Treasury
regulations, judicial authority and administrative rulings and practice. There
can be no assurance that the Internal Revenue Service (the "Service") will not
take a contrary view, and no ruling from the Service has been or will be
sought. Legislative, judicial or administrative changes or interpretations may
be forthcoming that could alter or modify the statements and conditions set
forth herein. Any such changes or interpretations may or may not be
retroactive and could affect the tax consequences to holders. Certain holders
(including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) may be subject to special rules
not discussed below. The Company recommends that each holder consult such
holder's own tax advisor as to the particular tax consequences of exchanging
such holder's Old Notes for Exchange Notes, including the applicability and
effect of any state, local or foreign tax laws.
The Company believes that the exchange of Old Notes for Exchange Notes
pursuant to the Exchange Offer will not be treated as an "exchange" for
federal income tax purposes because the Exchange Notes will not be considered
to differ materially in kind or extent from the Old Notes. Rather, the
Exchange Notes received by a holder will be treated as a continuation of the
Old Notes in the hands of such holder. As a result, there will be no federal
income tax consequences to holders exchanging Old Notes for Exchange Notes
pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of Exchange
Notes received in exchange for Old Notes where such Old Notes were acquired as
a result of market-making activities or other trading activities. The Company
has agreed that for a period of 180 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any
Participating Broker-Dealer for use in connection with any such resale
(provided that the Company receives notice from any Participating Broker-
Dealer of its status as a Participating Broker-Dealer within 30 days after the
consummation of the Exchange Offer). In addition, until October 13, 1997 (90
days after the commencement of the Exchange Offer), all dealers effecting
transactions in the Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the over-
the-counter market, in negotiated transactions, through the writing of options
on the Exchange Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such Participating Broker-
Dealer and/or the purchasers of any such Exchange Notes. Any Participating
Broker-Dealer that resells the Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any Participating Broker-Dealer that has
provided the Company with notice of its status as a Participating Broker-
Dealer within 30 days after the consummation of the Exchange Offer.
80
<PAGE>
LEGAL MATTERS
The validity of the Exchange Notes will be passed upon for the Company by
Kirkland & Ellis (a partnership including professional corporations), Chicago,
Illinois.
EXPERTS
The consolidated financial statements of Navistar Financial Corporation as
of October 31, 1996 and 1995 and for each of the three years in the period
ended October 31, 1996, included in Appendix A to this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing therein and have been so included in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
81
<PAGE>
NAVISTAR
FINANCIAL
CORPORATION
LOGO
<PAGE>
PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14: OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses which are payable by the Company in connection with the issuance
and distribution of the Exchange Notes being registered are estimated to be as
follows:
<TABLE>
<S> <C>
Registration fee................................................ $ 30,303
Printing costs.................................................. 35,000
Legal fees and expenses......................................... 40,000
Accounting fees and expenses.................................... 35,000
Blue sky fees and expenses (including legal fees)............... 5,000
Miscellaneous................................................... 5,000
--------
Total....................................................... $150,303
========
</TABLE>
ITEM 15: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware ("DGCL")
contains detailed provisions for indemnification of directors and officers of
Delaware corporations against expenses, judgments, fines, and settlements in
connection with litigation.
The Company's Bylaws (Article XI) provide for the indemnification of
directors and officers of the Company to the fullest extent permitted by
Delaware law.
Policies of insurance are maintained by the Company under which the
Company's directors and officers are insured, within the limits and subject to
the limitations of the policies, against certain expenses in connection with
the defense of certain actions, suits, or proceedings and certain liabilities
which might be imposed as a result of certain actions, suits or proceedings,
to which they are parties by reason of being or having been such directors or
officers.
ITEM 16. EXHIBITS.
See Index to Exhibits.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
II-1
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering;
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered, therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof;
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a directors, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE
REQUIREMENTS FOR FILING ON FORM S-2 AND HAS DULY CAUSED THIS AMENDMENT NO. 1
TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN CITY OF ROLLING MEADOWS, STATE OF ILLINOIS, ON
THE 14TH DAY OF JULY, 1997.
Navistar Financial Corporation
/s/ John J. Bongiorno
By___________________________________
John J. Bongiorno
President and Chief Executive
Officer
* * * * *
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON THE 14TH DAY OF JULY, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* President and Chief Executive Officer;
___________________________________________ Director (Principal Executive Officer)
John J. Bongiorno
* Vice President and Treasurer; Director
___________________________________________ (Principal Financial Officer)
R. Wayne Cain
* Vice President and Controller; Director
___________________________________________ (Principal Accounting Officer)
Phyllis E. Cochran
Vice President, Operations; Director
___________________________________________
Jordan H. Feiger
* Director
___________________________________________
John R. Horne
* Director
___________________________________________
Thomas M. Hough
Director
___________________________________________
Robert C. Lannert
* Director
___________________________________________
J. Steven Keate
* Director
___________________________________________
Thomas D. Silver
/s/ John J. Bongiorno
___________________________________________
John J. Bongiorno
Attorney in fact
</TABLE>
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S> <C>
4.1 Indenture, dated as of May 30, 1997, by and between the
Corporation and The Fuji Bank and Trust Company, as Trustee,
pursuant to which the Exchange Notes are to be issued.*
4.2 Form of 9% Senior Subordinated Notes due 2002.*
4.3 Indenture, dated as of November 15, 1993, between the
Corporation and Bank of America Illinois, formerly known as
Continental Bank, National Association, as Trustee, for 8 7/8%
Senior Subordinated Notes due 1998 for $100,000,000. Filed on
Registration No. 33-50541.
4.4 Purchase Agreement, dated as of May 22, 1997, by and among the
Corporation and J.P. Morgan Securities Inc., Chase Securities
Inc. and NationsBanc Capital Markets, Inc., as Initial
Purchasers.*
4.5 Registration Rights Agreement, dated as of May 30, 1997, by
and among the Corporation and J.P. Morgan Securities Inc.,
Chase Securities Inc. and NationsBanc Capital Markets, Inc.,
as Initial Purchasers.*
5.1 Opinion of Kirkland & Ellis as to legality of the securities
being offered.
10.1 Pooling and Servicing Agreement dated as of December 1, 1990,
among the Corporation, as Servicer, Navistar Financial
Securities Corporation, as Seller, and Manufacturers Hanover
Trust Company, as Trustee. Filed on Registration No. 33-36767.
10.2 Purchase Agreement dated as of December 1, 1990, between the
Corporation and Navistar Financial Securities Corporation, as
Purchaser, with respect to the Dealer Note Trust 1990. Filed
on Registration No. 33-36767.
10.3 Security, Pledge and Trust Agreement between the Corporation
and Bankers Trust Company, Trustee, dated as of April 26,
1993. Filed on Form 8-K dated April 30, 1993. Commission File
No. 1-4146-1.
10.4 Amended and Restated Purchase Agreement among Truck Retail
Instalment Paper Corp., as Seller, the Corporation, certain
purchasers, Chemical Bank and Bank of America Illinois,
formerly known as Continental Bank N.A. as Co-Agents, and J.P.
Morgan Delaware as Administrative Agent, dated as of April 26,
1993. Filed on Form 8-K dated April 30, 1993. Commission File
No. 1-4146-1.
10.5 Master Inter-company Agreement dated as of April 26, 1993,
between the Corporation and Transportation. Filed on Form 8-K
dated April 30, 1993. Commission File No. 1-4146-1.
10.6 Inter-company Purchase Agreement dated as of April 26, 1993,
between the Corporation and Truck Retail Instalment Paper
Corp. Filed on Form 8-K dated April 30, 1993. Commission File
No. 1-4146-1.
10.7 Purchase Agreement dated as of May 3, 1994, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1994-A Owner Trust. Filed on Registration No. 33-50291.
10.8 Pooling and Servicing Agreement dated as of May 3, 1994, among
the Corporation, as Servicer, and Navistar Financial Retail
Receivables Corporation, as Seller, and Navistar Financial
1994-A Owner Trust, as Issuer. Filed on Registration No. 33-
50291.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S> <C>
10.9 Trust Agreement dated as of May 3, 1994, between Navistar
Financial Retail Receivables Corporation, as Seller, and
Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1994-A Owner Trust. Filed on Registration
No. 33-50291.
10.10 Indenture dated as of May 3, 1994, between Navistar Financial
1994-A Owner Trust and The Bank of New York, as Indenture
Trustee, with respect to Navistar Financial 1994-A Owner
Trust. Filed on Registration No. 33-50291.
10.11 Purchase Agreement dated as of August 3, 1994, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1994-B Owner Trust. Filed on Registration No. 33-50291.
10.12 Pooling and Servicing Agreement dated as of August 3, 1994,
among the Corporation, as Servicer, and Navistar Financial
Retail Receivables Corporation, as Seller, and Navistar
Financial 1994-B Owner Trust, as Issuer. Filed on Registration
No. 33-50291.
10.13 Trust Agreement dated as of August 3, 1994, between Navistar
Financial Retail Receivables Corporation, as Seller, and
Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1994-B Owner Trust. Filed on Registration
No. 33-50291.
10.14 Indenture dated as of August 3, 1994, between Navistar
Financial 1994-B Owner Trust and The Bank of New York, as
Indenture Trustee, with respect to Navistar Financial 1994-B
Owner Trust. Filed on Registration No.33-50291.
10.15 Amended and Restated Credit Agreement dated as of November 4,
1994, among the Corporation, certain banks, certain Co-
Arranger banks, and Morgan Guaranty Trust Company of New York,
as Administrative Agent. Filed on Form 8-K dated November 4,
1994. Commission File No. 1-4146-1.
10.16 Liquidity Agreement dated as of November 7, 1994, among NFC
Asset Trust, as Borrower, Chemical Bank, Bank of America
Illinois, The Bank of Nova Scotia, and Morgan Guaranty Trust
Company of New York, as Co-Arrangers, and Chemical Bank, as
Administrative Agent. Filed on Form 8-K dated November 4,
1994. Commission File No. 1-4146-1.
10.17 Appendix A to Liquidity Agreement at Exhibit 10.20. Filed on
Form 8-K dated November 4, 1994. Commission File No. 1-4146-1.
10.18 Collateral Trust Agreement dated as of November 7, 1994,
between NFC Asset Trust and Bankers Trust Company, as Trustee.
Filed on Form 8-K dated November 4, 1994. Commission File No.
1-4146-1.
10.19 Administration Agreement dated as of November 7, 1994, between
NFC Asset Trust and the Corporation, as Administrator. Filed
on Form 8-K dated November 4, 1994. Commission File No. 1-
4146-1.
10.20 Trust Agreement dated as of November 7, 1994, between Truck
Retail Instalment Paper Corp., as Depositor, and Chemical Bank
Delaware, as Owner Trustee. Filed on Form 8-K dated November
4, 1994. Commission File No. 1-4146-1.
10.21 Servicing Agreement dated as of November 7, 1994, between the
Corporation, as Servicer, and Truck Retail Instalment Paper
Corp. Filed on Form 8-K dated November 4, 1994. Commission
File No. 1-4146-1.
10.22 Servicing Agreement dated as of November 7, 1994, between the
Corporation, as Servicer, and NFC Asset Trust. Filed on Form
8-K dated November 4, 1994. Commission File No. 1-4146-1.
10.23 Receivables Purchase Agreement dated as of November 7, 1994,
between Truck Retail Instalment Paper Corp., as Seller, and
NFC Asset Trust, as Purchaser. Filed on Form 8-K dated
November 4, 1994. Commission File No. 1-4146-1.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S> <C>
10.24 Retail Receivables Purchase Agreement dated as of November 7,
1994, between Truck Retail Instalment Paper Corp. and the
Corporation. Filed on Form 8-K dated November 4, 1994.
Commission File No. 1-4146-1.
10.25 Lease Receivables Purchase Agreement dated as of November 7,
1994, between Truck Retail Instalment Paper Corp. and Navistar
Leasing Corporation. Filed on Form 8-K dated November 4, 1994.
Commission File No. 1-4146-1.
10.26 Purchase Agreement dated as of December 15, 1994, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1994-C Owner Trust. Filed on Registration No. 33-55865.
10.27 Pooling and Servicing Agreement dated as of December 15, 1994,
among the Corporation, as Servicer, and Navistar Financial
Retail Receivables Corporation, as Seller, and Navistar
Financial 1994-C Owner Trust, as Issuer. Filed on Registration
No. 33-55865.
10.28 Trust Agreement dated as of December 15, 1994, between
Navistar Financial Retail Receivables Corporation, as Seller,
and Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1994-C Owner Trust. Filed on Registration
No. 33-55865.
10.29 Indenture dated as of December 15, 1994, between Navistar
Financial 1994-C Owner Trust and The Bank of New York, as
Indenture Trustee, with respect to Navistar Financial 1994-C
Owner Trust. Filed on Registration No. 33-55865.
10.30 Purchase Agreement dated as of May 25, 1995, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1995-A Owner Trust. Filed on Registration No. 33-55865.
10.31 Pooling and Servicing Agreement dated as of May 25, 1995,
among the Corporation, as Servicer, and Navistar Financial
Retail Receivables Corporation, as Seller, and Navistar
Financial 1995-A Owner Trust, as Issuer. Filed on Registration
No. 33-55865.
10.32 Trust Agreement dated as of May 25, 1995, between Navistar
Financial Retail Receivables Corporation, as Seller, and
Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1995-A Owner Trust. Filed on Registration
No. 33-55865.
10.33 Indenture dated as of May 25, 1995, between Navistar Financial
1995-A Owner Trust and The Bank of New York, as Indenture
Trustee, with respect to Navistar Financial 1995-A Owner
Trust. Filed on Registration No. 33-55865.
10.34 Pooling and Servicing Agreement dated as of June 8, 1995,
among the Corporation, as Servicer, Navistar Financial
Securities Corporation, as Seller, Chemical Bank, as 1990
Trust Trustee, and The Bank of New York as Master Trust
Trustee. Filed on Registration No. 33-87374.
10.35 Series 1995-1 Supplement to the Pooling and Servicing
Agreement dated as of June 8, 1995, among the Corporation, as
Servicer, Navistar Financial Securities Corporation, as
Seller, and The Bank of New York, as Master Trust Trustee on
behalf of the Series 1995-1 Certificateholders. Filed on
Registration No. 33-87374.
10.36 Class A-4 Supplement to the 1990 Pooling and Servicing
Agreement dated June 8, 1995, among the Corporation, as
Servicer, Navistar Financial Securities Corporation, as
Seller, and Chemical Bank (Successor to Manufacturers Hanover
Trust Company), as Trustee. Filed on Registration No. 33-
87374.
10.37 Purchase Agreement dated as of June 8, 1995, between the
Corporation and Navistar Financial Securities Corporation, as
Purchaser, with respect to the Dealer Note Master Trust. Filed
on Registration No. 33-87374.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S> <C>
10.38 Purchase Agreement dated as of November 1, 1995, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1995-B Owner Trust. Filed on Registration No. 33-55865.
10.39 Pooling and Servicing Agreement dated as of November 1, 1995,
among the Corporation, as Servicer, and Navistar Financial
Retail Receivables Corporation, as Seller, and Navistar
Financial 1995-B Owner Trust, as Issuer. Filed on Registration
No. 33-55865.
10.40 Trust Agreement dated as of November 1, 1995, between Navistar
Financial Retail Receivables Corporation, as Seller, and
Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1995-B Owner Trust. Filed on Registration
No. 33-55865.
10.41 Indenture dated as of November 1, 1995, between Navistar
Financial 1995-B Owner Trust and The Bank of New York, as
Indenture Trustee, with respect to Navistar Financial 1995-B
Owner Trust. Filed on Registration No. 33-55865.
10.42 Amendment No. 1 dated as of March 29, 1996, to the Loan and
Security Agreement dated as of November 7, 1994, between Truck
Retail Instalment Paper Corp. ("TRIP") and NFC Asset Trust
(the "Trust") filed on Form 8-K dated June 5, 1996. Commission
File No. 1-4146-1.
10.43 Amendment No. 1 and Consent dated as of March 29, 1996, to the
Liquidity Agreement dated as of November 7, 1994, among NFC
Asset Trust, certain lenders, and Chemical Bank, as
Administrative Agent for the lenders filed on Form 8-K dated
June 5, 1996. Commission File No. 1-4146-1.
10.44 Amendment No. 2 dated as of March 29, 1996, to the Amended and
Restated Credit Agreement dated as of November 4, 1994, as
amended by Amendment No. 1 dated as of December 15, 1995,
among the Corporation, certain banks, certain Co-Arranger
banks, and Morgan Guaranty Trust Company of New York, as
Administrative Agent filed on Form 8-K dated June 5, 1996.
Commission File No. 1-4146-1.
10.45 Purchase Agreement dated as of May 30, 1996, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1996-A Owner Trust. Filed on Registration No. 33-55865.
10.46 Pooling and Servicing Agreement dated as of May 30, 1996,
among the Corporation, as Servicer, and Navistar Financial
Retail Receivables Corporation, as Seller, and Navistar
Financial 1996-A Owner Trust, as Issuer. Filed on Registration
No. 33-55865.
10.47 Trust Agreement dated as of May 30, 1996, between Navistar
Financial Retail Receivables Corporation, as Seller, and
Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1996-A Owner Trust. Filed on Registration
No. 33-55865.
10.48 Indenture dated as of November 6, 1996, between Navistar
Financial 1995-B Owner Trust and The Bank of New York, as
Indenture Trustee, with respect to Navistar Financial 1996-A
Owner Trust. Filed on Registration No. 33-55865.
10.49 Purchase Agreement dated as of November 6, 1996, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1996-B Owner Trust. Filed on Registration No. 33-55865.
10.50 Pooling and Servicing Agreement dated as of November 6, 1996,
among the Corporation, as Servicer, and Navistar Financial
Retail Receivables Corporation, as Seller, and Navistar
Financial 1996-B Owner Trust, as Issuer. Filed on Registration
No. 33-55865.
10.51 Trust Agreement dated as of November 6, 1996, between Navistar
Financial Retail Receivables Corporation, as Seller, and
Chemical Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1996-B Owner Trust. Filed on Registration
No. 33-55865.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S> <C>
10.52 Indenture dated as of November 6, 1996, between Navistar
Financial 1995-B Owner Trust and The Bank of New York, as
Indenture Trustee, with respect to Navistar Financial 1996-B
Owner Trust. Filed on Registration No. 33-55865.
10.53 Purchase Agreement dated as of May 7, 1997, between the
Corporation and Navistar Financial Retail Receivables
Corporation, as Purchaser, with respect to Navistar Financial
1997-A Owner Trust. Filed on Registration No. 33-55865.
10.54 Pooling and Servicing Agreement dated as of May 7, 1997, among
the Corporation, as Servicer, and Navistar Financial Retail
Receivables Corporation, as Seller, and Navistar Financial
1997-A Owner Trust, as Issuer. Filed on Registration No. 33-
55865.
10.55 Trust Agreement dated as of May 7, 1997, between Navistar
Financial Retail Receivables Corporation, as Seller, and Chase
Manhattan Bank Delaware, as Owner Trustee, with respect to
Navistar Financial 1997-A Owner Trust. Filed on Registration
No. 33-55865.
10.56 Indenture dated as of May 7, 1997, between Navistar Financial
1997-A Owner Trust and The Bank of New York, as Indenture
Trustee, with respect to Navistar Financial 1997-A Owner
Trust. Filed on Registration No. 33-55865.
10.57 Amendment No. 3 dated as of May 27, 1997, to the Amended and
Restated Credit Agreement dated as of November 4, 1994, as
amended by Amendment No. 1 dated as of December 15, 1995 and
Amendment No. 2 dated as of March 29, 1996, among the
Corporation, certain banks, certain Co-Arranger banks, and
Morgan Guaranty Trust Company of New York, as Administrative
Agent filed on Form 8-K dated June 17, 1997. Commission File
No. 1-4146-1.
12.1 Statements regarding computation of ratios.*
13.1 The Corporation's Annual Report on Form 10-K for the fiscal
year ended October 31, 1996. Filed on Form 10-K dated January
22, 1997. Commission File No. 1-4146-1.
13.2 The Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended January 31, 1997. Filed on Form 10-Q dated March
14, 1997. Commission File No. 1-4146-1.
13.3 The Corporation's Quarterly Report on Form 10-Q for the fiscal
quarter ended April 30, 1997. Filed on Form 10-Q dated June
13, 1997. Commission File No. 1-4146-1.
23.1 Consent of Deloitte & Touche LLP.*
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1 above).
24.1 Power of Attorney.*
25.1 Statement of Eligibility of Trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
</TABLE>
- --------
* Filed Previously.
<PAGE>
Exhibit 5.1
[Kirkland & Ellis Letterhead]
July 14, 1997
Navistar Financial Corporation
2850 West Golf Rd.
Rolling Meadows, IL 60008
Re: Navistar Financial Corporation
Registration Statement on Form S-2
Registration No. 333-30167
Ladies and Gentlemen:
We are issuing this opinion letter in our capacity as special legal counsel
to Navistar Financial Corporation, a Delaware corporation (the "Company"), in
connection with the proposed registration by the Company of up to $100,000,000
in aggregate principal amount of the Company's 9% Series B Senior Subordinated
Notes due 2002 (the "Exchange Notes"), pursuant to a Registration Statement on
Form S-2 (Registration No. 333-30167) filed with the Securities and Exchange
Commission (the "Commission") on June 27, 1997 under the Securities Act of 1933,
as amended (the "Act") (such Registration Statement, as amended or supplemented,
is hereinafter referred to as the "Registration Statement"). The Exchange Notes
are to be issued pursuant to the Indenture (the "Indenture"), dated as of May
30, 1997, among the Company and The Fuji Bank and Trust Company, as Trustee, in
exchange for and in replacement of the Company's outstanding 9% Senior
Subordinated Notes due 2002 (the "Notes"), of which $100,000,000 in aggregate
principal amount is outstanding.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the Company's Certificate of Incorporation, as amended,
(ii) minutes and records of the corporate proceedings of the Company with
respect to the issuance of the Exchange Notes, (iii) the Registration Statement,
and (iv) the Registration Rights Agreement, dated May 30, 1997, among the
Company and J.P. Morgan Securities Inc., Chase Securities Inc. and NationsBanc
Capital Markets, Inc.
<PAGE>
Exhibit 25.1
Registration No. 333-30167
----------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATE DESIGNATED TO ACT AS TRUSTEE
Check if an application to determine eligibility of a trustee
pursuant to Section 305 (b) (2) _____
----------------------------------------
THE FUJI BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-2794155
(State of incorporation (I.R.S. employer
if not a national bank) identification no.)
Two World Trade Center
New York, New York 10048
(Address of principal executive offices) (Zip Code)
----------------------------------------
NAVISTAR FINANCIAL CORPORATION
(Exact name of obligor as specified in its charter)
Delaware
(State of other jurisdiction of
incorporation or organization)
36-2472404
(I.R.S. employer identification no.)
2850 West Golf Road
Rolling Meadows, Illinois 60008
(Address of principal executive offices) (Zip Code)
----------------------------------------
DEBT SECURITIES
(Title of the Indenture Securities)
<PAGE>
Item 1. General Information
-------------------
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority
to which it is subject.
New York Banking Department, Albany, New York.
Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor and Underwriters
------------------------------------------
If the obligor or any underwriter for the obligor is an
affiliate of the Trustee, describe each such affiliation.
None.
Item 16. List of Exhibits
----------------
List below all exhibits filed as part of this statement of
eligibility and qualifications.
Exhibit 1 - Copy of Organization Certificate of the Trustee,
incorporated herein by reference to Exhibit 1 of Form T-1,
Registration No. 333-6879
Exhibit 2 - Copy of certificate of authority of the Trustee to
commence business, incorporated herein by reference to
Exhibit 2 of Form T-1, Registration No. 333-6879
Exhibit 3 - Copy of authorization of the Trustee to exercise
trust powers, incorporated herein by reference to Exhibit 3 of
Form T-1, Registration No. 333-6879
Exhibit 4 - Copy of existing By-Laws of the Trustee incorporated
herein by reference to Exhibit 4 of Form T-1, Registration
No. 333-6879
Exhibit 5 - Not applicable
Exhibit 6 - The consent of the Trustee required by Section 321(b)
of the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990, incorporated herein by reference
to Exhibit 6 of Form T-1, Registration No. 333-6879
Exhibit 7 - Copy of the latest Report of Condition of the Trustee
as of March 31, 1997
Exhibit 8 - Not applicable
Exhibit 9 - Not applicable
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
The Fuji Bank and Trust Company, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
The City of New York and State of New York, on the 7th day of July 1997.
THE FUJI BANK AND TRUST COMPANY
/s/ Sharon Moore
-----------------------
Sharon Chase Moore
Vice President
<PAGE>
<TABLE>
<CAPTION>
Exhibit 7
Name of Bank: The Fuji Bank and Trust Company Call Date: 3/31/97 ST-BK: 36-5168 FFIEC 031
Address: Two World Trade Center, 79th-82nd Floor Page RC-1
City, State Zip: New York, NY 10048-0042
Certificate No.: 21843
Consolidated Report of Condition for Insured Commercial and State-Chartered
Savings Banks for March 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<S> <C> <C> <C>
_____
| C400|
---------------------
Dollar Amounts in Thousands| RCFD Bil Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------
ASSETS | ////////////////// |
1. Cash and balances due from depository institutions (from Schedule RC-A): | ////////////////// |
a. Noninterest-bearing balances and currency and coin(1).................................. | 0081 34,610 | 1.a.
b. Interest-bearing balances(2)........................................................... | 0071 106,825 | 1.b.
2. Securities: | ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A)............................. | 1754 0 | 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)........................... | 1773 10,845 | 2.b.
3. Federal funds sold and securities purchased under agreements to resell in | 1350 0 |
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's: | ////////////////// |
a. Federal funds sold..................................................................... | ////////////////// | 3.a.
b. Securities purchased under agreements to recall........................................ | ////////////////// | 3.b.
4. Loans and lease financing receivables: _________________________| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C) |RCFD 2122 | 2,005,854 | ////////////////// | 4.a.
b. LESS: Allowance for loan and lease losses.................... |RCFD 3123 | 31,149 | ////////////////// | 4.b.
c. LESS: Allocated transfer risk reserve........................ |RCFD 3128 | 0 | ////////////////// | 4.c.
d. Loans and leases, net of unearned income, -------------------------| ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c).................................... | 2125 1,974,705 | 4.d.
5. Trading assets (from Schedule RC-D)....................................................... | 3545 3,601 | 5.
6. Premises and fixed assets (including capitalized leases).................................. | 2145 2,488 | 6.
7. Other real estate owned (from Schedule RC-M).............................................. | 2150 0 | 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M) | 2130 0 | 8.
9. Customers' liability to this bank on acceptances outstanding.............................. | 2155 1,276 | 9.
10. Intangible assets (from Schedule RC-M).................................................... | 2143 462 | 10.
11. Other assets (from Schedule RC-F)......................................................... | 2160 18,027 | 11.
12. Total assets (sum of items 1 through 11).................................................. | 2170 2,152,839 | 12.
-------------------
- -------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Name of Bank: The Fuji Bank and Trust Company Call Date: 03/31/97 ST-BK: 36-5168 FFIEC 031
Address: Two World Trade Center, 79th-82nd Floor Page RC-2
City, State Zip: New York, NY 10048-0042
Certificate No.: 21843
Schedule RC--Continued
-------------------------
Dollar Amounts in Thousands|///////////Bil Mil Thou |
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES | //////////////////////// |
| //////////////////////// | 13.
Deposits: | //////////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E. | //////////////////////// |
part 1)........................................................................ | RCON 2200 134,212 | 13.a.
(1) Noninterest-bearing (1).........................|RCON 6631 109,635 | //////////////////////// | 13.a.(1)
(2) Interest-bearing................................|RCON 6636 24,577 | //////////////////////// | 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBF's (from Schedule | //////////////////////// |
RC-E, part II)................................................................. | RCFN 2200 311,725 | 13.b.
(1) Noninterest-bearing.............................|RCFN 6631 123 | //////////////////////// | 13.b.(1)
(2) Interest-bearing................................|RCFN 6636 311,602 | //////////////////////// | 13.c.(2)
14. Federal funds purchased and securities sold under agreements to repurchase........ | RCFD 2800 155,000 | 14.
15. a. Demand notes issued to the U.S. Treasury....................................... | RCFD 2840 0 | 15.a.
b. Trading liabilities (from Schedule RC-D)....................................... | RCFD 3548 3,556 | 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under | //////////////////////// |
capitalized leases) | //////////////////////// |
a. With a remaining maturity of one year or less.................................. | RCFD 2332 919,821 | 16.a.
b. With a remaining maturity of more than one year................................ | RCFD 2333 292,773 | 16.b.
17. Not Applicable.................................................................... | //////////////////////// | 17.
18. Bank's liability on acceptances executed and outstanding.......................... | RCFD 2920 1,276 | 18.
19. Subordinated notes and debentures (2)............................................. | RCFD 3200 43,500 | 19.
20. Other liabilities (from Schedule RC-G)............................................ | RCFD 2930 16,514 | 20.
21. Total liabilities (sum of items 13 through 20).................................... | RCFD 2948 1,878,377 | 21.
| //////////////////////// |
22. Not applicable.................................................................... | //////////////////////// | 22.
EQUITY CAPITAL | //////////////////////// |
23. Perpetual preferred stock and related surplus..................................... | RCFD 3838 0 | 23.
24. Common stock...................................................................... | RCFD 3230 98,474 | 24.
25. Surplus (exclude all surplus related to preferred stock).......................... | RCFD 3839 153,975 | 25.
26. a. Undivided profit and capital reserves.......................................... | RCFD 3632 23,831 | 26.a.
b. Net unrealized holding gains (losses on available-for-sale securities)......... | RCFD 8434 (9)| 26.b.
27. Cumulative foreign currency translation adjustments............................... | RCFD 8434 (1,809)| 27.
28. Total equity capital (sum of items 23 through 27)................................. | RCFD 3284 274,462 | 28.
29. Total liabilities limited-life preferred stock, and equity capital (sum of items | //////////////////////// |
21, 22, and 28)................................................................... | RCFD 3300 2,152,839 | 29.
-------------------------
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best Number
describes the most comprehensive level of auditing work performed for the bank by -------------------
independent external auditors as of any date during 1996................................... RCFD 6724 N/A | M.1.
-------------------
1 = Independent audit of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in accordance with generally accepted auditing standards by a
certified public accounting firm which submits a report on the consolidated holding company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally accepted auditing standards by a certified public
accounting firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------------------
(1) Includes total demand deposits and noninterest-bearing time and savings deposits.
(2) Includes limited life preferred stock and related surplus.
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
9% SENIOR SUBORDINATED NOTES DUE 2002
OF
NAVISTAR FINANCIAL CORPORATION
PURSUANT TO THE PROSPECTUS DATED JULY 15, 1997
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON AUGUST
26, 1997 UNLESS EXTENDED.
TO: THE FUJI BANK AND TRUST COMPANY (THE "EXCHANGE AGENT")
By Registered or Certified Mail: By Overnight Courier:
The Fuji Bank and Trust Company The Fuji Bank and Trust Company
Corporate Trust Department Corporate Trust Department
2 World Trade Center 2 World Trade Center
New York, New York 10048 New York, New York 10048
Attn: Thomas S. Moser Attn: Thomas S. Moser
By Hand: By Facsimile: (212) 321-2468
The Fuji Bank and Trust Company Attn: Corporate Trust Department
Corporate Trust Department Confirm by telephone: (212) 898-2543
2 World Trade Center
New York, New York 10048
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA A FACSIMILE NUMBER
OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
Attn: Thomas S. Moser
The instructions accompanying this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed.
The undersigned acknowledges receipt of the Prospectus, dated July 15, 1997
(the "Prospectus") of Navistar Financial Corporation (the "Company") and the
related Letter of Transmittal (the "Letter of Transmittal"), which together
describe the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 9% Senior Subordinated Notes due 2002, Series B (the
"Exchange Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement,
for each $1,000 principal amount of its outstanding 9% Senior Subordinated
Notes due 2002 (the "Notes"), of which $100,000,000 principal amount is
outstanding. The term "Expiration Date" shall mean 5:00 p.m., New York City
time, on August 26, 1997, unless the Company, in its sole discretion, extends
the Exchange Offer, in which case the term shall mean the latest date and time
to which the Exchange Offer is extended. The term "Holder" with respect to the
Exchange Offer means any person in whose name Notes are registered on the
books of the Company or any other person who has obtained a properly completed
bond power from the registered holder. Capitalized terms used but not defined
herein have the respective meanings set forth in the Prospectus.
<PAGE>
This Letter of Transmittal is to be used by holders of Notes if certificates
representing the Notes are to be physically delivered to the Exchange Agent
herewith. Holders of Notes whose certificates are not immediately available,
or who are unable to deliver their certificates or a confirmation of a book-
entry transfer of their Notes to the Exchange Agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") and all other
documents required by this Letter of Transmittal to the Exchange Agent on or
prior to the Expiration Date, must tender their Notes according to the
guaranteed delivery procedures described in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2 below.
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Exchange Agent.
The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with
respect to the Exchange Offer. Holders who wish to tender their Notes must
complete this letter in its entirety.
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (SEE INSTRUCTION 2):
Name of Registered or Acting Holder(s): ____________________________________
Window Ticket No. (if any): ________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Eligible Institution
that Guaranteed Delivery: __________________________________________________
If Delivered by Book-Entry Transfer,
the Account Number: ________________________________________________________
Transaction Code Number: ___________________________________________________
[_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER
THE EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE
EXCHANGE NOTES (PROVIDED THAT THE COMPANY RECEIVES NOTICE FROM ANY
PARTICIPATING BROKER-DEALER OF ITS STATUS AS A BROKER-DEALER WITHIN 30 DAYS
AFTER THE CONSUMMATION OF THE EXCHANGE OFFER).
Name: ______________________________________________________________________
Address: ___________________________________________________________________
----------------------------------------------------------------------------
Attention: _________________________________________________________________
2
<PAGE>
List below the Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the certificate numbers and principal
amount of Notes should be listed on a separate signed schedule affixed hereto.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING
BOX 1 DESCRIPTION OF NOTES
- -----------------------------------------------------------------------------
AME(S)NAND ADDRESS(ES)
OF REGISTERED PRINCIPAL AMOUNT
HOLDER(S) AGGREGATE PRINCIPAL TENDERED (MUST BE
(PLEASE FILL IN, IF CERTIFICATE AMOUNT REPRESENTED AN INTEGRAL MULTIPLE
BLANK) NUMBER(S) BY CERTIFICATE(S) OF $1,000)*
- -----------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------------
* Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Notes will be deemed to have tendered the entire
aggregate principal amount represented by the column labeled "Aggregate
Principal Amount Represented by Certificate(s)." If the space provided
above is inadequate, list the certificate numbers and principal amounts on
a separate signed schedule and affix the list to this Letter of
Transmittal.
The minimum permitted tender is $1,000 in principal amount of Notes. All
other tenders must be in integral multiples of $1,000.
BOX 2 SPECIAL REGISTRATION BOX 3 SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS (See Instructions 4, 5 and 6)
(See Instructions 4, 5 and 6)
To be completed ONLY if
To be completed ONLY if certificates for Notes in a
certificates for Notes in a principal amount not tendered, or
principal amount not tendered, or Exchange Notes issued in exchange
Exchange Notes issued in exchange for Notes accepted for exchange,
for Notes accepted for exchange, are to be sent to an address other
are to be issued in a name other than the address appearing in Box
than the name appearing in Box 1 1 above, or if Box 2 is filled in,
above. to an address other than the
address appearing in Box 2.
Issue certificate(s) to:
Deliver certificate(s) to:
Name ______________________________
(Please Print) Name ______________________________
(Please Print)
Address ___________________________
Address ___________________________
-----------------------------------
(Include Zip Code) -----------------------------------
(Include Zip Code)
-----------------------------------
(Tax Identification or Social -----------------------------------
Security Number) (Tax Identification or Social
Security Number)
BOX 4 BROKER-DEALER STATUS
[_] Check this box if the beneficial owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF THIS LETTER OF
TRANSMITTAL TO R. WAYNE CAIN, VICE PRESIDENT AND TREASURER, VIA FACSIMILE:
(847) 734-4090.
3
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the undersigned
hereby tenders to Navistar Financial Corporation (the "Company"), the
principal amount of Notes indicated above.
Subject to and effective upon the acceptance for exchange of the principal
amount of Notes tendered in accordance with this Letter of Transmittal, the
undersigned sells, assigns and transfers to, or upon the order of, the Company
all right, title and interest in and to the Notes tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Notes with the
full power of substitution to (i) present such Notes and all evidences of
transfer and authenticity to, or transfer ownership of, such Notes on the
account books maintained by the Book-Entry Transfer Facility to, or upon, the
order of, the Company, (ii) deliver certificates for such Notes to the Company
and deliver all accompanying evidences of transfer and authenticity to, or
upon the order of, the Company and (iii) present such Notes for transfer on
the books of the Company and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Notes, all in accordance with the terms
of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Notes tendered
hereby and that the Company will acquire good, valid and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claims, when the same are acquired by the
Company. The undersigned hereby further represents that any Exchange Notes
acquired in exchange for Notes tendered hereby will have been acquired in the
ordinary course of business of the person receiving such Exchange Notes,
whether or not such person is the undersigned, that neither the undersigned
nor any other such person has any arrangement or understanding with any person
to participate in the distribution of such Exchange Notes and that neither the
undersigned nor any such other person is an "affiliate," as defined in Rule
405 under the Securities Act, of the Company. In addition, the undersigned and
any such person acknowledge that (a) any person participating in the Exchange
Offer for the purpose of distributing the Exchange Notes must, in the absence
of an exemption therefrom, comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale of the Exchange Notes and cannot rely on the position of the staff of
the Securities and Exchange Commission enunciated in no-action letters and (b)
failure to comply with such requirements in such instance could result in the
undersigned or such person incurring liability under the Securities Act for
which the undersigned or such person is not indemnified by the Company. The
undersigned will, upon request, execute and deliver any additional documents
deemed by the Exchange Agent or the Company to be necessary or desirable to
complete the assignment, transfer and purchase of the Notes tendered hereby.
If the undersigned is not a broker-dealer, the undersigned represents that it
is not engaged in and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a Prospectus in connection with any resale of such Exchange
Notes, however, by so acknowledging and by delivering a Prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" the
meaning of the Securities Act. Unless otherwise notified in accordance with
the instructions set forth herein in Box 4 under "Broker-Dealer Status," the
Company will assume that the undersigned is not a Participating Broker-Dealer.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Notes when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
If any Notes tendered herewith are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Notes will
be returned, without expense, to the undersigned at the address shown below or
to a different address as may be indicated herein in Box 3 under "Special
Delivery Instructions" as promptly as practicable after the Expiration Date.
4
<PAGE>
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death, incapacity or dissolution of the
undersigned, and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representative, successors and assigns.
The undersigned understands that tenders of Notes pursuant to the procedures
described under the caption "The Exchange Offer--Procedures for Tendering" in
the Prospectus and in the instructions hereto will constitute a binding
agreement between the undersigned and the Company upon the terms and subject
to the conditions of the Exchange Offer, subject only to withdrawal of such
tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders."
Unless otherwise indicated in Box 2 under "Special Registration
Instructions," please issue the certificates representing the Exchange Notes
issued in exchange for the Notes accepted for exchange and any certificates
for Notes not tendered or not exchanged, in the name(s) of the registered
holder of the Notes appearing in Box 1 above. Similarly, unless otherwise
indicated in Box 3 under "Special Delivery Instructions," please send the
certificates, if any, representing the Exchange Notes issued in exchange for
the Notes accepted for exchange and any certificates for Notes not tendered or
not exchanged (and accompanying documents, as appropriate) to the undersigned
at the address shown below in the undersigned's signature(s). In the event
that the box entitled "Special Registration Instructions" and the box entitled
"Special Delivery Instructions" both are completed, please issue the
certificates representing the Exchange Notes issued in exchange for the Notes
accepted for exchange in the name(s) of, and return any certificates for Notes
not tendered or not exchanged to, the person(s) so indicated. The undersigned
understands that the Company has no obligation pursuant to the "Special
Registration Instructions" and "Special Delivery Instructions" to transfer any
Notes from the name of the registered Holder(s) thereof if the Company does
not accept for exchange any of the Notes so tendered.
Holders who wish to tender their Notes and (i) whose Notes are not
immediately available or (ii) who cannot deliver the Notes, this Letter of
Transmittal or any other documents required hereby to the Exchange Agent prior
to the Expiration Date, may tender their Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The
Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2.
5
<PAGE>
The lines below must be signed by the registered holder(s) exactly as their
name(s) appear(s) on the Notes or by person(s) authorized to become registered
holder(s) by a properly completed bond power from the registered holder(s), a
copy of which must be transmitted with this Letter of Transmittal. If Notes to
which this Letter of Transmittal relate are held of record by two or more
joint holders, then all such holders must sign this Letter of Transmittal.
SIGNATURES
x
---------------------------------------------------------- ----------
Date
x
---------------------------------------------------------- ----------
Date
Area Code and Telephone Number: ___________________________
If signature is by a trustee, executor, administrator, guardian, attorney-
in-fact, officer of a corporation or other person acting in a fiduciary or
representative capacity, then such person must (i) set forth his or her full
title below and (ii) submit evidence satisfactory to the Company of such
person's authority so to act. See Instruction 5.
Name(s): ________________________________________________________________
(Please Print)
Capacity: _______________________________________________________________
Address: ________________________________________________________________
(Include Zip Code)
MEDALLION SIGNATURE GUARANTEE
(If required by Instruction 5)
Certain Signatures must be Guaranteed by an Eligible Institution
Signature(s) Guaranteed by an Eligible Institution: _________________________
(Authorized Signature)
-----------------------------------------------------------------------------
(Title)
-----------------------------------------------------------------------------
(Name of Firm)
-----------------------------------------------------------------------------
(Address, Include Zip Code)
-----------------------------------------------------------------------------
(Area Code and Telephone Number)
Dated: __________________________________________________________________
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES FOR NOTES OR
BOOK-ENTRY CONFIRMATIONS. Certificates representing the tendered Notes (or a
confirmation of book-entry transfer of such Notes into the Exchange Agent's
account with the Book-Entry Transfer Facility), as well as a properly
completed and duly executed copy of this Letter of Transmittal (or facsimile
thereof) (or, in the case of a book-entry transfer, an Agent's Message), a
Substitute Form W-9 (or facsimile thereof) and any other documents required by
this Letter of Transmittal must be received by the Exchange Agent at its
address set forth herein prior to the Expiration Date. The method of delivery
of certificates for Notes and all other required documents is at the election
and sole risk of the tendering holder and delivery will be deemed made only
when actually received by the Exchange Agent. If delivery is by mail,
registered mail with return receipt requested, properly insured, is
recommended. As an alternative to delivery by mail, the holder may wish to use
an overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery. Neither the Company nor the Exchange Agent
is under an obligation to notify any tendering holder of the Company's
acceptance of tendered Notes prior to the completion of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available and who cannot deliver their
certificates for Notes (or comply with the procedures for book-entry transfer
prior to the Expiration Date), the Letter of Transmittal and any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date must tender their Notes according to the guaranteed
delivery procedures set forth below. Pursuant to such procedures:
(i) such tender must be made by or through a firm which is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States (an "Eligible Institution");
(ii) prior to the Expiration Date, the Exchange Agent must have received
from the holder and the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by facsimile transmission, mail, or
hand delivery) setting forth the name and address of the holder, the
certificate number or numbers of the tendered Notes, and the principal
amount of tendered Notes and stating that the tender is being made thereby
and guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, the Letter of Transmittal (or facsimile thereof)
(or, in the case of a book-entry transfer, an Agent's Message), together
with the tendered Notes (or a confirmation of book-entry transfer of such
Notes into the Exchange Agent's account with the Book-Entry Transfer
Facility) and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent; and
(iii) the certificates representing the tendered Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Notes into the
Exchange Agent's account with the Book-Entry Transfer Facility), together
with the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message) and all other documents
required by the Letter of Transmittal must be received by the Exchange
Agent within five New York Stock Exchange trading days after the Expiration
Date.
Failure to complete the guaranteed delivery procedures outlined above will
not, of itself, affect the validity or effect a revocation of any Letter of
Transmittal form properly completed and executed by a Holder who attempted to
use the guaranteed delivery procedure.
3. TENDER BY HOLDER. Only a holder of Notes may tender such Notes in the
Exchange Offer. Any beneficial owner of Notes who is not the registered holder
and who wishes to tender should arrange with such holder to execute and
deliver this Letter of Transmittal on such owner's behalf or must, prior to
completing and executing this Letter of Transmittal and delivering such Notes,
either make appropriate arrangements to register
7
<PAGE>
ownership of the Notes in such owner's name or obtain a properly completed
bond power from the registered holder.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes is tendered, the tendering holder should fill in the principal
amount tendered in the column labeled "Principal Amount Tendered" of the box
entitled "Description of Notes" (Box 1) above. The entire principal amount of
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of Notes is not
tendered, Notes for the principal amount of Notes not tendered and Exchange
Notes exchanged for any Notes tendered will be sent to the holder at his or
her registered address, unless a different address is provided in the
appropriate box on this Letter of Transmittal, as soon as practicable
following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
MEDALLION GUARANTEE OF SIGNATURE. If this Letter of Transmittal is signed by
the registered holder(s) of the Notes tendered herewith, the signatures must
correspond with the name(s) as written on the face of the tendered Notes
without alteration, enlargement, or any change whatsoever.
If any of the tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any tendered
Notes are held in different names on several Notes, it will be necessary to
complete, sign, and submit as many separate copies of the Letter of
Transmittal documents as there are names in which tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder, and
Exchange Notes are to be issued and any untendered or unaccepted principal
amount of Notes are to be reissued or returned to the registered holder, then,
the registered holder need not and should not endorse any tendered Notes nor
provide a separate bond power. In any other case, the registered holder must
either properly endorse the Notes tendered or transmit a properly completed
separate bond power with this Letter of Transmittal (executed exactly as the
name(s) of the registered holder(s) appear(s) on such Notes), with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution unless such certificates or bond powers are signed by an Eligible
Institution.
If this Letter of Transmittal or any Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and evidence satisfactory to the
Company of their authority to so act must be submitted with this Letter of
Transmittal.
No medallion signature guarantee is required if (i) this Letter of
Transmittal is signed by the registered holder(s) of the Notes tendered
herewith and the issuance of Exchange Notes (and any Notes not tendered or not
accepted) are to be issued directly to such registered holder(s) and neither
the "Special Registration Instructions" (Box 2) nor the "Special Delivery
Instructions" (Box 3) has been completed. In all other cases, all signatures
on this Letter of Transmittal must be guaranteed by an Eligible Institution.
6. SPECIAL REGISTRATION AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box, the name and address in which the Exchange
Notes and/or substitute Notes for principal amounts not tendered or not
accepted for exchange are to be sent, if different from the name and address
or account of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the employer identification number or social
security number of the person named must also be indicated and the indicated
and the tendering holders should complete the applicable box.
If no such instructions are given, the Exchange Notes (and any Notes not
tendered or not accepted) will be issued in the name of and sent to the
registered holder of the Notes.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Notes to it or its order pursuant to
the Exchange Offer. If, however, a transfer tax is imposed for any reason
8
<PAGE>
other than the transfer and sale of Notes to the Company or its order pursuant
to the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or on any other person) will be payable by
the tendering holder. If satisfactory evidence of payment of such taxes or
exemption from taxes therefrom is not submitted with this Letter of
Transmittal, the amount of transfer taxes will be billed directly to such
tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law required that a holder
of any Notes which are accepted for exchange must provide the Company (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual, is his or her social security number.
If the Company is not provided with the correct TIN, the Holder may be subject
to a $50 penalty imposed by Internal Revenue Service. (If withholding results
in an over-payment of taxes, a refund may be obtained.) Certain holders
(including, among other, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of
failure to report a interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the Notes are registered in more than one name or are not in
the name of the actual owner, see the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for information on
which TIN to report.
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of tendered Notes will be
determined by the Company, in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Notes
not validly tendered or any Notes, the Company's acceptance of which would, in
the opinion of the Company or its counsel, be unlawful. The Company also
reserves the right to waive any conditions of the Exchange Offer or defects or
irregularities in tenders of Notes as to any ineligibility of any holder who
seeks to tender Notes in the Exchange Offer. The interpretation of the terms
and conditions of the Exchange Offer (includes this Letter of Transmittal and
the instructions hereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with
tenders of Notes must be cured within such time as the Company shall
determine. The Company will use reasonable efforts to give notification of
defects or irregularities with respect to tenders of Notes, but shall not
incur any liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify specified conditions in the Exchange Offer in the case of any
tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED NOTES. Any tendering holder whose
Notes have been mutilated, lost, stolen, or destroyed should contact the
Exchange Agent at the address indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address set
9
<PAGE>
forth on the first page of this Letter of Transmittal. Holders may also
contact their broker, dealer, commercial bank, trust company, or other nominee
for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Notes as soon as practicable
after the Expiration Date and will issue Exchange Notes therefor as soon as
practicable thereafter. For purposes of the Exchange Offer, the Company shall
be deemed to have accepted tendered Notes when, as and if the Company has
given written and oral notice thereof to the Exchange Agent. If any tendered
Notes are not exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Notes will be returned, without expense, to the undersigned at the
address shown above or at a different address as may be indicated under
"Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders."
PAYER'S NAME: NAVISTAR FINANCIAL CORPORATION
- -------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE Social Security Number
YOUR TAXPAYER IDENTIFICA- or TIN
TION NUMBER ("TIN") IN THE
BOX AT RIGHT AND CERTIFY
BY SIGNING AND DATING
BELOW
//
---------------------------
-----------------------------------------------------------
Part 2--Check the box if you are NOT subject to backup
withholding under the provisions of section
3408(a)(1)(C) of the Internal Revenue Code because (1)
you have not been notified that you are subject to
backup withholding as a result of failure to report all
interest or dividends or (2) the Internal Revenue
Service has notified you that you are no longer subject
to backup withholding.
[_]
-----------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE INFORMATION Part 3--
SUBSTITUTE PROVIDED ON THIS FORM IS TRUE, CORRECT Awaiting
FORM W-9 AND COMPLETE. TIN . [_]
DEPARTMENT OF THE
TREASURY SIGNATURE DATE
-----------------------------------------------------------
INTERNAL REVENUE
SERVICE Name (if joint names, list first and circle the name of
the person or entity whose number you enter in Part I
below. See instructions if your name has changed.)
PAYER'S REQUEST
FOR -----------------------------------------------------------
TAXPAYER
IDENTIFICATION Address
NUMBER (TIN) -----------------------------------------------------------
City, State and ZIP Code
-----------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
List account number(s) here (optional)
10
<PAGE>
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
NAVISTAR FINANCIAL CORPORATION
9% SENIOR SUBORDINATED NOTES DUE 2002
This form must be used by a holder of 9% Senior Subordinated Notes due 2002
(the "Notes") of Navistar Financial Corporation (the "Company"), who wishes to
tender Notes to the Exchange Agent pursuant to the guaranteed delivery
procedures described in the section of the Prospectus entitled "The Exchange
Offer--Guaranteed Delivery Procedures," and in Instruction 2 to the related
Letter of Transmittal. Any holder who wishes to tender Notes pursuant to such
guaranteed delivery procedures must ensure that the Exchange Agent receives
this Notice of Guaranteed Delivery prior to the Expiration Date of the
Exchange Offer. Capitalized terms not defined herein have the meanings
ascribed to them in the Letter of Transmittal.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON AUGUST 26,
1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
TO: THE FUJI BANK AND TRUST COMPANY
(THE "EXCHANGE AGENT")
By Registered or Certified Mail:
The Fuji Bank and Trust Company
Corporate Trust Department
2 World Trade Center
New York, New York 10048
Attn: Thomas S. Moser
By Overnight Courier:
The Fuji Bank and Trust Company
Corporate Trust Department
2 World Trade Center
New York, New York 10048
Attn: Thomas S. Moser
By Hand:
The Fuji Bank and Trust Company
Corporate Trust Department
2 World Trade Center
New York, New York 10048
Attn: Thomas S. Moser
By Facsimile: (212) 321-2468
Attn: Corporate Trust Department
Confirm by telephone: (212) 898-2543
DELIVERY OF THIS FORM TO AN ADDRESS, OR TRANSMISSION VIA FACSIMILE, OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE>
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES
OR ACCOUNT AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
<S> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
PLEASE SIGN AND COMPLETE
- -------------------------------------------------------------------------------
Signatures of Registered Holder(s)
or Authorized Signatory: __________ Date: ______________________ , 1997
----------------------------------- Address: __________________________
----------------------------------- -----------------------------------
Name of Registered Holder(s): _____ Area Code and Telephone No.: ______
-----------------------------------
-----------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s)
exactly as their name(s) appear on certificates for Notes or on a security
position listing as the owner of Notes, or by person(s) authorized to
become Holder(s) by endorsements and documents transmitted with this
Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting
in a fiduciary or representative capacity, such person must provide the
following information:
Please print name(s) and address(es)
Name(s): __________________________________________________________________
---------------------------------------------------------------------------
Capacity: _________________________________________________________________
Address(es): ______________________________________________________________
---------------------------------------------------------------------------
---------------------------------------------------------------------------
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, guarantees that either the Notes
tendered hereby in proper form for transfer (or confirmation of the book-
entry transfer of such Notes into the Exchange Agent's account at Book-
Entry Transfer Facility as described in the Prospectus under the caption
"The Exchange Offer--Guaranteed Delivery Procedures"), together with a
properly completed Letter of Transmittal (or facsimile thereof) (or, in
the case of a book-entry transfer, an Agent's Message) and any other
required documents will be received by the Exchange Agent by 5:00 p.m.,
New York City time, on the fifth New York Stock Exchange trading day
following the Expiration Date.
Name of Firm: _____________________ -----------------------------------
Address: __________________________ Authorized Signature
-----------------------------------
Area Code and Telephone No.: ______ Name: _____________________________
Title: ____________________________
Date: ______________________ , 1997
- --------------------------------------------------------------------------------
DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole
risk of the holder, and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. As an alternative
to delivery by mail, the holders may wish to consider using an overnight or
hand delivery service. In all cases, sufficient time should be allowed to
assure timely delivery. For a description of the guaranteed delivery
procedures, see Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant
of the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of Notes, the signature must correspond with the name
shown on the security position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s)
appears on the Notes or signed as the name of the participant shown on the
Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address set forth on the first page of
this Notice of Guaranteed Delivery. Holders may also contact their broker,
dealer, commercial bank, trust company, or other nominee for assistance
concerning the Exchange Offer.
4
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER OF
NAVISTAR FINANCIAL CORPORATION
9% SENIOR SUBORDINATED NOTES DUE 2002
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated July
15, 1997 (the "Prospectus"), of Navistar Financial Corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 principal amount of its 9% Senior Subordinated
Notes due 2002, Series B (the "Exchange Notes"), for each $1,000 principal
amount of its outstanding 9% Senior Subordinated Notes due 2002 (the "Notes").
Capitalized terms used but not defined herein have the meanings ascribed to
them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Notes held by you for the account of the
undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 9% Senior Subordinated Notes due 2002.
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_] TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED): $
[_] NOT TO TENDER any Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representation and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations that
(i) the undersigned's principal residence is in the state of (fill in state) ,
(ii) the undersigned is acquiring the Exchange Notes in the ordinary course of
business of the undersigned, (iii) the undersigned is not participating, does
not intend to participate, and has no arrangement or understanding with any
person to participate in the distribution of the Exchange Notes, (iv) the
undersigned acknowledges that any person participating in the Exchange Offer
for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act of
1933, as amended (the "Act"), in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the staff of the Securities and Exchange Commission set forth
in no-action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer--Resale of the Exchange Notes," and (v) the
undersigned is not an "affiliate," as defined in Rule 405 under the Act, of
the Company; (b) to agree, on behalf of the undersigned, as set forth in the
Letter of Transmittal; and (c) to take such other action as necessary under
the Prospectus or the Letter of Transmittal to effect the valid tender of such
Notes.
PLEASE NOTE: THE COMPANY HAS AGREED THAT, FOR A PERIOD OF 180 DAYS AFTER THE
EXPIRATION DATE, IT WILL MAKE COPIES OF THE PROSPECTUS AVAILABLE TO ANY
PARTICIPATING BROKER-DEALER FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE
NOTES (PROVIDED THAT THE COMPANY RECEIVES NOTICE FROM ANY PARTICIPATING
BROKER-DEALER OF ITS STATUS AS A BROKER-DEALER WITHIN 30 DAYS AFTER
CONSUMMATION OF THE EXCHANGE OFFER).
(CONTINUED ON BACK)
<PAGE>
[_] Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes
for its own account as a result of market-making activities or other
trading activities. IF THIS BOX IS CHECKED, PLEASE SEND A COPY OF THESE
INSTRUCTIONS TO R. WAYNE CAIN, VICE PRESIDENT AND TREASURER, VIA
FACSIMILE: (847) 734-4090.
SIGN HERE
Name of beneficial owner(s): ________________________________________________
Signature(s): _______________________________________________________________
Name (please print): ________________________________________________________
Address:_____________________________________________________________________
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Telephone number: ___________________________________________________________
Taxpayer Identification or Social Security Number: __________________________
Date: _______________________________________________________________________
