PROSPECTUS SUPPLEMENT
(To Prospectus dated May 29, 1997)
$60,000,000
PRINCIPAL AMOUNT PLUS INTEREST
LIQUIDITY FACILITY
OF
FGIC SECURITIES PURCHASE, INC.
IN SUPPORT OF
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY
WATER FACILITIES REVENUE BONDS
(NEW JERSEY-AMERICAN WATER COMPANY, INC. PROJECT)
SERIES 1997B
Date of Series 1997B Bonds: Date of Issuance Due: May 1, 2032
The Series 1997B Bonds will continue to bear interest at a Weekly Rate
unless a change in the interest rate mode occurs as described herein. The
Series 1997B Bonds are subject to mandatory and optional tender and to
redemption prior to maturity, as described herein. Payment of the purchase
price equal to the principal of and up to 37 days' accrued interest at a
maximum rate of 15% per annum on the Series 1997B Bonds tendered for purchase
as described herein will be made pursuant and subject to the terms of the
FGIC-SPI Liquidity Facility described herein.
FGIC SECURITIES PURCHASE, INC.
The FGIC-SPI Liquidity Facility will expire on May 30, 2002 unless
extended by FGIC Securities Purchase, Inc.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------------
The obligations of FGIC Securities Purchase, Inc. under the FGIC-SPI
Liquidity Facility (the "Obligations") are not being sold separately from the
Series 1997B Bonds, which are being offered pursuant to a separate Official
Statement. The Obligations are not severable from the Series 1997B Bonds and
may not be separately traded. This Prospectus Supplement and the
accompanying Prospectus, appropriately supplemented, may also be delivered in
connection with any remarketing of Bonds purchased by FGIC Securities
Purchase, Inc.
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MERRILL LYNCH & CO.
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The date of this Prospectus Supplement is May 29, 1997.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
OBLIGATIONS. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF
OBLIGATIONS TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
DOCUMENTS INCORPORATED BY REFERENCE
There are hereby incorporated herein by reference the Annual Report on
Form 10-K for the year ended December 31, 1996 and the Quarterly Report on
Form 10-Q for the fiscal quarter ended March 29, 1997 of General Electric
Capital Corporation ("GE Capital"), both heretofore filed with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities
Exchange Act of 1934, as amended (the "1934 Act"), to which reference is
hereby made.
INTRODUCTION
This Prospectus Supplement is provided to furnish information on the
obligations of FGIC Securities Purchase, Inc. ("FGIC-SPI" or the "Liquidity
Facility Issuer") under the liquidity facility in support of $60,000,000
aggregate principal amount of New Jersey Economic Development Authority Water
Facilities Revenue Bonds (New Jersey-American Water Company, Inc. Project)
Series 1997B to be issued by the New Jersey Economic Development Authority
(the "Authority"), on or about May 30, 1997 (the "Series 1997B Bonds" or the
"Bonds"). The proceeds from the sale of the Series 1997B Bonds will be
loaned by the Authority to New Jersey-American Water Company, Inc. (the
"Company"), a regulated utility providing water and wastewater services in
the State of New Jersey. FGIC-SPI will enter into a Standby Bond Purchase
Agreement (the "FGIC-SPI Liquidity Facility") with First Union National Bank,
Philadelphia, Pennsylvania (the "Trustee" and the "Tender Agent"), pursuant
to which FGIC-SPI will be obligated under certain circumstances to purchase
unremarketed Bonds from the Owners thereof optionally or mandatorily
tendering their Bonds for purchase. In order to obtain funds to purchase the
Bonds, FGIC-SPI will enter into a Standby Loan Agreement with General
Electric Capital Corporation ("GE Capital") under which GE Capital will be
irrevocably obligated to lend funds as needed by FGIC-SPI to purchase Bonds.
The obligations of FGIC-SPI under the FGIC-SPI Liquidity Facility will expire
on May 30, 2002 unless extended by FGIC-SPI or sooner terminated in
accordance with its terms.
Capitalized terms used and not otherwise defined herein have the
meanings assigned to them in Appendix B hereof.
DESCRIPTION OF THE SERIES 1997B BONDS
GENERAL
The Series 1997B Bonds will be dated their date of initial issuance and
delivery and will be issued in the aggregate principal amount of $60,000,000.
Unless and until a change in the interest rate mode for the Series 1997B
Bonds occurs, the Series 1997B Bonds will bear interest at a rate determined
weekly (the "Weekly Rate") by the Remarketing Agent as described below.
While the Series 1997B Bonds are bearing interest at the Weekly Rate,
interest will be payable on the first Wednesday of each month (the "Interest
Payment Date"), commencing July 2, 1997. While the Series 1997B Bonds are
bearing interest at the Weekly Rate, interest on the Series 1997B Bonds will
be computed on the basis of a 365 or 366 day year, as the case may be, and
actual number of days elapsed.
While the Series 1997B Bonds are bearing interest at the Weekly Rate,
the Series 1997B Bonds will be issued in Authorized Denominations of $100,000
and integral multiples of $5,000 in excess of such amount.
The Series 1997B Bonds will be issued as fully registered bonds and,
when issued, will be registered in the name of Cede & Co. as nominee for the
Depository Trust Company, New York, New York ("DTC").
Purchases of beneficial interests in the Series 1997B Bonds from DTC may be
made in book-entry only form (without certificates) while the Series 1997B
Bonds are bearing interest at the Weekly Rate in the principal amount of
$100,000 or any integral multiple of $5,000 in excess thereof. For so long
as Cede & Co., as nominee of DTC, is the registered owner of the Series 1997B
Bonds, payments of the principal, redemption price, if any, and purchase
price of and interest on the Series 1997B Bonds will be made directly to DTC.
Disbursement of such payments to the Direct Participants of DTC is the
responsibility of DTC and disbursements of such payments to the Beneficial
Owners of the Series 1997B Bonds is the responsibility of the Direct
Participants and the Indirect Participants, as each such term is hereinafter
defined. See "DESCRIPTION OF THE SERIES 1997B BONDS - Book-Entry Only
System" herein.
The Indenture provides that, upon the satisfaction of certain conditions
more fully described in the Indenture, the interest rate mode for the Series
1997B Bonds may, at the option of the Company, and, under certain
circumstances, shall be converted to the Term Rate Mode or the Fixed Rate
Mode. Upon any such conversion to the Term Rate Mode or the Fixed Rate Mode,
the Series 1997B Bonds are subject to mandatory tender for purchase and shall
be deemed tendered for purchase as more fully described below and the current
Remarketing Agent is not obligated to remarket the Series 1997B Bonds and the
Series 1997B Bonds will no longer have the benefit of the Liquidity Facility.
REMARKETING AGENT
While the Series 1997B Bonds are bearing interest at the Weekly Rate,
the Remarketing Agent for the 1997B Bonds will be Merrill Lynch, Pierce,
Fenner & Smith Incorporated.
DETERMINATION OF THE WEEKLY RATE
The Weekly Rate for the Series 1997B Bonds for a particular Weekly Rate
Period shall be the rate established by the Remarketing Agent by no later
than 5:00 p.m., New York City time, on Tuesday (unless Tuesday is not a
Business Day, then Monday; unless Monday and Tuesday are not Business Days,
then on the next succeeding Business Day) of each calendar week during a
Weekly Rate Period, as the minimum rate of interest necessary, in the
judgment of the Remarketing Agent taking into account then prevailing market
conditions, to enable the Remarketing Agent to sell such Bonds on the first
day of such Weekly Rate Period at a price equal to the principal amount
thereof plus accrued interest, if any, therein, provided such Weekly Rate
shall not in any event exceed 15% per annum. The Weekly Rate so determined
by the Remarketing Agent shall become effective on Wednesday of each week and
shall remain in effect through and including the following Tuesday, whether
or not such days are Business Days.
If the Remarketing Agent cannot or does not determine a Weekly Rate for
any week or if a Weekly Rate determined for any week shall be held to be
invalid or unenforceable by a court of law, or, as set forth in an opinion of
Bond Counsel, would have an adverse effect on the exclusion of interest on
the Series 1997B Bonds from gross income for Federal income tax purposes, or
if the Standby Bond Purchase Agreement shall be terminated without a
mandatory tender for purchase of the Series 1997B Bonds and an Alternate
Liquidity Facility shall not be delivered to the Tender Agent in replacement
thereof, the Weekly Rate for such week shall be the same as the Weekly Rate
for the preceding week as if it were an interest rate determined by the
Remarketing Agent. If the Remarketing Agent cannot or does not determine a
Weekly Rate for two consecutive seven-day periods, the Weekly Rate shall be
equal to 85% of the latest 30-day dealer taxable commercial paper rate
published by the Federal Reserve Bank of New York on or before the day next
preceding such date. The Trustee will give notice (by first class mail,
postage prepaid) of the Weekly Rate for the Series 1997B Bonds to any owner
of the Series 1997B Bonds who request such notice in writing to the Trustee.
TENDER FOR PURCHASE OF SERIES 1997B BONDS
OPTIONAL TENDER
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During any Weekly Rate Period in which the book entry system for the
Series 1997B Bonds is in effect, any Series 1997B Bond in a principal amount
equal to an Authorized Denomination shall be purchased upon demand of the
registered owner thereof on any Business Day at a price equal to 100% of the
principal amount thereof plus accrued interest, if any, to the date of
purchase, upon delivery to the Remarketing Agent at its offices by 5:00 p.m.
New York City time, on any Business Day, of a written irrevocable notice to
tender, which will be effective upon receipt, which (i) states the name and
address of the beneficial owner, the principal amount of such beneficial
interest (and the portion thereof to be tendered, if less than the full
principal amount thereof is to be tendered), and (ii) states the date on
which such beneficial interest shall be so purchased, which date shall be a
Business Day not prior to the seventh day next succeeding the date of the
delivery of such notice to the Remarketing Agent. Such beneficial interest
will be deemed to have been surrendered on the date specified in such notice.
The substance of such notice to tender must also be given to the Remarketing
Agent by telephone prior to or simultaneously with the delivery of such
notice.
During any Weekly Rate Period in which the book-entry system for the
Series 1997B Bonds is not in effect, any Series 1997B Bond in a principal
amount equal to an Authorized Denomination shall be purchased on the demand
of the registered owner thereof on any Business Day at a price equal to 100%
of the principal amount thereof, plus accrued interest, if any, to the date
of purchase, upon delivery to the Tender Agent by not later than 5:00 p.m.,
New York City time on any Business day, of the following:
(a) A written irrevocable notice, which will be effective upon
receipt, which (i) states the name and address of the registered owner, the
principal amount of such Series 1997B Bond (and the portion thereof to be
tendered, if less than the full principal amount thereof is to be tendered,
provided the same is an Authorized Denomination) and the Series 1997B Bond
number, and (ii) states the date on which such Series 1997B Bond shall be so
purchased, which date shall be a Business Day not prior to the seventh day
next succeeding thedate of the delivery ofsuch notice to theTender Agent; and
(b) Such Series 1997B Bonds (with all necessary endorsements and
guarantees of signature) attached to the aforesaid notice; provided, however,
that such Series 1997B Bond shall be so purchased only if the Series 1997B
Bond delivered to the Tender Agent shall conform in all respects to the
description thereof in the aforesaid notice; and provided, further, that if
the registered owner of the tendered Series 1997B Bond has previously
certified to the Tender Agent that it is an open-ended diversified management
investment company (registered under the Investment Company Act of 1940, as
amended), the delivery of the Series 1997B Bond need not be made until 12:00
P.M., New York City time, on the date such Series 1997B Bond is to be
purchased from such registered owner; provided, further, however, that if the
registered owner fails to deliver such Series 1997B Bond as required (an
"Undelivered Series 1997B Bond"), such Series 1997B Bond shall nevertheless
be deemed to have been delivered at the time and on the date required, and
shall no longer be Outstanding under the Indenture, and such registered owner
thereafter shall be entitled only to the purchase price payable for such
Series 1997B Bond on such required delivery date, and such purchase price
shall be paid to such registered owner only upon surrender of such Series
1997B Bond to the Tender Agent.
NOTWITHSTANDING THE FOREGOING, THE REGISTERED OWNER OF ANY SERIES 1997B
BOND SHALL HAVE NO RIGHT TO TENDER, NOR SHALL THERE BE ANY PURCHASE OF LESS
THAN THE ENTIRE AMOUNT OF ANY SERIES 1997B BONDS BEARING INTEREST AT A WEEKLY
RATE UNLESS THE AMOUNT TO BE PURCHASED AND THE AMOUNT TO BE RETAINED BY SUCH
OWNER ARE IN AUTHORIZED DENOMINATIONS.
IN THE EVENT OF A FAILURE BY AN OWNER OF SERIES 1997B BONDS TO DELIVER
ITS SERIES 1997B BONDS ON OR PRIOR TO THE REQUIRED DELIVERY DATE, SAID OWNER
SHALL NOT BE ENTITLED TO ANY PAYMENT (INCLUDING INTEREST ACCRUING FROM AND
AFTER THE PURCHASE DATE) OTHER THAN THE PURCHASE PRICE FOR SUCH UNDELIVERED
SERIES 1997B BONDS, AND ANY SUCH UNDELIVERED SERIES 1997B BONDS SHALL NO
LONGER BE ENTITLED TO THE BENEFIT AND SECURITY OF THE INDENTURE, EXCEPT FOR
THE PURPOSE OF THE PAYMENT OF THE PURCHASE PRICE THEREOF; AND THE TRUSTEE
WILL NOT REGISTER ANY FURTHER TRANSFERS OF SUCH UNDELIVERED SERIES 1997B
BONDS.
MANDATORY TENDER
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Upon the conversion of the interest rate on the Series 1997B Bonds to
the Term Rate Mode or the Fixed Rate Mode, the Series 1997B Bonds bearing
interest at the Weekly Rate shall be subject to mandatory tender for purchase
in accordance with the terms of the Indenture on the Conversion Date at a
price equal to the principal amount thereof, plus accrued interest, if any.
The Series 1997B Bonds bearing interest at the Weekly Rate shall also be
subject to mandatory tender for purchase on a date established by the Trustee
(the "Default Tender Date"), which shall be no later than thirty (30) days
after the date the Trustee receives a notice from the Standby Bond Purchaser
that the Standby Bond Purchaser has elected to terminate the Standby Purchase
Agreement prior to its stated expiration date as a result of the occurrence
of a termination event under the Standby Bond Purchase Agreement. The
Standby Bond Purchase Agreement will terminate effective as of the close of
business on the thirtieth (30th) day following the receipt of such notice by
the Trustee. See "THE STANDBY BOND PURCHASE AGREEMENT" herein.
The Series 1997B Bonds bearing interest at a Weekly Rate shall also be
subject to mandatory tender and purchase on the Interest Payment Date prior
to the Termination Date (the "Liquidity Tender Date") of the Standby Bond
Purchase Agreement (but in no event shall such Liquidity Tender Date be later
than the Business Day preceding the Termination Date of the Standby Bond
Purchase Agreement) unless the Company delivers to the Trustee no later than
thirty (30) days prior to the Interest Payment Date prior to the Termination
Date written evidence satisfactory to the Trustee of the extension of the
Standby Bond Purchase Agreement or delivery of an Alternate Liquidity
Facility.
At least twenty-five (25) days prior to the Conversion Date, the Default
Tender Date or the Liquidity Tender Date, as appropriate, the Trustee shall
give to each owner of Series 1997B Bonds notice by certified mail stating:
(a) the Conversion Date, the Default Tender Date or the Liquidity Tender
Date, as appropriate; and (b) that on the Conversion Date, the Default Tender
Date or the Liquidity Tender Date, as appropriate, the Series 1997B Bonds are
subject to mandatory tender for purchase (or, if all the Series 1997B Bonds
are held in a book-entry only system, that the beneficial interests in the
Series 1997B Bonds are subject to mandatory tender for purchase). In
addition, if book-entry only system is not in effect, the notice shall
further state: (i) that all Owners who have not tendered Series 1997B Bonds
for purchase on the mandatory tender date will be deemed to have tendered
their Series 1997B Bonds for purchase on such date; and (ii) that any Series
1997B Bonds not delivered to the Tender Agent on or prior to the mandatory
tender date for which there has been irrevocably deposited in trust with the
Trustee or the Tender Agent on or prior to the mandatory tender date an
amount of money sufficient to pay the purchase price of such Series 1997B
Bonds on the mandatory tender date, shall be deemed to have been so purchased
at the price of par plus accrued interest as of such date, and such Series
1997B Bonds shall no longer be considered to be Outstanding for purposes of
the Indenture and shall no longer be entitled to the benefits of the
Indenture, except for the payment of the purchase price thereof (and no
interest shall accrue thereon from and after the mandatory tender date).
IN THE EVENT OF A FAILURE BY AN OWNER OF SERIES 1997B BONDS TO DELIVER
ITS SERIES 1997B BONDS ON OR PRIOR TO THE CONVERSION DATE, THE DEFAULT TENDER
DATE OR THE LIQUIDITY TENDER DATE, AS APPROPRIATE, SAID OWNER SHALL NOT BE
ENTITLED TO ANY PAYMENT (INCLUDING ANY INTEREST ACCRUING FROM AND AFTER THE
CONVERSION DATE, THE DEFAULT TENDER DATE OR THE LIQUIDITY TENDER DATE, AS
APPROPRIATE) OTHER THAN THE PURCHASE PRICE FOR SUCH UNDELIVERED SERIES 1997B
BONDS, AND ANY UNDELIVERED SERIES 1997B BONDS SHALL NO LONGER BE ENTITLED TO
THE BENEFIT AND SECURITY OF THE INDENTURE, EXCEPT FOR THE PURPOSE OF THE
PAYMENT OF THE PURCHASE PRICE THEREOF; AND THE TRUSTEE WILL NOT REGISTER ANY
FURTHER TRANSFERS OF SUCH UNDELIVERED SERIES 1997B BONDS.
OPTIONAL REDEMPTION
The Series 1997B Bonds bearing interest at a Weekly Rate are subject to
redemption prior to maturity on any Interest Payment Date, at the option of
the Authority, which option shall be exercised upon the giving of notice by
the Company of its intention to prepay amounts due under the Loan Agreement,
as a whole or in part, at a redemption price equal to the principal amount
thereof, plus accrued interest, if any, to the date fixed for redemption.
EXTRAORDINARY MANDATORY REDEMPTION
The Series 1997B Bonds are subject to extraordinary mandatory redemption
in whole (in the case of (i) and (ii) below) or in part (in the case of (iii)
below) prior to maturity at a redemption price equal to the principal amount
of the Series 1997B Bonds Outstanding plus accrued interest to the redemption
date if any one of the following events has occurred with respect to the
Series 1997B Bonds:
(i) If the Company ceases to operate the Project or causes the
Project to cease to be operated as an authorized "project" under the Act for
twelve (12) consecutive months without first obtaining the prior written
consent of the Authority; or
(ii) If any representation or warranty made by the Company in the
Loan Agreement or in any report, certificate, financial statements or other
instrument furnished in connection with the Loan Agreement shall prove to be
false or misleading in any material respect when made; or
(iii) If the Liquidity Facility Issuer of an Alternate Liquidity
Facility, after expiration of the required holding period as determined in
accordance with the Indenture, demands that the Series 1997B Bonds owned by
such Liquidity Facility Issuer be redeemed.
EXTRAORDINARY OPTIONAL REDEMPTION
The Series 1997B Bonds are subject to extraordinary optional redemption
at the option of the Authority, upon the written notice of the Company, at a
redemption price equal to the principal amount thereof to be redeemed, plus
accrued interest to the date of redemption if any one of the following events
has occurred:
(i) As a result of any change in the Constitution of the United
States of America, the Constitution of the State, or of any final legislative
or executive action of the United States of America or of the State or any
political subdivision thereof, or by any final decree or judgment of any
court after the contest thereof by the Company, the Loan Agreement shall have
become void or unenforceable or legally impossible of performance in
accordance with the intent and purpose of the Authority or the Company, in
which case the redemption of the Series 1997B Bonds shall be in whole at any
time and not in part; or
(ii) Unreasonable burdens or excessive liabilities shall have been
imposed upon the Company by reason of the operation of the Project,
including, without limitation, Federal, State or other ad valorem, property,
income or other taxes, not being imposed on the date of issuance and delivery
of the Series 1997B Bonds, other than ad valorem taxes currently levied upon
privately owned property used for the same general purpose as the Project, in
which case such redemption of the Series 1997B Bonds shall be in whole at any
time or in part on any Interest Payment Date.
MANDATORY REDEMPTION
The Mortgage Indenture provides that in the event all or substantially
all of the property of the Company at the time subject to the lien of the
Mortgage Indenture, or all or substantially all of the property of the
Company at the time so subject to such lien which is used or useful in
connection with the utility business of the Company shall be released from
the lien of the Mortgage Indenture as provided in the Mortgage Indenture, the
award or consideration received by the trustee under the Mortgage Indenture
for such property (together with any other moneys held by the trustee under
the Mortgage Indenture) shall be applied by the trustee under the Mortgage
Indenture to the redemption of all bonds then outstanding under the Mortgage
Indenture, including the 1997B General Mortgage Bonds (as therein defined),
as more fully provided in the Mortgage Indenture. In the event that the
1997B General Mortgage Bonds are called for redemption in whole or in part as
described in the preceding sentence, the Series 1997B Bonds shall be subject
to mandatory redemption on the redemption date established for the 1997B
General Mortgage Bonds, in an aggregate principal amount equal to the
aggregate principal amount of 1997B General Mortgage Bonds so called for
redemption at a redemption price equal to the principal amount of the Series
1997B Bonds to be redeemed, plus accrued interest to the redemption date.
SPECIAL MANDATORY REDEMPTION
The Series 1997B Bonds are (except as otherwise provided below) subject
to special mandatory redemption, in whole, or in part as described below, at
any time prior to maturity at a redemption price equal to the principal
amount thereof to be redeemed, plus accrued interest to the redemption date
if (i) funds remain in the Construction Fund established under the Indenture
after payment of all costs of the Project, in which case the Series 1997B
Bonds are redeemable in part from such funds, or (ii) (a) there shall have
been delivered to the Trustee an opinion of a nationally recognized bond
counsel appointed by the Authority or the Company and acceptable to the
Trustee to the effect that any payment of interest on the Series 1997B Bonds
or any amount in respect of interest on the Series 1997B Bonds made on or
after a date specified in said opinion is includable for Federal income tax
purposes in the gross income of any holder of such Series 1997B Bonds under
Section 103 of the Internal Revenue Code of 1986, as amended (the "Code")
(other than a holder who is a "substantial user" of the Project or a "related
person" as provided for in Section 147(a) of the Code and the regulations
applicable thereunder), or (b) a final determination by the Internal Revenue
Service or a final judgment is rendered by a court of competent jurisdiction
in a proceeding, which determination or judgment is not being contested in an
appropriate proceeding brought directly by the Company or by a holder of a
Series 1997B Bond (provided that the Company may not contest any such
determination or judgment unless the Company provides the holders of the
Series 1997B Bonds involved in such proceeding with an opinion of a
nationally recognized bond counsel that such contest has a reasonable
likelihood of success), to the effect that, as a result of the failure by the
Company to perform and observe any covenant, warranty, representation or
agreement in the Loan Agreement, the interest payable on the Series 1997B
Bonds is includable for Federal income tax purposes in the gross income of
any holder of the Series 1997B Bonds under Section 103 of the Code (other
than a holder who is a "substantial user" of the Project or a "related
person" as provided for in Section 147(a) of the Code and the regulations
applicable thereunder). A determination of taxability under (a) or (b) above
will result only from the inclusion of the interest paid or to be paid on any
Series 1997B Bond (except to a holder who is a "substantial user" or a
"related person") in the gross income of the holder thereof for Federal
income tax purposes and not from any other Federal tax consequences arising
with respect to the Series 1997B Bonds. The Company shall promptly (i)
notify the Trustee of such determination of taxability and the date, which
date must be within one hundred and eighty (180) days from the date of such
determination of taxability but not less than sixty (60) days from the date
the notice from the Company to the Trustee is mailed, on which the Series
1997B Bonds shall be redeemed pursuant to the Indenture; and (ii) on or prior
to the date set for redemption, pay to the Trustee a sum sufficient, together
with other funds deposited with the Trustee and available for such purpose,
to redeem all such Series 1997B Bonds at the principal amount thereof plus
accrued interest to the redemption date; provided, however, that if the
determination of taxability under (a) or (b) above shall include the
determination that the interest on a principal amount which is less than all
of the Series 1997B Bonds then outstanding is includable in the gross income
of the holders thereof and the loss of such exemption can be cured by a
partial redemption of the Series 1997B Bonds, then only such principal amount
of the Series 1997B Bonds as shall be necessary to cure the loss of such
exemption shall be redeemed. For purposes of a determination of taxability
under (b) above, no decree or judgment by a court or action by the Internal
Revenue Service shall be considered final unless the holder of a Series 1997B
Bond involved in such proceeding or action (i) has given the Company and the
Trustee prompt written notice of a written determination by the Internal
Revenue Service (a 30-day or 90-day letter) that interest on the Series 1997B
Bonds is includable in gross income and (ii) offers the Company the
opportunity to contest the determination relating to inclusion of interest on
the Series 1997B Bonds in gross income; provided, however that the Company
shall be deemed to have waived its right to contest if it shall not agree to
pay all expenses in connection with such contest and to indemnify such holder
against all liability in connection therewith.
REDEMPTION FROM AVAILABLE MONEYS
Notwithstanding anything in the Indenture to the contrary, while the
Series 1997B Bonds bear interest at the Weekly Rate, the Series 1997B Bonds
will only be redeemed to the extent that the Trustee has Available Moneys on
hand to pay the redemption price of the Series 1997B Bonds on the redemption
date.
SELECTION OF SERIES 1997B BONDS TO BE REDEEMED
If less than all of the Series 1997B Bonds are to be redeemed, the
Series 1997B Bonds to be redeemed will be selected by the Trustee, by lot,
using such method of selection as the Trustee shall consider acceptable in
its discretion.
NOTICE OF REDEMPTION
Notice of redemption of the Series 1997B Bonds or portions thereof to be
redeemed, and the redemption date, will be given not less than thirty (30)
days nor more than forty-five (45) days prior to the redemption date by
notice mailed to the registered Owners of the Series 1997B Bonds to be
redeemed. Notice having been given as aforesaid, the Series 1997B Bonds or
respective portions thereof so called for redemption, will become due and
payable on the designated redemption date at the applicable redemption price
plus accrued interest. If, on the redemption date, moneys are available for
the redemption of the Series 1997B Bonds or portions thereof to be redeemed,
then interest on the Series 1997B Bonds or portions thereof shall thereafter
cease to accrue. So long as DTC or its nominee is the registered owner of
the Series 1997B Bonds, all notices of redemption of the Series 1997B Bonds
will be sent only to DTC or its nominee. Any failure of DTC to advise any
Direct Participant, or of any Direct or Indirect Participant to advise any
Beneficial Owner of the Series 1997B Bonds, of any such notice of redemption
will not affect the validity of any redemption of the Series 1997B Bonds
based on such notice. See "DESCRIPTION OF THE SERIES 1997B BONDS - Book-
Entry Only System" herein.
If, at the time of mailing of notice of any optional redemption, the
Authority shall not have deposited with the Trustee moneys sufficient to
redeem all the Series 1997B Bonds called for redemption, such notice shall
state that it is conditional in that it is subject to the deposit of the
redemption moneys with the Trustee not later than the redemption date, and
such notice shall be of no effect and the redemption shall be canceled unless
such moneys are so deposited.
SOURCES OF PAYMENT AND SECURITY FOR THE SERIES 1997B BONDS
The Series 1997B Bonds are special limited obligations of the Authority
payable from and secured by a pledge of all of the right, title and interest
of the Authority in and to, and the remedies under, the 1997B General
Mortgage Bonds and the Loan Agreement (except for the Reserved Rights), and
all right, title and interest of the Authority in and to the Revenues (as
defined in the Indenture) and certain funds held under the Indenture. The
Revenues, as defined in the Indenture, include (i) all amounts payable by the
Company with respect to, and the proceeds from, the 1997B General Mortgage
Bonds, (ii) investment income on any moneys held by the Trustee pursuant to
the Indenture, and (iii) any other amounts paid by the Company pursuant to
the Loan Agreement (except for the Reserved Rights).
AS WILL BE STATED IN THE SERIES 1997B BONDS, THE STATE IS NOT OBLIGATED
TO PAY, AND NEITHER THE FAITH AND CREDIT NOR TAXING POWER OF THE STATE IS
PLEDGED TO THE PAYMENT OF THE PRINCIPAL, REDEMPTION PRICE, IF ANY, OR
PURCHASE PRICE OF, OR INTEREST ON, THE SERIES 1997B BONDS. THE SERIES 1997B
BONDS ARE SPECIAL, LIMITED OBLIGATIONS OF THE AUTHORITY, PAYABLE SOLELY OUT
OF THE REVENUES OR OTHER RECEIPTS, FUNDS OR MONEYS OF THE AUTHORITY PLEDGED
UNDER THE INDENTURE AND FROM ANY AMOUNTS OTHERWISE AVAILABLE UNDER THE
INDENTURE FOR THE PAYMENT OF THE SERIES 1997B BONDS. THE SERIES 1997B BONDS
ARE NOT AND SHALL NEVER CONSTITUTE A CHARGE AGAINST THE GENERAL CREDIT OF THE
AUTHORITY. THE AUTHORITY HAS NO TAXING POWER.
BOOK-ENTRY ONLY SYSTEM
DTC is the securities depository for the Series 1997B Bonds. The
ownership of one fully registered Series 1997B Bond in the aggregate
principal amount of $60,000,000 will be registered in the name of Cede & Co.,
as the nominee for DTC. DTC is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning
of New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and
a "clearing agency" registered pursuant to the provisions of Section 17A of
the Securities Exchange Act of 1934, as amended. DTC holds securities that
its participants (the "Participants") deposit with DTC. DTC also facilitates
settlement of securities transactions such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
accounts of the Participants, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and
certain other organizations ("Direct Participants"). DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
banks, securities brokers and dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly (the "Indirect Participants"). The rules applicable to DTC and
its Participants are on file with the Securities and Exchange Commission.
Purchases of the Series 1997B Bonds under the DTC system must be made by
or through Direct Participants, which will receive a credit for the Series
1997B Bonds on DTC's records. The ownership interest of each actual
purchaser of each Series 1997B Bond ("Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from DTC of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership interests in the Series
1997B Bonds are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will
not receive certificates representing their ownership interests in the Series
1997B Bonds, except in the event that use of the book-entry system for the
Series 1997B Bonds is discontinued.
To facilitate subsequent transfers, all the Series 1997B Bonds deposited
by Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. The deposit of the Series 1997B Bonds with DTC and their
registration in the name of Cede & Co., effect no change in beneficial
ownership of the Series 1997B Bonds. DTC has no knowledge of the actual
Beneficial Owners of the Series 1997B Bonds. DTC's records reflect only the
identity of the Direct Participants to whose accounts the Series 1997B Bonds
are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
All redemption notices of the Series 1997B Bonds will be sent to Cede &
Co. If less than all of the Series 1997B Bonds are being redeemed, DTC's
practice is to determine by lot the amount of the interest of each Direct
Participant in the Series 1997B Bonds to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Series 1997B Bonds. Under its usual procedures, DTC mails an Omnibus Proxy
to the Direct Participants as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those
Direct Participants to whose accounts the Series 1997B Bonds are credited on
the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Series 1997B Bonds will be made
to DTC. DTC's practice is to credit Direct Participants' accounts on the
payment dates in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
the payment date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
Participant and not of DTC, the Authority, the Company, the Trustee or the
Paying Agent, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of the principal of and interest on the
Series 1997B Bonds to DTC is the responsibility of the Authority, the Trustee
and the Paying Agent, disbursement of such payments to Direct Participants
shall be the responsibility of DTC, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct and Indirect
Participants.
DTC may discontinue providing its services as securities depository with
respect to the Series 1997B Bonds at any time by giving reasonable notice to
the Authority or the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, certificates for the Series
1997B Bonds are required to be printed and delivered by the Authority to the
Beneficial Owners thereof at the expense of the Company.
The Authority may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
certificates for the Series 1997B Bonds will be printed and delivered by the
Authority to the Beneficial Owners thereof at the expense of the Company.
The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that the Authority and the Company
believe to be reliable, but neither the Authority, the Company nor the
Underwriter make any representation as to the accuracy, completeness or
adequacy of such information or as to the absence of any material adverse
change in such information subsequent to the date indicated in such
information.
THE AUTHORITY, THE COMPANY AND THE TRUSTEE CANNOT AND DO NOT GIVE ANY
ASSURANCES THAT DTC, THE DTC PARTICIPANTS OR THE INDIRECT PARTICIPANTS WILL
DISTRIBUTE TO THE BENEFICIAL OWNERS OF THE SERIES 1997B BONDS (I) PAYMENTS OF
THE PRINCIPAL, REDEMPTION PRICE OR PURCHASE PRICE OF OR INTEREST ON THE
SERIES 1997B BONDS, (II) CERTIFICATES REPRESENTING AN OWNERSHIP INTEREST OR
OTHER CONFIRMATION OF BENEFICIAL OWNERSHIP INTERESTS IN SERIES 1997B BONDS,
OR (III) REDEMPTION OR OTHER NOTICES SENT TO DTC OR CEDE & CO., ITS NOMINEE,
AS THE REGISTERED OWNER OF THE SERIES 1997B BONDS, OR THAT THEY WILL DO SO ON
A TIMELY BASIS OR THAT DTC, DTC PARTICIPANTS OR INDIRECT PARTICIPANTS WILL
SERVE AND ACT IN THE MANNER DESCRIBED IN THIS OFFICIAL STATEMENT. THE
CURRENT RULES APPLICABLE TO DTC ARE ON FILE WITH THE SECURITIES AND EXCHANGE
COMMISSION AND THE CURRENT "PROCEDURES" OF DTC TO BE FOLLOWED IN DEALING WITH
DTC PARTICIPANTS ARE ON FILE WITH DTC.
NEITHER THE AUTHORITY, THE COMPANY, NOR THE TRUSTEE WILL HAVE ANY
RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT, INDIRECT PARTICIPANT OR
ANY BENEFICIAL OWNER OR ANY OTHER PERSON WITH RESPECT TO: (1) THE SERIES
1997B BONDS; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC
PARTICIPANT OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DTC
PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY BENEFICIAL OWNER
IN RESPECT OF THE PRINCIPAL, REDEMPTION PRICE OR PURCHASE PRICE OF OR
INTEREST ON THE SERIES 1997B BONDS; (4) THE DELIVERY BY DTC OR ANY DTC
PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER
WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN
TO THE SERIES 1997B BONDHOLDERS; (5) THE SELECTION OF THE BENEFICIAL OWNERS
TO RECEIVE PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF THE SERIES 1997B
BONDS; OR (6) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS A SERIES
1997B BONDHOLDER.
SUMMARY OF CERTAIN PROVISIONS
OF THE INDENTURE
The following is a summary of certain provisions of the Indenture. This
summary does not purport to be a complete exposition of the provisions in the
Indenture, and is qualified in all respects by reference to provisions
contained in the Indenture. Capitalized terms used herein and not otherwise
defined in Appendix B shall have the respective meanings set forth in the
Indenture, a copy of which may be obtained from the Trustee.
PURCHASE OF TENDERED BONDS
(a) In performing its duties under the Indenture, the Remarketing
Agent or the Tender Agent, as the case may be, shall act as a conduit and not
be considered to be purchasing Bonds or beneficial interests in Bonds for its
own account and, in the absence of written notification from the Trustee,
shall be entitled to assume that any Bond tendered or deemed tendered to the
Tender Agent, or any beneficial interest in any Bond tendered to the
Remarketing Agent, for purchase is entitled under the Indenture to be so
purchased. No acceptance of Bonds by the Tender Agent under the Indenture,
and no acceptance of a direction to tender beneficial interests in Bonds by
the Remarketing Agent under the Indenture, shall effect any merger or
discharge of the indebtedness of the Authority evidenced by the Bonds. The
Tender Agent shall accept all Bonds properly tendered in accordance with the
provisions of the Indenture; provided, however, that the Remarketing Agent
shall not accept any directions to remarket any beneficial interests in any
Bonds during a Term Rate Period or the Fixed Rate Period (other than those
Bonds deemed tendered as of a Term Rate Conversion Date, a Term Rate Reset
Date or the Fixed Rate Conversion Date).
(b) (i) The Remarketing Agent shall establish a special trust fund
designated as the "New Jersey Economic Development Authority Water Facilities
Revenue Bonds (New Jersey-American Water Company, Inc. Project) Series 1997B
Purchase Fund" (the "Purchase Fund"). The Remarketing Agent shall hold all
moneys delivered to it for the purchase of beneficial interests in Bonds in
the Purchase Fund in trust and without investment, solely for the benefit of
the persons delivering such moneys, until the beneficial interests in such
Bonds purchased with such moneys have been designated by the Remarketing
Agent as being held for the account of such persons. In the event that the
Bonds are no longer held in a book-entry only system, the Tender Agent shall
establish and hold the Purchase Fund.
(ii) Except as otherwise provided in the Indenture, the Tender
Agent shall hold all Bonds delivered to it for the benefit of the respective
Owners of Bonds tendering such Bonds until moneys representing the purchase
price of such Bonds have been delivered to or for the account of such Owners
of Bonds. The Tender Agent shall hold all moneys delivered to it for the
purchase price of the Bonds in the Purchase Fund in trust and without
investment, solely for the benefit of the persons delivering such moneys,
until the Bonds purchased with such moneys have been delivered to or for the
account of such persons.
(iii) The agent then holding the Purchase Fund (i.e., the
Remarketing Agent or the Tender Agent, as the case may be), shall withdraw
sufficient funds from the Purchase Fund to pay the purchase price of tender
beneficial interests in Bonds or Bonds, as the case may be, as the same
becomes due and payable.
(c) The Trustee shall establish the "Liquidity Facility Account" in
the Purchase Fund. Moneys received by the Trustee from the Liquidity
Facility Issuer shall be held in the Liquidity Facility Account and the
Trustee shall hold all moneys delivered to it for the purchase of Bonds by
the Liquidity Facility Issuer in trust and without investment, for the
benefit of the Liquidity Facility Issuer, until the Bonds purchased with such
moneys have been delivered to the Trustee to or for the account of the
Liquidity Facility Issuer. Upon remarketing of Bonds held for the benefit of
the Liquidity Facility Issuer, the Trustee shall not deliver Bonds to the
purchasers of such Bonds until the proceeds at such remarketing have been
transferred to the Liquidity Facility Issuer and the Liquidity Facility
Issuer has notified the Trustee in writing that the right to make certain
drawings or requests for payment under the Liquidity Facility with respect to
such Bonds has been reinstated.
(d) While the Bonds are held in a book-entry only system,
beneficial interests in the Bonds may be optionally tendered (or, if the
Bonds are no longer held in a book-entry only system, the Bonds may be
optionally tendered) for purchase during a Weekly Rate Period and shall be
deemed tendered for purchase on each Conversion Date, Liquidity Tender Date,
Default Tender Date and Term Rate Reset Date, as set forth in the Indenture
and the form of Bond contained in the Indenture.
REMARKETING OF TENDERED BONDS; PAYMENT OF PURCHASE PRICE
(a) Subject to the terms and provisions of the Remarketing
Agreement, the Remarketing Agent shall use its best efforts to remarket (i)
optionally tendered beneficial interests in Bonds, of which it has received
notice of tender from a beneficial owner, or (ii) optionally tendered Bonds,
of which it has received notice of tender from the Tender Agent pursuant to
subsection (b) of this Section, in each case at a price equal to 100% of the
principal amount thereof plus accrued interest to the purchase date. With
respect to Term Rate Bonds, Fixed Rate Bonds or Weekly Rate Bonds being
converted to a Term Rate or Fixed Rate Mode (or beneficial interests in such
Bonds) on any Term Rate Conversion Date, Term Rate Reset Date or Fixed Rate
Conversion Date, it shall be the Company's obligation to arrange for the
purchase of the Bonds (or beneficial interests therein) on each such purchase
date at the Bid Rate necessary to meet the requirements therefor contained in
the form of Bond set forth in the Indenture, and to provide to the
Remarketing Agent all information prerequisite to the performance by the
Remarketing Agent of its duties set forth in paragraph (c) below.
(b) Upon receipt of a duly tendered written notice of an optional
tender of beneficial interest in Bonds or of an optional tender of Bonds, in
each case conforming to the requirements in the Indenture and the form of
Bond set forth in the Indenture, the Remarketing Agent or the Tender Agent,
as applicable, shall notify the Remarketing Agent (if applicable), the
Company, the Liquidity Facility Issuer and the Trustee of the principal
amount of Bonds (or beneficial interests therein) tendered and the date fixed
for purchase, which date shall be a Business Day not less than seven days
from the date of receipt of such notice by the Tender Agent or the
Remarketing Agent, as the case may be.
(c) Prior to 5:00 p.m., New York City time, on the Business Day
next preceding a purchase date (whether optional or mandatory), the
Remarketing Agent shall give notice to the Tender Agent, the Company, the
Liquidity Facility Issuer and the Trustee of the principal amount of such
Bonds (or beneficial interests therein) remarketed, and, if the Bonds are no
longer held in a book-entry only system, the names, addresses and taxpayer
identification numbers of the purchasers and the denominations in which the
Bonds are to be issued to each purchaser. If less than all of the Bonds (or
beneficial interests therein) to be tendered on such purchase date have been
remarketed, the Remarketing Agent shall, in addition, notify the Trustee, the
Tender Agent, the Liquidity Facility Issuer and the Company prior to 5:00
p.m., New York City time, on the Business Day next preceding the purchase
date, of the principal amount of Bonds (or beneficial interests therein)
which have not been remarketed and the amount of accrued interest to be paid
on such Bonds (or beneficial interests therein) on such purchase date.
Purchasers of Bonds (or beneficial interests therein) which have been
remarketed shall be required to deliver the purchase price thereof directly
to the Remarketing Agent (if all of the Bonds are held in a book-entry only
system) or to the Tender Agent (if the Bonds are no longer held in a book-
entry system), as the case may be, for deposit in the Purchase Fund not later
than 10:00 a.m., New York City time, on the purchase date. By 10:30 a.m.,
New York City time, on the purchase date, the Remarketing Agent (if all of
the Bonds are held in a book-entry only system) or the Tender Agent (if the
Bonds are no longer held in a book-entry only system), as the case may be,
shall notify the Trustee, the Remarketing Agent (if applicable), the
Liquidity Facility Issuer and the Company of the principal amount of any
Bonds (or beneficial interests therein) which have been remarketed for which
payment has not been received and the amount of the deficiency in the
purchase price and shall advise the Trustee of the denominations and
registration instructions for any Bonds which have been remarketed.
(d) By no later than 11:00 a.m., New York City time, on the
purchase date (whether optional or mandatory), the Trustee shall present a
draft for a draw upon or a request for payment under the Liquidity Facility
in accordance with its terms in an amount equal to the purchase price of: (1)
any tendered Bonds (or beneficial interests therein) not remarketed; and (2)
any tendered Bonds (or beneficial interests therein) remarketed and for which
payment has not been received. In the event the Trustee does not receive
advice from the Remarketing Agent or the Tender Agent, as applicable,
pursuant to paragraph (c) above regarding the amount of Bonds which have been
remarketed for which payment has not been received, the Trustee shall presume
that payment has not received and shall draw or request payment for the full
amount of the purchase price of such Bonds. The Trustee shall hold all
amounts received by it from such drawing under or a request for payment under
the Liquidity Facility in the Purchase Fund-Liquidity Facilities Account
pending application of such amounts.
The Tender Agent or the Remarketing Agent, as the case may be, shall
purchase any Bonds required to be purchased from funds made available to it
in the Purchase Fund or the Tender Agent or the Remarketing Agent, as the
case may be, shall purchase any Bonds required to be purchased from funds
made available to it by the Trustee from the Liquidity Facility Account, as
the case may be.
(e) Notices pursuant to this Section shall be by telephone, by
telecopy or tested telex (receipt confirmed in either case by telephone) or
by telegram, promptly confirmed in writing.
(f) Anything in the Indenture to the contrary notwithstanding,
there shall be no obligation of the Remarketing Agent to remarket (i) Weekly
Rate Bonds (or beneficial interests therein) if there shall have occurred and
be continuing an Event of Default under the Indenture, of (ii) Term Rate
Bonds or Fixed Rate Bonds (or beneficial interests therein), unless the
Remarketing Agent and the Company have agreed otherwise in the Remarketing
Agreement.
(g) All Bonds not remarketed by the Remarketing Agent shall become
Standby Bond Purchaser Bonds and shall be delivered by the Tender Agent to
the Trustee to be held for the benefit of the Liquidity Facilities Issuer (to
the extent funds from the Liquidity Facility are used to purchase the Bonds).
The Bonds purchased with Company furnished funds shall become Company Bonds
and delivered by the Tender Agent to the Trustee to be held for the account
of the Company.
(h) Any Bond (or beneficial interest therein) optionally tendered
for purchase after the date on which the Trustee has notified the Bond Owners
of a Term Rate Conversion Date or the Fixed Rate Conversion Date in
accordance with the provisions of the Indenture and the form of Bond set
forth in the Indenture shall not be remarketed unless the purchaser has been
notified by the Remarketing Agent (if all of the Bonds are held in a book-
entry only system) or the Trustee (if the Bonds are no longer held in a book-
entry only system) of the conversion to the Term Rate Mode or the Fixed Rate
Mode, as appropriate. Any such notice shall contain the same provisions as
the noticed required of the Trustee pursuant to the Indenture. Any purchaser
so notified must deliver a notice to the Trustee and the Remarketing Agent
(if all of the Bonds are held in a book-entry only system) or the Tender
Agent (if the Bonds are no longer held in a book-entry only system), as the
case may be, stating that such purchaser will tender its Bonds (or its
beneficial interest therein) for purchase on the Term Rate Conversion Date or
the Fixed Rate Conversion Date, as appropriate, and agreeing not to resell
the Bonds (or its beneficial interest therein) before such Conversion Date.
FUNDS FOR PURCHASE PRICE OF BONDS
On the date Bonds (or beneficial interests therein) are to be purchased
pursuant to the provisions of the Indenture, the Remarketing Agent (if all of
the Bonds are held in a book-entry only system) or the Tender Agent (if the
Bonds are no longer held in a book-entry only system), as the case may be,
shall deliver the purchase price to the tendering Bond Owner (or the
tendering beneficial owner) only from the funds listed below, in the order of
priority indicated:
(a) The proceeds of the sale of such Bonds (or beneficial interests
therein) which have been remarketed by the Remarketing Agent to any person
other than the Company (or any affiliate of the Company) or the Authority
prior to the time such Bonds (or beneficial interests therein) are to be
purchased, and, if the Bonds are no longer held in a book-entry only system,
delivered to the Tender Agent by 10:00 a.m., New York City time, on the
purchase date;
(b) Moneys paid by the Liquidity Facility Issuer pursuant to a draw
upon or request for payment under the Liquidity Facility; and
(c) Provided no funds are available under (a) and (b) above, moneys
deposited by the Company with the Remarketing Agent (if all of the Bonds are
held in a book-entry only system) or the Tender Agent (if the Bonds are no
longer held in a book-entry only system), as the case may be, pursuant to the
Loan Agreement.
DELIVERY OF PURCHASED BONDS
If all of the Bonds are held in a book-entry only system, the
Remarketing Agent shall designate beneficial interests in Bonds purchased
with moneys described in subparagraph (a) of "Funds for Purchase Price of
Bonds" above as being held for the account of such purchasers. Beneficial
interests of Bonds purchased with moneys described in subparagraph (b) of
"Funds for Purchase Price of Bonds" above shall be designated by the
Remarketing Agent as being Standby Bond Purchaser Bonds and shall be held for
the account of the Liquidity Facility Issuer as provided in the Indenture.
Beneficial interests of Bonds purchased with moneys described in subparagraph
(c) of "Funds for Purchase Price of Bonds" above shall be designated by the
Remarketing Agent as Company Bonds and shall be held for the account of the
Company.
If the Bonds are no longer held in a book-entry only system, the Tender
Agent shall make available by 2:00 p.m., New York City time, on a purchase
date (whether optional or mandatory), at its Principal Office, Bonds
purchased with moneys described in subparagraph (a) of "Funds for Purchase
Price of Bonds" above for receipt by the purchaser thereof. Bonds purchased
with moneys described in said subparagraph (a) shall be registered in the
manner directed by the Remarketing Agent and delivered to the Remarketing
Agent for redelivery to the purchasers thereof. Bonds purchased with moneys
described in subparagraph (b) of "Funds for Purchase Price of Bonds" above
shall be registered in the name of the Liquidity Facility Issuer and
delivered to the Trustee, as agent for the Liquidity Facility Issuer as
provided in the Pledge Agreement. Bonds purchased with moneys described in
subparagraph (c) of "Funds for Purchase Price of Bonds" above shall be
registered in the name of the Company and delivered to the Company.
BONDS TO BE HELD BY TRUSTEE FOR ACCOUNT OF THE LIQUIDITY FACILITY ISSUER
The Trustee shall hold for the benefit of the Liquidity Facility Issuer
all Bonds purchased form funds received from the Liquidity Facility Issuer
and delivered to it pursuant to the Indenture in accordance with the terms of
the Standby Bond Purchase Agreement or Pledge Agreement, as the case may be,
unless and until such Bonds shall be canceled as provided therein or the
Liquidity Facility Issuer shall have been notified by the Remarketing Agent
or Trustee that immediately available funds have been made available to the
Remarketing Agent or the Tender Agent and the Liquidity Facility Issuer has
notified the Trustee that the right to make certain drawings or requests for
payment under the Liquidity Facility with respect to such Bonds has been
reinstated. Upon such reinstatement, any such Bonds which have been
remarketed as provided in the Indenture shall be delivered to the purchasers
in the Indenture and any other such Bonds shall, at the direction of the
Company, be (i) delivered to or held by the Trustee for the account of the
Company, (ii) delivered to the Trustee for cancellation or (iii) delivered to
the Company. The Liquidity Facility Issuer shall be entitled to all interest
paid on account of Bonds held by the Liquidity Facility Issuer or on its
behalf by the Trustee pursuant to the Indenture.
THE FGIC-SPI LIQUIDITY FACILITY
The Obligations will rank equally with all other general unsecured and
unsubordinated obligations of FGIC-SPI. The Obligations are not issued
pursuant to an indenture. As of the date hereof FGIC-SPI has approximately
$3 billion obligations currently outstanding after giving effect to the
Obligations.
Owners of the Series 1997B Bonds to which the Obligations relate will be
entitled to the benefits and subject to the terms of the FGIC-SPI Liquidity
Facility. Pursuant to the FGIC-SPI Liquidity Facility, FGIC-SPI agrees to
make available to a specified intermediary, upon receipt of an appropriate
demand for payment, the Purchase Price for such Series 1997B Bonds. The
obligation of FGIC-SPI under the FGIC-SPI Liquidity Facility will be
sufficient to pay a Purchase Price equal to the principal of and up to 37
days' interest on the Series 1997B Bonds at an assumed rate of 15% per annum.
TERMINATION EVENTS
The scheduled expiration date of the FGIC-SPI Liquidity Facility is May
30, 2002, unless extended or sooner terminated. Mandatory purchase of Bonds
by FGIC-SPI shall occur under the circumstances specified in the Indenture.
Under certain circumstances, the obligation of FGIC-SPI to purchase Bonds
tendered for purchase pursuant to an optional or mandatory tender, which have
not been remarketed, may be terminated. The following events constitute
"Termination Events" under the FGIC-SPI Liquidity Facility:
(a) (i) any portion of the commitment fee shall not be paid when due on
the quarterly payment date as set forth in the Standby Bond Purchase
Agreement and related payment agreement (the Payment Agreement"), or (ii) any
other amount payable thereunder shall not be paid when due and any such
failure shall continue for three (3) Business Days after notice thereof to
the Authority and the Company; (b) the State shall take any action which
would impair the power of the Authority to comply with the covenants and
obligations of the Authority under the Indenture or any right or remedy of
FGIC-SPI or any owners of the Bonds from time to time to enforce such
covenants and obligations; (c) (i) the Authority shall fail to observe or
perform any covenant or agreement contained in the Indenture and, if such
failure is a result of a covenant breach which is capable of being remedied,
such failure continues for ninety (90) days following written notice thereof
to the Authority and the Company from FGIC-SPI, provided that if any such
failure (other than a payment default) shall be such that it cannot be cured
or corrected within such ninety (90) day period, it shall not constitute a
Termination Event hereunder if curative or corrective action is instituted
within such period and diligently pursued until the failure of performance is
cured or corrected, or (ii) there shall not be at all times a Remarketing
Agent performing the duties thereof contemplated by the Indenture; (d) an
event of default has occurred and is continuing under the Loan Agreement; (e)
any representation, warranty, certification or statement made by the
Authority or the Company (or incorporated by reference) in any related
document or in any certificate, financial statement or other document
delivered pursuant thereto or any related document shall prove to have been
incorrect in any material respect when made; (f) any default by the Authority
shall have occurred and be continuing in the payment of principal of or
premium, if any, or interest on any bond, note or other evidence of
indebtedness issued, assumed or guaranteed by the Authority the obligation
and security for which under the Indenture or under any related document is
senior to, or on parity with, the Bonds; (g) the Authority or the Company
files a petition in voluntary bankruptcy, for the composition of its affairs
or for its corporate reorganization under any state or federal bankruptcy or
insolvency law, or makes an assignment for the benefit of creditors, or
admits in writing to its insolvency or inability to pay debts as they mature,
or consents in writing to the appointment of a trustee or receiver for
itself; (h) a court of competent jurisdiction shall enter an order, judgment
or decree declaring the Authority or the Company insolvent, or adjudging it
bankrupt, or appointing a trustee or receiver of the Authority, or approving
a petition filed against the Authority or the Company seeking a
reorganization of the Authority or the Company under any applicable law or
statute of the United States of America or any state thereof, and such order,
judgment or decree shall not be vacated or set aside or stayed within sixty
(60) days from the date of the entry thereof; (i) under the provisions of any
other law for the relief or aid of debtors, any court of competent
jurisdiction shall assume custody or control of the Authority or the Company
and such custody or control shall not be terminated within sixty (60) days
from the date of assumption of such custody or control; (j) any material
provision of the Standby Bond Purchase Agreement, the Indenture, the
Remarketing Agreement, any related document, the Variable Rate Bonds or the
Provider Bonds purchased by FGIC-SPI shall cease for any reason whatsoever
to be a valid and binding agreement of the Authority or the Company or the
Authority or the Company shall contest the validity or enforceability thereof;
or (k) failure to pay when due any amount payable under the Variable Rate
Bonds or the Provider Bonds (regardless of any waiver thereof by the Holders
of the Bonds).
Upon the occurrence of a Termination Event, FGIC-SPI may deliver notice
to the Trustee, the Authority, the Remarketing Agent and the Tender Agent
regarding its intention to terminate the Liquidity Facility. The FGIC-SPI
Liquidity Facility would terminate, effective at the close of business on the
30th day following the date of such notice, or if such date is not a Business
Day, the next Business Day. Prior to the effectiveness of such termination,
all Bonds that are Variable Rate Bonds are subject to mandatory tender for
purchase from the proceeds of a drawing under the FGIC-SPI Liquidity
Facility. The termination of the FGIC-SPI Liquidity Facility, however, does
not result in an automatic acceleration of the Bonds.
The obligations of the Authority with respect to the Bonds are as
described in the Official Statement relating to the Series 1997B Bonds.
THE STANDBY LOAN AGREEMENT; GE CAPITAL
In order to obtain funds to fulfill its obligations under the FGIC-SPI
Liquidity Facility, FGIC-SPI will enter into a standby loan agreement with GE
Capital (the "Standby Loan Agreement") under which GE Capital will be
irrevocably obligated to lend funds to FGIC-SPI as needed to purchase such
Bonds. Each loan under the Standby Loan Agreement will be in an amount not
exceeding the purchase price for tendered Bonds which represents the
outstanding principal amount of such tendered Bonds together with accrued
interest thereon to but excluding the date a borrowing is made and will
mature on the date which is five years from the effective date of the Standby
Loan Agreement. The proceeds of each loan shall be used only for the purpose
of paying the purchase price for tendered Bonds. When FGIC-SPI desires to
make a borrowing under the Standby Loan Agreement, it must give GE Capital
prior written notice of such borrowing by at least 11:45 a.m., New York City
time, on the proposed borrowing date. No later than 2:30 p.m., New York City
time, on each borrowing date (if the related notice of borrowing has been
received by 11:45 a.m. on such date), GE Capital will make available the
amount of the borrowing requested.
The Standby Loan Agreement will expressly provide that it is not a
guarantee by GE Capital of the Bonds or of FGIC-SPI's obligations under the
FGIC-SPI Liquidity Facility. GE Capital will not have any responsibility
for, or incur any liability in respect of, any act, or any failure to act, by
FGIC-SPI which results in the failure of FGIC-SPI to effect the purchase for
the account of FGIC-SPI of tendered Bonds with the funds provided pursuant to
the Standby Loan Agreement.
GE Capital is subject to the informational requirements of the 1934 Act
and in accordance therewith files reports and other information with the
Commission. Such reports and other information can be inspected and copied
at Room 1024 at the Office of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the Commission
at 500 W. Madison, 14th Floor, Chicago, Illinois 60661-2511, and 7 World
Trade Center, New York, New York 10048 and copies can be obtained by mail
from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. In addition, the
Commission maintains a Website that contains reports, proxy and other
information regarding registrants that file electronically, such as GE
Capital. The address of the Commission's Website is http:/www.sec.gov.
Reports and other information concerning GE Capital can also be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New
York 10005 on which certain of GE Capital's securities are listed.
The following table sets forth the consolidated ratio of earnings to
fixed charges of GE Capital for the periods indicated:
<TABLE>
<CAPTION>
Three Months
Ended
Year Ended December 31, March 29, 1997
<S> <C> <C> <C> <C> <C>
1992 1993 1994 1995 1996
1.44 1.62 1.63 1.51 1.53 1.56
</TABLE>
For purposes of computing the consolidated ratio of earnings to fixed
charges, earnings consist of net earnings adjusted for the provision for
income taxes, minority interest and fixed charges. Fixed charges consist
of interest and discount on all indebtedness and one-third of rentals,
which the Company believes is a reasonable approximation of the interest
factor of such rentals.
EXPERTS
The financial statements and schedule of General Electric Capital
Corporation and consolidated affiliates as of December 31, 1996 and 1995,
and for each of the years in the three year period ended December 31,
1996, appearing in GE Capital's Annual Report on Form 10-K for the year
ended December 31, 1996, incorporated by reference herein, have been
incorporated herein by reference in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in
accounting and auditing.
APPENDIX A
TENDER TIMELINE
TENDERS FOR BONDS
PURCHASE DATE
(New York City time)
11:00 a.m. (1)
11:45 a.m. (2)
2:15 p.m. (3)
2:30 p.m. (4)
1. Trustee shall give immediate telephonic notice, in any event not later
than 11:00 a.m. on the Purchase Date, to FGIC-SPI specifying the
aggregate principal amount of Bonds to be purchased by FGIC-SPI on
such Purchase Date.
2. FGIC-SPI must give GE Capital prior written notice of a borrowing
under the Standby Loan Agreement by 11:45 a.m. on the date of the
proposed borrowing.
3. No later than 2:15 p.m. on each Purchase Date, GE Capital will make
available the amount of borrowing requested.
4. FGIC-SPI purchases Bonds, for which remarketing proceeds are
unavailable, by 2:30 p.m. on the Purchase Date.
Appendix B
DEFINITIONS
-----------
"Alternate Liquidity Facility" shall mean any guaranty, standbypurchase
agreement or letter of credit approved in writing by the Bond Issuer
substituted for the Initial Liquidity Facility (or for any Alternate
Liquidity Facility) which is issued by a Qualified Issuer at least 30 days
prior to the Interest Payment Date prior to the Termination Date to be
effective on the Termination Date (unless the Interest Payment Date and the
Termination Date are the same date, in which case the Alternate Liquidity
Facility is issued by aQualified Issuer at least 30 daysprior to such date)
and has provisions inall material respects the sameas the Initial Liquidity
Facility (other than the expiration date therefor) and which provides
liquidity for payment of the purchase price of the Bonds when due, which is
accompanied by written evidence from the Rating Agencies that the
substitution of such Liquidity Facility in and of itself does not cause a
downgradingof the rating then in existence,if any, of the Series B Bonds by
Moody's, if Moody's is then rating the Bonds, and Standard & Poor's, if
Standard & Poor's is then rating the Bonds,as applicable, and an opinion of
Bond Counsel that the acceptanceof the Alternate Liquidity Facilitywill not
result in a Determinationof Taxability and for whichnotice of the Alternate
Liquidity Facility shall be given by first class mail to the Bondholders.
"Authorized Denomination" means, with respect to Bonds bearing interest
at a Weekly Rate orTerm Rate, $100,000 or any integralmultiple of $5,000 in
excess of such amount and with respect to Bonds bearing interest at a Fixed
Rate, $5,000 or any integral multiple thereof.
"Available Moneys" means in connection with the payment of the
principal, redemption price, if any, or purchase price of, or interest on,
the Series 1997BBonds: (i) moneys which have been on deposit in the Revenue
Fund (as defined in the Indenture, and including moneys which have been
transferred from theConstruction Fund (as definedin the Indenture) pursuant
to the provisions of theLoan Agreement and the Indenture) for a periodof at
least ninety-one (91) days prior to the expiration of whichperiod no act of
bankruptcy by or againstthe Company or the Authorityshall have occurred and
have not been dismissed subject to no further appeal, and the proceeds from
the investment of such moneys; (ii) moneys on deposit with the Trustee, not
derived from payments madefrom the Company or the Authority,which represent
proceedsfrom the remarketing of Series1997B Bonds by the Remarketing Agent;
(iii) moneys which are paid to the Trustee by the Liquidity Facility Issuer
pursuant to a drawupon or a request for paymentunder the Liquidity Facility
in orderto purchase Series 1997B Bonds which havenot been remarketed by the
Remarketing Agent; (iv) moneys which are paid to the Trustee by FGIC-SPI
pursuant to the Policy; and (v) moneys which in the opinion of a firm of
attorneys expert in matters relating to bankruptcy and insolvency are not
subject to a claim that the payment thereof tothe Owners of the Series 1997B
Bonds will constitute a voidable preference under Section 547 of the United
States Bankruptcy Code.
"Bond Counsel" shall mean St. John & Wayne L.L.C., or a firm of
attorneys of nationally recognized expertise with respect to the tax-exempt
obligations of political subdivisions, selected by the Company and acceptable
to the Remarketing Agent and the Trustee.
"Business Day" or "business day" means any date other than (i) Saturday
or Sunday, (ii) a day on which the New York Stock Exchange or banks are
authorized or obligated by law or executive order to close in New York, New
York or any city in which is located the principal corporate trust office of
the Trustee or the office of the Liquidity Facility issuer at which demands
for a draw down or payment under the Liquidity Facility will be made.
"Conversion Date" means a Term Rate Conversion Date, a Weekly Rate
Conversion Date or a Fixed Rate Conversion Date, as appropriate.
"Fixed Rate" means the interest rate per annum on the Bonds established
in accordance with the Indenture.
"Fixed Rate Bonds" means Bonds bearing interest at the Fixed Rate.
"Fixed Rate Conversion Date" shall mean the Weekly Rate Interest Payment
Date or the Term Rate Interest Payment Date on which the Bonds begin to bear
interest at the Fixed Rate pursuant to the Indenture.
"Fixed Rate Mode" means the Mode in which the Bonds bear interest at the
Fixed Rate.
"Fixed Rate Period" means the period from the Fixed Rate Conversion Date
to the maturity date of the Bonds.
"Interest Payment Date" means with respect to the Bonds, the dates on
which interest on such Bonds is payable as specified in the Indenture.
"Loan Agreement" shall mean the Series B Loan Agreement, dated as of May
1, 1997, between the Authority and the Company, including all amendments
thereof and supplements thereto.
"Moody's" shall mean Moody's Investors Service, Inc. and its successors
and assigns, and, if such corporation shall be dissolved or liquidated or
shall no longer perform the functions of a securities rating agency,
"Moody's" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Authority by written notice of an
Authorized Officer to the Trustee.
"Mortgage Indenture" shall mean the Indenture of Mortgage dated as of
May 1, 1968 between the Company and First Union National Bank (formerly known
as The Fidelity Bank, N.A.), as trustee, as amended and supplemented,
including the Supplemental Mortgage Indenture.
"Outstanding" shall mean all Bonds which have been executed and
delivered by the Issuer and authenticated by the Trustee or the Tender Agent
under the Indenture.
"Project" shall mean the construction and improvements to be undertaken
by the Company as contemplated by the Loan Agreement.
"State" shall mean the State of New Jersey.
"Term Rate" shall mean the interest rate per annum on the Bonds
established in accordance with the Indenture.
"Term Rate Bonds" means Bonds bearing interest at the Term Rate.
"Term Rate Conversion Date" shall mean the Weekly Rate Interest Payment
Date on which the Bonds begin to bear interest at a Term Rate pursuant to the
Indenture.
"Term Rate Mode" shall mean the Mode in which the Bonds bear interest at
a Term Rate.
"Term Rate Period" shall mean the period from(a) a Term Rate Conversion
Date or a Term Rate Reset Date, as appropriate, to (b) the final maturity of
the Bonds, a subsequent Conversion Date or Term Rate Reset Date, as
appropriate, but, subject to the provisions of the Indenture, in any event, a
period of not less than six months in duration which ends on a Term Rate
Interest Payment Date.
"Termination Date" means the termination date of the FGIC-SPI Liquidity
Facility, unless extended, unless such Liquidity Facility has been replaced
by an Alternate Liquidity Facility, in which event it means the termination
date of the Alternate Liquidity Facility.
"Weekly Rate" shall mean the interest rate per annum on the Bonds
established pursuant to the Indenture.
"Weekly Rate Mode" shall mean the Mode in which the Bonds bear interest
at a Weekly Rate.
"Weekly Rate Period" shall mean the period from the Closing Date until
the earlier of a Conversion Date or the maturity date of the Bonds (to the
extent that the Bonds are in the Weekly Rate Mode at such time), and, should
a Weekly Rate Conversion Date to the earlier of the following Conversion Date
or the maturity date of the Bonds (to the extent the Bonds are in the Weekly
Rate Mode at such time).
$1,000,000,000
PRINCIPAL AMOUNT PLUS INTEREST
LIQUIDITY FACILITY OBLIGATIONS
OF
FGIC SECURITIES PURCHASE, INC.
FGIC Securities Purchase, Inc. ("FGIC-SPI" or the "Company") intends to
offer from time to time, in connection with the issuance by municipal
authorities or other issuers of adjustable or floating rate debt securities
(the "Securities"), its obligations (the "Obligations") under one or more
liquidity facilities (the "Liquidity Facilities"). The Obligations will not
be sold separately from the Securities, which will be offered pursuant to a
separate prospectus or offering statement. The Obligations will not be
severable from the Securities and may not be separately traded. This
Prospectus, appropriately supplemented, may also be delivered in connection
with any remarketing of Securities purchased by FGIC Securities Purchase,
Inc. or its affiliates.
Unless otherwise specified in a prospectus supplement to the Prospectus
(a "Prospectus Supplement"), the Obligations will be issued from time to
time to provide liquidity for certain adjustable or floating rate Securities
issued by municipal authorities or other issuers. The specific terms of the
Obligations and the Securities to which they relate will be set forth in a
Prospectus Supplement. Each issue of Obligations may vary, where applicable,
depending upon the terms of the Securities to which the issuance of
Obligations relates.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURI-
TIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- ------------------------------
The date of this Prospectus is May 29, 1997
The information contained in this Prospectus has been obtained from FGIC
Securities Purchase, Inc. This Prospectus is submitted in connection with
the future sale of securities as referred to herein, and may not be
reproduced or used, in whole or in part, for any other purposes.
No dealer, salesman or any other person has been authorized by FGIC-SPI
to give any information or to make any representation, other than as
contained in this Prospectus or a Prospectus Supplement, in connection with
the offering described herein, and if given or made, such other information
or representation must not be relied upon as having been authorized by any of
the foregoing. This Prospectus does not constitute an offer of any
securities other than those described herein or a solicitation of an offer to
buy in any jurisdiction in which it is unlawful for such person to make such
offer, solicitation or sale.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and in accordance therewith
files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected and copied at Room 1024 at the Office of the Commission, 450 Fifth
Street N.W., Washington, D.C. 20549, as well as at the Regional Offices of
the Commission at 500 W. Madison, 14th Floor, Chicago, Illinois 60661-2511,
and 7 World Trade Center, New York, New York 10048 and copies can be obtained
by mail from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, the
Commission maintains a Website that contains reports, proxy and other
information regarding registrants that file electronically, such as FGIC-SPI.
The address of the Commission's Website is http:/www.sec.gov. FGIC-SPI does
not intend to deliver to holders of its obligations offered hereby an annual
report or other report containing financial information.
This Prospectus and the applicable Prospectus Supplement constitute a
prospectus with respect to the Obligations of FGIC-SPI under the Liquidity
Facilities to be issued from time to time by FGIC-SPI in support of the
Securities. It is not anticipated that registration statements with respect
to the Securities issued by municipal authorities or other issuers will be
filed under the Securities Act of 1933, as amended, in reliance on an
exemption therefrom.
------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
There are hereby incorporated in this Prospectus by reference the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 and
the Quarterly Report on Form 10-Q for the quarter ended March 31, 1997, all
heretofore filed with the Commission pursuant to Section 13 of the 1934 Act,
to which reference is hereby made.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
or 15(d) of the 1934 Act after the date of this Prospectus and prior to the
termination of the offering of the Obligations and the Securities shall be
deemed to be incorporated in this Prospectus by reference and to be a part
hereof from the date of filing of such documents. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, on the written or oral
request of such person, a copy of any or all of the documents referred to
above which have been or may be incorporated in this Prospectus by reference,
other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents. Requests for such copies
should be directed to Corporate Communications Department, FGIC Corporation,
115 Broadway, New York, New York 10006, Telephone No. (212) 312-3000.
SUMMARY
The proposed structure will be utilized to provide liquidity through a
"put" mechanism for floating or adjustable rate securities and other
derivative debt securities issued by municipal authorities or other issuers.
Such securities typically include a tender feature that permits broker-
dealers to establish interest rates on a periodic basis which would enable
the securities to be remarketed at par and that provides a secondary market
liquidity mechanism for holders desiring to sell their securities. Such
securities will be remarketed pursuant to an agreement under which the
broker-dealers will be obligated to use "best efforts" to remarket the
securities. In the event that they cannot be remarketed, FGIC-SPI will be
obligated, pursuant to a standby purchase agreement or similar contractual
arrangement with the issuer, remarketing agent, tender agent or trustee of
the securities, to purchase unremarketed securities, from the holders
desiring to tender their securities (the "put option") or upon certain other
events. This facility will assure the holders of liquidity for their
securities even when market conditions preclude successful remarketing.
The proposed structure may also be used in connection with concurrent
offerings of variable rate demand securities ("VRDNs") and convertible
inverse floating rate securities ("INFLOs"). VRDNs and INFLOs are municipal
derivative securities pursuant to which (i) the interest rate on the VRDNs is
a variable interest rate which is re-set by the remarketing agent from time
to time (not to exceed a stated maximum rate) (the "VRDN Rate") and (ii) the
interest rate on the INFLOs is concurrently re-set at a rate equal to twice a
specified Linked Rate minus the fee charged by FGIC-SPI for the Liquidity
Facility. The owners of VRDNs have the optional right to tender their VRDNs
to the issuer for purchase and, in the event the remarketing agent does not
successfully remarket the tendered VRDNs, FGIC-SPI is obligated to pay the
purchase price therefor pursuant to the terms of its liquidity facility.
If an owner of INFLOs desires a fixed rate of interest not subject to
fluctuation based on the inverse floating rate equation described above, he
may elect to purchase from VRDN holders an amount of VRDNs equal to the
principal amount of INFLOs for which such holder desires a fixed rate of
interest. The net effect of such purchase is to "link" an equal principal
amount of VRDNs and INFLOs and thereby set a fixed interest rate on the
combined securities. If the owner of such combined securities so elects, he
may "de-link" his VRDNs and INFLOs. The remarketing agent will then remarket
the VRDNs at a re-set interest rate and the INFLOs retained by the de-linking
owner will again continue to vary and to be re-set whenever the interest rate
of the VRDNs are re-set. An INFLOs owner may also elect to permanently link
his INFLOs with an equal principal amount of VRDNs and thereby permanently
fix the interest rate on the combined securities to their stated maturity;
once permanent linkage is effected, no subsequent de-linkage is permitted.
Until such time as VRDNs are permanently linked to INFLOs, the VRDNs
will remain subject to remarketing in the manner noted above and FGIC-SPI
will remain obligated to purchase unremarketed VRDNs in connection with the
optional right of holders to tender their VRDNs for purchase.
The fees for providing the liquidity mechanism will be paid by the
issuer or other entity specified in the applicable Prospectus Supplement,
typically over the life of the liquidity agreement or, in the case of VRDNs,
until such time as a VRDN is permanently linked with an INFLO. Except as
otherwise provided in a Prospectus Supplement, in order to obtain funds to
purchase unremarketed securities, FGIC-SPI will enter into standby loan
agreements with one or more financial institutions (the "Standby Lenders")
under which the Standby Lenders will be irrevocably obligated to lend funds
to FGIC-SPI as needed to purchase Securities for which the put option has
been exercised. Except as otherwise provided in a Prospectus Supplement, the
standby purchase agreement or similar contractual agreement between FGIC-SPI
and the trustee, issuer or other specified entity will provide that, without
the consent of the issuer and the trustee for the security holders, FGIC-SPI
will not agree or consent to any amendment, supplement or modification of the
related standby loan agreement, nor waive any provision thereof, if such
amendment, supplement, modification or waiver would materially adversely
affect the issuer or other specified entity, or the security holders. Except
as otherwise provided in a Prospectus Supplement, the obligations of FGIC-SPI
under the standby purchase agreement or similar contractual agreement may
only be terminated upon the occurrence of certain events of non-payment,
default or insolvency on the part of the issuer or other specified entity.
In the event of a termination of the obligations of FGIC-SPI under the
standby purchase agreement or similar contractual agreement, the securities
will be subject to a mandatory tender. Prior to such time, security holders
will have the option to tender their securities, all as set forth in the
applicable Prospectus Supplement.
The above structure is intended to receive the highest ratings from the
rating agencies and to provide public issuers with the lowest cost of
financing. There can be no assurances, however, that such ratings will be
maintained.
THE COMPANY
FGIC-SPI was incorporated in 1990 in the State of Delaware. All
outstanding capital stock of FGIC-SPI is owned by FGIC Holdings, Inc., a
Delaware corporation.
Unless otherwise specified in a Prospectus Supplement, the business of
FGIC-SPI consists and will consist of providing liquidity for certain
adjustable and floating rate Securities issued by municipal authorities or
other issuers through "liquidity facilities". The securities are typically
remarketed by registered broker-dealers at par on a periodic basis to
establish the applicable interest rate for the next interest period and to
provide a secondary market liquidity mechanism for security holders desiring
to sell their securities. Pursuant to standby purchase agreements or similar
contractual agreements with issuers of the securities, FGIC-SPI will be
obligated to purchase unremarketed securities from the holders thereof who
voluntarily or mandatorily tender their Securities for purchase. In order to
obtain funds to purchase the Securities, FGIC-SPI will enter into one or more
standby loan agreements with Standby Lenders under which the Standby Lenders
will be irrevocably obligated to lend funds as needed to FGIC-SPI to purchase
Securities as required.
FGIC-SPI's principal executive offices are located at 115 Broadway, New
York, New York 10006, Telephone No. (212) 312-3000.
THE LIQUIDITY FACILITIES
The Obligations will rank equally with all other general unsecured and
unsubordinated obligations of FGIC-SPI. The Obligations are not issued
pursuant to an indenture.
Registered owners of the Securities will be entitled to the benefits and
subject to the terms of the applicable Liquidity Facility as specified in the
Prospectus Supplement. Pursuant to the Liquidity Facilities, FGIC-SPI will
agree to make available to a specified intermediary, upon receipt of an
appropriate demand for payment, the purchase price for the Securities to
which such Liquidity Facility relates. The obligation of FGIC-SPI under each
Liquidity Facility will be sufficient to pay a purchase price equal to the
principal of the Security to which such facility relates and up to a
specified amount of interest at a specified rate set forth in the applicable
Prospectus Supplement.
THE STANDBY LOAN AGREEMENT
In order to obtain funds to fulfill its obligations under the Liquidity
Facilities, FGIC-SPI will enter into one or more Standby Loan Agreements with
one or more Standby Lenders under which the Standby Lenders will be
irrevocably obligated to lend funds to FGIC-SPI as needed to purchase the
Securities to which the applicable Liquidity Facility relates. Each Standby
Loan Agreement will have the terms set forth in the applicable Prospectus
Supplement. It is anticipated that each loan under a Standby Loan Agreement
will be in an amount not exceeding the purchase price for the Securities
tendered by the holders which will represent the outstanding principal
amount of such securities, premium, if any, and accrued interest thereon for a
specified period. The proceeds of each loan shall be used only for the
purpose of paying the purchase price for tendered Securities. It is not
anticipated that a Standby Lender will guarantee the Securities to which
its Standby Loan Agreement relates or FGIC-SPI's obligation under any
Standby Purchase Agreement. Standby Lenders will be identified in the
appropriate Prospectus Supplement.
PLAN OF DISTRIBUTION
The Obligations will not be sold separately from the Securities, which
will be offered pursuant to a separate prospectus, official statement or
offering circular. In the event that Kidder, Peabody & Co., Incorporated, an
affiliate to FGIC-SPI and FGIC Corporation, participates in the distribution
of the Obligations and related Securities, such distribution will conform to
the requirements set forth in the applicable sections of Schedule E to the
By-Laws of the National Association of Securities Dealers, Inc.
LEGAL MATTERS
The legality of the Obligations has been passed upon for FGIC-SPI by
Brown & Wood LLP, One World Trade Center, New York, New York 10048.
EXPERTS
The financial statements of FGIC Securities Purchase, Inc. at December
31, 1996 and 1995, and for each of the years in the three-year period ended
December 31, 1996 appearing in FGIC Securities Purchase, Inc.'s Annual Report
(Form 10-K) for the year ended December 31, 1996 incorporated by reference
herein, have been incorporated by reference herein in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
No dealer, salesman or any
other individual has been
authorized to give any information
or to make any representations $60,000
other than those contained in this
Prospectus in connection with the
offer made by this Prospectus, and, principal amount
if given or made, such information plus interest and premium,
or representations must not be if any
relied upon as having been
authorized by FGIC-SPI. This
Prospectus does not constitute an
offer or solicitation by anyone in LIQUIDITY FACILITY OBLIGATIONS
any jurisdiction in which an offer
or solicitation is not authorized
or in which the person making such
offer or solicitation is not
qualified to do so or to anyone to
whom it is unlawful to make such
offer or solicitation.
issued by
-------------
FGIC Securities
Purchase, Inc.
TABLE OF CONTENTS
Page in support of
----
New Jersey Economic Development Authority
PROSPECTUS SUPPLEMENT Water Facilities Revenue Bonds
Documents Incorporated By Reference (New Jersey-American Water Company,
S-2 Inc. Project)
Introduction . . . . . . . . S-2 Series 1997B
Description of the Series 1997B
Bonds . . . . . . . . . . . . S-2
The FGIC-SPI Liquidity Facility S-15
The Standby Loan Agreement; GE
Capital . . . . . . . . . . . S-16
Experts . . . . . . . . . . . S-17 ----------------
PROSPECTUS
Available Information . . . . . 2 PROSPECTUS SUPPLEMENT
Documents Incorporated By Reference
3 ----------------
Summary . . . . . . . . . . . . 4
The Company . . . . . . . . . . 5
The Liquidity Facilities . . . 5
The Standby Loan Agreement . . 5
Plan of Distribution. . . . . . 6 May 29, 1997
Legal Matters . . . . . . . . . 6
Experts . . . . . . . . . . . . 6
