The information in this pricing supplement is not complete and may be
changed. This pricing supplement is not an offer to sell these securities
and is not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 1999
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-59145
PRELIMINARY PRICING SUPPLEMENT NO. 2 DATED SEPTEMBER , 1999
(To Prospectus dated July 21, 1998 and
U.S. Prospectus Supplement dated July 29, 1998)
U.S.$1,000,000,000
McDONALD'S CORPORATION
Medium-Term Notes, Series F
(Fixed Rate Notes)
Due from 1 Year to 60 Years from Date of Issue
The following description of the terms of the Notes offered hereby
supplements, and to the extent inconsistent therewith replaces, the
descriptions included in the Prospectus and Prospectus Supplement referred
to above, to which descriptions reference is hereby made.
Principal Amount: U.S.$
Issue Price:
100% of the principal amount of the Notes
Original Issue Date:
September __, 1999
Stated Maturity:
July 15, 2018
Interest Rate:
___% per annum
Interest Payment Dates:
The first Interest Payment Date will be December 15, 1999, and
thereafter Interest Payment Dates will be January 15 and July 15
of each year, commencing January 15, 2000.
(Applicable only if other than February 15 and August 15 of each year)
Regular Record Dates:
The first Record Date will be December 1, 1999, and thereafter Record
Dates will be January 1 and July 1 of each year.
(Applicable only if other than February 1 and August 1 of each year)
Form: /X/ Book-Entry / / Certificated
Specified Currency: U.S. dollars
(If other than U.S. dollars, see attachment hereto)
Option to Receive Payments in Specified Currency: / / Yes / / No
(Applicable only if Specified Currency is other than U.S. dollars and
if Note is not in Book Entry form)
Authorized Denominations:
(Applicable only if other than U.S.$1,000 and increments of
U.S.$1,000 or if Specified Currency is other than U.S. dollars)
Method of Payment of Principal:
(Applicable only if other than immediately available funds)
Optional Redemption:
/ / The Notes cannot be redeemed prior to Stated Maturity.
/X/ The Notes can be redeemed prior to Stated Maturity.
Optional Redemption Dates:
The Notes will be redeemable in whole or in part, as set forth below,
at the option of McDonald's Corporation (the "Company") at any time.
Redemption Prices:
/ / The Redemption Price shall initially be % of the principal
amount of the Note to be redeemed and shall decline at each anniversary of
the initial Optional Redemption Date by % of the principal amount to be
redeemed until the Redemption Price is 100% of such principal amount;
provided, however, that in the case of an Original Issue Discount Note, the
Redemption Price shall be the Amortized Face Amount of the principal amount
to be redeemed.
/X/ Other:
The Notes will be redeemable in whole at any time or in part from time to
time, at the option of the Company, in each case at a redemption price
equal to the greater of (i) that percentage (the "Applicable Percentage")
of their Remaining Principal Amount to be redeemed and (ii) the sum of the
present values of the Applicable Percentage of each of the Remaining
Scheduled Payments, discounted from the date each such Remaining Scheduled
Payment is due to the date of redemption on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate
plus ____ basis points, plus in the case of each of clause (i) and (ii)
accrued interest to the date of redemption.
In addition, all or any portion of the amount of principal of the
Notes to be paid on any one or more Amortizing Payment Dates, being in the
aggregate less than all of the Remaining Principal Amount, may be redeemed,
at the option of the Company, at any time before the earliest of such
Amortizing Payment Dates, at a price for each such Amortizing Payment Date
equal to the greater of (i) the amount of principal to be redeemed with
respect to such Amortizing Payment Date and (ii) the sum of the present
values of (a) the amount of principal to be redeemed, and (b) each payment
of interest that would accrue and be payable on the amount of principal
to be redeemed from and after the date of redemption, discounted from the
date each such payment would be due had such amount of principal not been
redeemed to the date of redemption on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Treasury Rate plus ___ basis
points, plus in the case of each of clause (i) and (ii) accrued interest to
the date of redemption. The applicable Treasury Rate will be determined as
set forth below on the basis of the Comparable Treasury Issue, which will be
selected based on the Remaining Average Life of the Notes at the date of
redemption or the time remaining to the Amortizing Payment Date at the date
of redemption, as set forth below.
"Amortizing Payment Date" means each date set forth below in the
Amortization Schedule as a date on which an amortizing payment of principal
is scheduled to be made.
"Comparable Treasury Issue" means the United States Treasury
security selected by an Independent Investment Banker as having a maturity
comparable to the Remaining Average Life of the Notes that would be
utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the Remaining Average Life of the Notes (the
"Remaining Average Life Treasury Security"); provided, however, that in the
event of redemption of the amount of principal of the Notes to be paid on
an Amortizing Payment Date, being less than all of the Remaining Principal
Amount of the Notes, if the United States Treasury security selected as
aforesaid by an Independent Investment Banker as having a maturity
comparable to the period ending on such Amortizing Payment Date (the
"Amortizing Payment Date Treasury Security") shall be determined by the
Independent Investment Banker to have a lower yield, determined as set
forth under "Treasury Rate" below, than the Remaining Average Life Treasury
Security, then the Comparable Treasury Issue for purposes of fixing the
Treasury Rate shall be the Amortizing Payment Date Treasury Security.
"Comparable Treasury Price" means (a) the average of four Reference
Treasury Dealer Quotations for a redemption date, after excluding the
highest and lowest Reference Treasury Dealer Quotations, or (b) if the
Indenture Trustee obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such quotations.
"Independent Investment Banker" means Morgan Stanley & Co.
Incorporated or, if such firm is unwilling or unable to select the
Comparable Treasury Issue, an independent investment banking institution of
national standing appointed by the Indenture Trustee after consultation
with the Company.
"Reference Treasury Dealer" means Morgan Stanley & Co. Incorporated
and its successors and three primary U.S. government securities dealers in
New York City (each a "Primary Treasury Dealer") selected by the Indenture
Trustee after consultation with the Company; provided, however, that if
Morgan Stanley & Co. Incorporated shall cease to be a Primary Treasury
Dealer, the Indenture Trustee shall substitute therefor another Primary
Treasury Dealer after consultation with the Company.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as
determined by the Indenture Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Indenture Trustee by such
Reference Treasury Dealer at 5:00 p.m., New York City time, on the third
Business Day preceding such redemption date.
"Remaining Average Life" means, with respect to any Remaining
Principal Amount, the number of years (calculated to the nearest one-
twelfth year) obtained by dividing (i) the sum of the products obtained by
multiplying (a) the principal component of each Remaining Scheduled Payment
by (b) the number of years (calculated to the nearest one-twelfth year)
that will elapse between the date of redemption of the Notes and the
scheduled due date of such Remaining Scheduled Payment by (ii) such
Remaining Principal Amount.
"Remaining Principal Amount" means, with respect to any redemption
prior to maturity, the outstanding principal of the Notes that remains
unpaid at the time of such redemption.
"Remaining Scheduled Payments" means, with respect to the Remaining
Principal Amount, all payments of such Remaining Principal Amount and
interest accruable thereon that would be due after the date of redemption
to and including the Stated Maturity of the Notes if no payment of such
Remaining Principal Amount were made prior to its scheduled due date.
"Treasury Rate" means, with respect to any redemption date, (i) the
yield, under the heading which represents the average for the immediately
preceding week, appearing in the most recently published statistical
release designated "H.15 (519)" or any successor publication which is
published weekly by the Board of Governors of the Federal Reserve System
and which establishes yields on actively traded United States Treasury
securities adjusted to constant maturity under the caption "Treasury
Constant Maturities" for the maturity most closely corresponding to the
maturity of the Comparable Treasury Issue (if no maturity is within three
months before or after the maturity date, yields for the two published
maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated or
extrapolated from such yields on a straight line basis, rounding to the
nearest month) or (ii) if such release (or any successor release) is not
published during the week preceding the calculation date or does not
contain such yields, the rate per annum equal to the semi-annual equivalent
yield to maturity of the Comparable Treasury Issue, calculated using a
price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for such
redemption date. The Treasury Rate shall be calculated by the Company on
the third Business Day preceding the redemption date. "Business Day" means
any day other than a Saturday, a Sunday, a legal holiday or a day on which
banking institutions in the cities of New York or Chicago are authorized or
obligated by law, executive order or governmental decree to be closed.
Notice of any redemption by the Company will be mailed to each holder
of Notes to be redeemed at least 30 days but not more than 60 days prior to
the date fixed for redemption.
Unless the Company defaults in payment of the redemption price, on
and after the redemption date interest will cease to accrue on the Notes or
portions thereof called for redemption.
Sinking Fund:
/X/ The Notes are not subject to a Sinking Fund.
/ / The Notes are subject to a Sinking Fund.
Sinking Fund Dates:
Sinking Fund Amounts:
Amortizing Note:
/X/ Yes / / No
Amortization Schedule:
Scheduled Schedule
Payment Date Principal Payment Date Principal
------------ --------- ------------ ---------
12/15/1999 07/15/2009
01/15/2000 01/15/2010
07/15/2000 07/15/2010
01/15/2001 01/15/2011
07/15/2001 07/15/2011
01/15/2002 01/15/2012
07/15/2002 07/15/2012
01/15/2003 01/15/2013
07/15/2003 07/15/2013
01/15/2004 01/15/2014
07/15/2004 07/15/2014
01/15/2005 01/15/2015
07/15/2005 07/15/2015
01/15/2006 01/15/2016
07/15/2006 07/15/2016
01/15/2007 01/15/2017
07/15/2007 07/15/2017
01/15/2008 01/15/2018
07/15/2008 07/15/2018
01/15/2009
Optional Repayment:
/ / Yes /X/ No
Optional Repayment Dates:
Optional Repayment Prices:
Original Issue Discount Note:
/ / Yes /X/ No
Total Amount of OID:
Yield to Stated Maturity:
Initial Accrual Period OID:
Calculation Agent (if other than Principal Paying Agent):
Agent's discount or commission:
______% of the principal amount of the Notes Net proceeds to Company
(if sale to Agent as principal): ______% of the principal amount of the
Notes
Use of Proceeds:
The Company intends to use the net proceeds from the sale of the
Notes to refinance portions of The McDonald's Matching and Deferred Stock
Ownership Trust (the "ESOP Trust") 7.67% Guaranteed ESOP Notes, Series A,
due September 15, 2004, the ESOP Trust 7.30% Guaranteed ESOP Notes, Series B,
due June 1, 2006 and the ESOP Trust loan pursuant to a Loan and Guarantee
Agreement dated November 29, 1994 by and among the ESOP Trust, the Company
and Wachovia Bank of North Carolina, N.A.
Agent's Capacity:
/ / Agent /X/ Principal
Agent:
MORGAN STANLEY DEAN WITTER
CUSIP:
_____________
Plan of Distribution:
The Notes will be sold to Morgan Stanley Dean Witter at _____% of the
principal amount of the Notes, for resale to one or more investors at the
Issue Price set forth above.
In order to facilitate the offering of the Notes, the Agent may
engage in transactions that stabilize, maintain or otherwise affect the
price of the Notes. Specifically, the Agent may over-allot in connection
with this offering, creating short positions in the Notes for its own
account. In addition, to cover over-allotments or to stabilize the price
of the Notes, the Agent may bid for, and purchase, Notes in the open
market. Finally, the Agent may reclaim selling concessions allowed to a
dealer for distributing Notes in this offering, if the Agent repurchases
previously distributed Notes in transactions that cover syndicate short
positions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Notes above
independent market levels. The Agent is not required to engage in these
activities, and may end any of these activities at any time.
United States Tax Considerations:
The following is a summary of certain U.S. federal income tax
considerations that may be relevant to a holder of a Note that is a U.S.
holder (as defined in the Prospectus Supplement), and that purchases the
Note at its original issuance. This summary supplements, and should be
read together with, the section entitled "United States Tax Considerations"
in the Prospectus Supplement.
In the event that the Company redeems an amount of principal of the
Notes (scheduled to be paid on one or more future Amortizing Payment Dates)
that is less than all of the Remaining Principal Amount, a U.S. holder will
be treated as receiving a payment in redemption of a portion of the Note.
The U.S. holder will be treated as realizing gain to the extent of the
excess (if any) of the redemption amount received (less any accrued interest,
which will be taxable as such), over the U.S. holder's tax basis in the
portion of the Note that is treated as redeemed. A U.S. holder that
purchased its Note at original issuance at the Note's par value should
calculate its basis allocable to the redeemed portion of the Note as the
amount of principal, scheduled to be paid on the relevant future Amortizing
Payment Date(s), that the Company is redeeming.
