AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 2000
REGISTRATION NO. 333-46434
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------
PHH CORPORATION
(Exact name of Registrant as specified in its charter)
MARYLAND 52-0551284
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6 SYLVAN WAY
PARSIPPANY, NEW JERSEY 07054
(973) 428-9700
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
---------------------------
JAMES E. BUCKMAN
SENIOR EXECUTIVE VICE PRESIDENT
PHH CORPORATION
6 SYLVAN WAY
PARSIPPANY, NEW JERSEY 07054
(973) 428-9700
FAX (973) 496-5335
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
---------------------------
Copies to:
ERIC J. BOCK VINCENT J. PISANO, ESQ.
SENIOR VICE PRESIDENT AND SECRETARY SKADDEN, ARPS, SLATE, MEAGHER &
PHH CORPORATION FLOM LLP
6 SYLVAN WAY FOUR TIMES SQUARE
PARSIPPANY, NEW JERSEY 07054 NEW YORK, NY 10036
(212) 413-1836 (212) 735-3000
FAX (212) 413-1922 FAX (212) 735-2000
---------------------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box.|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462 (c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to rule 434,
please check the following box. |_|
-----------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==============================================================================================
Title of Each Class Proposed Maximum Proposed Maximum Amount of
of Securities to be Amount to be Aggregate Price Aggregate Offering Registration
Registered Registered(1) Per Unit(1) Price(2) Fee
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities $2,625,000,000 100% $2,625,000,000 $693,000
==============================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee.
(2) If any debt securities are issued at original issue discount, this
registration statement covers such greater amount of debt securities as
shall result in the initial offering prices of all debt securities
registered hereunder to aggregate $3,000,000,000.
Pursuant to Rule 429 under the Securities Act, the prospectus and
prospectus supplement filed as part of this registration statement relate
to the securities registered hereby and to the remaining unsold
$375,000,000 amount of Medium-Term Notes previously registered by PHH
Corporation under its registration statement on Form S-3, File No.
333-45373 in respect of which a filing fee of $110,625 was paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND
EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
[FLAG]
The information in this prospectus supplement is not complete and may be
changed. PHH Corporation may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus supplement is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 1, 2000
PROSPECTUS SUPPLEMENT
(To prospectus dated , 2000)
$3,000,000,000
PHH CORPORATION
[Logo]
MEDIUM-TERM NOTES
DUE NINE MONTHS TO 40 YEARS FROM THE DATE OF ISSUE
GENERAL TERMS OF SALE
The following terms will generally apply to the medium-term notes that
we will sell from time to time using this prospectus supplement and the
attached prospectus. We will include information on the specific terms for
each note in a pricing supplement to this prospectus supplement that we
will deliver to prospective buyers of any note. The maximum amount that we
expect to receive from the sale of the notes is between $2,977,500,000 and
$2,996,250,000 after paying the agent commissions of between $3,750,000 and
$22,500,000.
<TABLE>
<S> <C> <C> <C>
MATURITY: 9 months to 40 years from the INTEREST RATES: Fixed, floating, or zero coupon.
date of issue.
INDEXED Payments of interest or principal RANKING: Medium-term notes are part of our
NOTES: may be linked to the price of one senior indebtedness and rank prior
or more securities, currencies, to our subordinated indebtedness.
commodities or other goods.
REDEMPTION: Terms of specific notes may OTHER TERMS: You should review "Description of
permit or require redemption or Notes" and the pricing supplement
repurchase at our option or your for features that apply to your
option. notes.
RISKS: Currency risks may exist for
notes that are not payable in
dollars.
</TABLE>
-----------------
CONSIDER CAREFULLY THE INFORMATION UNDER "RISK FACTORS" BEGINNING ON
PAGE S-1 OF THIS PROSPECTUS SUPPLEMENT.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or any accompanying prospectus or pricing
supplement is truthful or complete. Any representation to the contrary is a
criminal offense.
Credit Suisse First Boston
Goldman, Sachs & Co.
Merrill Lynch & Co.
The date of this Prospectus Supplement is ____________, 2000.
RISK FACTORS
Some of the notes that we issue under this prospectus supplement, any
pricing supplement to this prospectus supplement and the attached
prospectus may be payable in currencies other than dollars. This prospectus
supplement, any pricing supplement and the attached prospectus do not
describe all the current or future risks of an investment in any of those
foreign currency notes. You should consult your own financial and legal
advisors about the risks involved before purchasing any foreign currency
notes. Foreign currency notes are not an appropriate investment if you are
unsophisticated with respect to foreign currency transactions. See "Special
Provisions Relating to Foreign Currency notes" below.
DESCRIPTION OF NOTES
The following description of the terms of our medium-term notes
supplements the description of the general terms and provisions of the debt
securities set forth in the attached prospectus. If any specific
information in this description is inconsistent with the description of the
more general terms of the debt securities contained in the prospectus, you
should rely on the information contained in this prospectus supplement.
The pricing supplement for each offering of notes will contain the
specific information and terms for that offering. If any information in the
pricing supplement, including any changes in the method of calculating
interest on any note, is inconsistent with this prospectus supplement, you
should rely on the information in the pricing supplement. The pricing
supplement may also add, update or change information contained in the
prospectus and this prospectus supplement. It is important for you to
consider the information contained in the prospectus, this prospectus
supplement and the pricing supplement in making your investment decision.
GENERAL
We will issue the notes under an indenture between us and Bank One,
N.A., as trustee. The notes we may offer will constitute a portion of a
single series of debt securities for purposes of the indenture, and we have
the right to increase the aggregate amount of notes that will still be part
of the same series. At the date of this prospectus supplement, the
aggregate principal amount of notes offered pursuant to this prospectus
supplement is limited to $3,000,000,000 or its equivalent in foreign
currencies or currency units. This amount will be reduced by an amount
equal to the gross proceeds from the sales of other debt securities
pursuant to the registration statement of which the accompanying prospectus
is a part. The statements in this prospectus supplement concerning the
notes and the indenture may not contain all of the information that is
important to you. Accordingly, you should carefully read the provisions of
the indenture, which is incorporated by reference into this prospectus
supplement in its entirety, including the definitions of terms used in this
prospectus supplement without definition. We have filed a copy of the
indenture with the Securities and Exchange Commission as an exhibit to the
registration statement of which the accompanying prospectus is a part.
The notes will be unsecured obligations of ours and will rank prior
to all of our subordinated indebtedness and on an equal basis with all of
our other unsecured indebtedness. As of June 30, 2000, the aggregate amount
of outstanding indebtedness to which the notes will rank equally, including
medium-term notes, commercial paper and commercial bank notes, was
$1,900,000,000. However, under general equitable principles, our right and
the right of our creditors, including the holders of notes, to participate
in any distributions of assets of our subsidiaries, if PHH were to be
liquidated, is likely to be subject to the prior claims of creditors of the
subsidiary, except to the extent that our claims as a creditor of the
subsidiary may be recognized or our subsidiaries were to be consolidated
with us in any liquidation. As of June 30, 2000, our subsidiaries had
$471,000,000 of outstanding indebtedness, excluding indebtedness owed to us
or our other subsidiaries. The notes will not be subordinated in right of
payment to any other of our indebtedness.
The indenture does not limit the aggregate principal amount of debt
securities which we may issue and permits debt securities to be issued in
one or more series up to the aggregate principal amount which we may
authorize from time to time. As of June 30, 2000, $390,000,000 aggregate
principal amount of our medium-term notes was outstanding. We may, from
time to time, without the consent of the holders of the notes, issue
additional notes or other debt securities under the indenture.
We will offer the notes on a continuing basis. The notes will have a
stated maturity on any day from 9 months to 40 years from the date of
issue, as selected by the initial purchaser and agreed to by us, and may be
subject to redemption or repayment prior to stated maturity at the price or
prices specified in the applicable pricing supplement. The maturity means
the date on which the principal of the note or an installment of principal
becomes due and payable as provided in the note, whether at the stated
maturity date or by declaration of acceleration, call for redemption or
otherwise. Unless otherwise specified in any applicable pricing supplement,
each note will bear interest at either (a) a fixed rate or (b) a floating
rate determined by reference to an interest rate formula or a base rate,
which may be adjusted by adding or subtracting a particular spread and/or
multiplying by a particular spread multiplier.
We will issue each note initially as either a global note or a
certificated note and, if denominated in U.S. dollars, in denominations of
$1,000 and whole multiples of $1,000 or, if denominated in any foreign
currency or currency units, the dollar equivalent in such foreign currency
or currency units. For a description of the denominations of foreign
currency notes see "Special Provisions Relating to Foreign Currency Notes."
Certificated notes may be transferred or exchanged at the offices of the
trustee, 14 Wall Street, Eighth Floor, Window 2, New York, New York 10005.
Global notes may be transferred or exchanged through a participating member
of the depositary, as discussed in more detail under "Global Notes" below.
No service charge will be made for any registration of transfer or exchange
of certificated notes, but we may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed.
We may offer the notes at different interest rates depending upon,
among other things, the aggregate principal amount of the notes purchased
in any single transaction. We may change interest rates or interest rate
formulas from time to time but no change will affect any note previously
issued or which we have agreed to sell.
Unless we indicate otherwise in the applicable pricing supplement,
the interest payment dates for fixed rate notes shall be those described
below under "Fixed Rate Notes." The interest payment dates for floating
rate notes will be indicated in the applicable pricing supplement. Unless
we specify otherwise in the applicable pricing supplement, each regular
record date for a fixed rate note or a floating rate note will be the
fifteenth day next preceding each interest payment date, whether or not a
business day.
We refer to the notes in the accompanying prospectus as the debt
securities. For a description of the rights attaching to different series
of debt securities under the indenture, see "Description of Debt
Securities" in the accompanying prospectus.
PAYMENT OF PRINCIPAL AND INTEREST
Payments of principal, premium, if any, and interest on global notes
will be made to the depositary by wire transfer, either in same day funds
or in next day funds. See "-Global Notes" below. In the case of
certificated notes:
(1) principal, premium, if any, and interest will be payable,
(2) the transfer of the notes will be registrable, and
(3) notes will be exchangeable for notes bearing identical
terms and provisions, in each case, at the offices of the trustee, 14
Wall Street, Eighth Floor, Window 2, New York, New York 10005.
We have the option, however, to pay interest, other than at maturity, by
check mailed to the address of the person in whose name the applicable note
is registered at the close of business on the relevant regular record date
as shown on the applicable security register. The global notes will be
registered in the name of a nominee of the depositary. A holder of U.S.
$10,000,000 or more in aggregate principal amount of notes of like tenor
and term, or a holder of the equivalent value in a specified currency other
than U.S. dollars, has the right to receive interest payments other than an
interest payment due at maturity by wire transfer of immediately available
funds to a designated account maintained in the United States, so long as
the trustee has received proper instructions in writing from that holder on
or prior to the applicable regular record date. The interest payment
instructions will remain in effect until revoked or changed by written
instructions received by the trustee from the holder. Any written
revocation or change which is received by the trustee after a regular
record date and before the related interest payment date will not be
effective with respect to the interest payable on that interest payment
date. Interest will be payable on each interest payment date specified in
the note on which an installment of interest is due and payable and at
maturity. If the original issue date of a note is between a regular record
date and the related interest payment date, the initial interest payment
will be made on the interest payment date following the next succeeding
regular record date to the registered holder on the next succeeding regular
record date unless we specify otherwise in the applicable pricing
supplement.
Unless we specify otherwise in an applicable pricing supplement,
interest payments will be equal to the amount of interest accrued from and
including the next preceding interest payment date in respect of which
interest has been paid or duly provided for, or from and including the date
of issue, if no interest has been paid with respect to the note, to but
excluding the applicable interest payment date. In the case of certificated
notes, payment of principal, premium, if any, and interest payable at
maturity on each certificated note will be paid in immediately available
funds against presentation of the certificated note at the offices of the
trustee, 14 Wall Street, Eighth Floor, New York, New York 10005; provided
that the certificated notes are presented to the trustee in time for the
trustee to make the payments in the funds in accordance with its normal
procedures. Interest payable at maturity will be payable to the person to
whom the principal of the note will be paid.
As used in the prospectus supplement, business day means any day,
other than a Saturday or Sunday, that meets each of the following
applicable requirements:
(1) it is not a legal holiday or a day on which banking
institutions are authorized or required by law or regulation to be
closed in The City of New York;
(2) if the note is denominated or payable in a specified
currency other than U.S. dollars:
(a) it is not a day on which banking institutions are
authorized or required by law or regulation to close in the
major financial center of the country issuing the specified
currency, which in the case of euro shall include the financial
center of each country that issues a component currency of the
euro and
(b) it is a day on which banking institutions in that
financial center are carrying out transactions in such
specified currency; and
(3) if the note is a LIBOR note, it is a London banking day.
A London banking day means any day on which dealings on deposits in U.S.
dollars are transacted in the London interbank market.
REDEMPTION AND REPAYMENT
Unless we specify otherwise in an applicable pricing supplement, we
will not redeem the notes prior to their stated maturity. If we so specify
in an applicable pricing supplement with respect to a note or notes, we
will have the right to redeem the note or notes on or after the date set
forth in the pricing supplement, either in whole or from time to time in
part, at our option, at the redemption price or prices specified in the
applicable pricing supplement, together with interest accrued thereon to
but excluding the date of redemption, on notice given not more than 60 days
nor less than 30 days prior to the date of redemption. The redemption price
with respect to each note subject to redemption prior to stated maturity
will be fixed at the time of sale and set forth in the applicable pricing
supplement and in the applicable note.
Unless we specify otherwise in an applicable pricing supplement, the
notes will not be subject to repayment at your option. If we so specify in
an applicable pricing supplement with respect to a note or notes, the note
or notes will be subject to repayment at your option in accordance with the
terms of the notes on their respective optional repayment dates fixed at
the time of sale and set forth in the applicable pricing supplement and in
the applicable note. On any optional repayment date with respect to a note,
the note will be repayable in whole or in part at your option at a price
specified in the applicable pricing supplement, together with interest
thereon payable to the optional repayment date, on notice given by you to
us not more than 60 days nor less than 30 days prior to the optional
repayment date.
If a note is represented by a global note, the depositary's nominee
will be the holder of the note and therefor will be the entity through
which you may exercise a right to repayment. In order to ensure that the
depositary's nominee will timely exercise a right to repayment with respect
to a particular note, you must instruct the broker or other direct or
indirect participant through which you hold an interest in the note to
notify the depositary of your desire to exercise a right to repayment. The
depositary would then notify the trustee. Different firms have different
deadlines for accepting instructions from their customers and, accordingly,
you should consult your broker or other direct or indirect participant
through which you hold an interest in a global note in order to ascertain
the deadline by which such an instruction must be given in order for timely
notice to be delivered to the depositary.
Unless we specify otherwise in an applicable pricing supplement, the
notes will not be subject to any sinking fund.
FIXED RATE NOTES
Unless we specify otherwise in an applicable pricing supplement:
o Each fixed rate note will bear interest from the date of issue
at the annual rate stated on the face of the fixed rate note,
payable semiannually on February 15 and August 15 of each year
and at maturity;
o Interest will be computed on the fixed rate notes on the basis
of a 360-day year of twelve 30-day months; and
o Interest on the fixed rate notes will be paid to the person in
whose name the note is registered at the close of business on
the regular record date, except that at maturity, interest will
be payable to the person surrendering the note to whom
principal will also be payable.
If any interest payment date or the maturity of a fixed rate note
falls on a day that is not a business day:
o the payment will be made on the next business day as if it were
made on the date such payment was due; and
o no interest will accrue on the amount so payable for the period
from and after such interest payment date or maturity.
FLOATING RATE NOTES
Each floating rate note will bear interest at a floating rate
determined by reference to the base rate or interest rate formula specified
in the applicable pricing supplement. Any floating rate note may also have
either or both of the following:
o a maximum numerical interest rate limitation, or ceiling, on
the rate of interest which may accrue during any interest
period; and
o a minimum numerical interest rate limitation, or floor, on the
rate of interest which may accrue during any interest period.
Interest on the floating rate notes will be determined by reference to a
base rate, which may be:
(a) the CD Rate in which case the note will be a CD Rate note;
(b) the Commercial Paper Rate in which case the note will be a
Commercial Paper Rate note;
(c) the Federal Funds Effective Rate in which case the note
will be a Federal Funds Effective Rate note;
(d) LIBOR in which case the note will be a LIBOR note;
(e) the Treasury Rate in which case the note will be a Treasury
Rate note;
(f) the Prime Rate in which case the note will be a Prime Rate
note; or
(g) any other base rate or interest rate formula as is stated
in the pricing supplement.
The applicable pricing supplement will specify the interest rate
formula or the base rate and the index maturity, the spread and/or spread
multiplier, if any, and the maximum or minimum interest rate limitation, if
any, applicable to each floating rate note. In addition, the pricing
supplement for the floating rate note may contain information concerning:
o the calculation agent,
o calculation dates,
o initial interest rate,
o interest determination dates,
o interest payment periods,
o interest payment dates,
o maturity,
o regular record dates,
o interest reset dates,
o interest reset periods,
o any initial redemption dates,
o any initial redemption percentage, and
o any annual redemption percentage reduction and optional
repayment date.
The index maturity is the period to maturity of an instrument or
obligation with respect to which the base rate is calculated. The spread is
the number of basis points above or below the base rate applicable to a
floating rate note, and the spread multiplier is the percentage of the base
rate applicable to the interest rate for a floating rate note. We may
change the spread, spread multiplier, index maturity and other variable
terms of the floating rate notes from time to time, but no change will
affect any floating rate note previously issued or as to which we have
accepted an offer to purchase.
Unless we specify otherwise in an applicable pricing supplement, the
rate of interest on each floating rate note will be reset daily, weekly,
monthly, quarterly, semi-annually or annually on an interest reset date, as
specified in the applicable pricing supplement. Unless we specify otherwise
in an applicable pricing supplement, the interest reset date will be:
o in the case of floating rate notes which reset daily, each
business day;
o in the case of floating rate notes which reset weekly, other
than Treasury Rate notes, the Wednesday of each week;
o in the case of treasury rate notes which reset weekly, the
Tuesday of each week, except as provided below;
o in the case of floating rate notes which reset monthly, the
third Wednesday of each month;
o in the case of floating rate notes which reset quarterly, the
third Wednesday of each February, May, August and November;
o in the case of floating rate notes which reset semi-annually,
the third Wednesday of each of the two months of each year
specified in the applicable pricing supplement; and
o in the case of floating rate notes which reset annually, the
third Wednesday of one month of each year, as specified in the
applicable pricing supplement.
Unless we specify otherwise in an applicable pricing supplement, the
interest rate in effect from the date of issue to the first interest reset
date with respect to a floating rate note will be the initial interest rate
stated in the applicable pricing supplement. If any interest reset date for
any floating rate note would otherwise be a day that is not a business day
for that floating rate note, the interest reset date for that floating rate
note will be postponed to the next day that is a business day for that
floating rate note, except that in the case of a LIBOR note, if the
business day is in the next succeeding calendar month, the interest reset
date shall be the immediately preceding business day.
The interest rate applicable to each interest accrual period
commencing on an interest reset date will be the rate determined by
reference to the interest determination date. The interest determination
date will be:
o the second business day prior to the interest reset date for a
Commercial Paper Rate note, a Federal Funds Effective Rate
note, a CD Rate note or a Prime Rate note;
o the second London banking day prior to such interest reset date
for a LIBOR note; and
o the day of the week in which such interest reset date falls on
which Treasury bills would normally be auctioned for a Treasury
Rate note.
Treasury bills are usually sold at auction on Monday of each week,
unless that day is a legal holiday, in which case the auction is usually
held on the following Tuesday, except that the auction may be held on the
preceding Friday. If, as the result of a legal holiday, an auction is so
held on the preceding Friday, that Friday will be the Treasury interest
determination date pertaining to the interest reset date occurring in the
next succeeding week. If an auction date falls on any interest reset date
for a Treasury Rate note, then the interest reset date shall instead be the
first business day immediately following the auction date.
With respect to a floating rate note, accrued interest is calculated
by multiplying the principal amount of a note by an accrued interest
factor. The accrued interest factor is computed by adding the interest
factors calculated for each day from the date of issue, or from the last
date for which interest has been paid, as the case may be, to the date for
which accrued interest is being calculated. Unless otherwise specified in
an applicable pricing supplement, the interest factor for each day is
computed by dividing the interest rate applicable to that date by 360, in
the case of Commercial Paper Rate notes, CD Rate notes, Federal Funds
Effective Rate notes, LIBOR notes and Prime Rate notes, or by the actual
number of days in the year, in the case of Treasury Rate notes.
All percentages resulting from any calculation with respect to
floating rate notes will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with five one-millionths of a
percentage point rounded upward. For example, 9.876545% or .09876545 would
be rounded to 9.87655% or .0987655. All dollar amounts used in or resulting
from the calculation on floating rates notes will be rounded to the nearest
cent with one half cent being rounded upward. The calculation agent will,
upon the request of the holder of any floating rate note, provide the
interest rate then in effect and the interest rate which will become
effective as a result of a determination made with respect to the most
recent interest determination date with respect to any note. Unless we
specify otherwise in an applicable pricing supplement, the trustee will be
the calculation agent for the floating rate notes. Unless we specify
otherwise in an applicable pricing supplement, the calculation date, where
applicable, pertaining to any interest determination date will be the
earlier of:
o the tenth calendar day after the interest determination date or
if that day is not a business day, the next succeeding business
day; and
o the business day next preceding the relevant interest payment
date or maturity, as the case may be.
In addition to any specified maximum interest rate which may be
applicable to any floating rate note, the interest rate on the notes will
in no event be higher than the maximum rate permitted by New York law, as
the same may be modified by United States law of general application. Under
current New York law, the maximum rate of interest on a loan to a
corporation is 25% per annum on a simple interest basis. The limit may not
apply to floating rate notes in which $2,500,000 or more has been invested.
Each floating rate note will bear interest from the date of issue at
the rates determined as described below until the principal thereof is paid
or otherwise made available for payment. Except as provided below, and
unless otherwise indicated in an applicable pricing supplement, interest
will be payable:
o in the case of floating rate notes which reset daily, weekly or
monthly, on the third Wednesday of each month or on the third
Wednesday of February, May, August and November of each year,
as specified in the applicable pricing supplement;
o in the case of floating rate notes which reset quarterly, on
the third Wednesday of February, May, August and November of
each year;
o in the case of floating rate notes which reset semi-annually,
on the third Wednesday of the two months of each year specified
in the applicable pricing supplement; and
o in the case of floating rate notes which reset annually, on the
third Wednesday of the month specified in the applicable
pricing supplement and in each case, at maturity.
If any interest payment date, other than an interest payment date
occurring at maturity, for any floating rate note other than a LIBOR note
would fall on a day that is not a business day with respect to such note,
the interest payment date will be the following day that is a business day
with respect to the note. In the case of a LIBOR note, however, if the
business day is in the next succeeding calendar month, the interest payment
date will be the immediately preceding day that is a business day with
respect to such LIBOR note. If the maturity of any floating rate note would
fall on a day that is not a business day, the payment of interest,
principal and premium, if any, may be made on the next succeeding business
day, and no interest on the payment will accrue for the period from and
after maturity.
COMMERCIAL PAPER RATE NOTES
A Commercial Paper Rate note will bear interest at the interest rate,
calculated with reference to the Commercial Paper Rate and the spread
and/or spread multiplier, if any, specified in the Commercial Paper Rate
note and in the applicable pricing supplement.
Unless we indicate otherwise in the applicable pricing supplement,
Commercial Paper Rate means, with respect to any Commercial Paper interest
determination date, the money market yield, calculated as described below,
on that date of the rate for commercial paper having the index maturity
designated in the applicable pricing supplement as such rate is published
by the Board of Governors of the Federal Reserve System in "Statistical
Release H.15(519), Selected Interest Rates," or any successor publication
of the Board of Governors of the Federal Reserve System under the heading
"Commercial Paper -- Nonfinancial."
The following procedures will be followed if the Commercial Paper
Rate cannot be determined as described above:
o In the event that the Commercial Paper Rate is not published by
3:00 P.M., New York City time, on the calculation date
pertaining to a Commercial Paper interest determination date,
then the Commercial Paper Rate will be the money market yield
on the Commercial Paper interest determination date of the rate
for commercial paper having the index maturity designated in
the applicable pricing supplement as published by the Federal
Reserve Bank of New York in its daily statistical release,
"Composite 3:30 P.M. Quotations for U.S. Government Securities"
under the heading "Commercial Paper."
o If by 3:00 P.M., New York City time, on the calculation date
the rate is not yet published in either H.15(519) or Composite
Quotations, then the Commercial Paper Rate for such Commercial
Paper interest determination date will be calculated by the
calculation agent and will be the money market yield of the
arithmetic mean of the offered rates as of 11:00 A.M., New York
City time, on such Commercial Paper interest determination
date, of three leading dealers of commercial paper in New York
City selected by the calculation agent for commercial paper
having the index maturity designated in the applicable pricing
supplement placed for an industrial issuer whose bond rating is
"AA," or the equivalent, from a nationally recognized
securities rating agency.
o If the three dealers selected above by the calculation agent
are not quoting that rate, the Commercial Paper Rate with
respect to such Commercial Paper interest determination date
will be the Commercial Paper Rate in effect on such Commercial
Paper interest determination date.
Money market yield will be a yield, expressed as a percentage
rounded, if necessary, to the nearest one hundred-thousandth of a percent,
calculated in accordance with the following formula:
[GRAPHIC OMITTED]
D x 360
Money Market Yield = --------------- x 100
360 - (D x M)
where "D" refers to the per annum rate for the commercial paper, quoted on
a bank discount basis and expressed as a decimal; and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
CD RATE NOTES
A CD Rate note will bear interest at the interest rate, calculated
with reference to the CD Rate and the spread and/or spread multiplier, if
any, specified in the CD Rate note and in the applicable pricing
supplement.
Unless we indicate otherwise in the applicable pricing supplement, CD
Rate means, with respect to any CD interest determination date, the rate on
such date for negotiable certificates of deposit having the index maturity
designated in the CD Rate note as published in H.15(519) under the heading
"CDs (Secondary Market)."
The following procedures will be followed if the CD Rate cannot be
determined as described above:
o If the above rate is not published by 3:00 P.M., New York City
time, on the calculation date pertaining to the CD interest
determination date, the CD Rate will be the rate on the CD
interest determination date for negotiable certificates of
deposit of the index maturity designated in the applicable
pricing supplement as published in Composite Quotations under
the heading "Certificates of Deposit."
o If the rate is not published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on the calculation
date pertaining to the CD interest determination date, the CD
Rate will be calculated by the calculation agent and will be
the arithmetic mean of the secondary market offered rates as of
10:00 A.M., New York City time, on such CD interest
determination date, of three leading nonbank dealers in
negotiable U.S. dollar certificates of deposit in New York City
selected by the calculation agent, after consultation with us,
for negotiable certificates of deposit of major United States
money market banks of the highest credit standing (in the
market for negotiable certificates of deposit) with a remaining
maturity closest to the index maturity designated in the
applicable pricing supplement in a denomination of $5,000,000.
o If the three dealers selected above by the calculation agent
are not quoting that rate, the CD Rate with respect to the CD
interest determination date will be the CD Rate in effect on
the CD interest determination date.
FEDERAL FUNDS EFFECTIVE RATE NOTES
A Federal Funds Effective Rate note will bear interest at the
interest rate, calculated with reference to the Federal Funds Effective
Rate and the spread and/or spread multiplier, if any, specified in the
Federal Funds Effective Rate note and in the applicable pricing supplement.
Unless we indicate otherwise in the applicable pricing supplement,
Federal Funds Effective Rate means, with respect to any Federal Funds
interest determination date, the rate on that date for Federal Funds as
published in H.15(519) under the heading "Federal Funds (Effective)."
The following procedures will be followed if the Federal Funds
Effective Rate cannot be determined as described above:
o If the above rate is not published by 9:00 A.M., New York City
time, on the calculation date pertaining to the Federal Funds
interest determination date, the Federal Funds Effective Rate
will be the rate on the Federal Funds interest determination
date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate."
o If the rate is not yet published in either H.15(519) or
Composite Quotations by 9:00 A.M., New York City time, on the
calculation date pertaining to the Federal Funds interest
determination date, then the Federal Funds Effective Rate for
the Federal Funds interest determination date will be
calculated by the calculation agent and will be the arithmetic
mean of the rates for the last transaction in overnight Federal
Funds arranged by three leading brokers of Federal Funds
transactions in New York City selected by the calculation agent
as of 9:00 A.M., New York City time, on the Federal Funds
interest determination date;
o If the three brokers selected above by the calculation agent
are not quoting that rate, the Federal Funds Effective Rate
with respect to the Federal Funds interest determination date
will be the Federal Funds Effective Rate in effect on the
Federal Funds interest determination date.
LIBOR NOTES
A LIBOR note will bear interest at the interest rate, calculated with
reference to LIBOR and the spread and/or spread multiplier, if any,
specified in the LIBOR note and in the applicable pricing supplement.
Unless we indicate otherwise in the applicable pricing supplement,
LIBOR will be determined by the calculation agent in accordance with the
following provisions:
(1) With respect to a LIBOR interest determination date,
LIBOR will be, as specified in the applicable pricing
supplement, either:
(a) the arithmetic mean of the offered rates for
deposits in U.S. dollars having the index maturity
designated in the applicable pricing supplement,
commencing on the second London banking day immediately
following such LIBOR interest determination date, that
appears on the Reuters Screen LIBO Page as of 11:00 A.M.,
London time, on such LIBOR interest determination date,
if at least two such offered rates appear on the Reuters
Screen LIBO Page. LIBOR as calculated as described in
this clause (a) will be referred to as LIBOR Reuters; or
(b) the rate for deposits in U.S. dollars having
the index maturity designated in the applicable pricing
supplement, commencing on the second London banking day
immediately following such LIBOR interest determination
date, that appears on the Telerate Page 3750 as of 11:00
A.M., London time, on such LIBOR interest determination
date. LIBOR as calculated as described in this clause (b)
will be referred to as LIBOR Telerate.
Reuters Screen LIBO Page means the display designated as page "LIBO"
on the Reuters Monitor Money Rates Service, or such other page as may
replace page LIBO on that service for the purpose of displaying London
interbank offered rates of major banks. Telerate Page 3750 means the
display designated as page "3750" on the Bridge Telerate Service, or any
other page as may replace the 3750 page on that service or any other
service or services as may be nominated by the British Bankers' Association
for the purpose of displaying London interbank offered rates for U.S.
dollar deposits.
If neither LIBOR Reuters nor LIBOR Telerate is specified in the
applicable pricing supplement, LIBOR will be determined as if LIBOR
Telerate had been specified. If at least two offered rates appear on the
Telerate Page 3750, the rate in respect of the LIBOR interest determination
date will be the arithmetic mean of the offered rates as determined by the
calculation agent. If fewer than two offered rates appear on the Telerate
Page 3750, or if no rate appears on the Reuters Screen LIBO Page, as
applicable, LIBOR in respect of such LIBOR interest determination date will
be determined as if the parties had specified the rate described in (2)
below.
(2) On any LIBOR interest determination date on which
fewer than two offered rates appear on the Reuters Screen LIBO
Page as specified in paragraph (1)(a) above, or on which no
rate appears on the Telerate Page 3750, as specified in
paragraph (1)(b) above, as applicable, LIBOR will be determined
on the basis of the rates at which deposits in U.S. dollars are
offered by four major banks, which will be referred to in this
clause (2) as the reference banks, in the London interbank
market selected by the calculation agent at approximately 11:00
A.M., London time, on the LIBOR interest determination date to
prime banks in the London interbank market, having the index
maturity designated in the applicable pricing supplement,
commencing on the second London banking day immediately
following the LIBOR interest determination date and in a
principal amount equal to an amount of not less than U.S.
$1,000,000 that is representative for a single transaction in
that market at that time. The calculation agent will request
the principal London office of each of the reference banks to
provide a quotation of its rate.
(a) If at least two quotations are provided, LIBOR
in respect of the LIBOR interest determination date will
be the arithmetic mean of the quotations.
(b) If fewer than two quotations are provided,
LIBOR in respect of the LIBOR Interest Determination Date
will be the arithmetic mean of the rates quoted by three
major banks in New York City selected by the calculation
agent at approximately 11:00 A.M., New York City time, on
the LIBOR interest determination date for loans in U.S.
dollars to leading European banks, having the index
maturity designated in the applicable pricing supplement,
the loans commencing on the second London banking day
immediately following such LIBOR interest determination
date and in a principal amount equal to an amount of not
less than U.S. $1,000,000 that is representative for a
single transaction in that market at that time.
(c) If the banks in New York City selected in
paragraph (b) by the calculation agent are not quoting as
mentioned in this sentence, LIBOR with respect to the
LIBOR interest determination date will be LIBOR in effect
on the LIBOR interest determination date.
TREASURY RATE NOTES
A Treasury Rate note will bear interest at the interest rate,
calculated with reference to the Treasury Rate and the spread and/or spread
multiplier, if any, specified in the Treasury Rate note and in the
applicable pricing supplement.
Unless we indicate otherwise in the applicable pricing supplement,
Treasury Rate means, with respect to any Treasury interest determination
date, the rate for the most recent auction of direct obligations of the
United States, which shall be referred to in this prospectus supplement as
Treasury Bills, having the index maturity designated in the applicable
pricing supplement as published in H.15(519) under the heading Pricing
"U.S. Government Securities -- Treasury Bills -- auction average
(investment)."
The following procedures will be followed if the Treasury Rate cannot
be determined as described above.
o If the rate is not published by 3:00 P.M., New York City time,
on the calculation date pertaining to the Treasury interest
determination date, the auction average rate, expressed as a
bond equivalent, rounded, if necessary, to the nearest one
hundred-thousandth of a percent, on the basis of a year of 365
or 366 days, as applicable, and applied on a daily basis, as
otherwise announced by the U.S. Department of the Treasury.
o If the result of the auction of Treasury Bills having the index
maturity designated in the applicable pricing supplement is not
otherwise reported as provided above by 3:00 P.M., New York
City time, on the calculation date or, if no auction is held in
a particular week, then the Treasury Rate shall be calculated
by the calculation agent and shall be a yield to stated
maturity, expressed as a bond equivalent on the basis of a year
of 365 or 366 days, as applicable, and applied on a daily
basis, of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 P.M., New York City time, on
such Treasury interest determination date, of three leading
primary U.S. securities dealers selected by the calculation
agent for the issue of Treasury Bills with a remaining maturity
closest to the index maturity designated in the applicable
pricing supplement.
o If the three dealers selected above by the calculation agent
are not quoting that rate, the Treasury Rate with respect to
the Treasury interest determination date will be the Treasury
Rate in effect on the Treasury interest determination date.
PRIME RATE NOTES
A Prime Rate note will bear interest at the interest rate, calculated
with reference to the Prime Rate and the spread and/or spread multiplier,
if any, specified in the Prime Rate note and in the applicable pricing
supplement.
Unless we indicate otherwise in the applicable pricing supplement,
Prime Rate means, with respect to any Prime interest determination date,
the rate set forth on such date in H.15(519) under the heading "Bank Prime
Loan."
o If the rate is not published prior to 9:00 A.M. New York City
time, on the calculation date pertaining to the Prime interest
determination date, then the Prime Rate will be determined by
the calculation agent and will be the arithmetic mean of the
rates of interest publicly announced by each bank that appears
on the Reuters Screen USPRIME1 Page, as defined below, as the
bank's prime rate or base lending rate as in effect for that
Prime interest determination date.
o If fewer than four rates but more than one rate appear on the
Reuters Screen USPRIME1 Page for the Prime interest
determination date, the Prime Rate will be determined by the
calculation agent and will be the arithmetic mean of the prime
rates quoted on the basis of the actual number of days in the
year divided by a 360-day year as of the close of business on
such Prime interest determination date by four major money
center banks in New York City selected by the calculation
agent.
o If fewer than two rates appear on the Reuters Screen USPRIME1
Page, the Prime Rate will be determined by the calculation
agent on the basis of the rates furnished in New York City by
the appropriate number of substitute banks or trust companies
organized and doing business under the laws of the United
States, or any State thereof, having total equity capital of at
least U.S. $500,000,000 and being subject to supervision or
examination by federal or state authority, selected by the
calculation agent to provide the rate or rates.
o If the banks selected above are not quoting that rate, the
Prime Rate will be the Prime Rate in effect on the Prime
interest determination date. Reuters Screen USPRIME1 Page means
the display designated as page "USPRIME1" on the Reuters
Monitor Money Rates Service or any other page as may replace
the USPRIME1 page on that service for the purpose of displaying
prime rates or base lending rates of major United States banks.
FOREIGN CURRENCY AND INDEX-LINKED NOTES
If any note is not to be denominated in U.S. dollars, some provisions
with respect to that note will be set forth in a foreign currency pricing
supplement which will indicate the specified currency in which the
principal, premium, if any, and interest with respect to such note are to
be paid, along with any other terms relating to the specified currency. The
pricing supplement also will provide specific historic exchange rate
information, currency risks relating to the specific currencies selected,
investment considerations and additional tax considerations.
Amounts due on a note in respect of principal, premium, if any, and
interest may be determined with reference to:
(a) a currency exchange rate or rates,
(b) a securities or commodities exchange index,
(c) the value of a particular security or commodity or
(d) any other index or indices.
The notes described in clauses (a) through (d) above are referred to
in this prospectus supplement as Index-Linked notes. The pricing supplement
relating to an Index-Linked note will state the method by and terms on
which the amount of principal payable at stated maturity, or upon
redemption or repayment, if applicable, and interest, premium or the
amortized face amount, if any, will be determined, the tax consequences to
holders of Index-Linked notes, a description of risks associated with
investments in Index-Linked notes and other information relating to
Index-Linked notes.
An investment in notes indexed, as to principal or interest or both,
to one or more values of currencies, including exchange rates between
currencies, commodities or interest rate indices entails significant risks
that are not associated with similar investments in a conventional
fixed-rate debt security. If the interest rate of a note is so indexed, it
may result in an interest rate that is less than that payable on a
conventional fixed-rate debt security issued at the same time, including
the possibility that no interest will be paid, and, if the principal amount
of a note is so indexed, the principal amount payable at maturity may be
less than the original purchase price of the note if allowed pursuant to
the terms of the note, including the possibility that no principal will be
paid. The secondary market for the notes will be affected by a number of
factors independent of the creditworthiness of the issuer and the value of
the applicable currency, commodity or interest rate index, including:
o the volatility of the applicable currency, commodity or
interest rate index;
o the time remaining to the maturity of the notes;
o the amount outstanding of the notes; and
o market interest rates.
The value of the applicable currency, commodity or interest rate
index depends on a number of interrelated factors, including economic,
financial and political events, over which we have no control.
Additionally, if the formula used to determine the principal amount or
interest payable with respect to the notes contains a multiple or leverage
factor, the effect of any change in the applicable currency, commodity or
interest rate index will be increased. The historical experience of the
relevant currencies, commodities or interest rate indices should not be
taken as an indication of future performance of the currencies, commodities
or interest rate indices during the term of any note. The credit ratings
assigned to our medium-term note program are a reflection of our credit
status, and are not a reflection of the potential impact of the factors
discussed above, or any other factors, on the market value of the notes.
Accordingly, prospective investors should consult their own financial and
legal advisors as to the risks entailed by an investment in the notes and
the suitability of the notes in light of their particular circumstances.
GLOBAL NOTES
The notes may be issued in whole or in part in the form of one or
more fully registered notes which will be deposited with, or on behalf of,
the depositary and registered in the name of the depositary's nominee.
Except as set forth below, a global note may not be transferred except as a
whole by the depositary to a nominee of the depositary or by a nominee of
the depositary to the depositary or another nominee of the depositary or by
the depositary or any nominee to a successor of the depositary or a nominee
of such successor.
The depositary has advised us and the agents that it is a
limited-purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. The depositary was created to hold
securities for its participants and to facilitate the clearance and
settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of
securities certificates. The depositary's participants include securities
brokers and dealers, including the agents, banks, trust companies, clearing
corporations and certain other organizations, some of which and/or their
representatives own the depositary. Access to the depositary'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, either directly or indirectly. Persons who are not
participants may beneficially own securities held by the depositary only
through participants.
Upon the issuance by us of notes represented by a global note, the
depositary will credit, on its book-entry registration and transfer system,
the respective principal amounts of the notes represented by such global
note to the accounts of participants. The accounts to be credited shall be
designated by the agents or by us, if the notes are offered and sold
directly by us.
If the depositary is at any time unwilling or unable to continue as
depositary and we do not appoint a successor depositary within 90 days, we
will issue notes in certificated form in exchange for each global note. In
addition, we may at any time determine not to have notes represented by one
or more global notes, and, in such event, we will issue notes in
certificated form in exchange for the global note or notes representing
such notes. In any such instance, an owner of a beneficial interest in a
global note will be entitled to physical delivery in certificated form of
notes equal in principal amount to their beneficial interest and to have
the notes registered in their name. notes so issued in certificated form
will be issued in denominations of $1,000 or any amount in excess thereof
which is a whole multiple of $1,000 and will be issued in fully registered
form only.
For a more complete description of global notes, see "Description of
Debt Securities - Global Securities" in the attached prospectus.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless we indicate otherwise in the applicable pricing supplement,
the notes will be denominated in U.S. dollars and payments of principal of,
premium, if any, and interest on the notes will be made in U.S. dollars.
The following provisions shall apply to foreign currency notes. These
provisions are in addition to, and to the extent inconsistent therewith
replace, the description of general terms and provisions of the notes set
forth in the attached prospectus and elsewhere in this prospectus
supplement.
Foreign currency notes are issuable in registered form only, without
coupons. The denominations for particular foreign currency notes will be
specified in the applicable pricing supplement.
Unless we provide otherwise in the applicable pricing supplement,
payment of the purchase price of foreign currency notes will be made in
immediately available funds.
Unless we indicate otherwise in the applicable pricing supplement,
all currency and currency unit amounts used and resulting from calculations
relating to currencies for a Foreign Currency note will be rounded to the
nearest one-hundredth of a unit, with five one-thousandths of a unit being
rounded upwards.
CURRENCIES
Unless we specify otherwise in the applicable pricing supplement,
purchasers are required to pay for foreign currency notes in the specified
currency. At the present time there are limited facilities in the United
States for the conversion of U.S. dollars into foreign currencies or
currency units and vice versa, and banks generally do not offer non-U.S.
dollar checking or savings account facilities in the United States.
However, if requested on or prior to the third business day preceding the
date of delivery of the notes, or by any other day as determined by the
agent which presented the offer to purchase the notes to us, the agent is
prepared to arrange for the conversion of U.S. dollars into the specified
currency stated in the applicable pricing supplement to enable the
purchasers to pay for the notes. Each conversion will be made by the
applicable agent on terms and subject to conditions, limitations and
charges as the applicable agent may from time to time establish in
accordance with its regular foreign exchange practices. All costs of
exchange will be borne by the purchasers of the notes. The foreign currency
notes provide that, in the event of an official redenomination of a foreign
currency or currency unit, our obligations with respect to payments on
notes denominated or payable in the foreign currency or currency unit will,
in all cases, be deemed immediately following such redenomination to
provide for payment of that amount of redenominated currency representing
the amount of the obligations immediately before such redenomination. In no
event, however, will any adjustment be made to any amount payable under the
notes as a result of any change in the value of such foreign currency or
currency unit relative to any other currency due solely to fluctuations in
exchange rates. See "Foreign Currency Risks -- Exchange Rates and Exchange
Controls."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
We will pay the principal of, premium, if any, and interest on
Foreign Currency notes in the specified currency. However, the exchange
rate agent appointed by us will convert all payments of principal of,
premium, if any, and interest on foreign currency notes to U.S. dollars.
Unless we specify otherwise in the applicable pricing supplement, the
holder of a foreign currency note may elect to receive payments in the
specified currency as described below.
Unless the holder has elected otherwise or unless we specify
otherwise in the applicable pricing supplement, payment in respect of a
foreign currency note shall be made in U.S. dollars based upon the exchange
rate as determined by the exchange rate agent based on the quotation for
such non-U.S. dollar currency or composite currency appearing at
approximately 11:00 a.m., New York City time, on the second business day
preceding the applicable date of payment, on the bank composite or
multi-contributor pages of the Telerate Monitor Foreign Exchange Service
or, if such service is not then available to the exchange rate agent, the
Reuters Monitor Foreign Exchange Service or, if neither is available, on a
comparable display or in a comparable manner as we and the exchange rate
agent shall agree, for the first three banks, or two, if three are not
available, in chronological order, appearing on a list of banks agreed to
by us and the exchange rate agent prior to the second business day, which
are offering quotes. The exchange rate agent will then select from among
the selected quotations in a manner specified in the applicable pricing
supplement. If fewer than two bids are available, then the conversion will
be based on the market exchange rate, as defined below, as of the second
business day preceding the applicable payment date. Market exchange rate
means the noon U.S. dollar buying rate in The City of New York for cable
transfers of the relevant currency as certified for customs purposes by the
Federal Reserve Bank of New York. If no market exchange rate as of the
second business day preceding the applicable payment date is available,
payments will be made in the specified currency, unless the specified
currency is unavailable due to the imposition of exchange controls or to
other circumstances beyond our control, in which case payment will be made
as described below under "Payment Currency." All currency exchange costs
will be borne by the holders of the notes by deductions from payments.
Unless we specify otherwise specified in the applicable pricing
supplement, a holder of foreign currency notes may elect to receive payment
of the principal of, premium, if any, and interest on the notes in the
specified currency by transmitting a written request for such payment to
the principal office of the trustee, 14 Wall Street, Eighth Floor, New
York, New York 10005, on or prior to the regular record date or at least
fifteen days prior to maturity, as the case may be. The request may be in
writing, mailed or hand delivered, or by cable, telex or other form of
facsimile transmission. A holder of a foreign currency note may elect to
receive payment in the specified currency for all principal, premium, if
any, and interest payments and need not file a separate election for each
payment. The election will remain in effect until revoked by written notice
to the trustee, 14 Wall Street, Eighth Floor, New York, New York 10005, but
written notice of any such revocation must be received by the trustee on or
prior to the regular record date or at least fifteen days prior to
maturity, as the case may be. Holders of foreign currency notes whose
foreign currency notes are to be held in the name of a broker or nominee
should contact such broker or nominee to determine whether and how an
election to receive payments in the specified currency may be made.
Interest on foreign currency notes paid in U.S. dollars will be paid
in the manner specified in the attached prospectus and this prospectus
supplement for interest on notes denominated in U.S. dollars. Interest on
foreign currency notes paid in the specified currency will be paid by a
check drawn on an account maintained at a bank outside the United States,
unless other arrangements have been made. The principal and premium, if
any, of foreign currency notes, together with interest accrued and unpaid
thereon, due at maturity will be paid in immediately available funds
against presentation of such foreign currency notes at the offices of the
trustee, 14 Wall Street, Eighth Floor, New York, New York 10005.
PAYMENT CURRENCY
Except as set forth below, if payment in respect of a foreign
currency note is required to be made in a specified currency and the
currency is unavailable due to the imposition of exchange controls or other
circumstances beyond our control, or is no longer used by the government of
the country issuing the currency or for the settlement of transactions by
public institutions of or within the international banking community, then
all payments due on that due date in respect of the foreign currency note
shall be made in U.S. dollars. The amount payable on any date in the
specified currency shall be converted into U.S. dollars at the market
exchange rate, on the date of such payment. In the event the market
exchange rate is not then available, we will be entitled to make payments
in U.S. dollars:
(1) if such specified currency is not a composite
currency, on the basis of the most recently available market
exchange rate for such specified currency or
(2) if the specified currency is a composite currency, in
an amount determined by the exchange rate agent to be the sum
of the results obtained by multiplying the number of units of
each component currency of the composite currency, as of the
most recent date on which the composite currency was used, by
the market exchange rate for the component currency on the
second business day prior to such payment date, or if such
market exchange rate is not then available, by the most
recently available market exchange rate for such component
currency.
If payment in respect of a foreign currency note is required to be
made in Euros and Euros are unavailable due to the imposition of exchange
controls or other circumstances beyond our control, or are no longer used
in the European Monetary System, then all payments due on that date in
respect of the foreign currency note will be made in U.S. dollars. The
amount so payable on any date in Euros shall be converted into U.S. dollars
at a rate determined by the exchange rate agent as of the second business
day prior to the date on which such payment is due on the following basis.
The component currencies of the Euros for this purpose shall be the
currency amounts that were components of the Euros as of the last date on
which Euros were used in the European Monetary System. The equivalent of
Euros in U.S. dollars shall be calculated by aggregating the U.S. dollar
equivalents of the components. The U.S. dollar equivalent of each of the
components will be determined by the exchange rate agent on the basis of
the most recently available market exchange rate, or as otherwise indicated
in the applicable pricing supplement.
All determinations referred to above made by the exchange rate agent
shall be subject to approval by us.
FOREIGN CURRENCY RISKS
This prospectus supplement, any pricing supplement to this prospectus
supplement and the attached prospectus do not describe all the risks of an
investment in foreign currency notes as they exist at the date of this
prospectus supplement or as the risks may change from time to time.
Prospective investors should consult their own financial and legal advisors
as to the risks entailed by an investment in the notes. The notes are not
an appropriate investment for investors who are unsophisticated with
respect to foreign currency transactions.
GOVERNING LAW AND JUDGMENTS
The notes will be governed by and construed in accordance with the
laws of the State of New York. Courts in the United States have not
customarily rendered judgments for money damages denominated or payable in
any currency other than the U.S. dollar. New York statutory law provides,
however, that a court shall render a judgment or decree in the foreign
currency of the underlying obligation and that the judgment or decree shall
be converted into U.S. dollars at the rate of exchange prevailing on the
date of the entry of the judgment or decree.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in foreign currency notes entails significant risks
that are not associated with a similar investment in a security denominated
and payable in U.S. dollars. Such risks include, without limitation:
o the possibility of significant market changes in rates of
exchange between the U.S. dollar and the various foreign
currencies,
o the possibility of significant changes in rates of exchange
between the U.S. dollar and the various foreign currencies
resulting from official redenomination with respect to a
specified currency, and
o the possibility of the imposition or modification of foreign
exchange controls by either the United States or foreign
governments.
These risks generally depend on factors over which we have no control, such
as economic and political events and on the supply of and demand for the
relevant currencies. In recent years rates of exchange between the U.S.
dollar and certain foreign currencies have been volatile and such
volatility may be expected in the future. Fluctuations in any particular
exchange rate that have occurred in the past are not necessarily
indicative, however, of fluctuations in the rate that may occur during the
term of any foreign currency note. Depreciation of the specified currency
of a foreign currency note against the U.S. dollar would result in a
decrease in the effective yield of such foreign currency note below its
coupon rate, and in certain circumstances could result in a loss to the
investor, on a U.S. dollar basis.
Governments have imposed from time to time, and may in the future
impose, exchange controls that could affect exchange rates as well as the
availability of a specified currency at an interest payment date or at
maturity of a foreign currency note. There can be no assurance that
exchange controls will not restrict or prohibit payments of principal, and
premium, if any, or interest in any specified currency other than U.S.
dollars. Even if there are no actual exchange controls, it is possible that
on an interest payment date or at maturity of a particular foreign currency
note, the specified currency for that foreign currency note would not be
available to us due to circumstances beyond our control. In any such event,
we will make required payments in U.S. dollars on the basis described
herein. Unless we specify otherwise in the applicable pricing supplement,
notes denominated or payable in a specified currency other than U.S.
dollars or euros will not be sold in or to residents of the country issuing
the specified currency. The information set forth in this prospectus
supplement and the applicable pricing supplement is directed to prospective
purchasers who are United States residents. We disclaim any responsibility
to advise prospective purchasers who are residents of countries other than
the United States with respect to any matters that may affect the purchase,
holding or receipt of payments of principal and premium, if any, or
interest on the notes. These persons should consult their own counsel with
regard to such matters.
Pricing supplements relating to foreign currency notes will indicate
the specified currency in which the principal, premium, if any, and
interest with respect to the note are to be paid, along with other terms
relating to the specified currency. The pricing supplement also will
provide specific historic exchange rate information, currency risks
relating to the specific currencies selected, investment considerations and
additional tax considerations. The information in the pricing supplement
concerning exchange rates is furnished as a matter of information only and
should not be regarded as indicative of the range of or trends in
fluctuations in currency exchange rates that may occur in the future.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal
income tax consequences of the ownership of notes. It deals only with notes
held as capital assets and not with special classes of holders, such as:
o banks,
o tax-exempt entities,
o regulated investment companies,
o common trust funds,
o dealers in securities or currencies,
o life insurance companies,
o persons holding notes as a hedge against currency risks, and
o United States holders, as defined below under "United States
holders", whose functional currency is not the U.S. dollar.
In addition, this summary does not address the federal income tax
consequences of owning indexed notes. These consequences will be addressed
in the applicable pricing supplement. The discussion is based upon the
Internal Revenue Code of 1986, as amended and regulations, rulings and
judicial decisions thereunder as of the date of this prospectus supplement.
These authorities may be repealed, revoked or modified so as to produce
federal income tax consequences different from those discussed below. The
following discussion of the United States federal income tax consequences
is based on the classification of the notes as debt of PHH, which
determination would be made at the time of the issuances of the notes. If,
as a result of the particular features of a particular issue of notes, an
adverse change in the financial condition of the issuer, or otherwise, the
status of the notes as debt for United States federal income tax purposes
were to be challenged, payments on the notes could be characterized as
dividends and subject to United States federal withholding tax to the
extent paid to non-United States holders. The remaining discussion assumes
that the notes will be classified as debt.
You should consult your tax advisor concerning the United States
federal income tax consequences applicable to your particular situation, as
well as any consequences under the laws of any other taxing jurisdiction.
UNITED STATES HOLDERS
For purposes of this discussion, a United States holder means:
(1) a citizen or resident of the United States;
(2) a partnership or corporation created or organized
in or under the law of the United States or of any State of the
United States;
(3) an estate the income of which is subject to United
States federal income tax regardless of its source;
(4) any trust if:
(A) a court within the United States is able to
exercise primary supervision over the administration of
the trust; and
(B) one or more United States fiduciaries have the
authority to control all substantive decisions of the
trust; and
(5) any other person that is subject to United States
federal income tax on interest income derived from a note as a
result of such income being effectively connected with the
conduct by such person of a trade or business within the United
States.
A United States holder also includes certain former citizens of the United
States whose income and gain on the notes will be subject to U.S. income
tax.
PAYMENTS OF INTEREST
Interest on a note, whether payable in the specified currency or U.S.
dollars, that constitutes "qualified stated interest," as defined below
under "Original Issue Discount," will be taxable to a United States holder
as ordinary interest income at the time it is received or accrued,
depending on the holder's method of accounting for tax purposes. In the
case of a United States holder of a foreign currency note using a cash
method of accounting, the amount of taxable interest income for United
States federal income tax purposes will be determined in the specified
currency and translated into U.S. dollars using the spot exchange rate on
the date of receipt, regardless of whether the interest is in fact paid in
or converted to U.S. dollars. In the case of a United States holder of a
foreign currency note using an accrual method of accounting, the amount of
taxable interest will depend on whether the holder has made a valid
election to use a "spot accrual convention" pursuant to regulations under
the Internal Revenue Code. If the holder has made this election, the amount
of taxable interest will be measured in the specified currency and
translated into U.S. dollars using the spot exchange rate in effect on the
last day of the accrual period, or last day of a partial accrual period
ending on the last day of the holder's taxable year; or where interest is
paid within five business days of such last day, the exchange rate in
effect on the date of receipt may be used. If the holder has not made such
an election, the amount of taxable interest will be measured in the
specified currency and translated into U.S. dollars using the average
exchange rate in effect during the accrual period. A United States holder
of a foreign currency note on the accrual method will also recognize
ordinary income or loss for federal income tax purposes upon receipt of
accrued interest income and upon the sale, retirement or other disposition
of a note. This gain or loss is referred to in this prospectus supplement
as exchange gain or loss. The exchange gain or loss, if any, will be
measured by subtracting the amount of taxable interest accrued in the
manner described above with respect to any accrual period from the U.S.
dollar value of the interest income received attributable to that accrual
period. The U.S. dollar value of the interest payment received will be
determined by translating the units of specified currency received into
dollars using the spot exchange rate in effect on the date of receipt of
the interest income or disposition of the note.
ORIGINAL ISSUE DISCOUNT
General. A note will generally be treated as having been issued at an
original issue discount if the excess of its "stated redemption price at
maturity" over its "issue price" equals or exceeds 1/4 of 1 percent of the
note's stated redemption price at maturity multiplied by the number of
complete years to its stated maturity, or in the case of installment
obligations, the weighted average maturity. "Stated redemption price at
maturity" is the total of all payments provided by the note that are not
payments of "qualified stated interest." "Issue price" is the first price
at which a substantial amount of the notes are sold for money other than to
bond houses, brokers, or similar persons or organizations acting in the
capacity of underwriters, placement agents or wholesalers. Generally,
"qualified stated interest" is stated interest that is unconditionally
payable in cash or property other than debt instruments of the issuer at
least annually in an amount equal to the product of the outstanding
principal amount of the note and, with respect to a fixed rate note, a
single fixed rate of interest, adjusted to account appropriately for any
differing lengths of intervals between payments. Qualified stated interest
also includes stated interest on certain variable rate debt instruments
that satisfy certain requirements of the Treasury regulations applicable to
original issue discount obligations if the interest is unconditionally
payable in cash or property, other than debt instruments of the issuer, at
least annually. A floating rate note may or may not qualify as a variable
rate debt instrument under the original issue discount regulations
depending on its interest rate formula and other terms as set forth in the
applicable pricing supplement.
In some cases, notes that bear stated interest and are issued at par
may be deemed to have original issue discount for federal income tax
purposes, with the result that the inclusion of interest in the holder's
income may vary from the actual cash payments of interest on such notes,
generally accelerating income for cash or accrual method taxpayers. We will
give notice in the applicable pricing supplement when we determine that a
particular note will be a discount note. Unless an applicable pricing
supplement so indicates, floating rate notes will not be discount notes.
United States holders of discount notes having a stated maturity of
more than one year from their date of issue will have to include original
issue discount in income before the receipt of cash attributable to such
income. The amount of original issue discount includible in income by a
United States holder of a discount note is the sum of the daily portions of
original issue discount with respect to the discount note for each day
during the taxable year or portion of the taxable year in which it holds
the note. The daily portion is determined by allocating to each day in any
"accrual period" a pro rata portion of the original discount allocable to
that accrual period. The amount of original issue discount allocable to an
accrual period is the excess of
(a) the product of the discount note's adjusted issue price at
the beginning of such accrual period and its yield to maturity, determined
on the basis of compounding at the close of each accrual period and
adjusted for the length of such period, over
(b) the sum of the qualified stated interest payments, if any,
payable, or treated as payable, on the discount note during the accrual
period.
Under the original issue discount regulations, the "accrual period" may be
of any length and may vary in length over the term of the note, provided
that each accrual period is no longer than one year and each scheduled
payment of principal or interest occurs either on the final day or on the
first day of an accrual period. The "adjusted issue price" of the discount
note at the start of any accrual period is the sum of the issue price of
such note plus the accrued original issue discount for each prior accrual
period minus any prior payments on the note that were not payments of
qualified stated interest. The amount of original issue discount includible
in income is adjusted for any United States holder who acquires a discount
note at a premium over its adjusted issue price but at an amount less than
or equal to the sum of all amounts payable on the instrument after the
acquisition date, other than payments of qualified stated interest. It
should be noted that the original issue discount regulations require
modifications to be made to the method for determining original issue
discount in the case of variable rate instruments.
Under the rules described above, United States holders of discount
notes will have to include in income increasingly greater amounts of
original issue discount in successive accrual periods and in advance of any
payment of cash related thereto.
At the time we issue a note, we will make a determination based on
the applicable Treasury Regulations and other authorities whether the note
bears original issue discount. We are required to report the amount of
original issue discount accrued on notes held of record by persons other
than corporations and other exempt holders.
Optional Redemption of Notes. Under the original issue discount
regulations, for purposes of calculating the stated redemption price at
maturity, if either we or the holder have an option to redeem, or cause the
redemption of, a note prior to its stated maturity, the option will be
presumed to be exercised if, by utilizing any date on which the note may be
redeemed as its maturity date and the amount payable on such date in
accordance with the terms of the note as its stated redemption price at
maturity, the yield on the note would be
(1) in the case of an option of ours, lower than its yield to
maturity computed without assuming the option to be so exercised or
(2) in the case of an option of the holder, higher than its
yield to maturity computed without assuming the option to be so exercised.
If the option is not in fact exercised when presumed to be exercised, the
note would be treated solely for original issue discount purposes as if it
were redeemed, and a new note were issued, on the presumed exercise date
for an amount equal to the adjusted issue price of the original note on
that date. Notice will be given in an applicable pricing supplement when we
determine that a particular note will be deemed to have a maturity date for
federal income tax purposes prior to its stated maturity.
Short Term Discount Notes. Under the original issue discount
regulations, a note that matures one year or less from the date of its
issuance, or a short-term discount note, will be treated as having been
issued at a discount equal to the excess of the total principal and
interest payments on the note over its issue price, or its tax basis if the
United States holder so elects. In general, an individual or other cash
basis United States holder of a short-term discount note is not required to
accrue short-term discount for United States federal income tax purposes
unless it elects to do so. Accrual basis United States holders and certain
other United States holders, including banks and dealers in securities, are
required to accrue the short-term discount on short-term discount notes on
a straight-line basis unless an election is made to accrue the short-term
discount under the constant-yield method, based on daily compounding. In
the case of a United States holder not required and not electing to include
the short-term discount in income currently, any gain realized on the sale
or retirement of the short-term discount note will be ordinary income to
the extent of the short-term discount accrued on a straight-line basis,
unless an election is made to accrue the short-term discount under the
constant-yield method, through the date of sale or retirement. United
States holders who are not required and do not elect to accrue the
short-term discount on short-term discount notes will be required to defer
deductions for interest on borrowings allocable to short-term discount
notes in an amount not exceeding the deferred income until the deferred
income is realized.
Foreign Currency Notes. The amount of original issue discount for any
accrual period on a discount note that is a foreign currency note will
depend on whether the holder has made a valid election to use a "spot
accrual convention" pursuant to regulations under the Internal Revenue
Code. If the holder has made such an election, original issue discount will
be determined in the specified currency and translated into U.S. dollars
using the spot exchange rate in effect on the last day of the accrual
period, or last day of a partial accrual period ending on the last day of
the holder's taxable year; or where interest is paid within five business
days of such last day, the exchange rate in effect on the date of receipt
may be used. If the holder has not made an election, original issue
discount will be determined in the specified currency and translated into
U.S. dollars using the average exchange rate in effect during the accrual
period. A United States holder of a discount note that is a foreign
currency note will also recognize ordinary income or loss, or exchange gain
or loss, upon receipt of an amount attributable to original issue discount,
whether in connection with a payment of interest or the sale or retirement
of a discount note. The exchange gain or loss, if any, will be measured by
subtracting the amount of original issue discount accrued in the manner
described above with respect to the accrual period from the U.S. dollar
value of the amount received attributable to that accrual period. The U.S.
dollar value of the amount received will be determined by translating the
units of specified currency received into dollars using the spot exchange
rate in effect on the date of receipt of payment or sale or retirement of
the note.
Notes Issued at a Premium. A United States holder that purchases a
note for an amount in excess of the sum of all amounts payable on the note
after the purchase date other than qualified stated interest will be
considered to have purchased the note at a "premium" and will not be
required to include any original issue discount in income. A United States
holder may generally elect to amortize the premium over the remaining term
of the note on a constant-yield method. The amount amortized in any year
will be treated as a reduction of the United States holder's interest
income from the note in such year. Any election will apply to all debt
instruments, other than debt instruments the interest on which is
excludable from gross income, held by the United States holder at the
beginning of the first taxable year to which the election applies and to
any such debt instruments thereafter acquired by the United States holder,
and is irrevocable without the consent of the Internal Revenue Service.
Bond premium on a note held by a United States holder that does not make
such election will decrease the gain or increase the loss otherwise
recognized on a taxable disposition of the note. If a note is callable by
us before its stated maturity, the earlier call date will be considered as
the maturity if it results in a smaller amortizable bond premium
attributable to the period of earlier call date. If a note is not then
called on the earlier call date, any unamortized bond premium must then be
amortized to a succeeding call date or to maturity. Some of the notes may
be callable prior to stated maturity. Therefore United States holders
should consult with their tax advisors to determine whether this rule will
apply to their individual situation. Bond premium on a Foreign Currency
note will be computed in the applicable specified currency. With respect to
a United States holder that elects to amortize the premium, the amortizable
bond premium will reduce interest income measured in units of the specified
currency. At the close of any period in which a portion of the bond premium
is amortized, exchange gain or loss, which is generally ordinary income or
loss, will be realized with respect to such portion based on the difference
between spot rates at the close of such period and spot rates at the time
of acquisition of the Foreign Currency note. With respect to a United
States holder that does not elect to amortize bond premium, the amount of
the bond premium will constitute a capital loss when the note matures,
which may be offset or eliminated by exchange gain.
Market Discount. If a United States holder purchases a note for an
amount that is less than its "revised issue price," which is defined as the
sum of the issue price of the note and the aggregate amount of the original
issue discount, if any, includible in the gross income of all previous
holders of the note, determined without regard to any adjustment for a
previous holder's acquisition premium, the amount of the difference will be
treated as "market discount", unless such difference is less than a de
minimis amount. The market discount provisions of the Internal Revenue Code
generally require a holder of a note acquired at a market discount to treat
as ordinary interest income any gain recognized on the disposition of the
note to the extent of the "accrued market discount" on the note at the time
of disposition. If a holder of a note makes a gift of the note, any accrued
market discount will be included in income as if the holder had sold the
note for a price equal to its fair market value. In addition, if a holder
of a note acquired at a market discount receives a partial principal
payment prior to maturity, that payment may be treated as ordinary income
to the extent of the accrued market discount on the note at the time the
payment is received and the accrued market discount on the note will be
reduced by the amount of ordinary income so recognized. These rules will
not apply to the extent the holder has, pursuant to an election, included
the accrued market discount in income as it accrued. Once made, the
election will apply to all market discount obligations acquired on or after
the first day of the first taxable year to which the election applies and
may not be revoked without the consent of the Internal Revenue Service. The
adjusted basis of a note will be increased by any accrued market discount
that is included in a holder's income pursuant to the election.
The amount of market discount that accrues while a holder holds a
note will be equal to the amount which bears the same ratio to the market
discount on the note as the number of days on which the holder holds the
note bears to the number of days from the date the holder acquires the note
through its stated maturity. Alternatively, a holder of a note may elect to
accrue market discount on the basis of a constant-yield method, rather than
the ratable-accrual method described in the preceding sentence.
The market discount rules also provide that any holder of a note
acquired at a market discount may be required to defer the deduction of a
portion of the interest on any indebtedness incurred or maintained to
purchase or carry the note until the note is disposed of in a taxable
transaction. This rule will not apply if the holder elects to include
accrued market discount in income currently.
Accrued market discount on foreign currency notes will generally be
determined by translating the market discount determined in the specified
currency into U.S. dollars at the spot rate on the date the foreign
currency note is retired or otherwise disposed of. If the United States
holder has elected to accrue market discount currently, then the amount
which accrues is determined in the specified currency and then translated
into U.S. dollars on the basis of the average exchange rate in effect
during the accrual period. A United States holder will recognize exchange
gain or loss with respect to market discount which is accrued currently
upon the sale, retirement or other disposition of the foreign currency note
measured in the same manner as exchange gain or loss arising upon receipt
of accrued interest on a foreign currency note, as described above.
ELECTION TO TREAT ALL INTEREST AS ORIGINAL ISSUE DISCOUNT
Under the original issue discount regulations, a United States holder
may elect to treat all interest on any note as original issue discount and
calculate the amount includible in gross income under the constant-yield
method described above. For the purpose of this election, interest includes
stated interest, short-term discount, original issue discount, de minimis
original issue discount, market discount, de minimis market discount and
unstated interest, as adjusted by any amortizable bond premium or
acquisition premium. If a United States holder makes this election for a
note with market discount or amortizable bond premium, the election is
treated as an election under the market discount or amortizable bond
premium provisions as described above, as the case may be, and the electing
United States holder will be required to include market discount in income
currently or amortize bond premium. The election is to be made for the
taxable year in which the United States holder acquired the note, and may
not be revoked without the consent of the IRS. United States holders should
consult with their own tax advisors about this election.
PURCHASE, SALE AND RETIREMENT OF NOTES
A United States holder's tax basis in a note will be its U.S. dollar
cost, which, in the case of a foreign currency note, will be the U.S.
dollar value of the purchase price on the date of purchase, increased by
the amount of any original issue discount, short-term discount or market
discount included in the United States holder's income with respect to the
note and reduced by the amount of any payments on a note that are not
qualified stated interest payments and by the amount of any amortizable
bond premium applied to reduce interest on the note. A United States holder
will generally recognize gain or loss upon the sale or retirement of a note
equal to the difference between the amount realized upon the sale or
retirement and the tax basis in the note. The amount realized will equal
the proceeds of the sale excluding the amount attributable to accrued but
unpaid interest, which is treated as the receipt of an interest payment.
The amount realized on a sale or retirement for an amount in specified
currency will be the U.S. dollar value of such amount on the date of sale
or retirement, excluding any amount attributable to accrued but unpaid
interest. Except:
(1) to the extent described above with respect to short-term
discount notes and foreign currency notes, and
(2) to the extent attributable to market discount or currency
gain or loss, as described in the following paragraph, gain or loss
recognized by a United States holder on the sale or retirement of a note
will generally be capital gain or capital loss and such gain or loss will
be long-term capital gain or loss if the note was held for more than one
year. Gain or loss recognized by a United States holder on the sale or
retirement of a foreign currency note that is attributable to changes in
exchange rates will be treated as ordinary income or loss and will be
limited to the amount of overall gain or loss realized on the disposition
of the note. Gain or loss attributable to fluctuations in exchange rates
will equal the difference between the U.S. dollar value of the principal
amount of the note expressed in units of the specified currency, determined
at the spot exchange rate on the date such payment is received or the note
is disposed of, and the U.S. dollar value of the amount paid for the note
expressed in units of the specified currency, determined at the spot
exchange rate as of the date the holder acquired the note.
EXCHANGE OF THE SPECIFIED CURRENCY
A United States holder who purchases a note with previously owned
specified currency will recognize exchange gain or loss at the time of
purchase attributable to the difference at the time of purchase, if any,
between his tax basis in such currency and the fair market value of the
note in U.S. dollars on the date of purchase. The gain or loss will be
ordinary income or loss. Specified currency received as interest on, or
original issue discount with respect to, a foreign currency note or on the
sale or retirement of a note will have a tax basis equal to its U.S. dollar
value determined with reference to the spot exchange rate at the time such
interest is received or at the time of such sale or retirement. Foreign
currencies and currency units which are purchased will generally have a tax
basis equal to their U.S. dollar cost. Any gain or loss realized on a sale
or other disposition of a foreign currency or currency unit, including its
use to purchase the foreign currency notes or upon exchange for U.S.
dollars, will be ordinary income or loss.
UNITED STATES ALIEN HOLDERS
Under present United States federal income and estate tax law and
subject to the discussion of backup withholding below:
(a) payments of principal, premium, if any, and interest,
including original issue discount, on the notes to any United States
alien holder, defined as a holder who is not a United States holder,
will not be subject to United States federal income tax or
withholding of federal income tax, provided that in the case of
interest or original issue discount:
(1) such interest or original issue discount is not effectively
connected with a trade or business conducted by the United States alien
holder in the United States,
(2) the United States alien holder does not actually or
constructively own 10% or more of the total combined voting power of all
classes of our stock entitled to vote,
(3) the United States alien holder is not a controlled foreign
corporation that is related to us through stock ownership,
(4) the United States alien holder is not a bank that acquired
the notes pursuant to a loan agreement made in the ordinary course of its
trade or business, and
(5) either:
(A) the beneficial owner of the note certifies to us or
our agent, under penalties of perjury, that he is not a United
States holder and provides his name and address, or
(B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the
ordinary course of its trade or business and holds the note,
certifies to us or our agent under penalties of perjury that
such statement has been received from the beneficial owner by
it or by a financial institution and furnishes the payor with a
copy thereof;
(b) a United States alien holder will not be subject to United
States federal income tax or withholding of federal income tax on
gain realized on the sale, exchange or redemption of a note unless:
(1) the gain is effectively connected with a trade or business
conducted by the United States alien holder in the United States or
(2) in the case of a United States alien holder who is an
individual and holds a note as a capital asset, the holder is present in
the United States for 183 days or more in the taxable year of sale and
certain other requirements are met; and
(c) a note held by an individual who at the time of death is
not a citizen or resident of the United States will not be subject to
United States federal estate tax as a result of such individual's
death if the individual does not actually or constructively own 10%
or more of the total combined voting power of all classes of our
stock entitled to vote and the income on the note, if received at the
time of the individual's death, would not have been effectively
connected with a U.S. trade or business of the individual.
Under proposed regulations that have not yet become effective,
certification procedures regarding a holder's status may change.
BACKUP WITHHOLDING AND INFORMATION REPORTING
United States Holders. In general, information reporting requirements
will apply to payments of principal and interest on a note and the proceeds
of the sale of a note before maturity within the United States to, and to
the accrual of original issue discount on a note with respect to,
non-corporate United States holders. A 31% "backup withholding" tax will
apply to such payments and to payments with respect to original issue
discount if the United States holder fails to provide an accurate taxpayer
identification number or to report all interest and dividends required to
be shown on its federal income tax returns. The amount of original issue
discount required to be reported by us may not be equal to the amount of
original issue discount required to be reported as taxable income by a
United States holder of discount notes.
United States Alien Holders. Payment of principal, premium, if any,
and interest made within the United States by us or any of our paying
agents are generally subject to information reporting and possibly "backup
withholding" at a rate of 31%. Information reporting and backup withholding
will not, however, apply to payments made to a United States alien holder
on a note if the certification described in clause (a) (5) above under
"United States alien holders" is received, provided in each case the payor
does not have actual knowledge that the holder is a United States person.
Payment of the proceeds from the sale by a United States alien holder
of a note made to or through a foreign office of a broker will not
generally be subject to information reporting or backup withholding. If,
however, the broker is a United States person, a controlled foreign
corporation for United States tax purposes or a foreign person 50% or more
of whose gross income is from a United States trade or business or (for
payments made after December 31, 2000) a foreign partnership with certain
U.S. connections, such payments will not be subject to backup withholding
but will be subject to information reporting, unless:
(a) such broker has documentary evidence in its records that
the beneficial owner is not a U.S. person and certain other conditions are
met or
(b) the beneficial owner otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be
allowed as a credit against such holder's U.S. federal income tax
liability, any resulting overpayment being refundable, provided the
required information is furnished to the IRS.
For payments made after December 31, 2000, for purposes of applying
the above rules for Unites States alien holders to an entity that is
treated as fiscally transparent, e.g., a partnership or trusts, the
beneficial owner means each of the ultimate beneficial owners of the
entity.
SUPPLEMENTAL PLAN OF DISTRIBUTION
We are offering the notes on a continuing basis through Credit Suisse
First Boston Corporation, Goldman, Sachs & Co. and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as the agents. The
agents have agreed to use their best efforts to solicit purchases of the
notes, and the notes may be sold to the agents for resale to investors and
other purchasers at varying prices related to prevailing market prices at
the time of resale, to be determined by the agents. We reserve the right to
sell notes directly on our own behalf in those jurisdictions where we are
authorized to do so. We will have the sole right to accept offers to
purchase notes and may reject any proposed purchase of notes in whole or in
part. The agents will have the right to reject any proposed purchase of
notes through them in whole or in part. Payment of the purchase price of
notes will be required to be made in immediately available funds in The
City of New York. We will pay the agents a commission ranging from .125% to
.750% of the principal amount of notes with maturities of up to 30 years
sold through the agents, depending upon the stated maturity, and may also
sell notes to the agents as principals at negotiated discounts. Commissions
on agency sales of notes with maturities of more than 30 years will be
determined at the time of sale. No commission will be payable on any sales
made directly to the public by us.
In addition, the agents may offer the notes they have purchased as
principal to other dealers. The agents may sell notes to any dealer at a
discount and, unless otherwise specified in the applicable pricing
supplement, the discount allowed to any dealer may include all or a portion
of the discount to be received by such agent from us. Unless otherwise
indicated in the applicable pricing supplement, any note sold to an agent
as principal will be purchased by such agent at a price equal to 100% of
the principal amount thereof less a percentage equal to the commission
applicable to any agency sale of a note of identical maturity, and may be
resold by the agent to investors and other purchasers from time to time in
one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale
or may be resold to certain dealers as described above. After the initial
public offering of notes to be resold to investors and other purchasers,
the public offering price, in the case of a fixed-price public offering,
concession and discount may be changed.
In connection with the offering made hereby, the agents may purchase
and sell the notes in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover short
positions created by the agents in connection with the offering.
Stabilizing transactions consist of certain bids or purchases for the
purpose of preventing or retarding a decline in the market price of the
notes, and short positions created by the agents involve the sale by the
agents of a greater principal amount of notes than they are required to
purchase from us. The agents may also impose a penalty bid, whereby selling
concessions allowed to broker-dealers in respect of the notes sold in the
offering may be reclaimed by the agents if such notes are repurchased by
the agents in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the notes,
which may be higher than the price that might otherwise prevail in the open
market; and these activities, if commenced, may be discontinued at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
The agents and any dealers to whom notes are sold may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as
amended. We have agreed to indemnify the agents against certain
liabilities, including liabilities under the Securities Act, and will
reimburse the agents for certain expenses.
The notes are a new issue of securities with no established trading
market. The agents have informed us that they intend to make a market in
the notes, but are under no obligation to do so and such market making may
be terminated at any time. Therefore, no assurance can be given as to the
existence of a trading market in the notes in the future.
One or more of the agents or their affiliates may be customers of,
extend credit to, engage in transactions with or perform services for us in
the ordinary course of business.
[FLAG]
The information in this prospectus is not complete and may be changed. PHH
Corporation may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 1, 2000
PROSPECTUS
PHH CORPORATION
May Offer--
$3,000,000,000
Debt Securities
We will provide the specific terms of these debt securities in
supplements to this prospectus. You should read this prospectus and the
accompanying prospectus supplement carefully before you invest.
------------------------
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus or any accompanying prospectus supplement is
truthful or complete. Any representation to the contrary is a criminal
offense.
------------------------
The date of this prospectus is ________________, 2000.
WHERE YOU CAN FIND MORE INFORMATION
As required by the Securities Act of 1933, we filed a registration
statement (No. 333-46434) relating to the securities offered by this
prospectus with the Securities and Exchange Commission.
This prospectus is a part of that registration statement, which includes
additional information.
We file annual, quarterly and current reports and other information
with the SEC. You may read and copy any document we file at the SEC's
public reference rooms in Washington, D.C., New York, New York and Chicago,
Illinois. You can also request copies of the documents, upon payment of a
duplicating fee, by writing the Public Reference Section of the SEC. Please
call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. These 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
the information we file with it. This means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus, and
later information that we file with the SEC will automatically update and
supersede this information. We incorporate by reference the documents
listed below and any future filings made with the SEC under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until our
offering is completed:
o Annual Report on Form 10-K for the year ended December 31,
1999; and
o Quarterly Reports on Form 10-Q for the quarterly periods ended
March 31 and June 30, 2000.
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Treasurer
PHH Corporation
6 Sylvan Way
Parsippany, New Jersey 07054
(973) 428-9700
You should rely only on the information provided in this prospectus
and the prospectus supplement, as well as the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not making an offer of these securities in any state
where the offer is not permitted. You should not assume that the
information in this prospectus, the prospectus supplement or any documents
incorporated by reference is accurate as of any date other than the date on
the front of the applicable document.
PHH CORPORATION
In connection with a merger with HFS Incorporated, on April 30, 1997,
we became a wholly-owned subsidiary of HFS. On December 17, 1997, in
connection with a merger agreement between CUC International Inc. and HFS,
HFS was merged into CUC, with CUC surviving and changing its name to
Cendant Corporation. As a result of the merger of HFS and CUC, we became a
wholly-owned subsidiary of Cendant.
As part of Cendant's ongoing evaluation of its business units, we may
from time to time explore our ability to make divestitures or acquisitions
and enter into related transactions as they arise. No assurance can be
given that any divestiture, acquisition or other transaction will be
consummated or, if consummated, the magnitude, timing, likelihood or
financial or business effect on us of such transactions. Among the factors
we will consider in determining whether or not to consummate any
transaction is the strategic and financial impact of such transaction on us
and our parent company, Cendant.
In connection with the merger of HFS and CUC, our fiscal year was
changed from a year ending on April 30 to a year ending on December 31.
We are a Maryland corporation. Our principal executive offices are
located at 6 Sylvan Way, Parsippany, New Jersey 07054. Our telephone number
is (973) 428-9700.
GENERAL
Our businesses provide a range of complementary consumer and business
services. Currently we operate in two business segments which provide home
buyers with mortgages and assist in employee relocations:
o In the mortgage segment, our Cendant Mortgage Corporation
subsidiary originates, sells and services residential mortgage
loans in the United States, marketing such services to
consumers through relationships with corporations, affinity
groups, financial institutions, real estate brokerage firms and
mortgage banks.
o In the relocation segment, our Cendant Mobility Services
Corporation subsidiary is the largest provider of corporate
relocation services in the world, offering relocation clients a
variety of services in connection with the transfer of a
client's employees.
On June 30, 1999, we completed the disposition of our fleet
businesses, under agreement with Avis Group Holdings, Inc. Under this
agreement, Avis acquired the net assets of our fleet business through the
assumption and subsequent repayment of $1.44 billion of intercompany debt
and the issuance to us of $360 million of convertible preferred stock of
Avis Fleet Leasing and Management Corporation, a wholly-owned subsidiary of
Avis. Coincident to the closing of the transaction, Avis refinanced the
assumed debt under management programs which was payable to us.
Accordingly, we also received from Avis $3.0 billion in cash proceeds and a
$30 million receivable. Utilizing the cash proceeds from the fleet
businesses disposition, we made a cash dividend payment to Cendant totaling
$1.1 billion. We recorded a net gain on the sale of discontinued operations
of $887 million ($871 million, after tax). The fleet businesses disposition
was structured as a tax-free reorganization and, accordingly, no tax
provision has been recorded on a majority of the gain. However, pursuant to
a recent interpretive ruling, the Internal Revenue Service has taken the
position that similarly structured transactions do not qualify as tax-free
reorganizations under Internal Revenue Code Section 368(a)(1)(A). If the
transaction is not considered a tax-free reorganization, the resultant
incremental liability could range between $10 million and $170 million
depending upon certain factors including utilization of tax attributes and
contractual indemnification provisions. Notwithstanding the Internal
Revenue Service interpretive ruling, we believe that, based upon analysis
of current tax law, our position would prevail, if challenged.
<TABLE>
<CAPTION>
RATIO OF EARNINGS TO FIXED CHARGES
Six Months Year Ended December 31, Year Ended
Ended June 30, January 31,
2000 1999 1998(2) 1997 1996 1996
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges(1)......... 2.45x 2.92x 2.78x ** 1.86x 1.82x
</TABLE>
(1) Fixed charges consist of interest expense on all indebtedness
(including amortization of deferred financing costs) and the portion
of operating lease rental expense that is representative of the
interest factor (deemed to be one-third of operating lease rentals).
The substantial portion of interest expense incurred on debt is used
to finance our mortgage services and relocation services activities.
(2) For the year ended December 31, 1998, income from continuing
operations before income taxes includes non-recurring merger-related
costs and other unusual credits of $19 million. Excluding such
credits, the ratio of earnings to fixed charges is 2.67x.
(**) Earnings are inadequate to cover fixed charges (deficiency of $56
million) for the year ended December 31, 1997. Loss from continuing
operations before income taxes includes non-recurring merger-related
costs and other unusual charges of $190 million. Excluding such
charges, the ratio of earnings to fixed charges is 2.16x.
USE OF PROCEEDS
The net proceeds from the sale of the Debt Securities will be used to
finance assets we manage for our clients and for general corporate
purposes.
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the debt securities sets
forth certain general terms and provisions of the debt securities to which
any supplement may relate. The particular terms of the debt securities
offered by any supplement and the extent, if any, to which such general
provisions may apply to the debt securities so offered will be described in
the supplement relating to such offered debt securities. The debt
securities are to be issued under an indenture between us and a trustee. A
copy of the indenture has been filed with the Commission as indicated in
the registration statement. The following summaries of provisions of the
indenture may not contain all of the information that is important to you.
Accordingly, you should carefully read all the provisions of the indenture
which is incorporated by reference into this prospectus in its entirety,
including the definitions therein of terms.
GENERAL
The debt securities will be our unsecured obligations and will rank
on a parity with all of our other unsecured and unsubordinated
indebtedness. The debt securities will be issued under an indenture between
us and Bank One, N.A., as trustee. Unless we specify a different place in
the applicable supplement, principal of and interest, if any, on the debt
securities will be payable at the corporate offices of the applicable
trustee; provided that payment of interest may be made at our option by
check or draft mailed to the person entitled thereto.
The indenture does not limit the aggregate principal amount of the
debt securities or of any particular series of offered debt securities that
we may issue and provides that debt securities may be issued thereunder
from time to time in one or more series.
A prospectus supplement relating to a particular series of debt
securities will contain some or all of the following terms of the offered
debt securities:
(1) the title of the offered debt securities and the series of
which the offered debt securities shall be a part;
(2) any limit on the aggregate principal amount of the offered
debt securities;
(3) the price, expressed as a percentage of the aggregate
principal amount thereof, at which the offered debt securities will be
issued;
(4) the date or dates on which the offered debt securities will
mature;
(5) the rate or rates, which may be fixed or variable, per
annum at which the offered debt securities will bear interest, if any;
(6) the date from which such interest, if any, on the offered
debt securities will accrue, the dates on which such interest, if any, will
be payable, the date on which payment of such interest, if any, will
commence and the record dates for such interest payment dates, if any;
(7) the dates, if any, on which and the price or prices at
which the offered debt securities will, pursuant to any mandatory sinking
fund provisions, or may, pursuant to any optional sinking fund or to any
purchase fund provisions, be redeemed by us and the other detailed terms
and provisions of such sinking and/or purchase funds;
(8) the date, if any, after which and the price or prices at
which the offered debt securities may, pursuant to any optional redemption
provisions, be redeemed at our option or the option of the holder thereof
and the other detailed terms and provisions of such optional redemption;
(9) the denominations in which the offered debt securities are
authorized to be issued;
(10) whether the principal and/or interest of the offered debt
securities is denominated in a currency other than United States dollars;
(11) the identity of the trustee and the indenture under which
the offered debt securities are issued; and
(12) any other terms of the offered debt securities.
Debt securities bearing no interest or interest at a rate which at
the time of issuance is below market rates may be issued under the
indenture and offered and sold at a substantial discount from the principal
amount thereof. Special federal income tax, accounting and other
considerations applicable thereto will be described in any supplement
relating to those debt securities. The debt securities are not subordinated
in right of payment to any other indebtedness of the Company. However, our
right and the right of our creditors, including the holders of debt
securities, under general equitable principles to participate in any
distributions of assets of any subsidiary upon our liquidation or
reorganization or otherwise is, unless we substantively consolidate with
our subsidiaries, likely to be subject to the prior claims of creditors of
the subsidiary, except to the extent that our claims as a creditor may be
recognized.
The debt securities will be issued only in fully registered form
without coupons. Offered debt securities may be presented at the corporate
offices of the applicable trustee for registration of transfer or exchange
without service charge, but we may require payment to cover taxes or other
governmental charges payable in connection therewith.
Prospective purchasers of the debt securities should be aware that
the indenture does not contain any covenant that would prevent Cendant from
removing assets from us or any of our subsidiaries, or that would limit our
ability to make advances, pay dividends or make any other distributions to
Cendant.
CERTAIN DEFINITIONS
The indenture contains certain restrictions upon our actions and
those of some of our subsidiaries. The following terms, among others, are
used in the indenture as indicated:
"Asset Securitization Subsidiary" means (i) any Subsidiary engaged
solely in the business of effecting asset securitization transactions, and
(ii) any Subsidiary whose primary purpose is to hold title or ownership
interests in vehicles, mortgage loans, relocation assets and related assets
under management.
"Consolidated Net Worth" means, at any date of determination, all
amounts which would be included on our balance sheet with our consolidated
Subsidiaries under stockholders' equity, in accordance with generally
accepted accounting principles in effect from time to time.
"Debt" means:
(1) all of our and our Subsidiaries' debt, obligations and other
liabilities which are includable as liabilities in a consolidated balance
sheet of us and our Subsidiaries, other than
(x) accounts payable and accrued expenses,
(y) advances from clients obtained in the ordinary course of
the relocation management services business of us and our Subsidiaries and
(z) current and deferred income taxes and other similar
liabilities, plus
(2) without duplicating any items included in Debt pursuant to the
foregoing clause (1), the maximum aggregate amount of all liabilities of
ours or any of our Subsidiaries under any guaranty, indemnity or similar
undertaking given or assumed of, or in respect of, the indebtedness,
obligations or other liabilities, assets, revenues, income or dividends of
any person other than us or one of our Subsidiaries and
(3) all other obligations or liabilities of ours or any of our
Subsidiaries in relation to the discharge of the obligations of any person
other than us or one of our Subsidiaries.
"Lien" means any mortgage, pledge, lien, security interest or
encumbrance.
"Material U.S. Subsidiary" means any Subsidiary which together with
our other Subsidiaries at the time of determination had assets constituting
10% or more of consolidated assets, accounts for 10% or more of
Consolidated Net Worth, or accounts for 10% or more of the revenues of us
and our consolidated Subsidiaries for the Rolling Period immediately
preceding the date of determination.
"Person" means any natural person, corporation, division of a
corporation, partnership, limited liability company, trust, joint venture,
association, company, estate, unincorporated organization or government or
any agency or political subdivision thereof.
"Revolving Lien" means any Lien which extends to property in
existence on the date of creation of such Lien and also to any property of
substantially the same characteristics subsequently acquired in the
ordinary course of our business or that of a Material U.S. Subsidiary of
ours.
"Rolling Period" means with respect to any fiscal quarter, such
fiscal quarter and the three immediately preceding fiscal quarters
considered as a single accounting period.
"Special Purpose Vehicle Subsidiary" means PHH Caribbean Leasing,
Inc. and any Subsidiary engaged in the fleet-leasing management business
which (i) is, at any one time, a party to one or more lease agreements with
only one lessee and (ii) finances, at any one time, its investment in lease
agreements or vehicles with only one lender, which lender may be us.
"Subsidiary" means, with respect to any person, any corporation,
association, joint venture, partnership, limited liability company or other
business entity of which at least a majority of the voting stock or other
ownership interests having ordinary voting power for the election of
directors (or the equivalent) is, at the time as of which any determination
is being made, owned or controlled by such person or one or more
subsidiaries of such person, or by such person and one or more subsidiaries
of such person.
GLOBAL SECURITIES
The debt securities of a series may be issued in whole or in part in
the form of one or more fully registered global notes that will be
deposited with, or on behalf of, a depositary identified in the prospectus
supplement relating to that series. Global securities will be issued in
registered form and in either temporary or permanent form. Unless and until
it is exchanged for debt securities in definitive form, a global security
may not be transferred except as a whole by the depositary for such global
security to a nominee of such depositary or by a nominee of such depositary
to such depositary or another nominee of such depositary or by such
depositary or any such nominee to a successor of such depositary or a
nominee of such successor.
The specific terms of the depositary arrangement with respect to a
series of debt securities will be described in the prospectus supplement
relating to such series. We anticipate that the following provisions will
apply to any depositary arrangements.
Upon the issuance of a global security, the depositary for such
global security or its nominee will credit the accounts of persons held
with it with the respective principal amounts of the debt securities
represented by such global security. The accounts shall be designated by
the underwriters or agents with respect to the debt securities or by us if
the debt securities are offered and sold directly by us. Ownership of
beneficial interests in a global security will be limited to persons that
have accounts with the depositary for such global security or its nominee
or persons that may hold interests through participants. Ownership of
beneficial interests in the global security will be shown on, and the
transfer of ownership will be effected only through, records maintained by
the depositary, with respect to participants' interests, for the global
security or by participants or persons that hold through participants, with
respect to beneficial owners' interests.
LIMITATIONS ON LIENS
We will not, and will not permit any Material U.S. Subsidiary of ours
to, incur any Lien to secure Debt without equally and ratably securing the
debt securities except:
(1) deposits under worker's compensation, unemployment insurance and
social security laws or to secure statutory obligations or surety or appeal
bonds or performance or other similar bonds in the ordinary course of
business, or statutory Liens of landlords, carriers, warehousemen,
mechanics and materialmen and other similar Liens, in respect of
liabilities which are not yet due or which are being contested in good
faith by appropriate proceedings, Liens for taxes not yet due and payable,
and Liens for taxes due and payable, the validity or amount of which is
currently being contested in good faith by appropriate proceedings and as
to which foreclosure and other enforcement proceedings shall not have been
commenced (unless fully bonded or otherwise effectively stayed);
(2) purchase money Liens granted to the vendor or Person financing
the acquisition of property, plant or equipment if:
(a) limited to the specific assets acquired and, in the case of
tangible assets, other property which is an improvement to or is acquired
for specific use in connection with such acquired property or which is real
property being improved by such acquired property; and
(b) the debt secured by such Lien is the unpaid balance of the
acquisition cost of the specific assets on which the Lien is granted;
(3) Liens and Revolving Liens upon real and/or personal property,
each of which Liens or Revolving Liens existed before the time of our
acquisition of such property or the company owning such property and was
not created in anticipation thereof and any extensions or renewals thereof;
provided that no such Lien or Revolving Lien shall extend to or cover any
property of us or a Material U.S. Subsidiary other than the respective
property so acquired and improvements thereon;
(4) Liens and Revolving Liens upon real and/or personal property of a
Person who in connection with our acquisition of the stock or equity of
such Person becomes a Material U.S. Subsidiary, each of which Liens or
Revolving Liens existed before the time of our acquisition of such Person
and was not created in anticipation thereof and any extension or renewal of
such Liens; provided that no such Lien shall extend to or cover any
property of us or a Material U.S. Subsidiary other than the Material U.S.
Subsidiary (and its acquired affiliates) so acquired;
(5) Liens arising out of attachments, judgments or awards as to which
an appeal or other appropriate proceedings for contest or review are
promptly commenced (and as to which foreclosure and other enforcement
proceedings
(a) shall not have been commenced (unless fully bonded or
otherwise effectively stayed) or
(b) in any event shall be promptly fully bonded or otherwise
effectively stayed);
(6) Liens securing Debt of any Material U.S. Subsidiary owing to us;
(7) Liens securing Debt and related obligations, or securing
interests in asset sale transactions which could alternatively be
characterized as Debt, or securing obligations to pay rent incurred in
connection with asset securitization transactions, which Debt or
securitized assets are not reported on our consolidated balance sheet or
that of our Material U.S. Subsidiaries, and which liens cover only the
assets securitized in the applicable asset securitization transaction or
other assets identified in connection with an asset securitization
transaction, and liens on the stock or equity of any special purpose
vehicle the sole purpose of which is to effectuate such asset
securitization transaction;
(8) Liens securing Debt and related obligations of an Asset
Securitization Subsidiary issued in asset securitization transactions,
which Debt or securitized assets are reported on our consolidated balance
sheet or that of our Material U.S. Subsidiaries, and which liens cover only
the assets securitized in the applicable asset securitization transaction
or other assets identified in connection with an asset securitization
transaction, and liens on the stock of such Asset Securitization
Subsidiary;
(9) Liens covering only the property or other assets of any Special
Purpose Vehicle Subsidiary and securing only the Debt of any such Special
Purpose Vehicle Subsidiary;
(10) mortgage liens existing on homes acquired by us or any of our
Material U.S. Subsidiaries in the ordinary course of their relocation
management business;
(11) other Liens incidental to the conduct of its business or the
ownership of its property and other assets, which do not secure any Debt
and did not otherwise arise in connection with the borrowing of money or
the obtaining of advances or credit and which do not, in the aggregate,
materially detract from the value of its property or other assets or
materially impair the use thereof in the operation of its business;
(12) Liens covering only the property or other assets of any
Subsidiary which principally transacts business outside of the United
States;
(13) Liens existing prior to the date of the indenture and any
extensions or renewals thereof;
(14) Liens incurred in the ordinary course of business to secure Debt
utilized to fund net investment in leases and leased vehicles, equity
advances on homes and other assets under management programs; and
(15) Liens to secure Debt not otherwise permitted by any of the
clauses (i) through (xi) if, at the time any such Liens are incurred, the
aggregate amount of Debt secured by such Liens does not exceed
$250,000,000.
RESTRICTIONS ON SALE, CONSOLIDATION OR MERGER
We will not and will not consolidate with or merge into or transfer
all or substantially all of our assets to any other corporation unless the
resulting, surviving or transferee corporation assumes all of our
obligations under the debt securities and the indenture. Thereafter, all
such obligations of the predecessor corporation shall terminate. If upon
any such consolidation, merger or transfer any property or assets of us or
a Material U.S. Subsidiary would become subject to a Lien securing Debt,
then before the consolidation, merger or transfer occurs, we will secure
the debt securities equally and ratably with or prior to the Debt secured
by such Lien; provided, however, that we will not so secure the debt
securities if we or a Material U.S. Subsidiary could incur such Debt and
secure it by a Lien on our property or the property of any Material U.S.
Subsidiary pursuant to the indenture (see "Limitations on Liens") without
equally and ratably securing the debt securities.
MODIFICATION AND WAIVER
We are permitted, with the consent of the holders of not less than a
majority in principal amount of the Outstanding debt securities (as defined
in the indenture) of each series affected by the modification, to
supplement the indenture to modify the rights of the holders of the debt
securities; provided that no such modification shall, without the consent
of the holder of each outstanding debt security affected thereby:
(1) change the stated maturity of the principal, or any installment
of principal or interest, of any outstanding debt security or change the
Redemption Price;
(2) reduce the principal amount of or the rate of interest on or any
premium payable on redemption of any outstanding debt security;
(3) modify the manner of determination of the rate of interest so as
to affect adversely the interest of a holder or reduce the amount of the
principal of an Original Issue Discount Debt Security due and payable upon
acceleration;
(4) change the place or currency of payment of principal of or
interest, if any, on any debt security;
(5) impair the right to institute suit for the enforcement of any
payment on or with respect to any debt security; or
(6) modify the provisions relating to modification or amendment of
the indenture or to waiver of compliance with or defaults of certain
restrictive provisions of the indenture, except to increase the percentage
in principal amount of Outstanding debt securities required, or to provide
that certain other provisions of the indenture cannot be modified or
amended without the consent of the holder of each outstanding debt security
affected thereby.
The holders of a majority in principal amount of an Outstanding
series of debt securities may on behalf of all the holders of such series
waive the compliance with certain covenants or waive any past default
except:
(1) a default in payment of the principal of (or premium, if any) or
interest on any debt security of such series or
(2) a default in respect of a covenant or provision of the indenture
which cannot be amended or modified without the consent of the holder of
each Outstanding debt security of such series affected.
EVENTS OF DEFAULT
The following shall constitute events of default with respect to debt
securities of any series then Outstanding:
(1) default for a period of 30 days in payment of any interest on the
debt securities of such series when due;
(2) default in payment of principal of (or premium, if any, on) the
debt securities of such series;
(3) default in the deposit of any sinking fund payment, when and as
due by the terms of a debt security of that series;
(4) default in performance of any other covenant in the applicable
indenture with respect to a series of debt securities, including violations
of the covenants described above relating to limitations on Liens,
limitations on Sale-Leaseback Transactions, limitations on certain advances
to non-Subsidiaries and restrictions on sales of assets and consolidation
or merger of us, continued for 90 days after written notice to us by the
trustee or by the holders of at least 25% in principal amount of the
Outstanding debt securities of that series; and
(5) certain events of bankruptcy, insolvency or reorganization.
If an event of default with respect to debt securities of any series
shall occur and be continuing, the applicable trustee or the holders of 25%
in principal amount of the Outstanding debt securities of such series may
declare the principal and accrued interest of all of the debt securities of
that series to be due and payable immediately. We will comply with
applicable tender offer rules under the Exchange Act in the event that the
occurrence of an event of default results in the repurchase of debt
securities.
The indenture provides that the trustee will, within 90 days after
the occurrence of a default under the indenture, give to holders of the
series of debt securities with respect to which a default has occurred
notice of all uncured defaults known to it but, except in the case of a
default in the payment of principal (including any sinking fund payment) or
premium, if any, or interest on or Redemption Price (if called for
redemption) of a series of debt securities with respect to which such
default has occurred, the trustee shall be protected in withholding such
notice if it in good faith determines that the withholding of such notice
is in the interest of such holders.
The indenture contains a provision entitling the trustee, subject to
the duty of such trustee during default to act with the required standard
of care, to be indemnified by the holders of a series of debt securities
with respect to which a default has occurred before proceeding to exercise
any right or power under the indenture at the request of such holders.
Subject to such right of indemnification, each indenture provides that the
holders of a majority in principal amount of the Outstanding debt
securities of such series may direct the time, method and place of
conducting any proceeding for any remedy available to the trustee or
exercising any trust or power conferred upon the trustee.
We will be required to furnish to the trustees annually a statement
as to the fulfillment by us of all of its obligations under the indenture.
The general provisions of the indenture do not afford holders of our
debt securities protection in the event of a highly leveraged or other
transaction involving us that may adversely affect holders of the debt
securities. Any covenants or other provisions included in a supplement or
amendment to the indenture for the benefit of the holders of any particular
series of debt securities will be described in the applicable prospectus
supplement.
CONCERNING THE TRUSTEE
We maintain general banking and credit relations with the trustees in
the ordinary course of business.
PLAN OF DISTRIBUTION
We may sell debt securities to or through underwriters, and also may
sell debt securities directly to other purchasers or through agents. The
distribution of the debt securities may be effected from time to time in
one or more transactions at a fixed price or prices (which may be changed
from time to time), at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices.
Each supplement will describe the method of distribution of the offered
debt securities.
In connection with the sale of debt securities, underwriters may
receive compensation from us or from purchasers of debt securities for whom
they may act as agents, in the form of discounts, concessions or
commissions. Underwriters may sell debt securities to or through dealers,
and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions from
the purchasers for whom they may act as agents. Underwriters, dealers and
agents that participate in the distribution of debt securities may be
deemed to be underwriters under the Securities Act and any discounts or
commissions received by them and any profit on the resale of debt
securities by them may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter or agent will be
identified and any such compensation will be described in the supplement.
Under agreements which may be entered into by us, underwriters and
agents who participate in the distribution of debt securities may be
entitled to indemnification by us against certain liabilities, including
liabilities under the Securities Act.
If so indicated in the supplement, we will authorize underwriters or
other persons acting as our agents to solicit offers by certain
institutions to purchase debt securities from us pursuant to contracts
providing for payment and delivery on a future date. Institutions with
which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such institutions must
be approved by us. The obligations of any purchaser under any such contract
will not be subject to any conditions except that (1) the purchase of the
offered debt securities shall not at the time of delivery be prohibited
under the laws of the jurisdiction to which such purchaser is subject, and
(2) if the offered debt securities are also being sold to dealers acting as
principals for their own account, the dealers shall have purchased such
offered debt securities not sold for delayed delivery. The underwriters and
such other agents will not have any responsibility in respect of the
validity or performance of such contracts.
LEGAL MATTERS
The validity of each issue of debt securities will be passed upon for
us by our counsel, Eric Bock, and certain legal matters will be passed upon
for the underwriters or agents by Skadden, Arps, Slate, Meagher & Flom LLP.
Skadden, Arps, Slate, Meagher & Flom LLP has, from time to time,
represented and may continue to represent us in connection with certain
legal matters.
EXPERTS
The consolidated financial statements of PHH Corporation and
subsidiaries incorporated in this prospectus by reference from our Annual
Report on Form 10-K for the year ended December 31, 1999, have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report,
which is incorporated herein by reference, and have been so incorporated in
reliance upon the report of said firm given upon their authority as experts
in accounting and auditing.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER
TO SELL, OR THE SOLICITATION OF AN OFFER TO
BUY, ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN
OFFER TO SELL, OR THE SOLICITATION OF AN OFFER
TO BUY, SUCH SECURITIES IN ANY CIRCUMSTANCES
IN WHICH SUCH OFFER OR SOLICITATION IS [PHH LOGO HERE]
UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR
ANY SALE MADE HEREUNDER OR THEREUNDER SHALL,
IN ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED OR INCORPORATED
BY REFERENCE HEREIN OR THEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH $3,000,000,000
INFORMATION.
---------------------------
TABLE OF CONTENTS
PAGE
PROSPECTUS SUPPLEMENT PHH CORPORATION
Risk Factors..............................S-1
Description of Notes......................S-1
Special Provisions Relating to
Foreign Currency Notes ................S-20
Certain Federal Income Tax
Considerations.........................S-25
Supplemental Plan of Distribution........S-36
PROSPECTUS
Where You Can Find More Information.........2
PHH Corporation.............................3
Ration of Earnings to Fixed Charges.........4
Use of Proceeds.............................5
Description of Debt Securities..............5
Plan of Distribution.......................14
Legal Matters..............................15
Experts....................................15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be borne by
PHH Corporation in connection with the issuance and distribution of the
securities being registered hereunder, other than commissions.
Registration fee...........................................$ 693,000
Transfer agent and registrar fees and expenses............. 60,000
Trustee fees and expenses.................................. 33,500
Printing and engraving..................................... 10,000
Legal fees and expenses.................................... 35,000
Accounting fees and expenses............................... 32,000
Blue Sky filing fees and expenses.......................... 5,000
Rating agency fees......................................... 550,000
Miscellaneous expenses..................................... 40,500
------------
Total................................................$ 1,459,000
============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
1. Charter, By-law and Statutory Provisions
Article VII, Section 5 of the charter of the Company provides that
the Company shall indemnify its directors and officers to the full extent
provided by the general laws of the State of Maryland now or hereafter in
force. Article VII, Section 6 of the by-laws of the Company relating to
indemnification of directors and officers provides for indemnification in
accordance with the charter of the Company.
2. Contract Provisions
The Company expects to enter into selling agency agreements,
distribution agreements and underwriting agreements with selling agents and
underwriters, pursuant to which such selling agents and underwriters will
agree to indemnify officers, directors and other persons controlling the
Company against certain losses, claims, damages and liabilities arising out
of untrue statements or omissions in the Company's Registration Statement
or related supplements in reliance upon information furnished by such
selling agents and underwriters for use therein.
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES.
(a) Exhibits
1 - Form of Distribution Agreement.*
4(a)(i) - Form of Indenture between Bank One, N.A. and PHH Corporation.
4(a)(ii) - Form of Supplemental Indenture No. 1, between PHH Corporation
and Bank One, N.A.
4(b)(i) - Proposed Form of Fixed Rate Note between PHH Corporation and
Bank One, N.A., as trustee.*
4(b)(ii) - Proposed Form of Floating Rate Note between PHH Corporation and
Bank One, N.A., as Trustee.*
5 - Opinion and consent of Eric Bock, counsel for PHH Corporation.*
12 - Computation of Ratio of Earnings to Fixed Charges (incorporated
by reference from Exhibit 12 from quarterly report on Form 10-Q
for period ended June 30, 2000 and annual report on Form 10-K
for period ended December 31, 1999).
23 - Consent of Independent Certified Public Accountants.
24 - Power of Attorney of certain officers and directors of PHH
Corporation (included on the signature pages).*
25 - Form T-1: Statement of Eligibility under the Trust Indenture Act
of 1939 of Bank One, N.A., as Trustee under the indenture.*
* Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES
None.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement: (i) to include any prospectus required by section 10(a)(3)
of the Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the Registration
Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
(2) that for the purpose of determining any liability under the
Securities Act of 1933 each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the Registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 that is incorporated by reference in
the Registration Statement shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof. Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of
prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or 497(h)
under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the County of Morris, State of New Jersey, on
the 1st day of November, 2000.
PHH CORPORATION
By: *
--------------------------------
Richard Smith
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed by the following persons
in the capacities and on the dates indicated.
PRINCIPAL EXECUTIVE OFFICER:
* November 1, 2000
-------------------------------------------
RICHARD SMITH
PRESIDENT
PRINCIPAL FINANCIAL OFFICER:
* November 1, 2000
-------------------------------------------
DUNCAN H. COCROFT
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER AND TREASURER
PRINCIPAL ACCOUNTING OFFICER:
* November 1, 2000
-------------------------------------------
JOHN MCCLAIN
SENIOR VICE PRESIDENT AND
CORPORATE CONTROLLER
THE BOARD OF DIRECTORS:
* November 1, 2000
-------------------------------------------
STEPHEN P. HOLMES
* November 1, 2000
-------------------------------------------
JAMES E. BUCKMAN
SENIOR EXECUTIVE VICE PRESIDENT
* By: /s/ Eric J. Bock
--------------------------
ERIC J. BOCK
ATTORNEY-IN-FACT
