PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated November 17, 1998)
$46,000,000
principal amount plus interest
Liquidity Facility
of
FGIC Securities Purchase, Inc.
in support of
RANCHO CALIFORNIA WATER DISTRICT FINANCING AUTHORITY
Adjustable Rate Revenue Bonds Series 1998A
Date of Bonds: Date of Delivery Due: August 15, 2029
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Liquidity Facility: We are providing a liquidity facility for the Bonds
described below (the "Liquidity Facility"). The Liquidity Facility will expire
on November , 2003 unless it is extended or terminated sooner in accordance
with its terms.
Terms of the Bonds: The Bonds are limited obligations of the Rancho
California Water District Financing Authority, and will be payable from
payments made by the Rancho California School District under an installment
sale agreement with the Rancho California Water District and other amounts
pledged under the indenture governing the Bonds. The Bonds will initially bear
interest at a Weekly Rate of %, with interest to be payable on the first
calendar day of each month, commencing December 2, 1998 unless converted to a
Daily Interest Rate, Bond Interest Term Rate or a Long-Term Interest Rate as
more fully described in the Prospectus Supplement. The 1998 Bonds are also
subject to mandatory and optional redemption prior to maturity and to
mandatory tender for purchase, as described in this Prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
Our obligations under the Liquidity Facility (the "Obligations") are not
being sold separately from the Bonds. The Bonds are being remarketed under a
separate disclosure document. The Obligations 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 us.
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PAINEWEBBER INCORPORATED
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The date of this prospectus supplement is November , 1998.
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION...............................................................S-2
DESCRIPTION OF THE BONDS...................................................S-2
THE LIQUIDITY FACILITY....................................................S-17
THE STANDBY LOAN AGREEMENT; GE CAPITAL....................................S-18
EXPERTS...................................................................S-20
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We
have not, and the underwriters have not, authorized any other person to
provide you with different information. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
INTRODUCTION
We are providing you with this prospectus supplement to furnish
information regarding our obligations under a Liquidity Facility in support of
$46,000,000 aggregate principal amount of Adjustable Rate Revenue Bonds Series
1998A which the Rancho California Water District Financing Authority (the
"Issuer") will issue on or about November , 1998 (the "Bonds"). We will enter
into a Standby Bond Purchase Agreement (the "Liquidity Facility") with BNY
Western Trust Company (the "Trustee" or the "Tender Agent"), pursuant to which
we will be obligated under certain circumstances to purchase unremarketed
Bonds from the holders optionally or mandatorily tendering their Bonds for
purchase. In order to obtain funds to purchase the Bonds, we 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
to us as needed to purchase Bonds. Our obligations under the Liquidity
Facility will expire on November , 2003 unless the Liquidity Facility is
extended or terminated sooner in accordance with its terms.
DESCRIPTION OF THE BONDS
Capitalized terms not otherwise defined have the meanings set forth in
Appendix B.
The Bonds are being issued pursuant to the Constitution and laws of the
State of California (the "State"), and particularly the statutory provisions
relating to the joint exercise of powers contained in Chapter 5, Division 7,
Title 1 of the Government Code of the State (the "Act"). The Bonds will be
issued in fully registered form without coupons and when issued will be
registered in the name of Cede & Co., as nominee of The Depository Trust
Company, New York, New York (DTC).
The Bonds will be issued in the aggregate principal amount, will be dated
and bear interest at the rates and mature (subject to prior redemption and
purchase), on August 15, 2029. The Bonds will be issued in fully-registered
form, registered in the name of a nominee of DTC. DTC will act as securities
depository for the Bonds. Individual purchases and sales may be made in
book-entry form only. Purchasers will not receive certificates representing
their interest in the Bonds purchased. References in this Description of Bonds
to the bondholders or registered owners shall mean DTC and shall not mean the
beneficial owners of the Bonds. Principal of and interest on the Bonds are
payable by wire transfer by the Trustee to DTC, which is expected, in turn, to
remit such amounts to the DTC participants for subsequent disbursement to the
beneficial owners. See "Book-Entry Only System" below.
PaineWebber Incorporated has been appointed by the Authority as the
exclusive initial remarketing agent with respect to the Bonds (the
"Remarketing Agent"). The Authority will enter into a Remarketing Agreement
with the Remarketing Agent with respect to the remarketing of the Bonds.
Book-Entry Only System
The Depository Trust Company ("DTC"), New York, New York, will act as
securities depository for the Bonds. The Bonds will be issued as fully
registered bonds registered in the name of Cede & Co. (DTC's partnership
nominee). One fully registered Bond will be issued for each maturity of the
Bonds of each Series, each in the aggregate principal amount of such maturity,
and will be deposited with DTC.
Principal and interest payments on the Bonds will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the payable date 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 payable 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 Trustee, or
the Authority, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of principal and interest to DTC is the
responsibility of the Authority or the Trustee, 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 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, Bonds are required to be printed and
delivered. The Authority may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository). In
that event, Bonds will be printed and delivered in accordance with the terms
of the Indenture.
Sources of Payment for the Bonds
The Bonds will be applied on the date of issuance of the Bonds to fund
and acquire a nonabatable Installment Sale Agreement, dated as of November 1,
1998 (the "Installment Sale Agreement"), by and between the District, as
purchaser, and the Authority, as seller. The Installment Sale Agreement will
be executed and delivered by the District on the date of issuance of the Bonds
and will be in a combined aggregate principal amount equal to the principal
amount of the Bonds.
The Installment Sale Agreement requires the District to make installment
payments (the "Installment Payments") to the Trustee which, in the aggregate,
are sufficient for the payment in full of all principal of and interest on the
Bonds when due, or upon the earlier redemption thereof. The proceeds of the
Bonds will be applied to acquire the Installment Purchase Agreement and pay
the costs of issuing the Bonds. The Bonds constitute limited obligations of
the Authority payable solely from installment payments made by the District
under the Installment Sale Agreement, and certain funds held under the
Indenture.
The Installment Payments due under the Installment Sale Agreement are
nonabatable and are payable from Net District Revenues (as defined herein) on
a parity with each other and with installment payments to be made by the
District under other previous Installment Sale Agreement executed by the
District. Net District Revenues consist of all income, ad valorem assessments,
standby charges, rents, rates, fees, charges and other moneys received by the
District.
Interest Rate Provisions
The Bonds will initially bear interest at a Weekly Interest Rate of %,
such interest to be paid monthly on the first Wednesday of each month (or if
such is not a business day then the next succeeding business day), commencing
December 2, 1998. Thereafter, at the election of the Authority, the Bonds may
bear interest from time to time at (i) a Daily Interest Rate during a Daily
Interest Rate Period, (ii) Bond Interest Term Rates (herein referred to as
"BIT Rates") during a Short-Term Interest Rate Period, or (iii) a Long-Term
Interest Rate during a Long-term Interest Rate Period, as more fully described
below and in Appendix A. All of the Bonds must bear interest in the same
interest rate mode.
Interest on the Bonds shall be computed, in the case of a Daily Interest
Rate Period, a Weekly Interest Rate Period or a Short-Term Interest Rate
Period, on the basis of a 365 or 366-day year, as appropriate, for the actual
number of days elapsed, and, in the case of a Long-Term Interest Rate Period,
on the basis of a 360-day year consisting of twelve 30-day months. When the
Bonds bear interest at a Daily Interest Rate, Weekly Interest Rate or a BIT
Rate, the Authorized Denominations will be $100,000 and any integral multiple
thereof, and, when the Bonds bear interest at a Long-Term Interest Rate, the
Authorized Denominations will be $5,000 and any integral multiple of $5,000
(the "Authorized Denominations").
Interest on the Bonds will be payable by the Trustee to the registered
Owners as of the Record Date (as defined below) (i) during any Daily Interest
Rate Period, on the fifth Business Day of each calendar month; (ii) during any
Weekly Interest Rate Period, on the first Wednesday of each calendar month,
or, if any such first Wednesday shall not be a Business Day, on the next
succeeding Business day; (iii) during any Long-Term Interest Rate Period, on
each February 15 and August 15, or, if any such February 15 or August 15 is
not a Business Day, on the next succeeding Business Day; and (iv) during any
BIT, on the day next succeeding the last day thereof (each, an "Interest
Payment Date"). "Business Day" shall mean any day other than a Saturday, a
Sunday or any other day on which banks located in the State of California or
New York are authorized or required to be closed. "Interest Rate Period" shall
mean any Daily Interest Rate Period, Weekly Interest Rate Period, Short-Term
Interest Rate Period or Long-Term Interest Rate Period.
"Record Date" means, with respect to the Bonds, (i) with respect to any
Interest Payment Date in respect to any Daily Interest Rate Period, the last
Business Day of each calendar month or, in the case of the last Interest
Payment Date in respect to a Daily Interest Rate Period, the Business Day
immediately preceding such Interest Payment Date, (ii) with respect to any
Interest Payment Date in respect of any Weekly Interest Rate Period or any
Bond Interest Term, the Business Day immediately preceding such Interest
Payment Date, and (iii) with respect to any Interest Payment Date in respect
to any Long-Term Interest Rate Period, the February 1 or August 1 immediately
preceding such Interest Payment Date or, in the event that an Interest Payment
Date occurs less than 15 days after the first day of a Long-Term Interest Rate
Period, such first day.
The term of the Bonds shall be divided into consecutive Interest Rate
Periods selected by the Authority. At any time, all Bonds (other than Bonds
held by the Liquidity Provider) shall bear interest, at either a Daily
Interest Rate, a Weekly Interest Rate, a Long-Term Interest Rate or BIT Rates.
During a Short-Term Interest Rate Period, Bonds may bear interest at different
BIT Rates or have BITs of different durations. For any Daily Interest Rate
Period, interest shall accrue from the first day thereof and thereafter from
the first day of each calendar month during such Daily Interest Rate Period.
For any Weekly Interest Rate Period, interest shall accrue at the Weekly
Interest Rate from the first Wednesday of each month to and including the
succeeding Tuesday preceding the first Wednesday of the next month. For any
BIT within a Short-Term Interest Rate Period, interest shall accrue from the
first day thereof to and including the last day thereof. For any Long-Term
Interest Rate Period, interest shall accrue from the first day thereof and
thereafter from each Interest Payment Date in respect thereof (other than the
last such Interest Payment Date), to and including the day immediately
preceding the next succeeding Interest Payment Date.
Within each Interest Rate Period, the applicable interest rate shall be
the rate of interest per annum determined by the Remarketing Agent (based on
the examination of tax-exempt obligations comparable, in the judgment of the
Remarketing Agent, to the Bonds and known by the Remarketing Agent to have
been priced or traded under then-prevailing market conditions) to be the
minimum interest rate which, if borne by the Bonds, would enable the
Remarketing Agent to sell such Bonds on such Business Day at a price (without
regard to accrued interest) equal to the principal amount thereof.
Establishment of Interest Rates and Payment of Interest
Except as provided in the Indenture with respect to Provider Bonds, each
Bond shall bear interest from and including the Interest Accrual Date
immediately preceding the date of authentication thereof, or, if such date of
authentication shall be an Interest Accrual Date to which interest on the
Bonds has been paid in full or duly provided for or the date of initial
authentication of the Bonds, from such date of authentication; provided,
however, that if, as shown by the records of the Trustee, interest on the
Bonds shall be in default, Bonds issued in exchange for Bonds surrendered for
registration of transfer or exchange shall bear interest from the date to
which interest has been paid in full on the Bonds or, if no interest has been
paid on the Bonds, from the date of the first authentication of Bonds. For any
Weekly Interest Rate Period, interest on the Bonds shall be payable on each
Interest Payment Date for the period commencing on the immediately preceding
Interest Accrual Date (or, if any Interest Payment Date is not a Wednesday,
commencing on the second preceding Interest Accrual Date) and ending on the
Tuesday immediately preceding the Interest Payment Date (or, if sooner, the
last day of the Weekly Interest Rate Period). For any Daily Interest Rate
Period, interest on the Bonds shall be payable on each Interest Payment Date
for the period commencing on the Interest Accrual Date preceding the prior
Interest Payment Date and ending on the last day of such month. For any Bond
Interest Term within a Short-Term Interest Rate Period or any Long-Term
Interest Rate Period, interest on the Bonds shall be payable on each Interest
Payment Date for the period commencing on the immediately preceding Interest
Accrual Date and ending on the day immediately preceding such Interest Payment
Date. In any event, interest on the Bonds shall be payable for the final
Interest Rate Period to the date on which the Bonds shall have been paid in
full. Interest shall be computed, in the case of the Short-Term or a Long-Term
Interest Rate Period, on the basis of a 360-day year consisting of twelve
30-day months, and in the case of any other Interest Rate Period, on the basis
of a 365 or 366-day year, as appropriate, for the actual number of days
elapsed.
Except as provided in the Indenture with respect to Provider Bonds, that
is Bonds acquired by FGIC SPI in connection with the Liquidity Facility in the
manner hereinafter provided, the term of the Bonds will be divided into
Interest Rate Periods during each of which the Bonds shall bear interest at a
Weekly Interest Rate, a Daily Interest Rate, Bond Interest Term Rates or a
Long-Term Interest Rate; provided, however, that at any time, all Bonds (other
than Provider Bonds) shall bear interest at a Weekly Interest Rate, a Daily
Interest Rate, a Long-Term Interest Rate or Bond Interest Term Rates. No
holder of a Bond shall be paid interest for any period at a rate higher than
the Maximum Rate. The first Interest Rate Period shall commence on the date of
issuance of the Bonds. On the Closing Date the Bonds shall be subject to the
Weekly Interest Rate.
Determination of Weekly Interest Rate. During each Weekly Interest Rate
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Period, the Bonds (other than Provider Bonds) shall bear interest at the
Weekly Interest Rate, which shall be determined by the Remarketing Agent by no
later than 5:00 p.m. (New York City time) on Tuesday of each week during such
Weekly Interest Rate Period, or if such day shall not be a Business Day, then
on the next succeeding Business Day. Each Weekly Interest Rate shall be
announced by the Remarketing Agent by no later than the close of business on
the Business Day next succeeding its day of determination and shall be
communicated to the Trustee by FAX. The first Weekly Interest Rate determined
for each Weekly Interest Rate Period (other than the Weekly Interest Rate
Period commencing on the next day succeeding the end of the first Weekly
Interest Rate Period) shall be determined on or prior to the first day of such
Weekly Interest Rate Period and shall apply to the period commencing on the
first day of such Weekly Interest Rate Period and ending on the next
succeeding Tuesday. Thereafter, each Weekly Interest Rate shall apply to the
period commencing on Wednesday and ending on the next succeeding Tuesday,
unless such Weekly Interest Rate Period shall end on a day other than Tuesday,
in which event the last Weekly Interest Rate for such Weekly Interest Rate
Period shall apply to the period commencing on Wednesday preceding the last
day of such Weekly Interest Rate Period and ending on the last day of such
Weekly Interest Rate Period. The Weekly Interest Rate shall be the rate of
interest per annum determined by the Remarketing Agent (based on the
examination of tax-exempt obligations comparable in the judgment of the
Remarketing Agent to the Bonds and known by the Remarketing Agent to have been
priced or traded under then-prevailing market conditions) to be the minimum
interest rate which, if borne by the Bonds, would enable the Remarketing Agent
to sell the Bonds on such date of determination at a price (without regarding
accrued interest) equal to the principal amount thereof. In the event that the
Remarketing Agent fails to establish a Weekly Interest Rate for any week, then
the Weekly Interest Rate for such week shall be the same as the Weekly
Interest Rate for the immediately preceding week if the Weekly Interest Rate
for such preceding week was determined by the Remarketing Agent. In the event
that the Weekly Interest Rate for the immediately preceding week was not
determined by the Remarketing Agent, or in the event that the Weekly Interest
Rate determined by the Remarketing Agent shall be held to be invalid or
unenforceable by a court of law, then the interest rate for such week shall be
equal to 100% of the PSA Municipal Swap Index of Municipal Market Data, a
Thomson Financial Services Company as published in The Wall Street Journal, or
its successors or assigns, made available for the week preceding the date of
determination, or if such index is no longer available, or no such index was
so made available, for the week preceding the date of determination, 70% of
the interest rate on 30-day high grade unsecured commercial paper notes sold
through dealers by major corporations as reported in The Wall Street Journal
on the day the Weekly Interest Rate would otherwise be determined as provided
herein for such Weekly Interest Rate Period as specified by the Authority to
the Trustee.
Adjustment to Weekly Interest Rate. At any time, the Authority, by
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written order to the Trustee, the Tender Agent, the Liquidity Provider and the
Remarketing Agent, may elect, subject to certain rights of the Liquidity
Provider with respect to Provider Bonds, that the Bonds shall bear interest at
a Weekly Interest Rate. Such direction of the Authority shall specify (1) the
effective date of such adjustment to a Weekly Interest Rate, which shall be
(A) a Business Day not earlier than the 30th day following the second Business
Day after receipt by the Trustee of such direction, (B) in the case of an
adjustment from a Long-Term Interest Rate Period, the day immediately
following the last day of the then-current Long-Term Interest Rate Period or a
day on which the Bonds would otherwise be subject to optional redemption
pursuant to the Indenture if such adjustment did not occur, and (C) in the
case of an adjustment from a Daily Interest Rate Period or Short-Term Interest
Rate Period, the day immediately following the last day of the Interest Rate
Period; and (2) the date of delivery for such Bonds to be purchased (if other
than such effective date). In addition, the direction of the Authority shall
be accompanied by an opinion of Bond Counsel and by a form of notice to be
mailed to the owners of the Bonds by the Trustee as provided in the following
paragraph. During each Weekly Interest Rate Period commencing on a date so
specified and ending on the day immediately preceding the effective date of
the next succeeding Interest Rate Period, the interest rate borne by the Bonds
shall be a Weekly Interest Rate.
Notice of Adjustment to Weekly Interest Rate. The Trustee shall give
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notice by first-class mail of an adjustment to a Weekly Interest Rate Period
to the Owners of the Bonds not less than 30 days prior to the effective date
of such Weekly Interest Rate Period. Such notice shall state (1) that the
interest rate on the Bonds will be adjusted to a Weekly Interest Rate unless
Bond Counsel fails to deliver to the Trustee, the Authority and the
Remarketing Agent an opinion of Bond Counsel as to such adjustment on the
effective date of such adjustment in the Interest Rate Period, in which case
the Bonds, if being adjusted from a Daily Interest Rate Period or a Short-Term
Interest Period, shall continue to bear interest at a Daily Interest Rate or
Bond Interest Term Rates, as the case may be, as in effect immediately prior
to such proposed adjustment in the Interest Rate Period, or if the Bonds are
being adjusted from a Long-Term Interest Rate Period, the Bonds shall be
adjusted to bear interest at a Weekly Interest Rate, (2) the effective date of
such Weekly Interest Rate Period, and (3) that the Bonds are subject to
mandatory tender for purchase on such effective date, setting forth the
applicable purchase price.
Determination of Daily Interest Rate. During each Daily Interest Rate
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Period with respect to any Bonds bearing interest at the Daily Interest Rate,
such Bonds shall bear interest at the Daily Interest Rate, which shall be
determined by the Remarketing Agent for such Bonds on each Business Day for
such Business Day and communicated to the Trustee by FAX. The Daily Interest
Rate shall be the rate of interest per annum determined by such Remarketing
Agent (based on an examination of tax-exempt obligations comparable, in the
judgment of such Remarketing Agent, to such Bonds and known by such
Remarketing Agent to have been priced or traded under then-prevailing market
conditions) to be the minimum interest rate which, if borne by such Bonds,
would enable such Remarketing Agent to sell such Bonds on such Business Day at
a price (without regard to accrued interest) equal to the principal amount
thereof. The Daily Interest Rate for any day for the Bonds which is not a
Business Day shall be the same as the Daily Interest Rate for the immediately
preceding Business Day. If for any reason a Daily Interest Rate for the Bonds
is not so established for any Business Day by the Remarketing Agent for such
Bonds, the Daily Interest Rate for such Business Day shall be the same as the
Daily Interest Rate for such Bonds for the immediately preceding day and such
rate shall continue until the earlier of (1) the date on which such
Remarketing Agent determines a new Daily Interest Rate for such Bonds or (2)
the seventh day succeeding the first such day on which such Daily Interest
Rate is not determined by such Remarketing Agent. In the event that the Daily
Interest Rate for the Bonds shall be held to be invalid or unenforceable by a
court of law, or the Remarketing Agent for such Bonds fails to determine a new
Daily Interest Rate for such Bonds for a period of seven days as described in
clause (2) of the immediately preceding sentence, the interest rate applicable
to such Bonds shall be determined by the Authority and shall be the interest
rate per annum equal to 68% of the rate on 30-day high grade unsecured
commercial paper notes sold through dealers by major corporations as reported
in The Wall Street Journal for each Business Day and for the next preceding
Business Day for each day which is not a Business Day until such Daily
Interest Rate is again validly determined by such Remarketing Agent.
Adjustment to Daily Interest Rate. Subject to the preceding paragraph, at
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any time, the Authority, by written order to the Trustee, the Tender Agent,
the Liquidity Provider and the Remarketing Agent, may elect subject to certain
rights of the Liquidity Provider with respect to Provider Bonds, that the
Bonds shall bear interest at a Daily Interest Rate. Such direction of the
Authority shall specify (1) the proposed effective date of such adjustment to
a Daily Interest Rate which date shall be (A) a Business Day not earlier than
the 30th day following the second Business Day after receipt by the Trustee of
such direction, (B) in the case of an adjustment from a Long-Term Interest
Rate Period, the day immediately following the last day of the then-current
Long-Term Interest Rate Period or a day on which the Bonds would be subject to
optional redemption pursuant to the Indenture with respect to such Bonds, (C)
in the case of an adjustment from a Weekly Interest Rate Period or Short-Term
Interest Rate Period, the day immediately following the last day of the
Interest Rate Period with respect to such Bonds; and (2) the date of delivery
of such Bonds to be purchased. In addition, the direction of the Authority
shall be accompanied by an Opinion of Bond Counsel and by a form of notice to
be mailed to the owners of the Bonds by the Trustee as provided in the
following paragraph. During each Daily Interest Rate Period for the Bonds
commencing on a date so specified and ending on the day immediately preceding
the effective date of the next succeeding Interest Rate Period, the interest
rate borne by such Bonds shall be a Daily Interest Rate.
Notice of Adjustment to Daily Interest Rate. The Trustee shall give
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notice by first-class mail of an adjustment to a Daily Interest Rate Period to
the owners of the Bonds not less than 30 days prior to the proposed effective
date of such Daily Interest Rate Period. Such notice shall state (1) that the
interest rate on the Bonds will be adjusted to a Daily Interest Rate unless
Bond Counsel fails to deliver to the Trustee, the Authority and the
Remarketing Agent an Opinion of Bond Counsel as to such adjustment on the
effective date of such adjustment in the Interest Rate Period, in which case
the Bonds, if being adjusted from a Short-Term Interest Period, shall continue
to bear interest at Bond Interest Term Rates as in effect immediately prior to
such proposed adjustment in the Interest Rate Period, or if the Bonds are
being adjusted from a Weekly Interest Rate Period or a Long-Term Interest Rate
Period, the Bonds shall be adjusted to bear interest at a Weekly Interest
Rate; (2) the effective date of such Daily Interest Rate Period; and (3) that
such Bonds are subject to mandatory tender for purchase on such proposed
effective date and setting forth the applicable purchase price.
Determination of Long-Term Interest Rate. During each Long-Term Interest
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Rate Period, the Bonds (other than Provider Bonds) shall bear interest at the
Long-Term Interest Rate. The Long-Term Interest Rate for the Bonds shall be
determined by the Remarketing Agent on a Business Day no later than the
effective date of such Long-Term Interest Rate Period with respect to the
Bonds. The Long-Term Interest Rate shall be the rate of interest per annum
determined by the Remarketing Agent (based on the examination of tax-exempt
obligations comparable in the judgment of the Remarketing Agent to the Bonds
and known by the Remarketing Agent to have been priced or traded under
then-prevailing market conditions) to be the minimum interest rate at which
the Remarketing Agent will agree to purchase the Bonds on such effective date
for resale at a price (without regarding accrued interest) equal to the
principal amount thereof. If, for any reason, the Long-Term Interest Rate is
not so determined for any Long-Term Interest Rate Period by the Remarketing
Agent on or prior to the first day of such Long-Term Interest Rate Period,
then the Bonds shall bear interest at the Weekly Interest Rate as provided
under the caption "Determination of Weekly Interest Rate" above, and shall
continue to bear interest at a Weekly Interest Rate determined in accordance
with such provisions until such time as the interest rate on the Bonds shall
have been adjusted to Bond Interest Term Rates or a Long-Term Interest Rate as
provided herein, and the Bonds shall be subject to purchase upon notice from
the owners thereof as described in the Indenture.
Adjustment to or Continuation of Long-Term Interest Rate.
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(A) At any time the Authority, by written order to the Trustee, the
Tender Agent, the Liquidity Provider and the Remarketing Agent, may
elect, subject to certain provisions of the Indenture related to the
provision of an Alternate Liquidity Facility, that the Bonds shall bear,
or continue to bear, interest at a Long-Term Interest Rate. The direction
of the Authority required by the preceding sentence, (1) shall specify
the duration of the Long-Term Interest Rate Period during which the Bonds
shall bear interest at a Long-Term Interest Rate; (2) shall specify the
effective date of such Long-Term Interest Rate Period, which date shall
be (aa) a Business Day not earlier than the 30th day following the second
Business Day after receipt by the Trustee of such direction, (bb) in the
case of an adjustment from a Long-Term Interest Rate Period to another
Long-Term Interest Rate Period, the day immediately following the last
day of the then-current Long-Term Interest Rate Period or a day on which
the Bonds would otherwise be subject to optional redemption pursuant to
the Indenture if such adjustment did not occur, and (cc) in the case of
an adjustment from a Short-Term Interest Rate Period, the day immediately
following the last day of the Short-Term Interest Rate Period; (3) shall
specify the last day of such Long-Term Interest Rate Period (which last
day shall be either the day immediately prior to the maturity date, or a
day which both immediately precedes a Business Day and is at least 181
days after the effective date thereof); (4) shall specify a date on or
prior to which Owners are required to deliver such Bonds to be purchased
(if other than such effective date); and (5) with respect to any such
Long-Term Interest Rate Period, may specify redemption prices greater,
and after periods longer, than those set forth in the Indenture, if
approved by Bond Counsel.
(B) Such direction of the Authority shall be accompanied by an
Opinion of Bond Counsel and by a form of the notice to be mailed by the
Trustee to the Owners of the Bonds as provided in the Indenture.
(C) If, by the second Business Day preceding the 29th day prior to
the last day of any Long-Term Interest Rate Period, the Trustee shall not
have received notice of the Authority's election that, during the next
succeeding Interest Rate Period, the Bonds shall bear interest at a
Weekly Interest Rate, a Daily Interest Rate or a Long-Term Interest Rate,
or at Bond Interest Term Rates, the next succeeding Interest Rate Period
shall be a Weekly Interest Rate Period until such time as the interest
rate on the Bonds shall be adjusted to a Daily Interest Rate, a Long-Term
Interest Rate or Bond Interest Term Rates as provided in the Indenture
and the Bonds shall be subject to mandatory purchase as provided in the
Indenture on the first day of such Weekly Interest Rate Period.
(D) In the event that the Authority shall deliver to the Liquidity
Provider, the Remarketing Agent, the Tender Agent and the Trustee on or
prior to the date that the interest rate for any Long-Term Interest Rate
Period is determined a notice to the effect that the Authority elects to
rescind its election to have the Bonds bear interest at a Long-Term
Interest Rate, then the interest rate on the Bonds shall not be adjusted
to a Long-Term Interest Rate, and the Bonds shall bear interest at a
Weekly Interest Rate, a Daily Interest Rate or Bond Interest Term Rates
as in effect prior to such event, or if the Bonds were to be adjusted
from a Long-Term Interest Rate, then the Bonds shall bear interest at a
Weekly Interest Rate for the period commencing on the date which would
have been the effective date of such Long-Term Interest Rate Period, and
the Bonds shall continue to be subject to mandatory purchase as provided
in the Indenture on the day which would have been the effective date of
such Long-Term Interest Rate Period.
(E) All Provider Bonds must be converted to a Long-Term Interest
Rate before any other Bonds are so converted and remarketed. If the
Standby Bond Purchase Agreement or Alternate Liquidity Facility is about
to expire or terminates by its terms and has not theretofore been
extended or replaced by an Alternate Liquidity Facility satisfactory to
Bond Insurer, then the Issuer and the Remarketing Agent shall use their
best efforts to remarket the Bonds and convert them to a Long-Term
Interest Rate to maturity, in either case, not later than 90 days prior
to the Expiration of the Standby Bond Purchase Agreement or Alternate
Liquidity Facility, and, in the event of termination thereof, as soon as
possible, but, in no event more than 180 days thereafter.
Notice of Adjustment to or Continuation of Long-Term Interest Rate. Upon
-------------------------------------------------------------------
receipt of Written Order received by the Trustee not less than five days prior
to mailing, the Trustee shall give notice by first-class mail of an adjustment
to a (or the establishment of another) Long-Term Interest Rate Period to the
Owners of the Bonds not less than 30 days prior to the effective date of such
Long-Term Interest Rate Period. Such notice shall state: (1) that the interest
rate on the Bonds shall be adjusted to, or continue to be, a Long-Term
Interest Rate unless (x) Bond Counsel fails to deliver to the Trustee, the
Authority, the Liquidity Provider and the Remarketing Agent an Opinion of Bond
Counsel as to such adjustment in the Interest Rate Period on the effective
date of such adjustment, or (y) the Authority shall elect, on or prior to the
date of determination of such Long-Term Interest Rate, to rescind its election
to cause the adjustment of the interest rate on the Bonds to a Long-Term
Interest Rate, in which case the Bonds, if being adjusted from a Weekly
Interest Rate Period, Daily Interest Rate Period or a Short-Term Interest Rate
Period shall continue to bear interest at a Weekly Interest Rate, a Daily
Interest Rate or Bond Interest Term Rates as in effect immediately prior to
such proposed adjustment in the Interest Rate Period, or if the Bonds are
being adjusted from a Long-Term Interest Rate Period, the Bonds shall be
adjusted to bear interest at a Weekly Interest Rate, (2) the effective date
and the last day of such Long-Term Interest Rate Period, and (3) that the
Bonds are subject to mandatory tender for purchase on such effective date and
the purchase price applicable thereto.
Adjustment from Long-Term Interest Rate Period. In addition to an
---------------------------------------------------
adjustment from a Long-Term Interest Rate Period on the day immediately
following the last day of the Long-Term Interest Rate Period, at any time
during a Long-Term Interest Rate Period (subject to the provisions set forth
in this paragraph the Authority may elect, subject to certain provisions of
the Indenture related to Provider Bonds, that the Bonds (other than Provider
Bonds) no longer shall bear interest at a Long-Term Interest Rate and shall
instead bear interest at a Weekly Interest Rate, Daily Interest Rate, Bond
Interest Term Rates or a new Long-Term Interest Rate, as specified in such
election. In the notice of such election, the Authority shall also specify the
effective date of the new Interest Rate Period, which date shall be (1) a
Business Day no earlier than the 30th day after the second Business Day
following the date of receipt by the Trustee of the notice of election from
the Authority, and (2) a day on which the Bonds shall be subject to optional
redemption in accordance with the Indenture.
Determination of Bond Interest Terms and Bond Interest Term Rates.
------------------------------------------------------------------
(A) During each Short-Term Interest Rate Period, each Bond (other
than a Provider Bond) shall bear interest during each Bond Interest Term
for such Bond at the Bond Interest Term Rate for such Bond. The Bond
Interest Term and the Bond Interest Term Rate for each Bond need not be
the same for any two Bonds, even if determined on the same date. Each of
such Bond Interest Terms and Bond Interest Term Rates for each Bond shall
be determined by the Remarketing Agent no later than the first day of
each Bond Interest Term and communicated to the Trustee by FAX. Except
for any Bond purchased on behalf of the Authority and remaining unsold by
the Remarketing Agent at the close of business on the first day of the
Bond Interest Term, each Bond Interest Term shall be for a period of days
within the range of ranges announced as possible Bond Interest Terms no
later than 9:00 a.m., New York City time, on the first day of each Bond
Interest Term by the Remarketing Agent. Each Bond Interest Term for each
Bond shall be a period of not less than one day nor more than 180 days,
determined by the Remarketing Agent to be the period which, together with
all other Bond Interest Terms for all Bonds then outstanding, will result
in the lowest overall interest expense on the Bonds over the next
succeeding 180 days. Any Bond purchased on behalf of the Authority and
remaining unsold by the Remarketing Agent as of the close of business on
the first day of the Bond Interest Term for that Bond shall have a Bond
Interest Term of one day or, if that Bond Interest Term would not end on
a day immediately preceding a Business Day, a Bond Interest Term ending
on the day immediately preceding the next Business Day. Each Bond
Interest Term shall end on either a day which immediately precedes a
Business Day or on the day immediately preceding the maturity date. If
for any reason a Bond Interest Term for any Bond cannot be so determined
by the Remarketing Agent, or if the determination of such Bond Interest
Term is held by a court of law to be invalid or unenforceable, then such
Bond Interest Term shall be 30 days, but if the last day so determined
shall not be a day immediately preceding a Business Day, shall end on the
first day immediately preceding the Business Day next succeeding such
last day, or if such last day would be after the day immediately
preceding the maturity date, shall end on the day immediately preceding
the maturity date. In determining the number of days in each Bond
Interest Term, the Remarketing Agent shall take into account the
following factors: (I) existing short-term tax-exempt market rates and
indices of such short-term rates, (II) the existing market supply and
demand for short-term tax-exempt securities, (III) existing yield curves
for short-term and long-term tax-exempt securities for obligations of
credit quality comparable to the Bonds, (IV) general economic conditions,
(V) economic and financial conditions that may affect or be relevant to
the Bonds, (VI) the Bond Interest Terms of other Bonds and (VII) such
other facts, circumstances and conditions pertaining to financial markets
as the Remarketing Agent, in its sole discretion, shall determine to be
relevant.
(B) The Bond Interest Term Rate for each Bond Interest Term for each
Bond (other than a Provider Bond) shall be the rate of interest per annum
determined by the Remarketing Agent (based on the examination of
tax-exempt obligations comparable in the judgment of the Remarketing
Agent to the Bonds and known by the Remarketing Agent to have been priced
or traded under then-prevailing market conditions) to be the minimum
interest rate which, if borne by such Bond, would enable the Remarketing
Agent to sell such Bond on the date and at the time of such determination
at a price (without regarding accrued interest) equal to the principal
amount thereof. If for any reason a Bond Interest Term Rate for any Bond
(other than a Purchased Bond) is not so established by the Remarketing
Agent for any Bond Interest Term, or such Bond Interest Term Rate is
determined by a court of law to be invalid or unenforceable, then the
Bond Interest Term Rate for such Bond Interest Term shall be the rate per
annum equal to 70% of the interest rate on high grade unsecured
commercial paper notes sold through dealers by major corporations as
reported by The Wall Street Journal on the first day of such Bond
Interest Term and which maturity most nearly equals the Bond Interest
Term for which a Bond Interest Term Rate is being calculated.
Adjustment to Bond Interest Term Rates. At any time, the Authority, by
--------------------------------------
written order to the Trustee, the Liquidity Provider, the Tender Agent, and
the Remarketing Agent, may elect, subject to certain provisions of the
Indenture related to the provision of an Alternate Liquidity Facility and to
Provider Bonds, that the Bonds shall bear interest at Bond Interest Term
Rates. Such direction of the Authority shall specify (1) the effective date of
the Short-Term Interest Rate Period (during which the Bonds shall bear
interest at Bond Interest Term Rates), which shall be (A) a Business Day not
earlier than the 30th day following the second Business Day after receipt by
the Trustee of such direction, (B) in the case of an adjustment from a
Long-Term Interest Rate Period, the day immediately following the last day of
the then-current Long-Term Interest Rate Period or a day on which the Bonds
would otherwise be subject to optional redemption pursuant to the Indenture if
such adjustment did not occur; provided that, if prior to the Authority's
making such election any Bonds shall have been called for redemption and such
redemption shall not have theretofore been effected, the effective date of
such Short-Term Interest Rate Period shall not precede such date fixed for
redemption, and (C) in the case of an adjustment from a Daily Interest Rate
Period or Weekly Interest Rate Period, the day immediately following the last
day of such Interest Rate Period; and (2) the date of delivery of such Bonds
to be purchased (if other than such effective date). In addition, the
direction of the Authority shall be accompanied by an opinion of Bond Counsel
and a form of the notice to be mailed by the Trustee to the Owners of the
Bonds as provided in the following paragraph. During each Short-Term Interest
Rate Period commencing on the date so specified and ending, with respect to
each Bond, on the day immediately preceding the effective date of the next
succeeding Interest Rate Period with respect to such Bond, each Bond shall
bear interest at a Bond Interest Term Rate during each Bond Interest Term for
such Bond.
Notice of Adjustment to Bond Interest Term Rates. The Trustee shall give
------------------------------------------------
notice by first-class mail of an adjustment to a Short-Term Interest Rate
Period to the Owners of the Bonds not less than 30 days prior to the effective
date of such Short-Term Interest Rate Period. Such notice shall state (1) that
the Bonds shall bear interest at Bond Interest Term Rates unless Bond Counsel
fails to deliver to the Trustee, the Authority and the Remarketing Agent an
Opinion of Bond Counsel as to such adjustment on the effective date of such
adjustment in the Interest Rate Period, in which case the Bonds, if being
adjusted from a Daily Interest Rate Period or a Weekly Interest Rate Period,
shall continue to bear interest at a Daily Interest Rate or a Weekly Interest
Rate, as the case may be, as in effect immediately prior to such proposed
adjustment in the Interest Rate Period, or if the Bonds are being adjusted
from a Long-Term Interest Rate Period, the Bonds shall be adjusted to bear
interest at a Weekly Interest Rate, and that during such Short-Term Interest
Rate Period, each Bond will have one or more consecutive Bond Interest Terms
during each of which such Bond will bear a Bond Interest Term Rate, (2) the
effective date of such Short-Term Interest Rate Period, and (3) that the Bonds
are subject to mandatory tender for purchase on the effective date of such
Short-Term Interest Rate Period, setting forth the applicable purchase price.
Adjustment from Short-Term Interest Rate Period. At any time during a
--------------------------------------------------
Short-Term Interest Rate Period, the Authority may elect, but subject to
certain provisions of the Indenture related to Provider Bonds that the Bonds
no longer shall bear interest at Bond Interest Term Rates and shall instead
bear interest at a Weekly Interest Rate, a Daily Interest Rate or a Long-Term
Interest Rate, as specified in such election.
The date on which all Bond Interest Terms determined shall end shall be
the last day of the then-current Short-Term Interest Rate Period and the day
next succeeding such date shall be the effective date of the Weekly Interest
Rate Period or Long-Term Interest Rate Period elected by the Authority.
The determination of the Weekly Interest Rate, a Daily Interest Rate and
Long-Term Interest Rate and each Bond Interest Term and Bond Interest Term
Rate by the Remarketing Agent, and the determination of the Purchased Bond
Rate by the Liquidity Provider, shall be conclusive and binding upon the
Remarketing Agent, the Trustee, the Tender Agent, the Authority, the Liquidity
Provider and the Owners of the Bonds.
In the event that the Authority shall elect to convert the interest rate
on the Bonds to a Weekly Interest Rate, a Daily Interest Rate, Bond Interest
Term Rates or Long-Term Interest Rate as provided in the Indenture, then the
written order furnished by the Authority to the Trustee, the Liquidity
Provider, the Tender Agent, and the Remarketing Agent as required by the
Indenture shall be made by registered or certified mail, or by telex or
telecopy, confirmed by registered or certified mail. Any such direction of the
Authority shall specify whether the Bonds are to bear interest at the Weekly
Interest Rate, Daily Interest Rate, Bond Interest Term Rates or the Long-Term
Interest Rate and shall be accompanied by a copy of the notice required to be
given by the Trustee pursuant to the Indenture.
In connection with any adjustment of the Interest Rate Period on the
Bonds, the Authority shall cause to be provided to the Trustee, the Liquidity
Provider, and the Remarketing Agent an Opinion of Bond Counsel on the
effective date of such adjustment. In the event that Bond Counsel fails to
deliver an Opinion of Bond Counsel on any such date, then the Interest Rate
Period on the Bonds shall not be adjusted, and the Bonds shall continue to
bear interest at a Weekly Interest Rate, Daily Interest Rate or Bond Interest
Term Rates, as the case may be, as in effect immediately prior to such
proposed adjustment in the Interest Rate Period; provided, however, that in
the event that the Bonds are being adjusted from a Long-Term Interest Rate
Period, and Bond Counsel fails to deliver such Opinion of Bond Counsel on the
effective date of such adjustment, then the Bonds nevertheless shall be
adjusted to bear interest at a Weekly Interest Rate. In any event, if notice
of such adjustment has been mailed to the Owners of the Bonds as provided in
the Indenture and Bond Counsel fails to deliver an Opinion of Bond Counsel on
the effective date as herein described, the Bonds shall continue to be subject
to mandatory purchase on the date which would have been the effective date of
such adjustment as provided in the Indenture.
Notwithstanding anything in the Indenture to the contrary, (1) the
Authority may not elect to adjust the interest rate on the Bonds from a
Long-Term Interest Rate which extends to the maturity date, (2) the Authority
may not elect to adjust the interest rate on the Bonds to a Bond Interest Term
Rate with an Interest Period longer than 30 days or a Long-Term Interest Rate
which does not extend to maturity unless an Alternate Liquidity Facility
meeting the requirements of the Indenture is delivered to the Trustee, and (3)
in connection with the adjustment from a Long-Term Interest Rate Period which
would require the mandatory tender for purchase of the Bonds at a purchase
price greater than the principal amount thereof as provided in the Indenture,
the Authority, as a condition to exercising its option to cause an adjustment
in the Interest Rate Period applicable to the Bonds, shall deliver to the
Trustee prior to the Trustee mailing notice of such adjustment in the Interest
Rate Period, money for the purpose of paying such premium.
Any Provider Bonds shall, subject to the next paragraph, bear interest at
the Provider Bonds Rate determined by the Liquidity Provider for the period
commencing from the date that the Liquidity Provider shall have purchased such
Bond and continuing until the Liquidity Provider (or a purchaser from the
Liquidity Provider other than a purchaser which purchased such Bond through
the Remarketing Agent) shall no longer be the owner of such Bond.
Notwithstanding anything in this Indenture to the contrary, interest on
Provider Bonds shall be paid by wire transfer on the date on which such
interest is due in accordance with the wire transfer instructions to be
provided by the Liquidity Provider (or a purchaser from the Liquidity Provider
other than a purchaser which purchased such Bond through the Remarketing
Agent) prior to such Interest Payment Date. Provider Bonds may be sold,
assigned or disposed of by the Liquidity Provider (or a purchaser from the
Liquidity Provider other than a purchaser which purchased such Bond through
the Remarketing Agent) only if the purchaser, assignee or subsequent owner
thereof provides the Trustee an authorization that the Remarketing Agent is
authorized to sell such Bonds on behalf of such purchaser pursuant to the
Indenture. The Provider Bonds and the Bond Register maintained by the Trustee
shall be noted indicating the requirement of such authorization and the
applicability of the provisions of this Section to subsequent ownership of the
Provider Bonds.
In the event the Liquidity Provider does not agree to extend the Purchase
Period beyond any stated expiration date of the Liquidity Facility and an
Alternate Liquidity Facility or a firm commitment for an Alternate Liquidity
Facility has not been obtained by the Authority within 90 days of such
expiration date, the Authority shall take all action necessary, in accordance
with the terms of the Indenture, to convert the Bonds to a Long Term Interest
Rate to maturity by such expiration date.
Tender and Purchase of Bonds
During Weekly Interest Rate Period. During any Weekly Interest Rate
-------------------------------------
Period, any Bond (other than a Purchased Bond) shall be purchased (in whole)
from its holder at the option of the holder on any Business Day at a purchase
price equal to the principal amount thereof plus accrued interest, if any,
from and including the Interest Accrual Date immediately preceding the date of
purchase through and including the day immediately preceding the date of
purchase, unless the date of purchase shall be an Interest Accrual Date, in
which case at a purchase price equal to the principal amount thereof, payable
in immediately available funds, upon delivery to the Tender Agent at its
Principal Office for delivery of notices of an irrevocable written notice
which states the principal amount of such Bond and the date on which the same
shall be 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
Tender Agent. Any notice delivered to the Tender Agent after 4:00 p.m., New
York City time, shall be deemed to have been received on the next succeeding
Business Day. Bank Bonds may not be tendered for purchase at the option of the
holder thereof.
During Daily Interest Rate Period. During any Daily Interest Rate Period
---------------------------------
for any of the Bonds, any Bond shall be purchased (in whole) from its holder
at the option of the holder on any Business Day at a purchase price equal to
the principal amount thereof plus accrued interest, if any, from and including
the Interest Accrual Date immediately preceding the date of purchase through
and including the day immediately preceding the date of purchase, unless the
date of purchase shall be an Interest Accrual Date in which case at a purchase
price equal to the principal amount thereof, payable in immediately available
funds, upon delivery to the Tender Agent at its Principal Office for delivery
of notices, by no later than 10:30 a.m., New York City time, on such Business
Day, of an irrevocable written notice or an irrevocable telephonic notice,
promptly confirmed by tested telex, telecopy or other writing, which states
the principal amount of such Bonds and the date of purchase. For payment of
such purchase price on the date specified in such notice, such Bond must be
delivered, at or prior to noon, New York City time, on such Business Day, to
the Tender Agent for such Bonds at the Delivery office of the Tender Agent,
accompanied by an instrument of transfer thereof, in form satisfactory to such
Tender Agent, executed in blank by the Registered Owner thereof or his duly
authorized attorney, with such signature guaranteed by an eligible guarantor
institution.
Mandatory Tender for Purchase On Day Next Succeeding the Last Day of Each
-------------------------------------------------------------------------
Bond Interest Term. On the day next succeeding the last day of each Bond
- --------------------
Interest Term for a Bond, unless such day is the maturity date or the first
day of a new Interest Rate Period (in which event such Bond shall be subject
to mandatory purchase pursuant to the following paragraph, the holder of such
Bond will be required to tender such Bond, and such Bond shall be purchased
from its holder at a purchase price equal to the principal amount thereof
payable in immediately available funds. The purchase price of any Bond so
purchased shall be payable only upon surrender of such Bond to the Tender
Agent at its principal office for delivery of Bonds, accompanied by an
instrument of transfer thereof, in form satisfactory to the Tender Agent,
executed in blank by the holder thereof or his duly authorized attorney, with
such signature guaranteed by an eligible guarantor institution.
Mandatory Tender for Purchase on First Day of Each Interest Rate Period.
------------------------------------------------------------------------
The Bonds shall be subject to mandatory tender for purchase on the first day
of each Interest Rate Period, or on the day which would have been the first
day of a new Interest Rate Period had one of the events specified in the
Indenture not occurred which resulted in the interest rate on the Bonds not
being adjusted, at a purchase price, payable in immediately available funds,
equal to the principal amount of the Bonds or, in the case of a purchase on
the first day of an Interest Rate Period which shall be preceded by a
Long-Term Interest Rate Period and which shall commence prior to the day
originally established as the last day of such preceding Long-Term Interest
Rate Period, at a purchase price equal to the optional redemption price set
forth in the Indenture which would have been applicable to the Bonds on such
mandatory purchase date if such preceding Long-Term Interest Rate Period had
continued to the day originally established as its last day, plus accrued
interest, if any.
Mandatory Tender for Purchase upon Termination, Expiration, Reduction,
-------------------------------------------------------------------------
Modification or Replacement of the Standby Agreement. If at any time the
- ---------------------------------------------------------
Trustee shall give notice in accordance with the Indenture that any Bond or
Bonds which, at such time, are subject to purchase under the Standby Purchase
Agreement as then in effect, shall on the date specified in such notice cease
to be payable from such Standby Purchase Agreement as a result of (i) (A) the
termination or expiration of the term of such Standby Purchase Agreement, or
(B) such Standby Purchase Agreement being reduced, replaced or modified with
the effect that the purchase price of such Bond or Bonds are no longer payable
from such Standby Purchase Agreement (in each case, whether or not any
Alternate Liquid Facility has been obtained), or (ii) the Bank notifying the
Trustee that an "Event of Default" has occurred under the Standby Purchase
Agreement and that the Bank is terminating the Standby Agreement in accordance
with its terms, then on the fifth Business Day after receipt of any notice
preceding any termination, expiration, reduction, or modification of the
Standby Agreement each such Bond or Bonds shall be purchased or deemed
purchased as provided herein.
Redemption Provisions
Optional Redemption.
-------------------
(a) On any Interest Payment Date during a Weekly Interest Rate Period or
Daily Interest Rate Period, the Bonds shall be subject to optional redemption
by the Authority from Available Money, in whole or in part, at a Redemption
Price of par, without premium.
(b) On the day succeeding the last day of any Bond Interest Term with
respect to any Bond, such Bond shall be subject to optional redemption by the
Authority from Available Money, in whole or in part, at a Redemption Price of
par, without premium.
(c) During any Long-Term Interest Rate Period, the Bonds shall be subject
to optional redemption by the Authority from Available Money, in whole or in
part, on any date during the periods specified below or, if approved by Bond
Counsel as provided in the Indenture on any date during the periods specified
in the notice of the Authority to the Trustee pursuant to the Indenture in
whole at any time or in part from time to time, at the Redemption Prices
(expressed as a percentage of principal amount) hereinafter indicated or
specified in the notice of the Authority to the Trustee, plus accrued
interest, if any, to the date fixed for redemption:
<TABLE>
Original Length of Prepayment Price
Long-Term Interest Commencement of as a Percentage
Rate Period Prepayment Period of Rate Period
- --------------------------------------- ------------------------------------- ------------------------------------
<S> <C> <C>
More than 10 years 8th anniversary of commencement of 102% declining by 1% on each
Long-Term Interest Rate Period succeeding anniversary of the first
day of the prepayment period until
reaching 100% and thereafter 100%
More than 8 years but not more than 6th anniversary of commencement of 101% until the first anniversary of
10 years Long-Term Interest Rate Period the first day of the prepayment
period and 100% from said first
anniversary and thereafter
More than 5 years but nor more than 8 4th anniversary of commencement of 100%
years Long-Term Interest Rate Period
5 years or less No prepayment
</TABLE>
(d) Any Liquidity Provider Bonds shall be subject to optional redemption
by the Authority, in whole or in part at any time, and from time to time, at a
Redemption Price of par, plus accrued interest to the date fixed for
redemption.
Mandatory Redemption from Insurance Proceeds. The Bonds shall be subject
--------------------------------------------
to mandatory redemption, in Authorized Denominations from Available Moneys, in
a principal amount equal to an Authorized Denomination less than or equal to
the amount of proceeds of insurance or condemnation payable under the
Installment Sale Agreement deposited in the Mandatory Redemption Fund pursuant
to the Indenture, on the earliest date for which notice of redemption may be
given in accordance with the Indenture at a Redemption Price equal to the
principal amount thereof, plus accrued interest to the redemption date,
without premium. If Bonds are to be redeemed pursuant to this provision, the
Issuer shall provide the Trustee, no later than four Business Days prior to
the day notice of such redemption is to be mailed, with a Written Order
specifying the principal amount of Bonds of each maturity to be redeemed.
Mandatory Sinking Fund Redemption. The Bonds maturing August 15, 2029
-----------------------------------
shall be subject to mandatory redemption by lot on August 15 in the following
respective years and in the following respective principal amounts by the
application of Mandatory Sinking Fund Installments at a Redemption Price equal
to the principal amount thereof, plus accrued interest to the redemption date,
without premium:
Year Principal Amount
2021 $
2022
2023
2024
2025
2026
2027
2028
2029
- --------------------
*Stated Maturity
To the extent that the Authority optionally redeems any of the Bonds
during a year, the Authority may forego an equivalent dollar amount of
principal redemption required pursuant to the foregoing paragraph during that
year.
The foregoing mandatory redemption schedule may be converted in whole or
in part to Serial Maturity Dates and/or Term Maturity Dates upon delivery of
an Opinion of Bond Counsel prior to the commencement of a Bond Interest Term
or Long-Term Interest Rate Period.
At least 75 days prior to each of the foregoing mandatory redemption
dates, the Authority shall notify the Trustee of the principal amounts to be
applied to the Bonds in order to accomplish the foregoing redemption schedule.
Upon any purchase of Bonds pursuant to the Indenture or any optional
redemption of Bonds, the Authority may direct that an amount equal to the
aggregate principal amount of Bonds so purchased or redeemed shall be credited
towards a part or all of any one or more yearly mandatory sinking fund
redemptions required for the Bonds by the Indenture. Any such direction shall
be in writing, shall be delivered to the Trustee and the Remarketing Agent at
least 75 days before the scheduled date of such mandatory redemption and shall
state the years in which and the amounts by which such mandatory sinking fund
redemptions are to be reduced.
Selection of Bonds to be Redeemed. If Bonds are to be optionally redeemed
---------------------------------
pursuant to the Indenture, the Trustee shall first select for redemption any
Liquidity Provider Bonds Outstanding, and thereafter shall select the Bonds to
be redeemed by lot within each maturity from which Bonds are to be redeemed,
as set forth in the Written Order of the Authority. If Bonds are to be
redeemed from proceeds of insurance or condemnation payable under any
Installment Sale Agreement, the Trustee shall first select for redemption any
Liquidity Provider Bonds Outstanding, and thereafter shall select the Bonds to
be redeemed by lot within each maturity from which Bonds are to be redeemed,
as set forth in the Written Order of the Authority. The Written Order shall
select those maturities to be redeemed such that payments remaining to be made
under the Installment Purchase Agreement will match debt service payments on
the Bonds which will remain Outstanding. The portion of any Bond to be
redeemed which exceeds the minimum Authorized Denomination shall be redeemed
in an Authorized Denomination and, in selecting portions of such Bonds for
redemption, the party making the selection shall treat each such Bond as
representing that number of Bonds which is obtained by dividing the principal
amount of such Bond by the minimum Authorized Denomination.
Notice of Redemption. So long as the Book-Entry System is used for the
--------------------
Bonds, the Trustee will give any notice of redemption or any other notices
required to be given to registered Owners of Bonds only to DTC. Any failure of
DTC to advise any DTC Participant, or of any DTC Participant to notify the
Beneficial Owner, of any such notice and its content or effect will not affect
the validity of the redemption of the Bonds called for redemption or any other
action premised on such notice. Beneficial Owners may desire to make
arrangements with a DTC Participant so that all notices of redemption or other
communications to DTC which affect such Beneficial Owners, including
notification of all interest payments, will be forwarded in writing by such
DTC Participant. See "BOOK-ENTRY ONLY SYSTEM" below. The Trustee is to give
notice mailed (unless waived pursuant to the Indenture) at least 30 days and
not more than 60 days before the date fixed for redemption, to the Owners of
such Bonds, or portions thereof, so called for redemption, at their respective
addresses as the same shall last appear on the Bond Register. Notwithstanding
the foregoing, with respect to the Owner of $1,000,000 or more aggregate
principal amount of Bonds, any redemption notice to such Owner shall be mailed
by certified mail, return receipt requested. No notice of redemption need be
given to the Owner of a Bond to be called for redemption if such Owner waives
notice thereof in writing, and such waiver shall be filed with the Trustee or
other authorized person or entity prior to the redemption date. Neither the
failure of an Owner to receive notice of redemption of Bonds nor any error in
such notice shall affect the validity of the proceedings for the redemption of
Bonds.
Payment of Redeemed Bonds. If notice of redemption has been given or
---------------------------
waived as provided in the Indenture, the Bonds or portions thereof called for
redemption shall be due and payable on the date fixed for redemption at the
Redemption Price, together with accrued interest to the date fixed for
redemption, upon presentation and surrender of the Bonds to be redeemed at the
office specified in the notice of redemption. If there shall be called for
redemption less than the full principal amount of a Bond, the Authority shall
execute and deliver and the Trustee shall authenticate, upon surrender of such
Bond and without charge to the Owner thereof, Bonds of like interest rate and
maturity in an aggregate principal amount equal to the unredeemed portion of
the principal amount of the Bonds so surrendered in such Authorized
Denominations as shall be specified by the Owner.
If any Bond or any portion thereof shall have been duly called for
redemption and payment of the Redemption Price, together with unpaid interest
accrued to the date fixed for redemption, shall have been made or provided
for, then interest on such Bond or such portion shall cease to accrue from
such date, and from and after such date such Bond or such portion shall no
longer be entitled to any lien, benefit, or security under the Indenture, and
the Owner thereof shall have no rights in respect of such Bond or such portion
except to receive payment of such Redemption Price and unpaid interest accrued
to the date fixed for redemption, as well as certain other rights as set forth
in the Indenture.
Defaults and Remedies
Events of Default
-----------------
The following events are referred to in the Indenture as the "Events of
Default":
(a) payment of interest on the Bonds is not made when the same
becomes due and payable;
(b) payment of the principal or Redemption Price of the Bonds is not
made when the same becomes due and payable;
(c) the Authority fails to observe or perform in any material way
any covenant, condition. agreement or provision contained in the Bonds or
in the Indenture on the part of the Authority to be performed other than
those set forth in (a) and (b) directly above and such failure continues
for thirty (30) (unless such period is extended with the written consent
of the Bond Insurer) days after written notice specifying such failure
and requiring the same to be remedied has been given to the Authority by
the Trustee, which notice shall be given by the Trustee at the direction
of the Bond Insurer and shall be given by the Trustee at the written
request of the Owners of not less than twenty-five percent (25%) in
aggregate principal amount of all Bonds then Outstanding and with the
consent of the Bond Insurer; provided, however, that if said default be
such that it cannot be corrected within the applicable period, it will
not constitute an Event of Default if corrective action is instituted by
the Authority within the applicable period and diligently pursued until
the default is corrected;
(d) the District fails to make any payment due under the District
Obligation which is held in the Program Fund; or
(e) the District fails to observe or make any default in any
material way any covenant, condition, agreement or provision on its part
to be performed contained in any instrument authorizing the issuance of
any other parity or subordinate securities having a lien on the District
Net Revenues, as defined in the Installment Sale Agreement;
Remarketing, Agent and Tender Agent for Bonds.
---------------------------------------------
(a) The initial Remarketing Agent for the Bonds will be PaineWebber
Incorporated.
The Authority will, with the consent of the Bond Insurer and the
Liquidity Provider, appoint any successor Remarketing Agent for the Bonds
subject to the conditions set forth in the Indenture. Each Remarketing Agent
will designate its principal office (other than the initial Remarketing Agent)
and signify its acceptance of the duties and obligations imposed upon it
hereunder by a written instrument of acceptance delivered to the Authority,
the Bond Insurer and the Liquidity Provider under which the Remarketing Agent
will agree, particularly, to keep such books and records as shall be
consistent with prudent industry practice and to make such books and records
available for inspection by the Authority, the Bond Insurer and the Liquidity
Provider at all reasonable times.
(b) The initial Tender Agent for the Bonds will be BNY Western Trust
Company. The Authority will appoint any successor Tender Agent for the Bonds,
subject to the conditions set forth in the Indenture. Each Tender Agent will
designate its principal office(s) for delivery of notices and delivery of
Bonds (except for such offices of the initial Tender Agent) and signify its
acceptance of the duties and obligations imposed upon it hereunder by a
written instrument of acceptance delivered to the Trustee, the Authority, the
Bond Insurer and the Liquidity Provider and the Remarketing Agent. By
acceptance of its appointment, the Tender Agent agrees:
(i) to hold all Bonds delivered to it pursuant to the Indenture, as
agent and bailee of, and in escrow for the benefit of, the respective
Owners which shall have so delivered such Bonds until moneys representing
the purchase price of such Bonds will have been delivered to or for the
account of or to the order of such Owners;
(ii) to establish and maintain a separate segregated trust fund
designated as the "Rancho California Water District Financing Authority
Adjustable Rate Revenue Bonds Series of 1998A Purchase Fund" (the
"Remarketing Proceeds Fund") containing a Remarketing Account (the
"Remarketing Account") and a Purchase Account (the "Purchase Account")
until such time as it has been discharged from its duties as Tender Agent
hereunder;
(iii) to hold all moneys (without investment thereof) delivered to
it hereunder in the Remarketing Proceeds Fund for the purchase of Bonds
pursuant to the Indenture. as agent and bailee of, and in escrow for the
benefit of, the person or entity which have so delivered such moneys
until the Bonds purchased with such moneys shall have been delivered to
or for the account of such person or entity;
(iv) to hold all moneys delivered to it by the Liquidity Provider
for the purchase of Bonds pursuant to the Indenture, as agent and bailee
of, and in escrow for the benefit of, the Owners or former Owners who
shall deliver Bonds to it for purchase until the Bonds purchased with
such moneys shall have been delivered to or for the account of Liquidity
Provider; provided, however, that if the Bonds shall at any time become
due and payable, the Tender Agent shall cause such moneys (other than
moneys held pursuant to the Indenture) to be returned to the Liquidity
Provider;
(v) to hold all Bonds registered in the name of the new Owners
thereof for delivery to the Remarketing Agent; and
(vi) to keep such books and records as shall be consistent with
prudent industry practice and to make such books and records available
for inspection by the Authority, the Trustee, the Bond Insurer, the
Liquidity Provider and the Remarketing Agent at all reasonable times.
Qualifications of Remarketing, Agent and Tender Agent; Resignation;
-------------------------------------------------------------------------
Removal.
- -------
The Remarketing Agent will be a member of the National Association of
Securities Dealers. having a combined capital stock, surplus and undivided
profits of at least $50,000,000 and authorized by law to perform all the
duties imposed upon it by the Indenture. The Remarketing Agent may at any time
resign and be discharged of the duties and obligations created by the
Indenture by giving notice to the Authority, the Trustee, the Tender Agent and
the Bond Insurer and the Liquidity Provider. Such resignation shall take
effect on the 45th day after the receipt by the Authority of the notice of
resignation. The Remarketing Agent may be removed at any time by the Authority
and the Remarketing Agent shall be removed at any time by the Authority if the
Remarketing Agent is in default under the Remarketing Agreement, by Written
Order given by the Authority and delivered to the Remarketing Agent, the
Trustee, the Tender Agent, the Bond Insurer and the Liquidity Provider.
The Tender Agent will be an association or a corporation duly organized
under the laws of the United States of America or any state or territory
thereof, and authorized by law to perform all the duties imposed upon it by
the Indenture. The Tender Agent may at any time resign and be discharged of
the duties and obligations created by the Indenture by giving at least 30 days
notice to the Trustee, the Authority, the Bond Insurer and the Liquidity
Provider and the Remarketing Agent. The Tender Agent may be removed at any
time by an instrument signed by the Authority, filed with the Tender Agent,
the Trustee and the Remarketing Agent. Such resignation or removal shall take
effect on the day a successor Tender Agent shall have been appointed by the
Authority and shall have accepted such appointment.
THE LIQUIDITY FACILITY
The Obligations will rank equally with all of our other general unsecured
and unsubordinated obligations. The Obligations are not issued under an
indenture. As of the date of this prospectus supplement, we have approximately
$2.6 billion amount of obligations currently outstanding, including the
Obligations we are issuing under this prospectus supplement.
Owners of the Bonds to which the Obligations relate will be entitled to
the benefits and will be subject to the terms of the Liquidity Facility. Under
the Liquidity Facility, we agree to make available to a specified
intermediary, upon receipt of an appropriate demand for payment, the purchase
price for the Bonds. Our obligation under the Liquidity Facility will be
sufficient to pay a purchase price equal to the principal of and up to 35
days' interest on the Bonds at an assumed rate of % per year.
Termination Events
The scheduled expiration date of the Liquidity Facility is November,
2003. The Indenture relating to the Bonds will specify certain circumstances
where we must purchase Bonds which a holder tenders for purchase pursuant to
an optional or mandatory tender, which have not been remarketed. Under certain
circumstances, we may terminate our obligation to purchase Bonds. The
following events would permit such termination:
(a) (i) if the District fails to pay any portion of the commitment fee
when due as set forth in the Standby Bond Purchase Agreement and the related
payment agreement, or (ii) if the District fails to pay when due any other
amount it must pay under those documents and such failure continues for a
specified number of business days;
(b) if the Authority fails to observe or perform any agreement contained
in the Standby Bond Purchase Agreement, the Indenture or a related municipal
financing agreement (or the applicable State takes any action which would
impair the power of the Authority or the District to so comply) and, if such
failure is a result of a covenant breach that the Authority or the District
can remedy, such failure continues for a specified number of days following
written notice of such failure from us to the Authority or the District;
(c) if any representation, warranty, certification or statement made by
the Authority or the District in the Standby Bond Purchase Agreement or any
related document or in any certificate, financial statement or other document
the Authority or the District delivers under those documents proves to have
been incorrect in any material respect when made;
(d) if the Authority defaults in the payment of principal of or premium,
if any, or interest on any bond, note or other evidence of indebtedness that
the Authority has issued, assumed or guaranteed, and such default is
continuing;
(e) if the Authority or the District commences a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of its or any substantial part of its property, or consents
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or
makes a general assignment for the benefit of creditors, or fails generally to
pay its debts as they become due, or declares a moratorium, or takes any
action to authorize any of the foregoing;
(f) if an involuntary case or other proceeding is commenced against the
Authority or the District seeking liquidation, reorganization or other relief
with respect to it or its debts under any bankruptcy, insolvency or other
similar law or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case remains undismissed and unstayed for a
period of 60 days; or if an order for relief is entered against the Authority
or the District under the federal bankruptcy laws;
(g) if any material provision of the Standby Bond Purchase Agreement or
any related document for any reason whatsoever ceases to be a valid and
binding agreement of the Authority or the District or the Authority or the
District contests the validity or enforceability of any of these documents; or
(h) if the Authority or the District does not pay when due any amount
payable under the Bonds or under a related municipal financing agreement
(regardless of whether the holders of the Bonds waive such failure).
Upon the occurrence of a termination event, we may deliver notice to the
Trustee, the Authority, the District, the Remarketing Agent and any applicable
paying agent or tender agent regarding our intention to terminate the
Liquidity Facility. In that case, the Liquidity Facility would terminate,
effective at the close of business on the 30th day following the date of the
notice, or if that date is not a business day, on the next business day.
Before the time at which termination takes effect, the Bonds will be subject
to mandatory tender for purchase from the proceeds of a drawing under the
Liquidity Facility. The termination of the Liquidity Facility, however, does
not result in an automatic acceleration of the Bonds.
The obligations of the Authority under the Bonds are as described in the
Authority's separate disclosure document relating to the Bonds.
THE STANDBY LOAN AGREEMENT; GE CAPITAL
In order to obtain funds to fulfill our obligations under the Liquidity
Facility, we 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 us as needed to purchase Bonds. The amount of each loan under
the Standby Loan Agreement will be no greater than the purchase price for
tendered Bonds. The purchase price represents the outstanding principal amount
of the tendered Bonds and interest accrued on the principal to but excluding
the date we borrow funds under the Standby Loan Agreement. Each loan will
mature on a date specified in the Standby Loan Agreement, which date will be
set forth in the applicable prospectus supplement. The proceeds of each loan
will be used only for the purpose of paying the purchase price for tendered
Bonds. When we wish to borrow funds under the Standby Loan Agreement, we must
give GE Capital prior written notice by a specified time on the proposed
borrowing date. No later than a specified time on each borrowing date (if GE
Capital has received the related notice of borrowing by the necessary time 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 our obligations under the Liquidity
Facility. GE Capital will not have any responsibility or incur any liability
for any act, or any failure to act, by us which results in our failure to
purchase tendered Bonds with the funds provided under the Standby Loan
Agreement.
<PAGE>
<TABLE>
Ratio of Earnings to Fixed Charges
The following table sets forth the consolidated ratio of earnings to fixed charges of GE Capital for the periods indicated:
Nine Months
Ended
- -------------------------------------------------------------------------------------- ----------------------
Year Ended December 31, September 26, 1998
- ------------ ----------- ---------- ---------- ---------- -----------
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
1.44 1.62 1.63 1.51 1.53 1.48 1.54
</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 we believe
reasonably approximates the interest factor of such rentals.
Where You Can Find More Information Regarding GE Capital
GE Capital files annual, quarterly and special reports, proxy statements
and other information with the SEC. You may read and copy any reports,
statements or other information GE Capital files at the SEC's public reference
rooms located at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661
and 7 World Trade Center, Suite 1300, New York, NY 10048. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. GE
Capital's SEC filings are also available to the public from commercial
document retrieval services and at the web site maintained by the SEC at
"http://www.sec.gov."
Incorporation of Information Regarding GE Capital
The SEC allows us to "incorporate by reference" information into this
prospectus supplement, which means that we can disclose important information
to you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus
supplement, except for any information superseded by information in this
prospectus supplement. This prospectus supplement incorporates by reference
the documents set forth below that GE Capital has previously filed with the
SEC. These documents contain important information about GE Capital, its
business and its finances.
Document Period
- -------- ------
Annual Report on Form 10-K....................... Year ended December 31, 1997
Quarterly Reports on Form 10-Q................... Quarters ended March 28, 1998,
June 27, 1998 and September
26, 1998
EXPERTS
The financial statements and schedule of General Electric Capital
Corporation and consolidated affiliates as of December 31, 1997 and 1996, and
for each of the years in the three year period ended December 31, 1997,
appearing in GE Capital's Annual Report on Form 10-K for the year ended December
31, 1997, have been incorporated by reference in this prospectus supplement, in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference in this prospectus supplement, and upon
the authority of said firm as experts in accounting and auditing.
<PAGE>
APPENDIX A
TENDER TIMELINE
TENDERS FOR BONDS
PURCHASE DATE
(New York City time)
- ----------- ------------ ------------ ------------ ------------ -----------
- ----------- ------------ ------------ ------------ ------------ -----------
11:30 a.m. 11:45 a.m. 2:15 p.m. 2:30 p.m.
[1] [2] [3] [4]
1. Trustee shall give immediate telephonic notice, in any event not
later than 11:30 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.
<PAGE>
APPENDIX B
SUMMARY OF CERTAIN DEFINITIONS
"Alternate Liquidity Facility" means a Standby Bond Purchase Agreement,
------------------------------
surety bond or other credit facility which satisfies the requirements of the
Indenture.
"Authorized Denominations" means (i) with respect to the Initial Interest
------------------------
Rate Period or any Long-Term Interest Rate Period for the Bonds, $5,000 and
any integral multiple thereof; and (ii) with respect to any Short-Term
Interest Rate Period, Daily Interest Rate Period or Weekly Interest Rate
Period for the Bonds, $100,000 and any integral multiple thereof.
"Bond or Bonds" means any Bond or all of the Bonds, as the case may be,
-------------
authorized and issued by the Authority, authenticated by the Trustee and
delivered under the Indenture.
"Bond Counsel" means an attorney-at-law, or a firm of such attorneys, of
------------
nationally recognized standing in matters pertaining to the tax-exempt nature
of interest on obligations issued by states and their political subdivisions,
duly admitted to the practice of law before the highest court of any state of
the United States of America.
"Bond Insurer" means Financial Guaranty Insurance Company, a New York
------------
stock insurance company, or any successor thereto or assignee thereof.
"Bond Interest Term" or "BIT" will mean each period established in
-------------------- ---
accordance with the Indenture during which the Bonds shall bear interest at a
Bond Interest Term Rate.
"Bond Interest Term Rate" or "BIT Rate" means a term, non-variable
-------------------------- ---------
interest rate on the Bonds established periodically in accordance with the
Indenture.
"Business Day" will mean a day other than (i) Saturday or Sunday, (ii) a
------------
day on which banking institutions in the city or cities in which the principal
corporate trust office of the Trustee or any Paying Agent appointed hereunder
are located or banking institutions in the city in which the principal office
of the Liquidity Provider is located are authorized or required by law to be
closed, or (iii) a day on which the New York Stock Exchange is closed.
"Daily Interest Rate" means, with respect to the Bonds, a variable
---------------------
interest rate on the Bonds established in accordance with the Indenture.
"Daily Interest Rate Period" means, with respect to the Bonds, each
----------------------------
period during which a Daily Interest Rate is in effect.
"Default Rate" means the Default Rate as defined in the Standby Bond
-------------
Purchase Agreement or the meaning provided to a similar term in an Alternate
Liquidity Facility.
"Indenture" means the Indenture of Trust, dated as of November 1, 1998,
---------
between the Authority and the Trustee, pursuant to which the Bonds are to be
issued, as amended or supplemented from time to time in accordance with its
terms.
"Installment Sale Agreement" means the Installment Sale Agreement, dated
--------------------------
as of November 1, 1998, by and between the District and the Authority relating
to the financing and refinancing of the Project.
"Interest Accrual Date" will mean (i) with respect to any Weekly Interest
---------------------
Rate Period, the first day thereof and, thereafter, the first Wednesday of
each month during that Weekly Interest Rate Period, (ii) with respect to any
Daily Interest Rate Period, the first day thereof and, thereafter, the first
day of each month, (iii) with respect to any Long-Term Interest Rate Period,
the first day thereof and, thereafter, each Interest Payment Date in respect
thereof, other than the last such Interest Payment Date, and (iv) with respect
to each Bond Interest Term within a Short-Term Interest Rate Period, the first
day thereof.
"Installment Payment" means the payments payable by the District from
--------------------
legally available funds, pursuant to the Installment Sale Agreement, during
the term of the Installment Sale Agreement which constitute the payments for
and in consideration of the purchase and financing of the Project during the
term of the Installment Sale Agreement for which such funds are budgeted and
appropriate or otherwise made legally available.
"Interest Payment Date" means the dates that Installment Payments are due
---------------------
and payable by the District, pursuant to the Installment Sale Agreement.
"Interest Payment Date" will mean with respect to the Bonds, (i) with
-----------------------
respect to any Weekly Interest Rate Period and with respect to any Provider
Bonds, the first Wednesday of each calendar month, or, if such first Wednesday
will not be a Business Day, the next succeeding Business Day, (ii) with
respect to any Daily Interest Rate Period, the fifth Business Day of each
calendar month, (iii) with respect to any Long-Term Interest Rate Period, each
February 15 and August 15, or, if any such February 15 or august 15 will not
be a Business Day, the next succeeding Business Day, (iv) with respect to any
Bond Interest Term, the day next succeeding the last day thereof, and (v) with
respect to each Interest Rate Period, the day next succeeding the last day
thereof.
"Interest Rate Period" means any Daily Interest Rate Period, Weekly
---------------------
Interest Rate Period, Bond Interest Term or Long-Term Interest Rate Period.
"Liquidity Facility" shall initially mean the Standby Bond Purchase
-------------------
Agreement issued by the Liquidity Provider; and, upon the delivery of an
Alternate Liquidity Facility in accordance with the terms hereof, means such
Alternate Liquidity Facility.
"Long-Term Interest Rate Period" means each period during which a
---------------------------------
Long-Term Interest Rate is in effect ("Long-Term Interest Rate") means a term,
non-variable interest rate on the Bonds established in accordance with the
Indenture.
"Maximum Interest Rate" means 12% per annum.
---------------------
"Opinion of Bond Counsel" means an opinion signed by Bond Counsel,
-------------------------
addressed to the Issuer, the Bond Insurer, the Liquidity Provider, the
Remarketing Agent and the Trustee, to the effect that the action proposed to
be taken is authorized or permitted by the laws of the State of California and
this Indenture, and will not adversely effect any exclusion pursuant to
section 103(a) of the Code from the gross income of the owners thereof for
federal income tax purposes.
"Outstanding" means, with respect to the Bonds and as of any date, the
-----------
aggregate of Bonds authorized, issued, authenticated and delivered under the
Indenture, except:
(a) Bonds cancelled or surrendered to the Trustee for cancellation
pursuant to the provisions of the Indenture respecting exchanges,
transfers and authentication of the Bonds;
(b) Bonds deemed to have been paid as provided in the provisions of
the Indenture respecting defeasance; and
(c) Bonds in lieu of or in substitution for which other Bonds will
have been authenticated and delivered pursuant to the Indenture.
Notwithstanding anything in the Indenture to the contrary, in the event that
the principal and/or interest due on the Bonds will be paid by the Bond
Insurer pursuant to the Municipal Bond Insurance Policy or the Liquidity
Provider pursuant to the Liquidity Facility, the Bonds will remain Outstanding
for all purposes, not be defeased or otherwise satisfied and not be considered
paid by the Authority, and the assignment and pledge of the Trust Estate and
all covenants, agreements and other obligations of the Authority to the Owners
will continue to exist and will run to the benefit of the Bond Insurer and the
Liquidity Provider and the Bond Insurer and the Liquidity Provider will be
subrogated to the rights of such Owners.
"Owner" means the Person or Persons in whose name or names a particular
-----
Bond or Bonds shall be registered on the Bond Register.
"Participants" means those broker-dealers, banks and other financial
------------
institutions from time to time for which the Depository holds Bonds as
securities depository.
"Payment Agreement" shall initially mean that certain Payment Agreement
------------------
by and among the Liquidity Provider, the Trustee and the District, dated as of
November 1, 1998, providing for the reimbursement for payments made under the
Standby Bond Purchase Agreement, or any similar agreement providing for the
issuance of any Alternate Liquidity Facility, in each case as such agreement
is originally executed and as the same may from time to time be amended or
supplemented.
"Provider Bonds" shall mean Bonds or beneficial interest therein
---------------
purchased with moneys provided under the Liquidity Facility pursuant to
Article II hereof and Bonds issued in exchange for or in replacement or
substitution thereof until such Bonds are remarketed or until the owner
thereof elects not to sell such Bonds as described in the Indenture.
"Provider Bonds Rate" means the rate applicable to Provider Bonds as
--------------------
established under the Standby Bond Purchase Agreement.
"Provider Rate" shall have the meaning ascribed to the term "Provider
--------------
Rate" in the Standby Bond Purchase Agreement.
"Redemption Price" means the principal amount, plus the applicable
-----------------
premium, if any, payable upon redemption of any Bond pursuant to the
Indenture.
"Remarketing Agent" means PaineWebber Incorporated, or any successor
------------------
remarketing agent appointed by the Authority in accordance with the terms of
the Remarketing Agreement and this Indenture.
"Remarketing Agreement" shall mean that certain Remarketing Agreement,
----------------------
dated as of November 1, 1998, by and among the Remarketing Agent, the District
and the Authority as such agreement is originally executed and as the same may
from time to time be amended or supplemented; provided, however, that the
Remarketing Agreement shall be in form and substance acceptable to the Bond
Insurer and the Liquidity Provider.
"Standby Bond Purchase Agreement" shall mean the Standby Bond Purchase
---------------------------------
Agreement, dated as of November 1, 1998, by and between FGIC Securities
Purchase, Inc. and the Trustee; and, upon the delivery of an Alternate
Liquidity Facility in accordance with the terms hereof, means such Alternate
Liquidity Facility.
"State" means the State of California.
-----
"Tax Opinion" means, with respect to any action requiring such an opinion
-----------
under the Indenture, an Opinion of Bond Counsel to the effect that such action
will not adversely affect the exclusion of interest on any Bond from gross
income for federal income tax purposes or the exemption of interest on the
Bonds from the State personal income taxes.
"Trustee" means BNY Western Trust Company, a corporation organized under
-------
the laws of the State, and its successor or successors under the Trust
Agreement.
"Weekly Interest Rate Period" means each period during which Weekly
------------------------------
Interest Rates are in effect.
"Weekly Interest Rate" means a variable interest rate on the Bonds
----------------------
established in accordance with the Indenture.
"Written Order" means a written direction of the Authority to the Trustee
-------------
signed by an Authorized Officer.
<PAGE>
$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 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 November 17, 1998
<PAGE>
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 Northwestern Atrium Center, 500 W. Madison Street, Suite 1400,
Chicago, Illinois 60661-2511, and 7 World Trade Center, 13th Floor, 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.
<PAGE>
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, 1997 and
the Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998, June
30, 1998 and September 30, 1998, 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.
<PAGE>
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, such
owner may elect to purchase from VRDN holders an amount of VRDNs equal to the
principal amount of INFLOs for which such INFLO owner 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, the
owner may "de-link" his or her 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 or her 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.
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,
1997 and 1996, and for each of the years in the three-year period ended December
31, 1997 appearing in FGIC Securities Purchase, Inc.'s Annual Report on Form
10-K have been incorporated herein by reference in this prospectus in reliance
upon the such report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference in this prospectus, and upon the
authority of said firm as experts in accounting and auditing.
<PAGE>
<TABLE>
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<S> <C>
TABLE OF CONTENTS $46,000,000
principal amount
plus interest and premium,
Page if any
----
Prospectus Supplement
Documents Incorporated By Reference..............S-2
Introduction.....................................S-2 LIQUIDITY FACILITY OBLIGATIONS
Description of the Bonds.........................S-2
The Liquidity Facility...........................S-17
The Standby Loan Agreement; GE Capital...........S-18
Experts..........................................S-20 issued by
Appendix A........................................A-1
Appendix B........................................B-1
Prospectus FGIC Securities
Available Information..............................2 Purchase, Inc.
Documents Incorporated By Reference................3
Summary............................................4
The Company........................................5 in support of
The Liquidity Facilities...........................5
The Standby Loan Agreement.........................5 Rancho California Water-District
Plan of Distribution...............................5 Financing Authority Adjustable
Legal Matters......................................6 Rate Revenue Bonds,
Experts............................................6 Series 1998A
PROSPECTUS SUPPLEMENT
November 17, 1998
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