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FILED PURSUANT TO
RULE 424(b)(3)
REGISTRATION NO. 333-47772
PROSPECTUS
[LOGO]
QWEST CORPORATION
(formerly U S WEST Communications, Inc.)
OFFER TO EXCHANGE ALL OF OUR OUTSTANDING
$1,000,000,000 AGGREGATE PRINCIPAL AMOUNT OF 7 5/8% NOTES DUE JUNE 9, 2003
FOR
$1,000,000,000 AGGREGATE PRINCIPAL AMOUNT OF 7 5/8% NOTES DUE JUNE 9, 2003
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
We hereby offer, upon the terms and subject to the conditions set forth in
this prospectus and the accompanying letter of transmittal (which together
constitute the "exchange offer"), to exchange up to $1,000,000,000 aggregate
principal amount of our new 7 5/8% Notes due June 9, 2003 (the "new 7 5/8%
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for a like principal amount of our outstanding 7 5/8%
Notes due June 9, 2003 (the "old 7 5/8% Notes," and collectively with the new
7 5/8% Notes, the "7 5/8% Notes"), which have not been so registered. The terms
of the new 7 5/8% Notes are identical in all material respects to the old 7 5/8%
Notes, except for the absence of certain transfer restrictions relating to the
old 7 5/8% Notes. The new 7 5/8% Notes will evidence the same indebtedness as
the old 7 5/8% Notes, and will be issued pursuant to, and entitled to the
benefits of, the same Indenture that governs the old 7 5/8% Notes.
We will accept for exchange any and all old 7 5/8% Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on November 23, 2000
unless extended. The exchange offer is not conditioned upon any principal amount
of the old 7 5/8% Notes being tendered for exchange pursuant to the exchange
offer. The exchange offer is subject to certain other customary conditions. See
"The Exchange Offer--Conditions of the Exchange Offer." We will not receive any
proceeds from the exchange offer.
Neither our direct parent corporation, Qwest Services Corporation, nor our
ultimate parent corporation, Qwest Communications International Inc. ("QCI"),
will be guaranteeing the payment of principal, premium, if any, or interest on
the 7 5/8% Notes.
YOU SHOULD CAREFULLY REVIEW THE RISK FACTORS ON PAGE 7 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is October 24, 2000.
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TABLE OF CONTENTS
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PAGE
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Forward-Looking Information May Prove Inaccurate............ 1
Where You Can Find More Information......................... 2
Prospectus Summary.......................................... 3
Risk Factors................................................ 7
Qwest Corporation........................................... 8
The Exchange Offer.......................................... 8
Use of Proceeds............................................. 15
Capitalization of Qwest Corporation......................... 16
Ratio of Earnings to Fixed Charges.......................... 16
Description of New 7 5/8% Notes............................. 16
Registration Rights......................................... 24
Certain U.S. Federal Tax Considerations..................... 27
Plan of Distribution........................................ 31
Legal Matters............................................... 32
Experts..................................................... 32
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FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
This prospectus contains or incorporates by reference financial projections,
synergy estimates and other "forward-looking statements" as that term is used in
federal securities laws about our financial condition, results of operations and
business. These statements include, among others:
- statements concerning the benefits that we expect will result from our
business activities and certain transactions we have completed, such as
increased revenues, decreased expenses and avoided expenses and
expenditures; and
- statements of our expectations, beliefs, future plans and strategies,
anticipated developments and other matters that are not historical facts.
These statements may be made expressly in this prospectus, or may be
incorporated by reference to other documents filed with the Securities and
Exchange Commission (the "SEC" or the "Commission"). You can find many of these
statements by looking for words such as "believes," "expects," "anticipates,"
"estimates," or similar expressions used in this prospectus or incorporated by
reference in this prospectus.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties that may cause our actual results to be materially different
from any future results expressed or implied by us in those statements. The
risks and uncertainties include those risks, uncertainties and risk factors
identified, among other places, under "Risk Factors" and under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
documents incorporated by reference in this prospects.
The most important facts that could prevent us from achieving our stated
goals include the following:
- intense competition in the local exchange, intraLATA (Local Access and
Transport Areas) toll, wireless and data markets;
- changes in demand for our products and services;
- dependence on new product development and acceleration of the deployment
of advanced new services, such as broadband data, wireless and video
services, which could require substantial expenditure of financial and
other resources in excess of contemplated levels;
- rapid and significant changes in technology and markets;
- higher than anticipated employee levels, capital expenditures and
operating expenses;
- adverse changes in the regulatory or legislative environment impacting the
competitive environment and service pricing in the local exchange market
and affecting QCI's business and delays in the ability to begin interLATA
long-distance services in our 14 state region; and
- failure to achieve the projected synergies and financial results expected
to result from the merger of U S WEST, Inc., our former parent corporation
("Old U S WEST"), with and into QCI on June 30, 2000 (the "Merger"), on a
timely basis or at all, and difficulties in combining the operations of
QCI and Old U S WEST, which could affect our revenues, levels of expenses
and operating results.
To the extent that this prospectus contains forward-looking information
regarding QCI, please see the forward-looking information safe harbor statements
contained in documents QCI has filed with the SEC.
Because the statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the
forward-looking statements. We caution you not to place undue
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reliance on the statements, which speak only as of the date of this prospectus
or, in the case of documents incorporated by reference, the date of the
document.
The cautionary statements contained or referred to in this section should be
considered in connection with any subsequent written or oral forward-looking
statements that we or persons acting on our behalf may issue. We do not
undertake any obligation to review or confirm analysts' expectations or
estimates or to release publicly any revisions to any forward-looking statements
to reflect events or circumstances after the date of this prospectus or to
reflect the occurrence of unanticipated events.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, and other information with
the SEC. You may read and copy any document we file at the SEC's public
reference rooms at 450 Fifth Street, N.W., Washington, D.C., 20549, and in New
York, New York, and Chicago, Illinois. For further information on the public
reference rooms, please call the SEC at 1-800-SEC-0330. Our SEC filings are also
available to the public from the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" into this prospectus certain
information that we file with the SEC, which means that we can disclose
important information to you by referring to that information in this
prospectus. Information incorporated by reference is considered a part of this
prospectus, and later information filed with the SEC will automatically update
and supersede previous information. We incorporate by reference the documents
listed below and any future filings (including filings made after the date on
which the registration statement was initially filed with the SEC and before the
registration statement becomes effective) made by us with the SEC under
Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"):
- Our Annual Report on Form 10-K for the year ended December 31, 1999;
- Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000
and June 30, 2000; and
- Our Current Reports on Form 8-K filed February 11, 2000, May 1, 2000 and
May 1, 2000.
You may obtain a copy of these filings, at no cost, by writing or
telephoning us at:
Corporate Secretary
Qwest Corporation
1801 California Street, Suite 3800
Denver, Colorado 80202
(303) 992-1400
If you would like to request documents from us, please do so by
November 16, 2000 to receive them before the exchange offer expires.
Documents that QCI has filed with the SEC are available to the public from
the SEC's web site at http://www.sec.gov.
You should rely only on the information in this prospectus or incorporated
by reference in this prospectus. We have not authorized anyone to provide you
with different information. We are not making any offer of these debt securities
in any state where the offer is not permitted. You should not assume that the
information contained in this prospectus is accurate as of any date other than
the date on the front page of this prospectus.
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PROSPECTUS SUMMARY
WHO WE ARE
Qwest Corporation (formerly U S WEST Communications, Inc.) (the "Company" or
"Qwest," which may be referred to as "we," "us," or "our") is a wholly owned
subsidiary of Qwest Services Corporation, which is a wholly owned subsidiary of
QCI. We are a Colorado corporation and our principal executive offices are
located at 1801 California Street, Denver, Colorado 80202, Suite 3800, telephone
number (303) 992-1400.
We provide communications services to more than 25 million residential and
business customers in the 14 state region (the "Region") comprised of Arizona,
Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota,
Oregon, South Dakota, Utah, Washington and Wyoming. We are organized on the
basis of our products and services and operate in three segments: retail
services, wholesale services and network services. For additional information,
please refer to the documents we have incorporated by reference. See "WHERE YOU
CAN FIND MORE INFORMATION."
THE EXCHANGE OFFER
On June 9, 2000, we issued $1,000,000,000 aggregate principal amount of
7 5/8% Notes due 2003 to certain initial purchasers in a transaction exempt from
the registration requirements of the Securities Act. The terms of the new 7 5/8%
Notes due 2003 and the old 7 5/8% Notes are substantially identical in all
material respects, except that the new 7 5/8% Notes will be freely transferable
by the holders, except as otherwise provided in this prospectus.
We are offering to exchange each $1,000 principal amount of new 7 5/8% Notes
(together with the old 7 5/8% Notes, the "7 5/8% Notes") for each $1,000
principal amount of old 7 5/8% Notes.
Based upon existing interpretations of the Securities Act by the Staff of
the SEC as set forth in several no-action letters to third parties, we believe
that the new 7 5/8% Notes issued in the exchange offer may be offered for resale
or resold by holders without having to comply with the registration and
prospectus delivery requirements of the Securities Act, provided that:
- the new 7 5/8% Notes are acquired in the ordinary course of the holders'
business and the holders have no arrangement with any person to engage in
a distribution of new 7 5/8% Notes; and
- the holders are not "affiliates" of us or broker-dealers who purchased old
7 5/8% Notes directly from us to resell under Rule 144A or any other
available exemption under the Securities Act.
Each holder, other than a broker-dealer, must represent that it is not an
affiliate of us, is acquiring the new 7 5/8% Notes in the ordinary course of its
business, is not engaged in and does not intend to engage in a distribution of
the new 7 5/8% Notes and has no arrangement to participate in a distribution of
new 7 5/8% Notes. Each broker-dealer that receives new 7 5/8% Notes for its own
account in the exchange offer must acknowledge that it will comply with the
prospectus delivery requirements of the Securities Act in connection with any
resale of the new 7 5/8% Notes. Broker-dealers who acquired old 7 5/8% Notes
directly from us and not as a result of market-making activities or other
trading activities may not participate in the exchange offer and must comply
with the prospectus delivery requirements of the Securities Act in order to
resell the old 7 5/8% Notes.
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We do not intend to seek our own no-action letter from the Staff of the SEC,
and there can be no assurance that the Staff would make a similar determination
with respect to the new 7 5/8% Notes as it has in the no-action letters to third
parties referred to above.
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Expiration Date........................... The exchange offer will expire at 5:00 p.m., New York City
time, on November 23, 2000, or a later date and time to
which we extend it (the "expiration date").
Withdrawal................................ The tender of the old 7 5/8% Notes in the exchange offer may
be withdrawn at any time before 5:00 p.m., New York City
time, on November 23, 2000, or a later date and time to
which we extend the offer.
Interest On The New 7 5/8% Notes And The
Old 7 5/8% Notes......................... Interest on the new 7 5/8% Notes will accrue from the date
of the original issuance of the old 7 5/8% Notes or from the
date of the last periodic payment of interest on the old
7 5/8% Notes, whichever is later. No additional interest
will be paid on the old 7 5/8% Notes tendered and accepted
for exchange. However, old 7 5/8% Notes that are not
tendered or accepted for exchange will continue to accrue
interest.
Procedures For Tendering Old 7 5/8%
Notes.................................... To accept the exchange offer, you must complete, sign and
date a copy of the letter of transmittal and mail or
otherwise deliver it, together with the old 7 5/8% Notes and
any other required documentation, to the exchange agent at
the address set forth in this prospectus. Persons holding
the old 7 5/8% Notes through the Depository Trust Company
and wishing to accept the exchange offer must do so under
the Depository Trust Company's automated tender offer
program. Under this program, each tendering participant will
agree to be bound by the letter of transmittal.
Exchange Agent............................ Our exchange agent is Bank One Trust Company, National
Association.
Federal Income Tax Considerations......... In the opinion of our counsel, the exchange of old 7 5/8%
Notes for new 7 5/8% Notes in the exchange offer will not be
a taxable exchange for United States federal income tax
purposes.
Effect Of Not Tendering................... Old 7 5/8% Notes that are not tendered or that are tendered
but not accepted will continue to be subject to the existing
restrictions on transfer. We will have no further obligation
to register the old 7 5/8% Notes under the Securities Act.
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THE NEW 7 5/8% NOTES
Some of the terms and conditions described below are subject to important
limitations and exceptions. The "DESCRIPTION OF NEW 7 5/8% NOTES" section of
this prospectus beginning on page 16 contains a more detailed description of the
terms and conditions of the new 7 5/8% Notes.
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Issuer.................................... Qwest Corporation (formerly U S WEST
Communications, Inc.), a Colorado corporation.
Securities Offered........................ $1,000,000,000 principal amount of new 7 5/8% Notes due
2003.
Maturity.................................. June 9, 2003.
Interest Rate............................. 7 5/8% per annum, calculated using a 360-day year of twelve
30 day months.
Interest Payment Dates.................... Interest on the 7 5/8% Notes is payable semi-annually in
arrears commencing December 9, 2000 and each June 9 and
December 9 thereafter until maturity.
Ranking................................... The new 7 5/8% Notes will rank equally with all of our other
unsecured and unsubordinated indebtedness. As of
September 30, 2000, we had approximately $7.334 billion of
debt outstanding.
QCI will not be guaranteeing the payment of principal,
premium, if any, or interest on the 7 5/8% Notes.
Optional Redemption....................... We can redeem the 7 5/8% Notes at any time at a redemption
price determined as described under "DESCRIPTION OF NEW
7 5/8% NOTES--OPTIONAL REDEMPTION" on page 17.
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RISK FACTORS
We urge you to carefully review the risk factors on page 7 for a discussion
of factors you should consider before exchanging your old 7 5/8% Notes for new
7 5/8% Notes.
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SELECTED FINANCIAL DATA
(DOLLARS IN MILLIONS)
The following table sets forth our selected historical financial
information. The selected historical financial data below should be read in
conjunction with our consolidated financial statements and notes thereto,
included in our Form 10-K for the year ended December 31, 1999 and Form 10-Qs
for the quarters ended March 31, 2000 and June 30, 2000. See "WHERE YOU CAN FIND
MORE INFORMATION."
The selected historical financial data at December 31, 1999, 1998, 1997 and
1996 and for each of the four years ended December 31, 1999, have been derived
from our consolidated financial statements, which have been audited by Arthur
Andersen LLP, independent public accountants. The selected historical financial
data at December 31, 1995 and for the year ended December 31, 1995, has been
derived from our consolidated financial statements, which have been audited by
PricewaterhouseCoopers LLP, independent accountants. See "EXPERTS." The selected
historical financial data as of June 30, 2000 and for the six months ended
June 30, 2000 are derived from our unaudited consolidated financial statements,
and, in the opinion of management, contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fully our financial position
at June 30, 2000 and results of operations for the six months ended June 30,
2000. Results for the six months ended June 30, 2000 are not necessarily
indicative of results for the full year.
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AS OF AND FOR THE SIX
MONTHS ENDED
AS OF AND FOR THE YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- ---------------------
1995 1996 1997 1998 1999 1999 2000
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STATEMENT OF INCOME DATA:
Operating revenues........... $ 9,284 $ 9,831 $10,083 $10,871 $11,464 $ 5,630 $ 5,973
Operating income(1).......... 2,225 2,400 2,336 2,618 2,960 1,429 1,598
Interest expense............. 386 414 374 386 403 187 244
Net earnings(2).............. 1,121 1,267 1,252 1,335 1,562 756 830
BALANCE SHEET DATA:
Total assets................. 16,350 16,632 17,008 17,578 19,978 18,335 21,618
Total debt................... 6,406 6,209 5,516 5,943 7,092 6,312 8,771
Total equity................. 3,746 4,060 4,400 4,463 4,720 4,462 4,507
OPERATING DATA:
EBIDTA(3).................... 4,247 4,501 4,439 4,756 5,253 2,571 2,739
Capital expenditures......... 2,714 2,779 2,605 2,797 4,027 1,627 2,588
Ratio of earnings to fixed
charges(4).................. 4.86 4.95 5.33 5.55 5.91 5.99 5.11
Telephone network access
lines in service
(thousands)................. 14,795 15,424 16,033 16,601 17,009 17,078 16,816
Billed access minutes of
use (millions)
Interstate................. 47,801 52,039 55,362 58,927 61,854 31,642 30,831
Intrastate................. 9,504 10,451 11,729 12,366 13,022 6,951 6,370
Telephone company employees.. 47,934 45,427 43,749 46,310 46,352 47,044 49,403
Telephone company employees
per ten thousand access
lines....................... 32.4 29.5 27.3 27.9 27.3 28.0 28.9
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(FOOTNOTES ON FOLLOWING PAGE)
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------------------------
(1) Operating income for the six months ended June 30, 2000 includes
merger-related expenses of $120. Operating income for 1998 includes
separation cost from MediaOne Group, Inc. of $94 and an asset impairment
charge of $35. 1997 operating income includes a $225 regulatory charge
related primarily to a rate reduction order in the State of Washington. 1996
operating income includes the current effects of $24 from adopting Statement
of Financial Accounting Standards ("SFAS") No. 121.
(2) Net earnings for the six months ended June 30, 2000 include merger-related
expenses of $73. Net earnings for 1998 and fiscal 1998 includes separation
cost from MediaOne Group, Inc. of $68 and an asset impairment charge of $21.
1997 net earnings include a $152 regulatory charge related primarily to a
rate reduction order in the State of Washington, a gain of $48 on the sales
of certain rural telephone exchanges, and a gain of $32 on the sale of our
investment in Bell Communications Research, Inc. 1996 net earnings include a
gain of $36 on the sales of certain rural telephone exchanges and the
cumulative and current effects of $34 and $15, respectively, from adopting
SFAS No. 121. 1995 net earnings include a gain of $85 on the sales of
certain rural telephone exchanges, an extraordinary charge of $8 for early
extinguishment of debt and $8 for costs associated with the November 1995
recapitalization.
(3) Earnings before interest, taxes, depreciation, amortization, and other
("EBITDA"). We consider EBITDA an important indicator of the operational
strength and performance of our business. EBITDA, however, should not be
considered as an alternative to operating or net income as an indicator of
the performance of our business or as an alternative to cash flows from
operating activities as a measure of liquidity, in each case determined in
accordance with generally accepted accounting principles.
(4) See "RATIO OF EARNINGS TO FIXED CHARGES" on page 16.
RISK FACTORS
You should carefully consider the following discussion of risks, and the
other information included or incorporated by reference in this prospectus in
evaluating us and our business before participating in the exchange offer:
RISK FACTORS RELATED TO THE EXCHANGE
Holders of old 7 5/8% Notes who do not exchange their old 7 5/8% Notes for
new 7 5/8% Notes will continue to be subject to the restrictions on transfer of
the old 7 5/8% Notes, as set forth in the legends on the old 7 5/8% Notes. The
old 7 5/8% Notes may not be offered or sold unless they are registered under the
Securities Act or are exempt from registration. See "THE EXCHANGE OFFER."
RISKS ASSOCIATED WITH QCI/OLD U S WEST MERGER
Our parent company expects that the Merger will result in certain benefits
on a combined basis, including operating efficiencies, cost savings, synergies
and other benefits. Achieving the benefits of the Merger on a combined basis may
adversely impact us. An efficient integration of the businesses on a combined
basis will require considerable effort. Our senior management, which following
the Merger is the same as for our parent company, will be diverted to achieving
these combined benefits. Both difficulties encountered in the transition and
integration process, and decisions made for the benefit of the combined
entities, could have a material adverse effect on our revenues, levels of
expenses and operating results. No assurance can be given that QCI will succeed
in integrating in a timely manner or without encountering significant
difficulties or that the expected operating efficiencies, cost savings,
synergies and other benefits from the integration will be realized, and if
realized on a combined basis, will benefit us on a separate basis. There can be
no assurance that the integration efforts will not have a material adverse
effect on our ability to compete or will not materially affect our ability to
service our debt.
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CREDIT RATINGS
In June, 2000, Moody's Investors Services, Inc., Standard & Poor's Ratings
Services and Fitch Investor Services, Inc. announced their updated credit
ratings for us, post-Merger. All ratings are stable and are not currently under
review.
The current credit ratings for our senior unsecured indebtedness are as
follows:
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MOODY'S STANDARD & POOR'S FITCH
INVESTORS SERVICES, INC. RATING SERVICES INVESTOR SERVICES, INC.
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A2 BBB+ A
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OTHER RISKS
We may decide to accelerate the deployment of additional services and/or
advanced new services to customers, such as broadband data and wireless, which
would require substantial expenditure of financial and other resources. Such
acceleration could have a material adverse effect on our financial condition or
results of operations.
QWEST CORPORATION
We provide communications services to more than 25 million residential and
business customers in the Region. We are organized on the basis of our products
and services and operate in three segments: retail services, wholesale services
and network services.
We are incorporated under the laws of the State of Colorado and have our
principal offices at 1801 California Street, Denver, Colorado 80202, Suite 3800,
telephone number (303) 992-1400. We are a wholly owned subsidiary of Qwest
Services Corporation, which is a wholly owned subsidiary of QCI.
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
We originally issued and sold the old 7 5/8% Notes on June 9, 2003 in an
offering exempt from registration under the Securities Act in reliance upon the
exemptions provided by the Securities Act. Accordingly, the old 7 5/8% Notes may
not be transferred in the United States unless registered or unless an exemption
from the registration requirements of the Securities Act and applicable state
securities laws is available.
As a condition to the sale of the old 7 5/8% Notes, we and the initial
purchasers of the old 7 5/8% Notes (the "initial purchasers") entered into a
registration rights agreement dated as of June 5, 2000 (the "Registration Rights
Agreement"). In the Registration Rights Agreement, we agreed that we would use
our reasonable best efforts to:
- file with the SEC a registration statement under the Securities Act with
respect to the new 7 5/8% Notes within 150 calendar days of June 9, 2000
(or by November 6, 2000);
- cause a registration statement to be declared effective under the
Securities Act within 180 calendar days after June 9, 2000 (or by
December 6, 2000);
- keep the exchange offer open for not less than 30 calendar days (or longer
if required by applicable law) after the date that notice of the exchange
offer is mailed to the holders of the old 7 5/8% Notes; and
- consummate the exchange offer within 225 calendar days of June 9, 2000 (or
by January 20, 2001).
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We have filed a copy of the Registration Rights Agreement as an exhibit to
the registration statement of which this prospectus is a part. The registration
statement satisfies certain of our obligations under the Registration Rights
Agreement.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD 7 5/8% NOTES
This prospectus and the accompanying letter of transmittal together make up
the exchange offer. On the terms and subject to the conditions set forth in this
prospectus and the letter of transmittal, we will accept for exchange any old
7 5/8% Notes that are properly tendered on or before the expiration date unless
they are withdrawn as permitted below. We will issue $1,000 principal amount of
new 7 5/8% Notes in exchange for each $1,000 principal amount at maturity of
outstanding old 7 5/8% Notes surrendered in the exchange offer. Holders of the
old 7 5/8% Notes may tender some or all of their old 7 5/8% Notes. Old 7 5/8%
Notes, however, may be exchanged only in integral multiples of $1,000. The form
and terms of the new 7 5/8% Notes are the same as the form and terms of the old
7 5/8% Notes except that the exchange will be registered under the Securities
Act and the new 7 5/8% Notes will not bear legends restricting their transfer.
The new 7 5/8% Notes will evidence the same debt as the old 7 5/8% Notes and
will be issued under the same indenture.
The exchange offer is not conditioned upon any minimum principal amount of
old 7 5/8% Notes being tendered. As of the date of this prospectus, an aggregate
of $1,000,000,000 in principal amount at maturity of the old 7 5/8% Notes is
outstanding. This prospectus is first being sent on or about October 24, 2000,
to all holders of old 7 5/8% Notes known to us.
Holders of the old 7 5/8% Notes do not have any appraisal or dissenters'
rights under the indenture in connection with the exchange offer.
We may, at any time or from time to time, extend the period of time during
which the exchange offer is open and delay acceptance for exchange of any old
7 5/8% Notes, by giving written notice of the extension to the holders as
described below. During the extension, all old 7 5/8% Notes previously tendered
will remain subject to the exchange offer and may be accepted for exchange by
us. Any old 7 5/8% Notes not accepted for exchange for any reason will be
returned without expense to the tendering holder as promptly as practicable
after the expiration of the exchange offer.
We reserve the right to amend or terminate the exchange offer if any of the
conditions of the exchange offer are not met. The conditions of the exchange
offer are specified below under "--Conditions of the Exchange Offer." We will
give written notice of any extension, amendment, nonacceptance or termination to
the holders of the old 7 5/8% Notes as promptly as practicable. Any extension to
be issued by means of a press release or other public announcement will be
issued no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
PROCEDURES FOR TENDERING OLD 7 5/8% NOTES
The tender of old 7 5/8% Notes by a holder as set forth below and the
acceptance by us will create a binding agreement between the tendering holder
and us upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal. Except as set forth below, a
holder who wishes to tender old 7 5/8% Notes for exchange must send a completed
and signed letter of transmittal, including all other documents required by the
letter of transmittal, to the exchange agent at one of the addresses set forth
below under "--Exchange Agent" on or before the expiration date. In addition,
either:
- the exchange agent must receive before the expiration date certificates
for the old 7 5/8% Notes along with the letter of transmittal;
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- the exchange agent must receive confirmation before the expiration date of
a book-entry transfer of the old 7 5/8% Notes into the exchange agent's
account at The Depository Trust Company ("DTC") as described below; or
- the holder must comply with the guaranteed delivery procedures described
below.
The method of delivery of old 7 5/8% Notes, letters of transmittal and all
other required documents, including delivery through DTC, is at the election and
risk of the holders. If the delivery is by mail, we recommend that holders use
registered mail, properly insured, with return receipt requested. In all cases,
holders should allow sufficient time to assure timely delivery. Holders should
not send letters of transmittal or old 7 5/8% Notes to us.
Some beneficial ownership of old 7 5/8% Notes may be registered in the name
of a broker, dealer, commercial bank, trustee or other nominee. If one of those
beneficial owners wishes to tender, the beneficial owner should contact the
registered holder of the old 7 5/8% Notes promptly and instruct the registered
holder to tender on the beneficial owner's behalf. If one of those beneficial
owners wishes to tender on its own behalf, then before completing and signing
the letter of transmittal and delivering its old 7 5/8% Notes, the beneficial
owner must either register ownership of the old 7 5/8% Notes in the beneficial
owner's name or obtain a properly completed power of attorney from the
registered holder of old 7 5/8% Notes. The transfer of record ownership may take
considerable time. If the letter of transmittal is signed by a person other than
the registered holder of the old 7 5/8% Notes, the old 7 5/8% Notes must be
endorsed or accompanied by appropriate powers of attorney. In either case, the
letter of transmittal must be signed exactly as the name of the registered
holder appears on the old 7 5/8% Notes.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed unless the old 7 5/8% Notes surrendered for exchange are tendered:
- by a registered holder of the old 7 5/8% Notes who has not completed the
box entitled "SPECIAL REGISTRATION INSTRUCTIONS" or "SPECIAL DELIVERY
INSTRUCTIONS" on the letter of transmittal; or
- for the account of a firm or other entity identified in Rule 17Ad-15 under
the Exchange Act as an eligible guarantor institution. Eligible guarantor
institutions include:
- a member of a registered national securities exchange; or
- a member of the National Association of Securities Dealers, Inc.; or
- a commercial bank or trust company having an office or correspondent in
the United States.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantees must be by an eligible guarantor
institution.
If old 7 5/8% Notes are registered in the name of a person other than a
signer of the letter of transmittal, the old 7 5/8% Notes surrendered for
exchange must be endorsed by the registered holder with the signature guaranteed
by an eligible guarantor institution. Alternatively, the old 7 5/8% Notes may be
accompanied by a written assignment, signed by the registered holder with the
signature guaranteed by an eligible guarantor institution.
10
<PAGE>
All questions as to the validity, form, eligibility, time of receipt and
acceptance of old 7 5/8% Notes tendered for exchange will be determined by us in
our sole discretion, and our determination will be final and binding. We reserve
the absolute right to reject any tenders of any old 7 5/8% Notes not properly
tendered or any old 7 5/8% Notes whose acceptance might, in our judgment or the
judgment of our counsel, be unlawful. We also reserve the absolute right to
waive any defects or irregularities or conditions of the exchange offer as to
any old 7 5/8% Notes either before or after the expiration date. The
interpretation of the terms and conditions of the exchange offer as to any old
7 5/8% Notes either before or after the expiration date by us will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of old 7 5/8% Notes for exchange must be cured within a
reasonable period of time as we will determine. Neither we, the exchange agent
nor any other person will be under any duty to give notification of any defect
or irregularity with respect to any tender of old 7 5/8% Notes for exchange. Any
old 7 5/8% 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.
If the letter of transmittal or any old 7 5/8% Notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. Unless waived by us,
those persons must submit proper evidence satisfactory to us of their authority
to act.
By tendering, each holder will represent to us:
- that it is not an "affiliate," as defined in Rule 405 of the Securities
Act, of us, or if it is an affiliate, it will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable;
- that it is not a broker-dealer tendering Registrable Securities (as
defined in the Registration Rights Agreement described herein) acquired
directly from us;
- that it is acquiring the new 7 5/8% Notes in the ordinary course of its
business; and
- at the time of the closing of the exchange offer it has no arrangement or
understanding to participate in the distribution, within the meaning of
the Securities Act, of the new 7 5/8% Notes.
If the holder is a broker-dealer that will receive new 7 5/8% Notes for its
own account in exchange for old 7 5/8% Notes that were acquired as a result of
market-making activities or other trading activities, the holder may be deemed
to be an "underwriter" within the meaning of the Securities Act. Such holder
will be required to acknowledge in the letter of transmittal that it will
deliver a prospectus in connection with any resale of the new 7 5/8% Notes.
However, by so acknowledging and by delivering a prospectus, the holder will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
ACCEPTANCE OF OLD 7 5/8% NOTES FOR EXCHANGE; DELIVERY OF NEW 7 5/8% NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all old 7 5/8% Notes
properly tendered and will issue the new 7 5/8% Notes promptly after acceptance
of the old 7 5/8% Notes. See "--Conditions of the Exchange Offer" below. We will
be deemed to have accepted properly tendered old 7 5/8% Notes for exchange when
we have given oral or written notice to the exchange agent.
For each old 7 5/8% Note validly tendered to us, the holder of the old
7 5/8% Note will receive a new 7 5/8% Note having a principal amount equal to
the principal amount of the tendered old 7 5/8% Note. The new 7 5/8% Notes will
bear interest at the same rate and on the same terms as the old 7 5/8% Notes.
Consequently, interest on the new 7 5/8% Notes will accrue at a rate of 7 5/8%
per annum and will be
11
<PAGE>
payable semiannually in arrears on December 9, 2000, and each June 9 and
December 9 thereafter until maturity. Interest on each new 7 5/8% Note will
accrue from the last interest payment date on which interest was paid on the
surrendered old 7 5/8% Note or, if no interest has been paid on such old 7 5/8%
Note, from the date of the original issuance thereof.
The issuance of new 7 5/8% Notes for old 7 5/8% Notes that are accepted for
exchange in the exchange offer will be made only after timely receipt by the
exchange agent of certificates for the old 7 5/8% Notes or a timely book-entry
confirmation of the old 7 5/8% Notes into the exchange agent's account at the
book-entry transfer facility, a completed and signed letter of transmittal and
all other required documents. If any tendered old 7 5/8% Notes are not accepted
for any reason set forth in the terms and conditions of the exchange offer, or
if old 7 5/8% Notes are submitted for a greater amount than the holder desires
to exchange, the unaccepted or non-exchanged old 7 5/8% Notes will be returned
without expense to the tendering holder as promptly as practicable after the
exchange offer expires or terminates. In the case of old 7 5/8% Notes tendered
by book-entry procedures described below, the non-exchanged old 7 5/8% Notes
will be credited to an account maintained with the book-entry transfer facility.
CONDITIONS OF THE EXCHANGE OFFER
We will not be required to accept for exchange any old 7 5/8% Notes and may
terminate or amend the exchange offer before the expiration date, if we
determine that we are not permitted to effect the exchange offer because of:
- any changes in law, or applicable interpretations by the SEC; or
- any action or proceeding is instituted or threatened in any court or
governmental agency with respect to the exchange offer.
If we determine that any of the conditions are not satisfied, we may refuse
to accept any old 7 5/8% Notes and return all tendered old 7 5/8% Notes to the
tendering holders or extend the exchange offer and retain all old 7 5/8% Notes
tendered before the expiration date, subject to the rights of holders to
withdraw such old 7 5/8% Notes or waive such unsatisfied conditions with respect
to the exchange offer and accept all properly tendered old 7 5/8% Notes which
have not been withdrawn. If such waiver or amendment constitutes a material
change to the exchange offer, we will promptly disclose such waiver or amendment
by means of a prospectus supplement that will be distributed to the registered
holders of the old 7 5/8% Notes and we will extend the exchange offer to the
extent required by Rule 14e-1 under the Exchange Act.
Holders may have certain rights and remedies against us under the
Registration Rights Agreement if we fail to close the exchange offer, whether or
not the conditions stated above occur. These conditions are not intended to
modify those rights or remedies. See "REGISTRATION RIGHTS."
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account for the old
7 5/8% Notes at the book-entry transfer facility for the exchange offer within
two business days after the date of this prospectus, and any financial
institution that is a participant in the book-entry transfer facility's systems
may make book-entry delivery of old 7 5/8% Notes by causing the book-entry
transfer facility to transfer the old 7 5/8% Notes into the exchange agent's
account at the book-entry transfer facility in accordance with the book-entry
transfer facility's procedures for transfer. Although delivery of old 7 5/8%
Notes may be effected through book-entry transfer at the book-entry transfer
facility, the letter of transmittal or facsimile, or an agent's message, with
any required signature guarantees and any other required documents, must be
received by the exchange agent at one of the addresses set forth below under
12
<PAGE>
"--Exchange Agent" on or before the expiration date or the guaranteed delivery
procedures described below must be complied with.
The term "agent's message" means a message, transmitted by DTC to the
exchange agent and forming a part of a book-entry confirmation, that states that
DTC has received an express acknowledgment from the tendering participant
stating that the participant has received and agrees to be bound by the terms of
the letter of transmittal, and that we may enforce the letter of transmittal
against the participant.
GUARANTEED DELIVERY PROCEDURES
If a registered holder wishes to tender his old 7 5/8% Notes and the old
7 5/8% Notes are not immediately available, or time will not permit the holder's
old 7 5/8% Notes or other required documents to reach the exchange agent before
the expiration date, or the procedure for book-entry transfer cannot be
completed on time, the old 7 5/8% Notes may nevertheless be exchanged if:
- the tender is made through an eligible guarantor institution;
- before the expiration date, the exchange agent has received from the
eligible guarantor institution an agent's message with respect to
guaranteed delivery or a completed and signed letter of transmittal, or a
facsimile, and a notice of guaranteed delivery, substantially in the form
provided by us. Delivery may be made by facsimile transmission, mail or
hand delivery. The letter of transmittal and notice of guaranteed delivery
must set forth the name and address of the holder of the old 7 5/8% Notes
and the amount of the old 7 5/8% Notes being tendered, state that the
tender is being made and guarantee that within five trading days on the
New York Stock Exchange ("NYSE") after the date of signing of the notice
of guaranteed delivery, the certificates for all physically tendered old
7 5/8% Notes, in proper form for transfer, or a book-entry confirmation,
and any other documents required by the letter of transmittal, will be
deposited by the eligible guarantor institution with the exchange agent;
and
- the certificates for all physically tendered old 7 5/8% Notes, in proper
form for transfer, or a book-entry confirmation and all other documents
required by the letter of transmittal, are received by the exchange agent
within five NYSE trading days after the date of signing the notice of
guaranteed delivery.
WITHDRAWAL RIGHTS
Tenders of old 7 5/8% Notes may be withdrawn at any time before the close of
business on the expiration date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the exchange agent at one of the addresses set forth below under
"--Exchange Agent." Notice may be sent by facsimile transmission, mail or hand
delivery. Any notice of withdrawal must:
- specify the name of the person who tendered the old 7 5/8% Notes to be
withdrawn;
- identify the old 7 5/8% Notes to be withdrawn, including the amount of the
old 7 5/8% Notes;
- specify the name, in the case where certificates for old 7 5/8% Notes have
been transmitted, in which the old 7 5/8% Notes are registered, if
different from that of the withdrawing holder; and
- state that such holder of the old 7 5/8% Notes is withdrawing his election
to have such old 7 5/8% Notes tendered.
If certificates for old 7 5/8% Notes have been delivered or otherwise
identified to the exchange agent, then, before the release of the certificates
the withdrawing holder must also submit the serial numbers of the particular
certificates to be withdrawn and a signed notice of withdrawal with signatures
13
<PAGE>
guaranteed by an eligible guarantor institution unless the holder is an eligible
guarantor institution. If old 7 5/8% Notes have been tendered under the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the book-entry transfer facility
to be credited with the withdrawn old 7 5/8% Notes and otherwise comply with the
procedures of the facility. We will determine all questions as to the validity,
form, eligibility and time of receipt of the notices, and our determination will
be final and binding on all parties. Any old 7 5/8% Notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
exchange offer. Any old 7 5/8% Notes that have been tendered for exchange, but
that are not exchanged for any reason, will be returned to the holder without
cost to the holder as soon as practicable after withdrawal, rejection of tender
or termination of the exchange offer. In the case of old 7 5/8% Notes tendered
by book-entry transfer into the exchange agent's account at the book-entry
transfer facility under the book-entry transfer procedures described above, the
old 7 5/8% Notes will be credited to an account with the book-entry transfer
facility specified by the holder. Properly withdrawn old 7 5/8% Notes may be
re-tendered by following one of the procedures described under "--Procedures for
Tendering Old 7 5/8% Notes" above at any time on or before the expiration date.
EXCHANGE AGENT
Bank One Trust Company, National Association has been appointed as the
exchange agent for the exchange offer. All signed letters of transmittal should
be directed to the exchange agent at the addresses set forth below. Questions
and requests for assistance, requests for additional copies of this prospectus
or of the letter of transmittal and requests for notices of guaranteed delivery
should be directed to the exchange agent addressed as follows:
<TABLE>
<S> <C>
BY MAIL: BY HAND, OVERNIGHT MAIL OR COURIER:
Bank One Trust Company, National Association Bank One Trust Company, National Association
Attention: Exchanges Attention: Exchanges
Global Corporate Trust Services Global Corporate Trust Services
1 Bank One Plaza, Mail Suite IL 1-0122 One North State Street, 9th Floor
Chicago, IL 60670-0122 Chicago, IL 60602
or or
Bank One Trust Company, National Association Bank One Trust Company, National Association
Attention: Exchanges Attention: Exchanges
Global Corporate Trust Services Global Corporate Trust Services
14 Wall Street, 8th Floor 14 Wall Street, 8th Floor
New York, NY 10005 New York, NY 10005
</TABLE>
FOR INFORMATION CALL:
(800) 524-9472
Fax: 312-407-8853
E-mail: [email protected]
Delivery of a letter of transmittal to an address other than as set forth
above or transmission of instructions via facsimile other than as set forth
above does not constitute a valid delivery of the letter of transmittal.
14
<PAGE>
FEES AND EXPENSES
We will not make any payment to brokers, dealers or others soliciting
acceptances of the exchange offer and holders who tender old 7 5/8% Notes will
not be required to pay brokerage commissions or fees.
We will pay the expenses that will be incurred in connection with the
exchange offer. We estimate the expenses will be approximately $500,000.
ACCOUNTING TREATMENT
For accounting purposes, we will recognize no gain or loss as a result of
the exchange offer. The expenses of the exchange offer will be amortized over
the term of the new 7 5/8% Notes.
TRANSFER TAXES
Holders who instruct us to register new 7 5/8% Notes in the name of a person
other than the registered tendering holder will be responsible for paying any
applicable transfer tax, as will holders who request that old 7 5/8% Notes not
tendered or not accepted in the exchange offer be returned to a person other
than the registered tendering holder. In all other cases, no transfer taxes will
be due.
REGULATORY MATTERS
We are not aware of any governmental or regulatory approvals that are
required in order to complete the exchange offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the exchange offer is voluntary. Old 7 5/8% Notes that are
not exchanged for new 7 5/8% Notes will remain outstanding, continue to accrue
interest and will be restricted securities. Accordingly, those old 7 5/8% Notes
may only be transferred:
- to a person who the seller reasonably believes is a qualified
institutional buyer under Rule 144A under the Securities Act;
- in an offshore transaction under Rule 903 or Rule 904 of Regulation S
under the Securities Act; or
- under Rule 144 under the Securities Act (if available);
and in accordance with all applicable securities laws of the states of the
United States. Following the consummation of the exchange offer, we will have no
further obligation to such holders to provide for registration under the
Securities Act, except that under certain circumstances, we are required to
file a shelf registration statement under the Securities Act. See "REGISTRATION
RIGHTS."
PAYMENT OF ADDITIONAL INTEREST UPON REGISTRATION DEFAULTS
If we fail to meet our obligations to complete the exchange offer or file a
shelf registration statement, additional interest will accrue on the 7 5/8%
Notes. For additional information regarding payments of additional interest,
please see "REGISTRATION RIGHTS."
USE OF PROCEEDS
We will not receive any proceeds from the issuance of the new 7 5/8% Notes
or the closing of the exchange offer.
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<PAGE>
CAPITALIZATION OF QWEST CORPORATION
The following table sets forth, at June 30, 2000 our consolidated historical
capitalization. The table should be read in conjunction with our historical
financial statements and notes thereto included in the documents incorporated by
reference herein. See "WHERE YOU CAN FIND MORE INFORMATION."
<TABLE>
<CAPTION>
AT JUNE 30, 2000
---------------------
(DOLLARS IN MILLIONS)
<S> <C>
Short-term debt............................................. $ 2,328
=======
Long-term debt.............................................. $ 6,443
Total shareowner's equity(1)................................ 4,507
-------
Total capitalization........................................ $10,950
=======
</TABLE>
------------------------
(1) We have issued one share of common stock to our parent company, Qwest
Services Corporation.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratio of earnings to fixed charges for
each of the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
--------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
4.86 4.95 5.33 5.55 5.91 5.99 5.11
</TABLE>
In determining these ratios, we have computed "earnings" by adding income
before income taxes, extraordinary items and cumulative effect of change in
accounting principle and fixed charges. "Fixed charges" consist of interest on
indebtedness and the portion of rentals representative of the interest factor.
DESCRIPTION OF NEW 7 5/8% NOTES
GENERAL
The new 7 5/8% Notes will be issued as a separate series of debt securities
("Debt Securities") under an indenture dated as of October 15, 1999, as
supplemented and amended from time to time (the "Indenture"), between us and
Bank One Trust Company, National Association (the "Trustee"). The new 7 5/8%
Notes and the old 7 5/8% Notes are considered together to be a single series for
all purposes under the Indenture. The following summaries of the material
provisions of the Indenture do not purport to be complete and are subject to and
are qualified in their entirety by reference to all of the provisions of the
Indenture, which provisions of the Indenture are incorporated herein by
reference. Capitalized and other terms not otherwise defined herein will have
the meanings given to them in the Indenture. You may obtain a copy of the
Indenture from us upon request. See "WHERE YOU CAN FIND MORE INFORMATION."
The Indenture does not limit the aggregate principal amount of Debt
Securities that may be issued under it and provides that Debt Securities may be
issued from time to time in one or more series. As of the date of this
prospectus, the principal amount of Debt Securities outstanding under the
Indenture is $6,590,000,000, including the old 7 5/8% Notes.
Since the new 7 5/8% Notes will not constitute a separate series of Debt
Securities under the Indenture, holders of old 7 5/8% Notes who do not exchange
such old 7 5/8% Notes for new 7 5/8% Notes
16
<PAGE>
will vote together as a separate series of Debt Securities with holders of such
new 7 5/8% Notes of that series for all relevant purposes under the Indenture.
In that regard, the Indenture requires that certain actions by the holders under
such old 7 5/8% Notes (including acceleration following an Event of Default)
must be taken, and certain rights must be exercised, by specified minimum
percentages of the aggregate principal amount of the outstanding notes of that
series. In determining whether holders of the requisite percentage in principal
amount of the notes of that series have given any notice, consent or waiver or
taken any other action permitted under the Indenture, any old 7 5/8% Notes that
remain outstanding after the exchange offer will be aggregated with the new
7 5/8% Notes and the holders of the old 7 5/8% Notes and the new 7 5/8% Notes
will each vote together as a single series for all purposes. Accordingly, all
references in this section will be deemed to mean, at any time after the
exchange offer is consummated, the requisite percentage in aggregate principal
amount of the old 7 5/8% Notes and the new 7 5/8% Notes.
The 7 5/8% Notes initially will be limited to $1,000,000,000 aggregate
principal amount. We may "reopen" any series of debt securities and issue
additional securities of that series. The 7 5/8% Notes will be issued only in
registered form, without coupons, in denominations of $1,000 and integral
multiples thereof. The 7 5/8% Notes are our unsecured obligations and rank
equally with all of our other unsecured and unsubordinated indebtedness.
The 7 5/8% Notes will bear interest at the rate of 7 5/8% per annum from
June 9, 2000, or from the most recent interest payment date to which interest
has been paid or duly provided for, payable semiannually in arrears on
December 9, 2000, and each June 9 and December 9 thereafter until maturity
(each, an "Interest Payment Date"), to the persons in whose names the 7 5/8%
Notes are registered at the close of business on May 15 or November 15, as the
case may be, immediately preceding such Interest Payment Date. Interest will be
calculated on the basis of a 360-day year of twelve 30-day months. If any
Interest Payment Date, maturity date or redemption date is a Legal Holiday in
New York, New York, the required payment will be made on the next succeeding day
that is not a Legal Holiday as if it were made on the date such payment was due
and no interest will accrue on the amount so payable for the period from and
after such Interest Payment Date, maturity date or redemption date, as the case
may be, to such next succeeding day. "Legal Holiday" means a Saturday, a Sunday
or a day on which banking institutions in The City of New York are not required
to be open. The 7 5/8% Notes will mature and the principal amount will be
payable on June 9, 2003. The 7 5/8% Notes will not have the benefit of any
sinking fund.
The Trustee, through its corporate trust office in the Borough of Manhattan
in The City of New York (in such capacity, the "Paying Agent") will act as our
paying agent with respect to the 7 5/8% Notes. Payments of principal, premium,
if any, and interest on the 7 5/8% Notes will be made by us through the Paying
Agent to DTC. See "--Book-Entry Only; Delivery and Form."
The principal of, premium, if any, and interest on the 7 5/8% Notes will be
payable in U.S. dollars or in such other coin or currency of the United States
of America as at the time of payment is legal tender for the payment of public
and private debts. No service charge will be made for any registration of,
transfer or exchange of 7 5/8% Notes, but we may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. The 7 5/8% Notes may be presented for registration of transfer or
exchange at the office of the Paying Agent in the Borough of Manhattan in the
City of New York, or at any other office or agency maintained by us or the
Paying Agent for such purpose.
OPTIONAL REDEMPTION
The 7 5/8% Notes will be redeemable at our option, in whole at any time or
in part from time to time, on at least 15 days but not more than 60 days prior
written notice mailed to the registered holders thereof, at a redemption price
equal to the greater of (i) 100% of the principal amount of the
17
<PAGE>
7 5/8% Notes to be redeemed or (ii) the sum, as determined by the Quotation
Agent (as defined below), of the present values of the principal amount of the
7 5/8% Notes to be redeemed and the remaining scheduled payments of interest
thereon from the redemption date to June 9, 2003 (the "Remaining Life")
discounted from their respective scheduled payment dates to the redemption date
on a semiannual basis (assuming a 360-day year consisting of 30-day months) at
the Treasury Rate (as defined below) plus 12.5 basis points, plus, in either
case, accrued interest thereon to the date of redemption.
If money sufficient to pay the redemption price of and accrued interest on
all of the 7 5/8% Notes (or portions thereof) to be redeemed on the redemption
date is deposited with the Trustee or Paying Agent on or before the redemption
date and certain other conditions are satisfied, then on and after such
redemption date, interest will cease to accrue on such 7 5/8% Notes (or such
portion thereof) called for redemption.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the Remaining
Life 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 with the Remaining Life.
"Comparable Treasury Price" means, with respect to any redemption date, the
average of two Reference Treasury Dealer Quotations for such redemption date.
"Quotation Agent" means the Reference Treasury Dealer appointed by us.
"Reference Treasury Dealer" means each of Lehman Brothers Inc. and Merrill
Lynch Government Securities Inc., and their successors; provided, however, that
if any of the foregoing will cease to be a primary U.S. Government securities
dealer in New York City (a "Primary Treasury Dealer"), we will substitute
therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
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 Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third business day preceding such redemption date.
"Treasury Rate" means, with respect to any redemption date, the rate per
annum equal to the semiannual yield to maturity of the Comparable Treasury
Issue, calculated on the third business day preceding such redemption date 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.
We may at any time, and from time to time, purchase the 7 5/8% Notes at any
price or prices in the open market or otherwise.
BOOK-ENTRY ONLY; DELIVERY AND FORM
The new 7 5/8% Notes will initially be issued in the form of global
securities held in book-entry form. The new 7 5/8% Notes will be deposited with
the Trustee as custodian for DTC and DTC or Cede & Co., as its nominee
("Nominee"), will initially be the sole registered holder of the new 7 5/8%
Notes. Except as set forth below, a global security may not be transferred
except as a whole by DTC to Nominee or by Nominee to DTC. Investors may elect to
hold interests in the global securities directly through DTC (in the United
States), Clearstream Banking Luxembourg ("Clearstream Luxembourg") or Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear"), as the case may be, if they are participants in
such systems, or indirectly through organizations that are participants in such
systems. Clearstream Luxembourg and Euroclear will hold interests on behalf of
their participants through customers' securities accounts in Clearstream
18
<PAGE>
Luxembourg and Euroclear's names on the books of their respective depositaries,
which are participants in DTC. Citibank N.A. will act as depositary for
Clearstream Luxembourg and Chase Manhattan Bank New York will act as depositary
for Euroclear (in such capacities, the "U.S. Depositaries").
When a global security is issued, DTC or its nominee will credit, on its
internal system, the accounts of persons holding through it with the principal
amounts of the individual beneficial interest represented by the global security
purchased by those persons in the offering of the new 7 5/8% Notes. The accounts
were initially designated by the initial purchasers of the old 7 5/8% Notes with
respect to old 7 5/8% Notes sold by the initial purchasers.
Only participants that have accounts with DTC or persons that hold interests
through participants can own beneficial interests in a global security.
Ownership of beneficial interests by participants in a global security will be
shown on records maintained by DTC or its nominee for the global security, and
that ownership interest will be transferred only through those records.
Ownership of beneficial interests in the global security by persons that hold
through participants will be shown on records maintained by the participant, and
the transfer of that ownership interest within the participant will occur only
through the participant's records.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of the securities in definitive form. Those limits and
laws may make it more difficult to transfer beneficial interests in a global
security. We will make payments on the new 7 5/8% Notes represented by any
global security to DTC or its nominee as the sole registered owner and the sole
holder of the new 7 5/8% Notes represented by the global security. Neither we
nor the Trustee, any agent of ours or the initial purchasers will have any
responsibility for any aspect of DTC's reports relating to beneficial ownership
interests in a global security representing any new 7 5/8% Notes or for
reviewing any of DTC's records relating to the beneficial ownership interests.
DTC has advised us that upon receipt of any payment on any global security, DTC
will immediately credit, on its book-entry registration and transfer system, the
accounts of participants with payments in amounts proportionate to their
beneficial interests in the principal or face amount of the global security.
Payments of interest and principal of global securities held through Clearstream
Luxembourg or Euroclear will be credited to the cash accounts of Clearstream
Luxembourg participants or Euroclear participants, as the case may be, in
accordance with the relevant system's rules and procedures. We expect that
payments by participants to owners of beneficial interests in a global security
held through those participants will be governed by standing instructions and
customary practices as is now the case with securities held for customer
accounts registered in "street name" and will be the sole responsibility of the
participants subject to any statutory or regulatory requirements as may be in
effect from time to time.
So long as DTC or its nominee is the registered owner of the global
security, DTC or its nominee will be considered the sole owner or holder of the
new 7 5/8% Notes represented by the global security for the purposes of
receiving payment on the new 7 5/8% Notes, receiving notices and for all other
purposes under the Indenture and the new 7 5/8% Notes. Except as provided above,
owners of beneficial interests in a global security will not be entitled to
receive physical delivery of certificated new 7 5/8% Notes and will not be
considered the holders of the global security for any purposes under the
Indenture. Accordingly, each person owning a beneficial interest in a global
security must rely on the procedures of DTC and, if the person is not a
participant, on the procedures of the participant through which the person owns
its interest, to exercise any rights of a holder under the global security or
the Indenture. We understand that under existing industry practices, if we
request any action of holders or an owner of a beneficial interest in a global
security wants to take any action that a holder is entitled to take under the
Indenture, DTC would authorize the participants holding the beneficial interest
to take that action, and the participants would authorize beneficial owners
owning through the participants to take the action on the instructions of
beneficial owners owning through them.
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DTC has advised us that it will take any action permitted to be taken by a
holder of new 7 5/8% Notes only at the direction of a participant to whose
account with DTC interests in the global security are credited and only as to
the portion of the aggregate principal amount of the new 7 5/8% Notes as to
which the participant has given that direction. DTC has advised us that DTC is a
limited-purpose trust company organized under the Banking Law 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 New York Uniform Commercial Code and a "clearing agency"
registered under the Exchange Act. DTC was created to hold the securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in the securities through electronic
book-entry changes in accounts of the participants. This eliminates the need for
physical movement of securities certificates. DTC's participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, some of whom own DTC. Access to DTC's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant.
CERTIFICATED NEW 7 5/8% NOTES
New 7 5/8% Notes represented by a global security are exchangeable for
certificated new 7 5/8% Notes only if:
- DTC notifies us that it is unwilling or unable to continue as a depository
for the global security or if at any time DTC ceases to be a registered
clearing agency, and a successor depository is not appointed by us within
90 days;
- we notify the Trustee that the global security will be so transferable,
registrable and exchangeable; or
- an event of default with respect to the new 7 5/8% Notes has occurred and
is continuing.
Any global security that is exchangeable for certificated new 7 5/8% Notes
under the preceding sentence will be transferred to, and registered and
exchanged for, certificated new 7 5/8% Notes in authorized denominations and
registered in names that DTC or its nominee holding the global security may
direct.
Subject to the foregoing, a global security is not exchangeable, except for
a global security of the same denomination to be registered in the name of DTC
or its nominee. If a global security becomes exchangeable for certificated new
7 5/8% Notes:
- certificated new 7 5/8% Notes will be issued only in fully registered form
in denominations of $1,000 or integral multiples;
- payments will be made and transfers will be registered at the office or
agency of us maintained for that purpose; and
- no service charge will be made for any issuance of the certificated new
7 5/8% Notes, although we may require payment to cover any tax or
governmental charge imposed.
GLOBAL CLEARANCE AND SETTLEMENT PROCEDURES
Settlement for the new 7 5/8% Notes represented by the global securities
will be made in immediately available funds. We will make all payments of
principal and interest on the 7 5/8% Notes in immediately available funds.
The new 7 5/8% Notes will trade in DTC's Same-Day Funds Settlement System
until maturity, and secondary market trading activity in the new 7 5/8% Notes
will therefore be required by DTC to settle in immediately available funds.
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Secondary market trading between Clearstream Luxembourg participants and/or
Euroclear participants will occur in the ordinary way in accordance with the
applicable rules and operating procedures of Clearstream Luxembourg and
Euroclear and will be settled using the procedures applicable to conventional
eurobonds in immediately available funds.
Cross-market transfers between persons holding directly or indirectly
through DTC and persons holding directly or indirectly through Clearstream
Luxembourg or Euroclear participants will be effected in accordance with DTC's
rules on behalf of the relevant European international clearing system by its
U.S Depositary. Such cross-market transactions will require delivery of
instructions to the relevant
European international clearing system by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to its
U.S. Depositary to take action to effect final settlement on its behalf by
delivering or receiving the 7 5/8% Notes in DTC, and making or receiving payment
in accordance with normal procedures for same-day funds settlement applicable to
DTC. Clearstream Luxembourg participants and Euroclear participants may not
deliver instructions directly to DTC.
Because of time-zone differences, credits of the 7 5/8% Notes received in
Clearstream Luxembourg or Euroclear as a result of a transaction with a DTC
participant will be made during subsequent securities settlement processing and
will be credited the business day following the DTC settlement date. Such
credits or any transactions in such 7 5/8% Notes settled during such processing
will be reported to the relevant Euroclear or Clearstream Luxembourg
participants on such business day. Cash received in Clearstream Luxembourg or
Euroclear as a result of sales of 7 5/8% Notes by or through a Clearstream
Luxembourg participant or a Euroclear participant to a DTC participant will be
received with value on the DTC settlement date but will be available in the
relevant Clearstream Luxembourg or Euroclear cash account only as of the
business day following settlement in DTC.
Although DTC, Clearstream Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of interests in the global
securities among participants of DTC, Clearstream Luxembourg and Euroclear, they
are under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither we or the Trustee will
have any responsibility for the performance by DTC, Clearstream Luxembourg and
Euroclear, or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
CERTAIN COVENANTS
Other than as described below under "--Limitation on Liens," the Indenture
does not contain any provisions that would limit our ability to incur
indebtedness or that would afford holders of 7 5/8% Notes protection in the
event of a sudden and significant decline in our credit quality or a takeover,
recapitalization or highly leveraged or similar transaction involving us.
Accordingly, we could in the future enter into transactions that could increase
the amount of indebtedness outstanding at that time or otherwise adversely
affect our capital structure or credit rating. See "RISK FACTORS."
LIMITATION ON LIENS
The Indenture contains a covenant that if we mortgage, pledge or otherwise
subject to any lien all or some of our property or assets, we will secure the
7 5/8% Notes, any other outstanding Debt Securities and any of our other
obligations that may then be outstanding and entitled to the benefit of a
covenant similar in effect to such covenant, equally and proportionally with the
indebtedness or
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obligations secured by such mortgage, pledge or lien, for as long as any such
indebtedness or obligation is so secured. This covenant does not apply:
- to the creation, extension, renewal or refunding of (a) mortgages or liens
created or existing at the time property is acquired, (b) mortgages or
liens created within 180 days after property is acquired, or
(c) mortgages or liens securing the cost of construction or improvement of
property; or
- to the making of any deposit or pledge to secure public or statutory
obligations or with any governmental agency at any time required by law in
order to qualify us to conduct all or some part of our business or in
order to entitle us to maintain self-insurance or to obtain the benefits
of any law relating to workmen's compensation, unemployment insurance, old
age pensions or other social security, or with any court, board,
commission or governmental agency as security incident to the proper
conduct of any proceeding before it.
The Indenture does not prevent any other entity from mortgaging, pledging or
subjecting to any lien any of its property or assets, whether or not acquired
from us (Section 4.03).
AMENDMENT AND WAIVER
With the written consent of the holders of more than 50% of the principal
amount of the outstanding Debt Securities of each series that will be affected
(with each series voting as a class), we and the Trustee may amend or supplement
the Indenture or modify the rights of the holders of Debt Securities of that
series. Such majority of holders may also waive compliance by us with any
provision of the Indenture, any supplemental indenture or the Debt Securities of
any such series except a default in the payment of principal or interest.
However, without the consent of the holder of each Debt Security affected, an
amendment or waiver may not (Section 9.02):
- reduce the amount of Debt Securities whose holders must consent to an
amendment or waiver;
- change the rate or the time for payment of interest;
- change the principal or the fixed maturity;
- waive a default in the payment of principal, premium, if any, or interest;
- make any Debt Security payable in a different currency; or
- make any change in the provisions of the Indenture concerning (a) waiver
of existing defaults (Section 6.04), (b) rights of holders of Debt
Securities to receive payment (Section 6.07), or (c) amendments and
waivers with consent of holders of Debt Securities (Section 9.02(a), third
sentence).
We and the Trustee may amend or supplement the Indenture without the consent
of any holder of any of the Debt Securities to (Section 9.01):
- cure any ambiguity, defect or inconsistency in the Indenture or the Debt
Securities;
- provide for the assumption of all of our obligations under the Debt
Securities and the Indenture by any corporation in connection with a
merger, consolidation or transfer or lease of our property and assets
substantially as an entirety;
- provide for uncertificated Debt Securities in addition to or instead of
certificated Debt Securities;
- add to the covenants made by us for the benefit of the holders of any
series of Debt Securities (and if such covenants are to be for the benefit
of less than all series of Debt Securities, stating
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that such covenants are included solely for the benefit of such series) or
to surrender any right or power conferred upon us;
- add to, delete from, or revise the conditions, limitations, and
restrictions on the authorized amount, terms, or purposes of issue,
authentication and delivery of the Debt Securities, as set forth in the
Indenture;
- make any change that does not adversely affect the rights of any holder of
Debt Securities in any material respect;
- provide for the issuance of and establish the form and terms and
conditions of a series of Debt Securities or to establish the form of any
certifications required to be furnished pursuant to the terms of the
Indenture or any series of Debt Securities or to add to the rights of the
holders of any series of Debt Securities; or
- secure any Debt Securities as provided under the heading "--Limitation on
Liens."
CONSOLIDATION, MERGER AND SALE OF ASSETS
We may, without the consent of the holders of the 7 5/8% Notes or any other
outstanding Debt Securities, consolidate with, merge into or be merged into, or
transfer or lease our property and assets substantially as an entirety to
another entity. However, we may only do this if:
- the successor entity is a corporation and assumes by supplemental
indenture all of our obligations under the 7 5/8% Notes, any other
outstanding Debt Securities and the Indenture; and
- after giving effect to the transaction, no Default or Event of Default has
occurred and is continuing.
After that time, all of our obligations under the 7 5/8% Notes, any other
outstanding Debt Securities and the Indenture terminate (Section 5.01).
EVENTS OF DEFAULT
Any one of the following is an Event of Default with respect to any series
of Debt Securities, including the 7 5/8% Notes (Section 6.01):
- if we default in the payment of interest on the Debt Securities of such
series, and such default continues for 90 days;
- if we default in the payment of the principal of any Debt Security of such
series when the same becomes due and payable at maturity, upon redemption,
or otherwise;
- if we fail to comply with any of our other agreements in the Debt
Securities of such series, in the Indenture or in any supplemental
indenture under which the Debt Securities of such series were issued,
which failure continues for 90 days after we receive notice from the
Trustee or the holders of at least 25% in principal amount of all of the
outstanding Debt Securities of that series; and
- if certain events of bankruptcy or insolvency occur with respect to us.
If an Event of Default with respect to the Debt Securities of any series
occurs and is continuing, the Trustee or the holders of at least 25% in
principal amount of all of the outstanding Debt Securities of that series may
declare the principal (or, if the Debt Securities of that series are original
issue discount securities, such portion of the principal amount as may be
specified in the terms of that series) of all the Debt Securities of that series
to be due and payable. When such declaration is made, such principal (or, in the
case of original issue discount securities, such specified amount) will be
immediately due and payable (Section 6.02). The holders of a majority in
principal amount of Debt
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Securities of that series may rescind such declaration and its consequences if
the rescission would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived (other than nonpayment of
principal or interest that has become due solely as a result of acceleration).
Holders of Debt Securities may not enforce the Indenture or the Debt
Securities, except as provided in the Indenture (Section 6.06). The Trustee may
require indemnity satisfactory to it before it enforces the Indenture or the
Debt Securities (Section 7.01(e)). Subject to certain limitations, the holders
of more than 50% in principal amount of the Debt Securities of each series
affected (with each series voting as a class) may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power of the Trustee (Section 6.05). The Trustee may
withhold from holders of Debt Securities notice of any continuing default
(except a default in the payment of principal or interest) if it determines in
good faith that withholding notice is in their interests (Section 7.05).
SATISFACTION AND DISCHARGE
We may terminate all of our obligations under the 7 5/8% Notes and the
Indenture with respect to the 7 5/8% Notes or any installment of interest on the
7 5/8% Notes if we irrevocably deposit in trust with the Trustee money or U.S.
Government Obligations sufficient to pay, when due, principal and interest on
the 7 5/8% Notes to maturity or redemption or such installment of interest, as
the case may be, and if all other conditions set forth in the 7 5/8% Notes are
met (Section 8.01).
GOVERNING LAW
The Indenture and the 7 5/8% Notes will be governed by, and construed in
accordance with, the laws of the State of New York, applicable to agreements
made and to be performed wholly within such jurisdiction.
CONCERNING THE TRUSTEE AND THE PAYING AGENT
We and certain of our affiliates maintain banking and other business
relationships in the ordinary course of business with Bank One Trust Company,
National Association. In addition, Bank One Trust Company, National Association
and certain of its affiliates serve as trustee, authenticating agent, or paying
agent with respect to certain Debt Securities previously issued by us and our
affiliates.
OTHER INDEBTEDNESS
QCI has issued indebtedness that is currently outstanding under various
indentures. Certain of QCI's indentures contain restrictive covenants limiting
its, and its subsidiaries', ability to pay dividends, make investments, create
liens, sell assets, enter into transactions with affiliates, borrow money,
refinance debt and engage in mergers and consolidations. As a wholly-owned
subsidiary of QCI, we are subject to some of the restrictive covenants contained
in the QCI indentures. We do not believe that these restrictive covenants have a
material adverse effect on our ability to finance our operations.
REGISTRATION RIGHTS
Based on an interpretation by the Staff of the SEC set forth in no-action
letters, and subject to the immediately following sentence, we believe that the
new 7 5/8% Notes to be issued pursuant to the exchange offer may be offered for
resale, resold and otherwise transferred by the holders thereof (other than
holders who are broker-dealers) without further compliance with the registration
and prospectus delivery provisions of the Securities Act. However, any purchaser
of old 7 5/8% Notes who is an affiliate of us or who intends to participate in
the exchange offer for the purpose of distributing the new 7 5/8% Notes, or any
broker-dealer who purchased the old 7 5/8% Notes from us for resale pursuant to
Rule 144A or any other available exemption under the Securities Act:
- will not be able to rely on the interpretations of the Staff set forth in
the no-action letters;
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- will not be entitled to tender such old 7 5/8% Notes in the exchange
offer; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of the old
7 5/8% Notes unless such sale or transfer is made pursuant to an exemption
from such requirements.
We do not intend to seek our own no-action letter, and there can be no
assurance that the Staff would make a similar determination with respect to the
new 7 5/8% Notes as it has in such no-action letters to third parties. Each
holder of the old 7 5/8% Notes (other than certain specified holders) who wishes
to exchange the old 7 5/8% Notes for new 7 5/8% Notes in the exchange offer will
be required to represent that:
- it is not an affiliate of us;
- it is not a broker-dealer tendering Registrable Securities (as defined in
the Registration Rights Agreement) acquired directly from us;
- the Notes to be exchanged for new 7 5/8% Notes in the exchange offer were
acquired in the ordinary course of its business; and
- at the time of the exchange offer, it has no arrangement or understanding
with any person to participate in the distribution (within the meaning of
the Securities Act) of the new 7 5/8% Notes.
In addition, in connection with any resale of new 7 5/8% Notes, any
broker-dealer who acquired the new 7 5/8% Notes for its own account as a result
of market-making or other trading activities (a "Participating Broker-Dealer")
and who receives new 7 5/8% Notes in exchange for such old 7 5/8% Notes pursuant
to the exchange offer, may be deemed to be an "underwriter" within the meaning
of the Securities Act and must deliver a prospectus meeting the requirements of
the Securities Act. The SEC has taken the position that Participating
Broker-Dealers may fulfill their prospectus delivery requirements with respect
to the new 7 5/8% Notes other than a resale of an unsold allotment from the
original sale thereof, with the prospectus contained in the registration
statement filed in connection with the exchange offer (the "Exchange Offer
Registration Statement"). Under the Registration Rights Agreement, we are
required to allow Participating Broker-Dealers and other persons, if any,
subject to similar prospectus delivery requirements to use the prospectus
contained in the Exchange Offer Registration Statement in connection with the
resale of such new 7 5/8% Notes for a period of 225 calendar days from the
issuance of the new 7 5/8% Notes.
If:
- because of any change in law or in currently prevailing interpretations of
the Staff, we are not permitted to effect the exchange offer;
- the exchange offer is not consummated within 225 calendar days of June 9,
2000; or
- in the case of any holder that participates in the exchange offer, such
holder does not receive new 7 5/8% Notes on the date of the exchange that
may be sold without restriction under state and federal securities laws
(other than due solely to the status of such holder as our affiliate
within the meaning of the Securities Act or as a broker-dealer);
then in each case, we will promptly deliver to the holders written notice
thereof; and at our sole expense:
- as promptly as practicable (but in no event more than 90 days after so
required or requested pursuant to the Registration Rights Agreement),
file a shelf registration statement covering resales of the old 7 5/8%
Notes (the "Shelf Registration Statement");
- use our reasonable best efforts to cause the Shelf Registration Statement
to be declared effective under the Securities Act as soon as practicable;
and
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- use our reasonable best efforts to keep effective the Shelf Registration
Statement until the earlier of two years (or, if Rule 144(k) is amended to
provide a shorter restrictive period, such shorter period) after the
closing date or such time as all of the applicable old 7 5/8% Notes have
been sold thereunder.
We will, if a Shelf Registration Statement is filed, provide to each holder
copies of the prospectus that is a part of the Shelf Registration Statement,
notify each such holder when the Shelf Registration Statement for the old 7 5/8%
Notes has become effective and take certain other actions as are required to
permit unrestricted resales of the old 7 5/8% Notes. A holder that sells old
7 5/8% Notes pursuant to the Shelf Registration Statement will be required to be
named as a selling security holder in the related prospectus, to provide
information related thereto and to deliver such 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 that are applicable to such a holder (including
certain indemnification rights and obligations). We have no obligation to
include in the Shelf Registration Statement holders who do not deliver such
information to us.
If we fail to comply with certain provisions of the Registration Rights
Agreement, in each case as described below, then a special interest premium (the
"Special Interest Premium") will become payable in respect of the old 7 5/8%
Notes.
If:
- the Exchange Offer Registration Statement is not filed with the SEC on or
before the 150th calendar day following June 9, 2000 (or by November 6,
2000);
- the Exchange Offer Registration Statement is not declared effective on or
before the 180th calendar day following June 9, 2000 (or by December 6,
2000); or
- the exchange offer is not consummated or the Shelf Registration Statement
is not declared effective on or before the 225th calendar day following
June 9, 2000 (or by January 20, 2001);
the Special Interest Premium will accrue in respect of the old 7 5/8% Notes,
from and including the next calendar day following each of (a) such 150-day
period in the case of the first bullet listed above, (b) such 180-day period in
the second bullet listed above and (c) such 225-day period in the case of the
third bullet listed above, in each case at a rate equal to 0.25% per annum.
The aggregate amount of the Special Interest Premium in respect of each of
the old 7 5/8% Notes, payable pursuant to the above provisions, will in no event
exceed 0.25% per annum. If the Exchange Offer Registration Statement is not
declared effective on or before the 225th calendar day following June 9, 2000
and we request holders of old 7 5/8% Notes to provide the information called for
by the Registration Rights Agreement for inclusion in the Shelf Registration
Statement, the old 7 5/8% Notes owned by holders who do not deliver such
information to us when required pursuant to the Registration Rights Agreement
will not be entitled to any Special Interest Premium for any day after the 225th
day following June 9, 2000.
Upon:
- filing of the Exchange Offer Registration Statement after the 150-day
period described above;
- effectiveness of the Exchange Offer Registration Statement after the
180-day period described above; or
- consummation of the exchange offer or the effectiveness of a Shelf
Registration Statement, as the case may be, after the 225-day period
described above;
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the interest rate on the old 7 5/8% Notes from the day of such filing,
effectiveness or consummation, as the case may be, will be reduced to the
original interest rate set forth on the cover page of this prospectus for the
old 7 5/8% Notes.
If a Shelf Registration Statement is declared effective pursuant to the
foregoing paragraphs, and if we fail to keep such Shelf Registration Statement
continuously (a) effective or (b) useable for resales for the period required by
the Registration Rights Agreement due to certain circumstances relating to
pending corporate developments, public filings with the SEC and similar events,
or because the prospectus contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading, and such failure continues
for more than 60 days (whether or not consecutive) in any twelve-month period
(the 61st day being referred to as the "Default Day"), then from the Default Day
until the earlier of:
- the date that the Shelf Registration Statement is again deemed effective
or is usable,
- the date that is the second anniversary of the closing date (or, if
Rule 144(k) is amended to provide a shorter restrictive period, such
shorter period), or
- the date as of which all of the new 7 5/8% Notes are sold pursuant to the
Shelf Registration Statement,
the Special Interest Premium in respect of the old 7 5/8% Notes will accrue at a
rate equal to 0.25% per annum.
If we fail to keep the Shelf Registration Statement continuously effective
or useable for resales pursuant to the preceding paragraph, we will give the
holders notice to suspend the sale of the old 7 5/8% Notes and will extend the
relevant period referred to above during which we are required to keep effective
the Shelf Registration Statement (or the period during which Participating
Broker-Dealers are entitled to use the prospectus included in the Exchange Offer
Registration Statement in connection with the resale of new 7 5/8% Notes) by the
number of days during the period from and including the date of the giving of
such notice to and including the date when holders will have received copies of
the supplemented or amended prospectus necessary to permit resales of the old
7 5/8% Notes or to and including the date on which we have given notice that the
sale of the old 7 5/8% Notes may be resumed, as the case may be.
Each old 7 5/8% Note contains a legend to the effect that the holder
thereof, by its acceptance thereof, will be deemed to have agreed to be bound by
the provisions of the Registration Rights Agreement.
The Registration Rights Agreement is governed by, and construed in
accordance with, the laws of the State of New York. This summary 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 reference to, all the
provisions of the Registration Rights Agreement, a form of which is available
upon request to us. In addition, the information set forth above concerning
certain interpretations and positions taken by the Staff is not intended to
constitute legal advice, and prospective investors should consult their own
legal advisors with respect to such matters.
CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
The following discussion summarizes certain U.S. federal tax consequences of
an exchange of old 7 5/8% Notes for new 7 5/8% Notes in the exchange offer and
the purchase, beneficial ownership and disposition of new 7 5/8% Notes. For
purposes of this summary, a "U.S. Holder" means a beneficial owner of an old
7 5/8% or a new 7 5/8% Note that is for U.S. federal income tax purposes:
- an individual who is a citizen or resident of the United States;
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- a corporation, partnership or other business entity created or organized
under the laws of the United States or any state thereof (including the
District of Columbia);
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust with respect to which a court within the United States is able to
exercise primary supervision over its administration, and one or more
United States persons have the authority to control all of its substantial
decisions.
An individual may, subject to certain exceptions, be deemed to be a resident
of the United States by reason of being present in the United States for at
least 31 days in the calendar year and for an aggregate of at least 183 days
during a three-year period ending in the current calendar year (counting for
such purposes all the days present in the current year, one-third of the days
present in the immediately preceding year, and one-sixth of the days present in
the second preceding year). A "Non-U.S. Holder" is a beneficial owner of an old
7 5/8% Note or a new 7 5/8% Note that is not a U.S. Holder.
This summary is based on interpretations of the Internal Revenue Code of
1986, as amended (the "Code"), regulations issued thereunder, and rulings and
decisions currently in effect (or in some cases proposed), all of which are
subject to change. Any such change may be applied retroactively and may
adversely affect the federal tax consequences described herein. This summary
addresses only holders that own old 7 5/8% Notes or will own new 7 5/8% Notes as
capital assets and not as part of a "straddle" or a "conversion transaction" for
U.S. federal income tax purposes or as part of some other integrated investment.
This summary does not discuss all of the tax consequences that may be relevant
to particular investors or to investors subject to special treatment under the
U.S. federal income tax laws (such as life insurance companies, tax-exempt
entities, regulated investment companies, securities dealers, and investors
whose functional currency is not the U.S. dollar). Persons considering the
exchange of their old 7 5/8% Notes for new 7 5/8% Notes and persons considering
the purchase of new 7 5/8% Notes should consult their tax advisors concerning
the application of U.S. federal tax laws to their particular situations as well
as any consequences of the exchange of the old 7 5/8% Notes for new 7 5/8% Notes
and of the purchase, beneficial ownership and disposition of new 7 5/8% Notes
arising under the laws of any state or other taxing jurisdiction.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER TO U.S. HOLDERS AND
NON-U.S. HOLDERS
The exchange of old 7 5/8% Notes for new 7 5/8% Notes pursuant to the
exchange offer will not be a taxable event for U.S. federal income tax purposes.
U.S. Holders and Non-U.S. Holders will not recognize any taxable gain or loss as
a result of such exchange and will have the same tax basis and holding period in
the new 7 5/8% Notes as they had in the old 7 5/8% Notes immediately before the
exchange.
U.S. FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
TREATMENT OF INTEREST. Stated interest on the new 7 5/8% Notes will be
taxable to U.S. Holders as ordinary interest income as the interest accrues or
is paid in accordance with the holder's regular method of accounting.
MARKET DISCOUNT. If a U.S. Holder acquires a new 7 5/8% Note for an amount
that is less than its principal amount by more than a DE MINIMIS amount
(generally 0.25% of the principal amount multiplied by the number of remaining
whole years to maturity), the amount of the difference will be treated as
"market discount." In the event a U.S. Holder acquires a new 7 5/8% Note with
market discount, unless the U.S. Holder elects to include such market discount
in income as it accrues, a U.S. Holder will be required to treat any principal
payment on, and any gain on the sale, exchange,
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retirement or other disposition (including a gift) of, a new 7 5/8% Note as
ordinary income to the extent of any accrued market discount that has not
previously been included in income. In general, market discount on the new
7 5/8% Notes will accrue ratably over the remaining term of the new 7 5/8% Notes
or, at the election of the U.S. Holder, under a constant yield method. In
addition, a U.S. Holder could be required to defer the deduction of all or a
portion of the interest paid on any indebtedness incurred or continued to
purchase or carry a new 7 5/8% Note unless the U.S. Holder elects to include
market discount in income currently. Such an election applies to all debt
instruments held by a taxpayer and may not be revoked without the consent of the
Internal Revenue Service (the "IRS").
AMORTIZATION OF BOND PREMIUM. A U.S. Holder that purchases a new 7 5/8%
Note for an amount in excess of its stated principal amount will be considered
to have purchased the Note at a premium. The U.S. Holder may elect to amortize
such premium (as an offset to interest income), using a constant yield method,
over the remaining term of the new 7 5/8% Note (or to an earlier call date if it
results in a smaller amount of amortizable bond premium). Such election, once
made, generally applies to all debt instruments held or subsequently acquired by
the U.S. Holder on or after the first day of the first taxable year to which
such election applies and may be revoked only with the consent of the IRS. A
U.S. Holder that elects to amortize such premium must reduce its tax basis in
the related 7 5/8% Note by the amount of the premium amortized during its
holding period. If a U.S. Holder does not elect to amortize the premium, the
amount of such premium will be included in the U.S. Holder's tax basis for
purposes of computing gain or loss in connection with a taxable disposition of
the new 7 5/8% Note.
SALE OR OTHER DISPOSITION OF NEW 7 5/8% NOTES
In general, upon the sale, retirement or other taxable disposition of a new
7 5/8% Note, a U.S. Holder will recognize taxable gain or loss equal to the
difference between (i) the amount of the cash and the fair market value of any
property received on the sale, retirement or other taxable disposition (not
including any amount attributable to accrued but unpaid interest or accrued
market discount not previously included in income), and (ii) the U.S. Holder's
adjusted tax basis in the new 7 5/8% Note. A U.S. Holder's adjusted tax basis in
a new 7 5/8% Note generally will be equal to the cost of the Note to such U.S.
Holder, increased by the amount of any market discount previously included in
income by the U.S. Holder and reduced by the amount of any payments received by
the U.S. Holder, other than payments of qualified stated interest, and by the
amount of amortizable bond premium taken into account. Subject to the discussion
of market discount above, gain or loss realized on the sale, retirement or other
taxable disposition of a new 7 5/8% Note will be capital gain or loss.
U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OWNERSHIP
OF NEW 7 5/8% NOTES
For purposes of the following summary, interest and gain on the sale,
exchange or other disposition of a new 7 5/8% Note will be considered "U.S.
trade or business income" if such income or gain is:
- effectively connected with the conduct of a trade or business in the
United States; or
- in the case of a treaty resident, attributable to a permanent
establishment (or, in the case of an individual, to a fixed base) in the
United States.
TREATMENT OF INTEREST. A Non-U.S. Holder that is not subject to U.S.
federal income tax as a result of any direct or indirect connection to the
United States other than its ownership of a new 7 5/8% Note will not be subject
to U.S. federal income or withholding tax in respect of interest income on the
new 7 5/8% Note if:
- the interest is not U.S. trade or business income;
- the Non-U.S. Holder provides an appropriate statement on IRS Form W-8 or
Form W-8BEN, together with all appropriate attachments, signed under
penalties of perjury, identifying the Non-U.S. Holder and stating, among
other things, that the Non-U.S. Holder is not a United States person for
U.S. federal income tax purposes; and
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- the Non-U.S. Holder is not a "10-percent shareholder" or a "related
controlled foreign corporation" with respect to the Company as specially
defined for U.S. federal income tax purposes.
If a new 7 5/8% Note is held through a securities clearing organization or
certain other financial institutions, the organization or institution may
provide a signed statement to eliminate withholding tax. However, in such case,
the signed statement must be accompanied by a copy of the IRS Form W-8 or
Form W-8BEN or the substitute form provided by the beneficial owner to the
organization or institution. For interest paid with respect to a new 7 5/8% Note
after December 31, 2000, a Non-U.S. Holder that is treated as a partnership for
U.S. federal tax purposes generally will be required to provide an IRS
Form W-8IMY and to attach an appropriate certification by each beneficial owner
of the Non-U.S. Holder (including in certain cases, such beneficial owner's
beneficial owners). Prospective investors, including foreign partnerships and
their partners, should consult their tax advisors regarding these possible
additional reporting requirements.
To the extent these conditions are not met, a 30% withholding tax will apply
to interest income on the new 7 5/8% Note, unless an income tax treaty reduces
or eliminates such tax or unless the interest is U.S. trade or business income
with respect to such Non-U.S. Holder and the Non-U.S. Holder provides an
appropriate statement to that effect. In the latter case, such Non-U.S. Holder
generally will be subject to U.S. federal income tax with respect to all income
from the new 7 5/8% Notes at regular rates applicable to U.S. taxpayers.
Additionally, in such event, Non-U.S. Holders that are corporations could be
subject to a branch profits tax on such income.
TREATMENT OF DISPOSITIONS OF NEW 7 5/8% NOTES. In general, a Non-U.S.
Holder will not be subject to U.S. federal income tax on any amount received
(other than amounts in respect of accrued but unpaid interest) upon retirement
or disposition of a new 7 5/8% Note unless such Non-U.S. Holder is an individual
present in the United States for 183 days or more in the taxable year of the
sale, exchange or other disposition and certain other requirements are met, or
unless the gain is U.S. trade or business income. In the latter event, Non-U.S.
Holders generally will be subject to U.S. federal income tax with respect to
such gain at regular rates applicable to U.S. taxpayers. Additionally, in such
event, Non-U.S. Holders that are corporations could be subject to a branch
profits tax on such gain.
TREATMENT OF NEW 7 5/8% NOTES FOR U.S. FEDERAL ESTATE TAX PURPOSES. An
individual Non-U.S. Holder (who is not domiciled in the United States for U.S.
federal estate tax purposes at the time of death) will not be subject to U.S.
federal estate tax in respect of a new 7 5/8% Note, so long as the Non-U.S.
Holder is not a "10-percent shareholder" with respect to the Company as
specially defined for U.S. federal income tax purposes and payments of interest
on such new 7 5/8% Note would not have been considered U.S. trade or business
income at the time of such Non-U.S. Holder's death.
U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
Under certain circumstances, the Code requires "information reporting"
annually to the IRS and to each holder of new 7 5/8% Notes, and "backup
withholding" at a rate of 31% with respect to certain payments made on or with
respect to the new 7 5/8% Notes. Backup withholding generally does not apply
with respect to certain holders of new 7 5/8% Notes, including corporations,
tax-exempt organizations, qualified pension and profit sharing trusts and
individual retirement accounts.
A U.S. Holder may be subject to backup withholding unless such U.S. Holder
provides an IRS Form W-9, signed under penalties of perjury, identifying the
U.S. Holder, providing such U.S. Holder's taxpayer identification number and
certifying such U.S. Holder is not subject to backup withholding.
A Non-U.S. Holder that provides an IRS Form W-8 or Form W-8BEN, together
with all appropriate attachments, signed under penalties of perjury, identifying
the Non-U.S. Holder and stating that the Non-U.S. Holder is not a United States
person, will not be subject to IRS reporting
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requirements and U.S. backup withholding. With respect to interest paid after
December 31, 2000, IRS Forms W-8BEN will generally be required from the
beneficial owners of interests in a Non-U.S. Holder that is treated as a
partnership for U.S. federal income tax purposes.
The payment of the proceeds on the disposition of a new 7 5/8% Note to or
through the U.S. office of a broker generally will be subject to information
reporting and backup withholding at a rate of 31% unless the Non-U.S. Holder
either certifies its status as a Non-U.S. Holder under penalties of perjury on
IRS Form W-8 or Form W-8BEN (as described above) or otherwise establishes an
exemption. The payment of the proceeds on the disposition of a new 7 5/8% Note
by a Non-U.S. Holder to or through a non-U.S. office of a non-U.S. broker will
not be subject to backup withholding or information reporting unless the
non-U.S. broker is a "U.S. related person" (as defined below). The payment of
proceeds on the disposition of a new 7 5/8% Note by a Non-U.S. Holder to or
through a non-U.S. office of a U.S. broker or a U.S. related person generally
will not be subject to backup withholding but will be subject to information
reporting unless the Non-U.S. Holder certifies its status as a Non-U.S. Holder
under penalties of perjury or the broker has certain documentary evidence in its
files as to the Non-U.S. Holder's foreign status and the broker has no actual
knowledge to the contrary.
For this purpose, a "U.S. related person" is:
- a "controlled foreign corporation" as specially defined for U.S. federal
income tax purposes;
- a foreign person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year preceding
the payment (or for such part of the period that the broker has been in
existence) is derived from activities that are effectively connected with
the conduct of a U.S. trade or business; or
- for payments made after December 31, 2000, a foreign partnership if at any
time during its tax year one or more of its partners are United States
persons who, in the aggregate, hold more than 50% of the income or capital
interest of the partnership or if, at any time during its taxable year,
the partnership is engaged in the conduct of a U.S. trade or business.
Backup withholding is not an additional tax and may be refunded (or credited
against the Non-U.S. Holder's U.S. federal income tax liability, if any),
provided that certain required information is furnished. The information
reporting requirements may apply regardless of whether withholding is required.
Copies of the information returns reporting such interest and withholding also
may be made available to the tax authorities in the country in which a Non-U.S.
Holder is a resident under the provisions of an applicable income tax treaty or
agreement.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives new 7 5/8% Notes for its own
account in the exchange offer must acknowledge that it acquired the old 7 5/8%
Notes for its own account as a result of market-making or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of the new
7 5/8% 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. See
"REGISTRATION RIGHTS." A Participating Broker-Dealer may use this prospectus, as
it may be amended or supplemented from time to time, in connection with resales
of new 7 5/8% Notes received in exchange for old 7 5/8% Notes where the old
7 5/8% Notes were acquired as a result of market-making activities or other
trading activities. Under the Registration Rights Agreement, we have agreed that
for a period of 225 calendar days after the expiration date, we will make this
prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any resale of new 7 5/8% Notes.
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We will not receive any proceeds from any sale of the new 7 5/8% Notes by
any Participating Broker-Dealer. New 7 5/8% Notes received by Participating
Broker-Dealers for their own account in 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 new 7 5/8% Notes
or a combination of the methods of resale, at market prices prevailing at the
time of resale, at prices related to the prevailing market prices or negotiated
prices. Any 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
the new 7 5/8% Notes. Any Participating Broker-Dealer that resells new 7 5/8%
Notes that were received by it for its own account in the exchange offer and any
broker or dealer that participates in a distribution of the new 7 5/8% Notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit on any resale of new 7 5/8% Notes and any commissions or concessions
received by those 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 225 calendar days after closing of the exchange offer, we
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any Participating Broker-Dealer that requests
the documents in the letter of transmittal. We have agreed to pay all expenses
incident to our performance of, or compliance with, the Registration Rights
Agreement and all expenses incident to the exchange offer, including the
expenses of one counsel for the holders of the old 7 5/8% Notes but excluding
commissions or concessions of any brokers or dealers, and will indemnify the
holders, including any broker-dealers, and certain parties related to the
holders against certain liabilities, including liabilities under the Securities
Act.
We have not entered into any arrangements or understandings with any person
to distribute the new 7 5/8% Notes to be received in the exchange offer.
LEGAL MATTERS
Certain legal matters with respect to the 7 5/8% Notes will be passed upon
for us by O'Melveny & Myers LLP, Los Angeles, California, and by Holme
Roberts & Owen LLP, Denver, Colorado. O'Melveny & Myers LLP, Los Angeles,
California is also passing on certain federal income tax matters in connection
with the 7 5/8% Notes.
EXPERTS
Our consolidated financial statements and schedules as of December 31, 1999
and 1998 and for each of the three years in the period ended December 31, 1999
included in our Annual Report on Form 10-K filed March 3, 2000, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto, which are incorporated by reference in this
prospectus and in the registration statement in reliance upon the authority of
said firm as experts in giving said reports.
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