PROSPECTUS SUPPLEMENT
(To Prospectus dated May 13, 1999)
STRUCTURED PRODUCTS CORP., THE DEPOSITOR
1,160,000 CORPORATE-BACKED TRUST SECURITIES (CORTSK) CERTIFICATES
(PRINCIPAL AMOUNT $25 PER CERTIFICATE)
ISSUED BY
CORTsm TRUST FOR SOUTHERN COMPANY CAPITAL TRUST I, THE TRUST
RELATING TO
SOUTHERN COMPANY CAPITAL TRUST I 8.% EXCHANGE CAPITAL SECURITIES
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The Trust will issue a single class of Certificates, which will represent
interests in the Trust and will be paid only from the assets of the Trust. The
assets of the Trust will consist of $25,000,000 8% Capital Trust Pass-through
Securities issued by Countrywide Capital I and all future payments of interest
and a single payment of principal due on the underlying Capital Trust
Pass-through Securities, as described in this Prospectus Supplement. The sole
assets of Countrywide Capital I are the 8% Junior Subordinated Deferrable
Interest Debentures issued by Countrywide Home Loans, Inc.
The Certificates will evidence the right to receive semi-annual interest
payments on the principal amount of your Certificates at an interest rate of 8%
per annum and the right to receive your pro rata amount of a single payment of
principal of $25,000,000 due on December 15, 2026 or on such earlier date as
described in this Prospectus Supplement. The Certificates will represent
interests in the Trust only and will not represent an interest in or obligations
of any other party. No governmental agency or instrumentality has insured or
guaranteed the Certificates or the underlying Capital Trust Pass-through
Securities.
YOU SHOULD FULLY CONSIDER THE RISK FACTORS ON PAGE S-7 IN THIS PROSPECTUS
SUPPLEMENT PRIOR TO INVESTING IN THE CERTIFICATES.
The Certificates have been approved for listing, subject to official notice
of issuance, on the New York Stock Exchange. Trading of the Certificates on the
New York Stock Exchange is expected to commence within a 30-day period after the
initial delivery thereof. See "Underwriting" herein.
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Per
Certificate Total
----------- -----
Public offering price...................... $25 $25,000,000
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Underwriting discount...................... $0.7875 $787,500
- -----------------------------------------------
Proceeds to Trust (before expenses)........ $24.2125 $24,212,500
The Underwriters expect to deliver your Certificates in book-entry form
only through the Depository Trust Company on or about November 16, 1999.
SM "CorTS" is a service mark of Salomon Smith Barney Inc.
---------------------
SALOMON SMITH BARNEY PAINEWEBBER INCORPORATED
---------------------
November 15, 1999
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INFORMATION ABOUT CERTIFICATES
We provide information to you about the Certificates in two separate
documents that progressively provide more detail: (a) the accompanying
Prospectus, which provides general information, some of which may not apply to
the Certificates; and (b) this Prospectus Supplement, which describes the
specific terms of your Certificates.
You are urged to read both the Prospectus and this Prospectus Supplement
in full to obtain material information concerning the Certificates. If the
descriptions of the Certificates vary between this Prospectus Supplement and the
Prospectus, you should rely on the information contained in this Prospectus
Supplement.
We include cross-references in this Prospectus Supplement and the
Prospectus to captions in these materials where you can find further related
discussions. The Table of Contents for this Prospectus Supplement and the
Prospectus identify the pages where these sections are located.
You can find a listing of the pages where capitalized terms used in this
Prospectus Supplement and the accompanying Prospectus are defined under the
caption "Index of Terms" beginning on page S-22 in this document and beginning
on page 41 in the accompanying Prospectus.
The Depositor has filed with the Securities and Exchange Commission a
registration statement (of which this Prospectus Supplement and the accompanying
Prospectus form a part) under the Securities Act of 1933, as amended, with
respect to the Certificates. This Prospectus Supplement and the accompanying
Prospectus do not contain all of the information contained in the registration
statement. For further information regarding the documents referred to in this
Prospectus Supplement and the Prospectus, you should refer to the registration
statement and the exhibits thereto. The registration statement and such exhibits
can be inspected and copied at prescribed rates at the public reference
facilities maintained by the Securities and Exchange Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048, and Chicago Regional
Office, John C. Kluczynski Federal Building, Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can also be obtained electronically through the Securities and Exchange
Commission's internet web site (http://www.sec.gov).
You should rely only on the information contained in this Prospectus
Supplement or the Prospectus. Neither the Depositor nor the Underwriters have
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. Neither the Depositor nor the Underwriters are making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. You
should assume that the information appearing in this Prospectus Supplement or
the Prospectus is accurate as of the date on their respective front covers only.
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SUMMARY
This summary highlights selected information from this Prospectus
Supplement. It does not contain all of the information you need to consider in
making your investment decision. To understand all of the terms of the offering
of the Certificates, you should read carefully this Prospectus Supplement and
the accompanying Prospectus in full.
ESTABLISHMENT OF THE TRUST.... Structured Products Corp., the Depositor, is
establishing a Trust to be designated as CorTSsm Trust For Countrywide
Capital I. The assets of the Trust will consist of the Underlying Capital
Securities, which are $25,000,000 8% Capital Trust Pass-through Securities
due December 15, 2026 issued by Countrywide Capital I, the Underlying
Issuer, and payments of principal and interest made on the Underlying
Capital Securities as discussed in more detail under "Description of the
Certificates" herein. The Underlying Issuer is a Delaware business trust
formed for the exclusive purposes of issuing the Underlying Capital
Securities and investing the proceeds thereof in the 8% Junior Subordinated
Deferrable Interest Debentures issued by Countrywide Home Loans, Inc.
Countrywide Home Loans, Inc. is an indirect, wholly-owned subsidiary of
Countrywide Credit Industries, Inc. Countrywide Credit Industries, Inc. has
guaranteed the payment of distributions on the Underlying Capital
Securities but only to the extent that the Underlying Issuer has funds
legally and immediately available therefor. Countrywide Credit Industries,
Inc. has also guaranteed the due and punctual payment of principal and
interest on the 8% Junior Subordinated Deferrable Interest Debentures when
and as the same becomes due and payable, whether at maturity, upon
redemption or otherwise.
OFFERED SECURITIES............ The Trust will issue the Certificates in a single
class.
As holder of Certificates, you will have the right to receive from the
Trust:
o periodic payments of interest on the principal amount of your Certificates
accruing from the closing date at a rate of 8% per annum, on each June 15
and December 15 (absent the occurrence of a deferral of interest payments
by the Underlying Issuer), commencing on December 15, 1999, until the
principal amount
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of your Certificates is paid in full as described below; and
o the pro rata share for your Certificates of a single payment of principal
of $25,000,000. It is expected that you will receive your pro rata share of
the principal payment on December 15, 2026, the maturity date of the
Underlying Capital Securities, or on such earlier date on which the Trust
redeems your Certificates as described under "Description of the
Certificates-Redemption of Certificates Upon Redemption of Underlying
Capital Securities" herein.
The Certificates are expected to trade flat. This means that any accrued
and unpaid interest on the Certificates will be reflected in the trading
price, and purchasers will not pay and sellers will not receive any accrued
and unpaid interest on the Certificates not included in the trading price.
REDEMPTION OF THE CERTIFICATES...The Underlying Issuer has the right, at its
option, to redeem the Underlying Capital Securities in whole or in part on
or after December 15, 2006, at an amount equal to the par amount of, plus
accrued interest on, the Underlying Capital Securities to be redeemed.
The Underlying Issuer also has the right to redeem the Underlying Capital
Securities in whole or in part at any time if there is more than an
insubstantial risk that certain adverse tax events may occur with respect
to the Underlying Issuer and Countrywide Home Loans, Inc., at an amount
equal to the par amount of, plus accrued interest on, the Underlying
Capital Securities being redeemed.
If the Underlying Capital Securities are redeemed in whole, the Trust will
redeem all Certificates, and if the Underlying Capital Securities are
redeemed in part, the Trust will redeem an equal principal amount of
Certificates selected by lot, in each case, for an amount at least equal to
their principal amount. See "Description of the Certificates--Redemption of
Certificates Upon Redemption of Underlying Capital Securities" herein.
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The Underlying Issuer is not required to redeem the Underlying Capital
Securities. Therefore, there can be no assurance that the Trust will
repurchase your Certificates prior to December 15, 2026. Should the Trust
redeem your Certificates prior to December 15, 2026, the Trustee will
notify you by mail at least 15 days before such redemption date.
DEFERRAL OF INTEREST... Interest payments on the Certificates will be deferred
if, and during the period that, Countrywide Home Loans, Inc. elects to
defer interest payments on the 8% Junior Subordinated Deferrable Interest
Debentures.
UNDERLYING CAPITAL SECURITIES... Countrywide Capital I 8% Capital Trust
Pass-through Securities.
TRUSTEE AND TRUST AGREEMENT... U.S. Bank Trust National Association will act as
Trustee pursuant to a trust agreement dated May 21, 1999, as supplemented
by a supplement dated as of the closing date. You may inspect the trust
agreement and the supplement at the office of the Trustee at 100 Wall
Street, Suite 1600, New York, NY 10005.
DENOMINATIONS.... Each Certificate will have a principal amount of
$25.
REGISTRATION, CLEARANCE AND SETTLEMENT... Your Certificates will be registered
in the name of Cede & Co., as the nominee of The Depository Trust Company.
TAX CONSIDERATIONS... Orrick, Herrington & Sutcliffe LLP, counsel to the
Depositor, is of the opinion that under existing law (1) the Trust will be
a grantor trust and not a partnership or an association taxable as a
corporation; and (2) your Certificates will represent beneficial interests
in the Underlying Capital Securities. For information reporting purposes,
absent the occurrence of a deferral of interest payments by the Underlying
Issuer, interest payments on the Underlying Capital Securities will be
reported to you (and the Internal Revenue Service) as interest and not
original issue discount and will be included in your income as it is paid
(or, if you are an accrual method taxpayer, as it is accrued) as interest
(and not as original issue
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discount). See "Certain Federal Income Tax Considerations" in the
Prospectus.
ERISA CONSIDERATIONS.. An "employee benefit plan" subject to the Employee
Retirement Income Security Act of 1974, as amended, or a "plan" subject to
Section 4975 of the Internal Revenue Code of 1986, contemplating the
purchase of Certificates should consult with its counsel before making such
a purchase. The fiduciary of such an employee benefit plan or plan and such
legal advisors should consider whether the Certificates will satisfy all of
the requirements of the "publicly-offered securities exception" described
herein or the possible application of other "prohibited transaction
exemptions" described herein. See "Certain ERISA Considerations" herein.
LISTING... The Certificates have been approved for listing, subject to official
notice of issuance, on the New York Stock Exchange. Trading of the
Certificates on the New York Stock Exchange is expected to commence within
a 30-day period after the initial delivery thereof. See "Underwriting"
herein.
RATINGS... It is a condition to issuance of the Certificates that they be rated
identically to the Underlying Capital Securities by each of Moody's
Investors Service, Inc. and Standard & Poor's Ratings Services. As of the
date of this prospectus supplement, the Underlying Capital Securities are
rated "a3" and "BBB+" by Moody's Investors Service, Inc. and Standard &
Poor's Ratings Services, respectively.
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RISK FACTORS
You should consider the following factors in deciding whether to purchase the
Certificates:
1. NO INVESTIGATION OF THE UNDERLYING CAPITAL SECURITIES, THE UNDERLYING
ISSUER, COUNTRYWIDE CREDIT INDUSTRIES, INC. OR COUNTRYWIDE HOME LOANS, INC.
HAS BEEN MADE BY THE DEPOSITOR, UNDERWRITERS OR TRUSTEE. None of the
Depositor, the Underwriters or the Trustee has made, or will make, any
investigation of the business condition, financial or otherwise, of the
Underlying Issuer, Countrywide Credit Industries, Inc. or Countrywide Home
Loans, Inc., or verify any reports or information filed by the Underlying
Issuer or Countrywide Credit Industries, Inc. with the Securities and
Exchange Commission or otherwise made available to the public. It is
strongly recommended that prospective investors in the Certificates
consider publicly available financial and other information regarding the
Underlying Issuer, Countrywide Credit Industries, Inc. and Countrywide Home
Loans, Inc. See "The Underlying Issuer," "Description of the Underlying
Capital Securities," and "Appendix A-Description of Underlying Capital
Securities" herein.
2. UNDERLYING ISSUER IS THE ONLY PAYMENT SOURCE. The payments made by the
Underlying Issuer on the Underlying Capital Securities are the only source
of payment for your Certificates. Countrywide Home Loans, Inc. and
Countrywide Credit Industries, Inc. are subject to laws permitting
bankruptcy, moratorium, reorganization or other actions; should Countrywide
Home Loans, Inc. or Countrywide Credit Industries, Inc. experience
financial difficulties, this could result in delays in payment, partial
payment or non-payment of your Certificates. In the event of nonpayment on
the Underlying Capital Securities by the Underlying Issuer, you will bear
the risk of such nonpayment. See "Description of the Certificates--Recovery
on Underlying Capital Securities Following Payment Default or Acceleration"
herein.
3. CERTAIN PAYMENTS TO THE DEPOSITOR. On December 15, 1999 as payment of the
balance of the purchase price for the Underlying Capital Securities, the
Trustee will pay to the Depositor the amount of the interest accrued on the
Underlying Capital Securities from June 15, 1999 to but not including the
closing date. In the event a payment default or acceleration on the
Underlying Capital Securities occurs on or prior to December 15, 1999 and
the Depositor is not paid such accrued interest on such date, the Depositor
will have a claim for such accrued interest, and will share pro rata with
holders of the Certificates to the extent of such claim in the proceeds
from the recovery on the Underlying Capital Securities. See "Description of
the Certificates--Recovery on Underlying Capital Securities Following
Payment Default or Acceleration" herein.
4. DISTRIBUTIONS ON THE UNDERLYING CAPITAL SECURITIES, AND CONSEQUENTLY THE
CERTIFICATES, MAY BE DEFERRED. Distributions on the Underlying Capital
Securities, and consequently the Certificates, may be deferred by the
Underlying Issuer in the event Countrywide Home Loans, Inc. defers payments
on its 8% Junior Subordinated Deferrable Interest Debentures. The deferral
may be for up to ten (10) semiannual interest distribution dates provided
that such extension period may not extend beyond December 15, 2026. During
any extension period, interest on the 8% Junior Subordinated Deferrable
Interest Debentures, and consequently the Certificates, will continue to
accrue (and the amount of distributions to which holders of such notes, and
consequently the Certificateholders, will continue to
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accumulate) at the rate of 8% per annum, compounded semi-annually. See
"Description of the Certificates--Distributions" herein.
5. POSSIBLE TAX AND MARKET PRICE CONSEQUENCES OF A DEFERRAL OF DISTRIBUTIONS.
Should Countrywide Home Loans, Inc. exercise its right to defer payments of
interest on the 8% Junior Subordinated Deferrable Interest Debentures, each
holder of the Underlying Capital Securities, and thus each holder of the
Certificates, will be required to accrue income (as original issue
discount) in respect of the deferred interest allocable to its Underlying
Capital Securities or Certificates, as the case may be, for United States
federal income tax purposes, which will be allocated but not distributed to
it. As a result, each such holder of a Certificate will recognize income
for United States federal income tax purposes in advance of the receipt of
cash and will not receive the cash related to such income from the
Underlying Issuer if the holder disposes of its Certificates prior to the
record date for the payment of distributions thereafter. See "Certain
Federal Income Tax Consequences" herein.
Should Countrywide Home Loans, Inc. elect to exercise its right to defer
payments of interest on the 8% Junior Subordinated Deferrable Interest
Debentures in the future, the market price of the Underlying Capital
Securities, and consequently the Certificates, is likely to be adversely
affected. A holder that disposes of its Certificates during a deferral
period, therefore, might not receive the same return on its investment as a
holder that continues to hold its Certificates. In addition, merely as a
result of the existence of Countrywide Home Loans, Inc.'s right to defer
payments of interest on the 8% Junior Subordinated Deferrable Interest
Debentures, the market price of the Underlying Capital Securities, and
consequently the Certificates, may be more volatile than the market prices
of other securities that are not subject to such deferrals.
6. THE 8% JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURES ARE SUBORDINATED
TO OTHER OBLIGATIONS OF COUNTRYWIDE HOME LOANS, INC., AND COUNTRYWIDE
CREDIT INDUSTRIES, INC.'S GUARANTEE OF PAYMENTS DUE ON THE 8% JUNIOR
SUBORDINATED DEFERRABLE INTEREST DEBENTURES iS SUBORDINATED TO OTHER
OBLIGATIONS OF COUNTRYWIDE CREDIT INDUSTRIES, INC. The obligations of
Countrywide Home Loans, Inc. under the 8% Junior Subordinated Deferrable
Interest Debentures will be unsecured and rank subordinate and junior in
right of payment to all senior indebtedness of Countrywide Home Loans, Inc.
Countrywide Credit Industries, Inc.'s guarantee of the payments due on the
8% Junior Subordinated Deferrable Interest Debentures will be unsecured and
rank subordinate and junior in right of payment to all senior indebtedness
of Countrywide Credit Industries, Inc. There is no limitation on the amount
of secured or unsecured debt, including senior indebtedness, that may be
incurred by Countrywide Home Loans, Inc. or by Countrywide Credit
Industries, Inc. or by any of its subsidiaries. The ability of the
Underlying Issuer to pay amounts due on the Underlying Capital Securities
is solely dependent upon Countrywide Home Loans, Inc. or Countrywide Credit
Industries, Inc. making payments on the 8% Junior Subordinated Deferrable
Interest Debentures as and when required. See "Description of the
Underlying Capital Securities" herein.
7. THE UNDERLYING CAPITAL SECURITIES MAY BE REDEEMED BY THE UNDERLYING ISSUER
IN THE EVENT CERTAIN ADVERSE TAX EVENTS OCCUR. If a Tax Event (as defined
herein) occurs and is continuing and Countrywide Home Loans, Inc. receives
an opinion of a nationally recognized independent tax counsel experienced
in such matters that, as a result of such Tax Event, there is more than an
insubstantial risk that Countrywide Home Loans, Inc. would be precluded
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from deducting the interest on the 8% Junior Subordinated Deferrable
Interest Debentures for United States income tax purposes, even if the 8%
Junior Subordinated Deferrable Interest Debentures were distributed to the
holders of the Underlying Capital Securities in liquidation of such
holders' interest in the Underlying Issuer, then within 90 days following
the occurrence of such Tax Event and on not less than 30 nor more than 60
days' notice, Countrywide Home Loans, Inc. will have the right to prepay
the 8% Junior Subordinated Deferrable Interest Debentures in whole or in
part and therefore cause a mandatory redemption of the Underlying Capital
Securities, and consequently the Certificates, at the par amount of, plus
accrued interest on, the Underlying Capital Securities to be redeemed. See
"Description of the Certificates--Redemption of Certificates Upon
Redemption of Underlying Capital Securities" herein.
FORMATION OF THE TRUST
Structured Products Corp. (the "Depositor" or the "Company") will establish
a Trust, to be designated as CorTSsm Trust For Countrywide Capital I (the
"Trust") under New York law pursuant to the Trust Agreement dated May 21, 1999
(the "Trust Agreement"), as supplemented by the CorTSsm Supplement 1999-4 dated
as of the Closing Date. The "Closing Date" means the date of initial delivery of
the Certificates. The assets of the Trust will consist of $25,000,000 8% Capital
Trust Pass-through Securities due December 15, 2026 (the "Underlying Capital
Securities" or, as referred to in the Prospectus, the "Term Assets") issued by
Countrywide Capital I (the "Underlying Issuer" or, as referred to in the
Prospectus, the "Term Assets Issuer") and payments of principal and interest
made by the Underlying Issuer on the Underlying Capital Securities as discussed
in more detail under "Description of the Certificates" herein. The sole asset of
the Underlying Issuer is $25,000,000 principal amount of the 8% Junior
Subordinated Deferrable Interest Debentures (the "Junior Subordinated
Debentures") issued by Countrywide Home Loans, Inc. ("CHL"). CHL is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc. ("CCI"). The
Trust Agreement will be qualified as an indenture under the Trust Indenture Act
of 1939, as amended (the "Trust Indenture Act"). Concurrently with the execution
and delivery of the Trust Agreement, the Company will deposit with the Trustee
the Underlying Capital Securities and the Trustee, on behalf of the Trust, will
accept such Underlying Capital Securities and deliver the Certificates to or
upon the order of the Company. The Trustee will hold the Underlying Capital
Securities for the benefit of the holders of the Certificates (the
"Certificateholders").
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
Certificates will be used to purchase the Underlying Capital Securities, which,
after the purchase thereof, will be deposited by the Company with the Trust and
will be the sole Deposited Assets (as defined in the Prospectus) of the Trust.
THE UNDERLYING ISSUER
This Prospectus Supplement does not provide information with respect to
the Underlying Issuer, CCI or CHL. No investigation has been made of the
financial condition or creditworthiness of the Underlying Issuer, CCI or CHL in
connection with the issuance of the Certificates. The Company is not an
affiliate of the Underlying Issuer, CCI or CHL.
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The Underlying Issuer is a Delaware business trust formed for the
exclusive purposes of issuing the Underlying Capital Securities and investing
the proceeds thereof in the Junior Subordinated Debentures. CCI is subject to
the informational requirements of the Securities Exchange Act of 1934 and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by CCI with the Commission pursuant to
the informational requirements of the Exchange Act can be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048, and Chicago Regional
Office, John C. Kluczynski Federal Building, Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be maintained upon written request addressed to the Securities and Exchange
Commission, Public Reference Section, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a web site
at http://www.sec.gov containing reports, proxy statements and other information
regarding registrants that file electronically with the Commission. Such
reports, proxy statements and other information can also be inspected at the
offices of the New York Stock Exchange and the Pacific Stock Exchange, on which
one or more of CCI's securities are listed.
THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS, THE UNDERLYING CAPITAL
SECURITIES PROSPECTUS AND THE UNDERLYING CAPITAL SECURITIES REGISTRATION
STATEMENT DESCRIBES THE MATERIAL TERMS OF THE UNDERLYING CAPITAL SECURITIES.
THIS PROSPECTUS SUPPLEMENT IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, (I) THE PROSPECTUS, (II) THE UNDERLYING CAPITAL SECURITIES
PROSPECTUS AND (III) THE UNDERLYING CAPITAL SECURITIES REGISTRATION STATEMENT OF
WHICH SUCH UNDERLYING CAPITAL SECURITIES PROSPECTUS IS A PART. NO REPRESENTATION
IS MADE BY THE TRUST, THE TRUSTEE, THE UNDERWRITERS OR THE COMPANY AS TO THE
ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED IN THE UNDERLYING CAPITAL
SECURITIES REGISTRATION STATEMENT.
DESCRIPTION OF THE UNDERLYING CAPITAL SECURITIES
The Underlying Capital Securities of the Trust will consist solely of
$25,000,000 aggregate principal amount of Countrywide Capital I 8% Capital Trust
Pass-through Securities issued by the Underlying Issuer, having the
characteristics described in a Prospectus dated December 10, 1996 and a
Prospectus Supplement dated December 11, 1996 (collectively, the "Underlying
Capital Securities Prospectus"). The Underlying Capital Securities were
originally issued by the Underlying Issuer as part of an underwritten public
offering of $300,000,000 aggregate principal amount of such securities, pursuant
to a registration statement no. 333-14111 (together with all amendments and
exhibits thereto, the "Underlying Capital Securities Registration Statement"),
filed by the Underlying Issuer with the Commission under the Securities Act of
1933, as amended (the "Securities Act"). Distributions are required to be made
on the Underlying Capital Securities (i) semiannually on the 15th of each June
and December, commencing on December 15, 1999, or if such day is not a Business
Day, on the next succeeding Business Day and (ii) a single payment of principal
of $25,000,000 payable on December 15, 2026 (the "Maturity Date") or upon
earlier redemption. The payments of interest on the Junior Subordinated
Debentures, and thus the Underlying Capital Securities and the Certificates, may
be deferred by CHL at any time or from time to time for up to ten (10)
semiannual interest periods. During any such period, neither CHL nor CCI will be
permitted to make a payment on its capital stock or any debt securities that
rank equal to or junior to, the Junior Subordinated Debentures or CCI's
guarantees, respectively. The Junior Subordinated Debentures,
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and consequently the Underlying Capital Securities, rank subordinate and junior
to all senior indebtedness of CHL. CCI has guaranteed the payment of
distributions on the Underlying Capital Securities but only to the extent that
the Underlying Issuer has funds legally and immediately available therefor. CCI
has also guaranteed the due and punctual payment of principal and interest on
the Junior Subordinated Debentures when and as the same become due and payable,
whether at maturity, upon redemption or otherwise. CCI's guarantee, however, is
an unsecured obligation of CCI and ranks subordinate and junior to all senior
indebtedness of CCI.
This Prospectus Supplement sets forth material terms with respect to the
Underlying Capital Securities, but does not provide detailed information with
respect thereto. This Prospectus Supplement relates only to the Certificates
offered hereby and is not an offering document for the Underlying Capital
Securities. All disclosure contained herein with respect to the Underlying
Capital Securities is derived from publicly available documents described above.
The Underlying Issuer and CCI are subject to the information reporting
requirements of the Securities Exchange Act of 1934 (the "Exchange Act").
Accordingly, the Underlying Issuer and CCI are obligated to file reports and
other information with the Commission. Although the Company has no reason to
believe the information concerning the Underlying Capital Securities or the
Underlying Issuer set forth in the Underlying Capital Securities Prospectus or
any report filed under the Exchange Act is not reliable, neither the Company nor
any of the Underwriters has participated in the preparation of such documents,
or made any due diligence inquiry with respect to the information provided
therein. Neither the Company nor any of the Underwriters has verified the
accuracy or completeness of such documents or reports. Information contained in
such documents and reports is as of the date(s) stated therein, and comparable
information, if given as of the date hereof, may be different. There can be no
assurance that events affecting the Underlying Capital Securities, the
Underlying Issuer, CHL or CCI have not occurred, which have not yet been
publicly disclosed, which would affect the accuracy or completeness of the
publicly available documents described above.
RATINGS
The Underlying Capital Securities have been rated "a3" by Moody's
Investors Service, Inc. ("Moody's") and "BBB+" by Standard & Poor's Ratings
Services, a division of the McGraw-Hill Companies ("S&P"). Any rating of the
Underlying Capital Securities is not a recommendation to purchase, hold or sell
such Underlying Capital Securities or the Certificates, and there can be no
assurance that a rating will remain for any given period of time or that a
rating will not be revised or withdrawn entirely by a rating agency if in its
judgment circumstances in the future so warrant.
YEAR 2000
Certain information technology ("IT") and non-IT systems (i.e. embedded
technology such as microcontrollers) may utilize older computer programs that
were written using two digits rather than four to define the applicable year.
Consequently, such computer programs may recognize a date using "00" as the year
1900 rather than the year 2000. These computer programs may fail to operate
properly in the year 2000 and after if they are not modified or replaced to
comply with year 2000 requirements.
The Underlying Issuer may not timely conduct or complete a year 2000
assessment and there can be no assurance that the Underlying Issuer will make
any necessary modifications or replacements of its IT or non-IT systems in time,
if at all. Failure to do so could result in a disruption of operations of the
Underlying Issuer, including, among other things, a temporary inability to
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process funds or engage in similar normal business practices. As a result,
payments to Certificateholders may be interrupted or impaired.
THE UNDERWRITERS AND THE UNDERLYING ISSUER
From time to time, Salomon Smith Barney Inc. and PaineWebber Incorporated
(collectively, the "Underwriters") may be engaged by the Underlying Issuer, CHL
or CCI as underwriters or placement agents, in an advisory capacity or in other
business arrangements. In addition, the Underwriters or an affiliate of the
Depositor may make a market in other outstanding securities of the Underlying
Issuer, CHL or CCI.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the terms of the Trust
Agreement. The following summary as well as other pertinent information included
elsewhere in this Prospectus Supplement and in the Prospectus describes material
terms of the Certificates and the Trust Agreement, but does not purport to be
complete and is subject to, and qualified in its entirety by reference to, all
the provisions of the Certificates and the Trust Agreement. The following
summary supplements the description of the general terms and provisions of the
Certificates of any given series and the related Trust Agreement set forth in
the Prospectus, to which description reference is hereby made.
The Certificates will be denominated and distributions with respect
thereto will be payable in United States Dollars, which will be the "Specified
Currency" as such term is defined in the Prospectus. The Certificates represent
in the aggregate the entire beneficial ownership interest in the Trust. The
property of the Trust will consist of (i) the Underlying Capital Securities and
(ii) all payments on or collections in respect of the Underlying Capital
Securities accrued on or after the Closing Date, together with any proceeds
thereof. The property of the Trust will be held for the benefit of the holders
of the Certificates by the Trustee. The Certificates represent a pro rata
portion of the then-current aggregate principal balance of all outstanding
Certificates and will equal the portion of the proceeds received from the
Underlying Capital Securities that the holder of such Certificate is entitled to
receive on December 15, 2026.
All distributions to Certificateholders will be made only from the
property of the Trust as described herein. The Certificates do not represent an
interest in or obligation of the Depositor, the Underlying Issuer, CCI, the
Trustee, the Underwriters, or any affiliate if any thereof.
DISTRIBUTIONS
Each Certificate evidences the right to receive, to the extent received on
the Underlying Capital Securities, a semiannual distribution of interest on June
15 and December 15 of each year, commencing December 15, 1999, and a
distribution of principal on December 15, 2026, or if any such day is not a
Business day, the next succeeding Business Day, or upon early redemption. For
purposes of the foregoing, "Business Day" means any day other than a Saturday, a
Sunday or a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to be closed. Distributions of
interest on the Certificates, however, may be deferred as a result in the
deferral of payment on the Junior Subordinated Debentures held by the Underlying
Issuer. Distributions on the Junior Subordinated Debentures may be deferred by
CHL for up to ten
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(10) consecutive semiannual interest periods (such deferral period, the
"Extension Period") provided that no Extension Period extends beyond December
15, 2026. During any Extension Period, interest on the Junior Subordinated
Debentures, and consequently the Certificates, will continue to accrue (and the
amount of distributions to which holders of the Junior Subordinated Debentures,
and consequently the Certificateholders, will continue to accumulate) at the
rate of 8% per annum, compounded semi-annually.
ADDITIONAL UNDERLYING CAPITAL SECURITIES AND CERTIFICATES
From time to time hereafter, additional Underlying Capital Securities may
be sold to the Trust, in which case additional Certificates will be issued in a
principal amount equal to the principal amount of Underlying Capital Securities
so sold to the Trustee. Any such additional Certificates issued will rank pari
passu with the Certificates issued on the date hereof.
REDEMPTION OF CERTIFICATES UPON REDEMPTION OF UNDERLYING CAPITAL SECURITIES
Upon receipt by the Trustee of a notice that all or a portion of the
Underlying Capital Securities are to be redeemed, the Trustee will select by lot
an equal principal amount of Certificates for redemption and establish the date
such Certificates are to be redeemed. Notice of such redemption will be given by
the Trustee to the registered Certificateholders not less than 15 days prior to
the redemption date by mail to each registered Certificateholder at such
registered Certificateholder's last address on the register maintained by the
Trustee, provided, however, that the Trustee will not be required to give any
notice of redemption prior to the third business day after the date it receives
notice of such redemption.
The Underlying Capital Securities as originally issued are redeemable, in
whole or in part on or after December 15, 2006, on not less than 30 nor more
than 60 days' notice, at the option of the Underlying Issuer (such redemption,
an "Optional Redemption"). The redemption price in the case of an Optional
Redemption of the Underlying Capital Securities will be equal to the par amount
of, plus accrued interest on, the Underlying Capital Securities being redeemed.
In addition, if a Tax Event (as defined below) occurs and is continuing,
within 90 days following the occurrence of such Tax Event, Countrywide Capital I
will, except in certain limited circumstances described in the Underlying
Capital Securities Prospectus, be dissolved and the Junior Subordinated
Debentures distributed pro rata to the holders of the Underlying Capital
Securities. If after a Tax Event has occurred, CHL receives an opinion of
nationally recognized independent tax counsel experienced in such matters that,
as a result of such Tax Event, there is more than an insubstantial risk that CHL
would be precluded from deducting the interest on the Junior Subordinated
Debentures for United States income tax purposes, even if the Junior
Subordinated Debentures were distributed to the holders of the Underlying
Capital Securities in liquidation of such holders' interest in the Underlying
Issuer, then within 90 days following the occurrence of such Tax Event and on
not less than 30 nor more than 60 days' notice, CHL will have the right to
prepay the 8% Junior Subordinated Deferrable Interest Debentures in whole or in
part and therefore cause a mandatory redemption of the Underlying Capital
Securities, and consequently the Certificates at the par amount of, plus accrued
interest on, the Underlying Capital Securities being redeemed (such redemption,
a "Tax Event Redemption"). "Tax Event" means the receipt by the Underlying
Issuer of an opinion of a nationally recognized independent tax counsel
experienced in such matters to the effect that, as a result of (i) any amendment
to, clarification of or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of the United States or any political
S-13
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subdivision or taxing authority thereof or therein, (ii) any judicial decision
or official administrative pronouncement, ruling, regulatory procedure, notice
or announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action") or (iii) any amendment
to, clarification of or change in the administrative position or interpretation
of any Administrative Action or judicial decision that differs from the
theretofore generally accepted position, in each case, by any legislative body,
court, governmental agency or regulatory body, irrespective of the manner in
which such amendment, clarification or change is made known, which amendment,
clarification or change is effective or such Administrative Action or decision
is announced, in each case, on or after December 11, 1996, there is more than an
insubstantial risk that (a) the Underlying Issuer is, or will be within 90 days
of the date thereof, subject to United States federal income tax with respect to
interest accrued or received on the Junior Subordinated Debentures or subject to
more than a de minimis amount of other taxes, duties or other governmental
charges, (b) any portion of interest payable by CHL to the Underlying Issuer on
the Junior Subordinated Debentures is not, or within 90 days of the date thereof
will not be, deductible by CHL for United States federal income tax purposes, or
(c) CHL could become liable to pay, on the next date on which any amount would
be payable with respect to the Junior Subordinated Debentures, any additional
interest as set forth in the indenture relating to the Junior Subordinated
Debentures.
In the event that the Junior Subordinated Debentures are distributed to
the Trust in exchange for the Underlying Capital Securities upon the occurrence
of a Tax Event, such distribution will not cause the Certificates to be
redeemed. The Trust will hold the Junior Subordinated Debentures for the benefit
of the Certificateholders in accordance with the terms of the Trust Agreement.
The holder of a Certificate which is redeemed will receive, on the
redemption date, a payment equal to its pro rata share of the distributions made
on the Underlying Capital Securities pursuant to an Optional Redemption or a Tax
Event Redemption as set forth above.
RECOVERY ON UNDERLYING CAPITAL SECURITIES FOLLOWING PAYMENT DEFAULT OR
ACCELERATION
If a Payment Default or an Acceleration occurs, the Trustee will promptly
give notice to The Depository Trust Company ("DTC") or, for any Certificates
which are not then held by DTC or any other depository, directly to the
registered holders of the Certificates thereof. Such notice will set forth (i)
the identity of the issue of Underlying Capital Securities, (ii) the date and
nature of such Payment Default or Acceleration, (iii) the amount of the interest
or principal in default, (iv) the Certificates affected by the Payment Default
or Acceleration, and (v) any other information which the Trustee may deem
appropriate.
In the event of a Payment Default, the Trustee is required to proceed
against the Underlying Issuer or CHL on behalf of the Certificateholders to
enforce the Underlying Capital Securities or otherwise to protect the interests
of the Certificateholders, subject to the receipt of indemnity in form and
substance satisfactory to the Trustee; provided, that holders of Certificates
representing a majority of the Voting Rights on the Certificates will be
entitled to direct the Trustee in any such proceeding or direct the Trustee to
sell the Underlying Capital Securities, subject to the Trustee's receipt of
satisfactory indemnity. In the event of an Acceleration and a corresponding
payment on the Underlying Capital Securities, the Trustee will distribute the
proceeds to the Certificateholders no later than two Business Days after the
receipt of immediately available funds.
A "Payment Default" means a default in the payment of any amount due on
the Underlying Capital Securities after the same becomes due and payable (and
the expiration of any applicable
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grace period on the Underlying Capital Securities). An "Acceleration" means the
acceleration of the maturity of the Underlying Capital Securities after the
occurrence of any default on the Underlying Capital Securities other than a
Payment Default.
In the event that the Trustee receives money or other property in respect
of the Underlying Capital Securities (other than a scheduled payment on or with
respect to an interest payment date) as a result of a Payment Default on the
Underlying Capital Securities (including from the sale thereof), the Trustee
will promptly give notice as provided in the Trust Agreement to DTC, or for any
Certificates which are not then held by DTC or any other depository, directly to
the registered holders of the Certificates then outstanding and unpaid. Such
notice will state that, not later than 30 days after the receipt of such moneys
or other property, the Trustee will allocate and distribute such moneys or other
property to the holders of Certificates then outstanding and unpaid, pro rata by
principal amount (after deducting the costs incurred in connection therewith and
subject to the provisions set forth under "Description of the Trust Agreement -
Certain Payments to the Depositor" herein). Property other than cash will be
liquidated by the Trustee, and the proceeds thereof distributed in cash, only to
the extent necessary to avoid distribution of fractional securities to
Certificateholders. Any such amounts received by the Trustee in excess of
principal and accrued unpaid interest on the Certificates will be distributed to
the Depositor. In-kind distribution of Underlying Capital Securities to
Certificateholders will be deemed to reduce the principal amount of Certificates
on a dollar-for-dollar basis. Following such in kind distribution, all
Certificates will be cancelled. Other than as set forth under "Description of
the Trust Agreement - Certain Payments to the Depositor", no amounts will be
distributed to the Depositor in respect of the Underlying Capital Securities
unless and until principal and accrued interest on the Certificates has been
paid (or reduced by distributions in kind) in full.
Interest and principal payments on the Underlying Capital Securities are
payable solely by the Underlying Issuer. CHL and CCI are subject to laws
permitting bankruptcy, liquidation, moratorium, reorganization or other actions
which, in the event of financial difficulties of CHL or CCI, could result in
delays in payment, partial payment or non-payment of the Certificates relating
to the Underlying Capital Securities.
LISTING ON THE NEW YORK STOCK EXCHANGE
The Certificates have been authorized for listing, upon official notice of
issuance, with the New York Stock Exchange ("NYSE"). There can be no assurance
that the Certificates, once listed, will continue to be eligible for trading on
the NYSE.
FORM OF THE CERTIFICATES
The Certificates will be delivered in registered form. The Certificates
will be issued, maintained and transferred on the book-entry records of DTC and
its Participants in minimum denominations of $25 and integral multiples thereof.
Certificateholders will not receive physical certificates.
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<PAGE>
DESCRIPTION OF THE TRUST AGREEMENT
GENERAL
The Certificates will be issued pursuant to the Trust Agreement, a form of
which is filed as an exhibit to the Registration Statement of which this
Prospectus Supplement and the Prospectus form a part. A Current Report on Form
8-A relating to the Certificates containing a copy of the CorTSsm Supplement
1999-5 to the Trust Agreement as executed will be filed by the Company with the
Commission following the issuance and sale of the Certificates. The assets of
the Trust created under the Trust Agreement will consist of (i) the Underlying
Capital Securities and (ii) all payments on or collections in respect of the
Underlying Capital Securities due after the Closing Date. Reference is made to
the Prospectus for important information in addition to that set forth herein
regarding the Trust, the terms and conditions of the Trust Agreement and the
Certificates. The following summaries of certain provisions of the Trust
Agreement do not purport to be complete and are subject to the detailed
provisions contained in the form of Trust Agreement, to which reference is
hereby made for a full description of such provisions, including the definition
of certain terms used herein.
CERTAIN PAYMENTS TO THE DEPOSITOR
On December 15, 1999, as payment of the balance of the purchase price for
the Underlying Capital Securities, the Trustee will pay to the Depositor the
amount of the interest accrued on the Underlying Capital Securities from June
15, 1999 to but not including the Closing Date. In the event the Depositor is
not paid such accrued interest on such date, the Depositor will have a claim for
such accrued interest, and will share pari passu with Certificateholders to the
extent of such claim in the proceeds from the recovery on the Underlying Capital
Securities.
THE TRUSTEE
U.S. Bank Trust National Association, a national banking association, will
act as Trustee for the Certificates and the Trust pursuant to the Trust
Agreement. The Trustee's offices are located at 100 Wall Street, Suite 1600, New
York, New York 10005 and its telephone number is (212) 361-2500.
The Trust Agreement will provide that the Trustee and any director,
officer, employee or agent thereof will be indemnified by the Trust and held
harmless against any loss, liability or expense incurred in connection with any
legal action relating to the Trust Agreement or the Certificates or the
performance of the Trustee's duties under the Trust Agreement, other than any
loss, liability or expense that was incurred by reason of willful misconduct,
bad faith or negligence in the performance of the Trustee's duties under the
Trust Agreement.
Pursuant to the Trust Agreement, as compensation for the performance of
its duties under such agreement, the Trustee will be entitled to payment of
Trustee fees and reimbursement of expenses by the Company pursuant to a separate
agreement with the Company, but will not have any claim against the Trust with
respect thereto.
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EVENT OF DEFAULT
There are no events of default with respect to the Certificates. If a
Payment Default or Acceleration occurs (or other default with respect to the
Underlying Capital Securities occurs), the Trustee will act upon the instruction
of Certificateholders to recover amounts due on the Underlying Capital
Securities and distribute the proceeds from such recovery (after deducting the
costs incurred in connection therewith and subject to the provisions set forth
above under "--Certain Payments to the Depositor") to the Certificateholders.
See "Description of the Certificates--Recovery on Underlying Capital Securities
Following Payment Default or Acceleration" herein.
NO DERIVATIVE TRANSACTIONS
The Trust is not permitted to engage in derivative transactions.
VOTING RIGHTS
The Certificateholders will have 100% of the total voting rights as
specified in the Trust Agreement (the "Voting Rights"). All Voting Rights with
respect to the Certificates will be allocated in proportion to the respective
principal balances of the then-outstanding Certificates held by such
Certificateholders on any date of determination.
VOTING OF UNDERLYING CAPITAL SECURITIES
The Trustee, as holder of the Underlying Capital Securities, has the right
to vote and give consents and waivers in respect of such Underlying Capital
Securities as permitted by the depositary with respect thereto and except as
otherwise limited by the Trust Agreement. In the event that the Trustee receives
a request from the Underlying Issuer for its consent to any amendment,
modification or waiver of the Underlying Capital Securities or any document
relating thereto, or receives any other solicitation for any action with respect
to the Underlying Capital Securities, the Trustee will mail a notice of such
proposed amendment, modification, waiver or solicitation to each
Certificateholder of record as of such date. The Trustee will request
instructions from the Certificateholders as to whether or not to consent to or
vote to accept such amendment, modification, waiver or solicitation. The Trustee
will consent or vote, or refrain from consenting or voting, in the same
proportion (based on the relative principal balances of the Certificates) as the
Certificates of the Trust were actually voted or not voted by the
Certificateholders thereof as of a date determined by the Trustee prior to the
date on which such consent or vote is required; PROVIDED, HOWEVER, that,
notwithstanding anything to the contrary stated herein, the Trustee will at no
time vote in favor of or consent to any matter (i) which would alter the timing
or amount of any payment on the Underlying Capital Securities, including,
without limitation, any demand to accelerate the Underlying Capital Securities
or (ii) which would result in the exchange or substitution of any Underlying
Exchange Capital Security pursuant to a plan for the refunding or refinancing of
such Underlying Exchange Capital Security, except in each case with the
unanimous consent of the Certificateholders and subject to the requirement that
such vote or consent would not, based on an opinion of counsel, materially
increase the risk that the Trust would fail to qualify as a grantor trust for
federal income tax purposes. The Trustee will have no liability for any failure
to act resulting from Certificateholders' late return of, or failure to return,
directions requested by the Trustee from the Certificateholders.
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TERMINATION OF THE TRUST
The Trust will terminate upon (i) the payment in full at maturity or upon
early redemption of the Certificates or (ii) the distribution of the proceeds
received upon a recovery on the Underlying Capital Securities (after deducting
the costs incurred in connection therewith) after a Payment Default or an
Acceleration thereof (or other default with respect to the Underlying Capital
Securities).
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Orrick, Herrington & Sutcliffe LLP, counsel to the Depositor, is of the
opinion that under existing law (1) the Trust will be a grantor trust and not a
partnership or an association taxable as a corporation; and (2) your
Certificates will represent beneficial interests in the Underlying Capital
Securities. For information reporting purposes, absent the occurrence of a
deferral of interest payments by the Underlying Issuer, interest payments on the
Underlying Capital Securities will be reported to you on Form 1099 (and the
Internal Revenue Service) as interest and not original issue discount and will
be included in your income as it is paid (or, if you are an accrual method
taxpayer, as it is accrued) as interest (and not as original issue discount).
See "Certain Federal Income Tax Considerations" in the Prospectus.
Should CHL exercise its right to defer payments of interest on the Junior
Subordinated Debentures, each holder of the Underlying Capital Securities, and
thus each holder of the Certificates, will be required to accrue income (as
original issue discount) in respect of the deferred interest allocable to its
Underlying Capital Securities or Certificates, as the case may be, for United
States federal income tax purposes, which will be allocated but not distributed
to it. As a result, each such holder of a Certificate will recognize income for
United States federal income tax purposes in advance of the receipt of cash and
will not receive the cash related to such income from the Underlying Issuer if
the holder disposes of its Certificates prior to the record date for the payment
of distributions thereafter.
CERTAIN ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Code impose certain requirements on (a) an employee
benefit plan (as defined in Section 3(3) of ERISA), (b) a plan described in
Section 4975(e)(1) of the Code, including an individual retirement account
("IRA") or Keogh plan or (c) any entity whose underlying assets include plan
assets by reason of a plan's investment in the entity (each, a "Plan").
ERISA and Section 4975 of the Code prohibit certain transactions involving
the assets of a Plan and persons who have specified relationships to the Plan,
I.E., "parties in interest" within the meaning of ERISA or "disqualified
persons" within the meaning of the Code (collectively, "Parties in Interest").
Thus, a Plan fiduciary considering an investment in Certificates should consider
whether such an investment might constitute or give rise to a prohibited
transaction under ERISA or Section 4975 of the Code. The Underlying Issuer, the
Underwriters, the Trustee and their respective affiliates may be Parties in
Interest with respect to many Plans.
If an investment in Certificates by a Plan were to result in the assets of
the Trust being deemed to constitute "plan assets" of such Plan, certain aspects
of such investment, including the operations of the Trust and the deemed
extension of credit between the Underlying Issuer and the
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holder of a Certificate (as a result of the Underlying Capital Securities being
deemed to be plan assets), as well as subsequent transactions involving the
Trust or its assets, might constitute or result in prohibited transactions under
Section 406 of ERISA and Section 4975 of the Code unless exemptive relief were
available under an applicable exemption issued by the United States Department
of Labor (the "DOL"). Neither ERISA nor the Code defines the term "plan assets."
Under Section 2510.3-101 of the DOL regulations (the "Regulation"), a Plan's
assets may include the assets of an entity if the Plan acquires an "equity
interest" in such entity unless an exception applies under the Regulation. Thus,
if a Plan acquires a Certificate, for certain purposes (including the prohibited
transaction provisions of Section 406 of ERISA and Section 4975 of the Code),
the Plan would be considered to own an undivided interest in the underlying
assets of the Trust unless such Certificate is a "publicly-offered security" or
another exception applies under the Regulation.
The Underwriters expect that the Certificates will satisfy the criteria
for treatment as publicly-offered securities under the Regulation. A
publicly-offered security is a security that is (i) freely transferable, (ii)
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another at the conclusion of the initial offering, and
(iii) either is (A) part of a class of securities registered under Section 12(b)
or 12(g) of the Exchange Act, or (B) sold to the Plan as part of an offering of
securities to the public pursuant to an effective registration statement under
the Securities Act and the class of securities of which such security is a part
is registered under the Exchange Act within 120 days (or such later time as may
be allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred.
The Underwriters will verify that there will be at least 100 separate
purchasers (whom the Underwriters have no reason to believe are not independent
of the Company or of one another) at the conclusion of the initial offering.
There is no assurance that the 100 independent investor requirement of the
"publicly-offered security" exception will, in fact, be satisfied.
NOTHING HEREIN SHALL BE CONSTRUED AS A REPRESENTATION THAT AN INVESTMENT
IN THE CERTIFICATES WOULD MEET ANY OR ALL OF THE RELEVANT LEGAL REQUIREMENTS
WITH RESPECT TO INVESTMENTS BY, OR IS APPROPRIATE FOR, PLANS GENERALLY OR ANY
PARTICULAR PLAN. ANY PLAN OR ANY OTHER ENTITY THE ASSETS OF WHICH ARE DEEMED TO
BE "PLAN ASSETS," SUCH AS AN INSURANCE COMPANY INVESTING ASSETS OF ITS GENERAL
ACCOUNT, PROPOSING TO ACQUIRE CERTIFICATES SHOULD CONSULT WITH ITS COUNSEL.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement (the "Underwriting Agreement") between the Underwriters named below
and the Company, the Company will sell the Certificates to the Underwriters, and
each of the Underwriters named below have agreed to purchase from the Company
the respective number of Certificates set forth opposite its name. In the
Underwriting Agreement, the Underwriters named below have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Certificates if
any Certificates are purchased.
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Number of
UNDERWRITERS CERTIFICATES
PaineWebber Incorporated....................... 500,000
Salomon Smith Barney........................... 500,000
-------
Total 1,000,000
=========
The Company has been advised by the Underwriters that it proposes
initially to offer the Certificates to the public at the public offering price
set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of $0.50 per Certificate.
The Underwriters may allow and such dealers may reallow a concession not in
excess of $0.25. After the initial public offering, the public offering price
and the concessions may be changed.
The Certificates are a new issue of securities with no established trading
market. The Certificates will be approved for listing, subject to official
notice of issuance, on the NYSE. Trading of the Certificates on the NYSE is
expected to commence within the 30-day period after the initial delivery
thereof. In order to meet one of the requirements for listing the Certificates
on the NYSE, the Underwriters have undertaken to sell the Certificates to a
minimum of 400 beneficial owners. The Underwriters have told the Company that it
presently intends to make a market in the Certificates prior to commencement of
trading on the NYSE, as permitted by applicable laws and regulations. The
Underwriters are not obligated, however, to make a market in the Certificates.
Any market making by the Underwriters may be discontinued at any time at the
sole discretion of the Underwriters. No assurance can be given as to whether a
trading market for the Certificates will develop or as to the liquidity of any
trading market.
The Certificates are expected to trade flat. This means that any accrued
and unpaid interest on the Certificates will be reflected in the trading price,
and purchasers will not pay and sellers will not receive any accrued and unpaid
interest on the Certificates not included in the trading price.
Until the distribution of the Certificates is completed, rules of the
Commission may limit the ability of the Underwriters to bid for and purchase the
Certificates. As an exception to these rules, the Underwriters are permitted to
engage in certain transactions that stabilize the price of the Certificates.
Possible transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Certificates.
If the Underwriters create a short position in the Certificates in
connection with this offering, that is, if they sell a greater aggregate
principal amount of Certificates than is set forth on the cover page of this
Prospectus Supplement, the Underwriters may reduce that short position by
purchasing Certificates in the open market. The Underwriters may also impose a
penalty bid on certain selling group members. This means that if an Underwriter
purchases Certificates in the open market to reduce its short position or to
stabilize the price of the Certificates, it may reclaim the amount of the
selling concession from the selling group members who sold those Certificates as
part of the offering.
In general, purchase of a security for the purposes of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a Certificate to the extent that it
were to discourage resales of the Certificates.
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Neither the Company nor the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transaction
described above might have on the price of the Certificates. In addition,
neither the Company nor the Underwriters make any representation that the
Underwriters will engage in such transactions. Such transactions, once
commenced, may be discontinued without notice.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain civil liabilities, including liabilities under the
Securities Act, or will contribute to payments the Underwriters may be required
to make in respect thereof.
Salomon Smith Barney Inc. is an affiliate of the Company, and the
participation by Salomon Smith Barney Inc. in the offering of the
Certificates complies with Conduct Rule 2720 of the National Association of
Securities Dealers, Inc. regarding underwriting securities of an affiliate.
RATINGS
It is a condition to the establishment of the Trust and the issuance of
the Certificates that the Certificates be rated identically to the Underlying
Capital Securities by both Moody's and S&P. Moody's and S&P have rated the
Underlying Capital Securities "a3" and "BBB+" respectively.
The ratings address the likelihood of the receipt by holders of the
Certificates of payments required under the Trust Agreement, and are based
primarily on the credit quality of the Underlying Capital Securities.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by S&P and Moody's.
Each security rating should be evaluated independently of any other security
rating.
The Company has not requested a rating on the Certificates by any rating
agency other than the S&P and Moody's. However, there can be no assurance as to
whether any other rating agency will rate the Certificates, or, if it does, what
rating would be assigned by any such other rating agency. A rating on the
Certificates by another rating agency, if assigned at all, may be lower than the
ratings assigned to the Certificates by the S&P and Moody's.
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be passed upon for
the Company and for the Underwriters by Orrick, Herrington & Sutcliffe LLP, New
York, New York.
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INDEX OF TERMS
Acceleration...................................................S-15
Administrative Action..........................................S-14
Business Day...................................................S-12
CCI.............................................................S-9
Certificateholders..............................................S-9
CHL.............................................................S-9
Closing Date....................................................S-9
Commission.....................................................S-10
Company.........................................................S-9
Depositor.......................................................S-9
DOL............................................................S-19
DTC............................................................S-14
ERISA..........................................................S-18
Exchange Act...................................................S-11
Extension Period...............................................S-13
IRA............................................................S-18
IT.............................................................S-11
Junior Subordinated Debentures..................................S-9
Maturity Date..................................................S-10
Moody's........................................................S-11
NYSE...........................................................S-15
Optional Redemption............................................S-13
Parties in Interest............................................S-18
Payment Default................................................S-14
Plan...........................................................S-18
Regulation.....................................................S-19
S&P............................................................S-11
Securities Act.................................................S-10
Tax Event......................................................S-13
Tax Event Redemption...........................................S-13
Trust...........................................................S-9
Trust Agreement.................................................S-9
Trust Indenture Act.............................................S-9
Underlying Capital Securities...................................S-9
Underlying Capital Securities Prospectus.......................S-10
Underlying Capital Securities Registration Statement...........S-10
Underlying Issuer...............................................S-9
Underwriters...................................................S-12
Underwriting Agreement.........................................S-19
Voting Rights..................................................S-17
S-22
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APPENDIX A
DESCRIPTION OF THE UNDERLYING CAPITAL SECURITIES
Issuer: Countrywide Capital I
Underlying Capital Securities: 8% Capital Trust Pass-through
Securities due December 15, 2026
Maturity Date: December 15, 2026
Original Principal Amount Issued: $300,000,000
CUSIP No.: 222371AA4
Stated Interest Rate: 8% per annum
Interest Payment Dates: June 15 and December 15
Optional The Underlying Capital Securities,
Redemption: and consequently the Certificates,
will be redeemable, in whole or in
part, on or after December 15,
2006, at the option of the
Underlying Issuer, on not less than
30 nor more than 60 days notice, at
a price equal to the par amount
of, plus accrued interest, on the
Underlying Capital Securities being
redeemed.
Tax Event The Underlying Capital Securities
Redemption: are redeemable, in whole or in
part, at any time by the Underlying
Issuer if certain adverse tax
events occur with respect to CHL.
Principal Amount of Underlying
Capital Securities Deposited
Under Trust Agreement: $25,000,000
The above summary is qualified in its entirety by reference to the
Underlying Capital Securities Prospectus. Neither the Depositor nor any of its
affiliates make any representation about the completeness, accuracy or
timeliness of information in the Underlying Capital Securities Prospectus.
AVAILABLE INFORMATION
CCI is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports, proxy statements
and other information with the Commission. Reports, proxy statements and other
information filed by CCI with the Commission pursuant to the informational
requirements of the Exchange Act can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: New York Regional Office, Seven World Trade Center,
13th Floor, New York, New York 10048, and Chicago Regional Office, John C.
Kluczynski Federal Building, Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can also be
maintained upon written request addressed to the Securities and Exchange
Commission, Public Reference Section, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission maintains a Web site
at http://www.sec.gov containing reports, proxy statements and other information
regarding registrants that file electronically with the Commission. Such
reports, proxy statements and other information can also be inspected at the
offices of the New York Stock Exchange or the Pacific Stock Exchange, on which
one or more of CCI's securities are listed.
A-1
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