<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1996
REGISTRATION NO. 333-11243
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C> <C>
AT&T CAPITAL CORPORATION CAPITA PREFERRED FUNDING L.P. CAPITA PREFERRED TRUST
(EXACT NAME OF REGISTRANT AS (EXACT NAME OF REGISTRANT AS SPECIFIED (EXACT NAME OF REGISTRANT AS
SPECIFIED IN CHARTER) IN CERTIFICATE OF LIMITED PARTNERSHIP) SPECIFIED IN CERTIFICATE OF TRUST)
DELAWARE DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
22-3211453 22-3467161 22-3467159
(I.R.S. EMPLOYER IDENTIFICATION NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
44 WHIPPANY ROAD
MORRISTOWN, NEW JERSEY 07962
(201) 397-3000
</TABLE>
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT J. INGATO
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
AT&T CAPITAL CORPORATION
44 WHIPPANY ROAD
MORRISTOWN, NEW JERSEY 07962
(201) 397-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ANDREW R. KELLER RICHARD T. PRINS
SIMPSON THACHER & BARTLETT GREGORY A. FERNICOLA
425 LEXINGTON AVENUE SKADDEN, ARPS, SLATE, MEAGHER & FLOM
NEW YORK, NEW YORK 10017 919 THIRD AVENUE
(212) 455-2000 NEW YORK, NEW YORK 10022
(212) 735-3000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
------------------------
CALCULATION OF REGISTRATION FEE
[CAPTION]
<TABLE>
<S> <C> <C> <C> <C>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED AMOUNT TO BE REGISTERED PER UNIT OFFERING PRICE(1) FEE(2)
<S> <C> <C> <C> <C>
Capita Preferred Trust
Originated
Preferred Securities........ 8,000,000 $ 25 $ 200,000,000 $ 60,607
Capita Preferred Funding L.P.
Partnership
Preferred Securities(3)..... 8,000,000 $ 25 $ 200,000,000 --
Guarantee of AT&T Capital
Corporation with respect to
Trust Preferred
Securities(4)............... -- -- -- --
Guarantee of AT&T Capital
Corporation with respect to
Partnership Preferred
Securities(4)............... -- -- -- --
Totals................... -- $ 60,607
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457.
(2) The Registrants paid $345 of the registration fee with the initial filing of
this Registration Statement.
(3) The Partnership Preferred Securities will be purchased by Capita Preferred
Trust with the proceeds of the sale of the Trust Preferred Securities,
together with the proceeds received from AT&T Capital Corporation in respect
of the common securities to be issued by Capita Preferred Trust. No separate
consideration will be received for the Partnership Preferred Securities.
(4) No separate consideration will be received for guarantees of AT&T Capital
Corporation with respect to the Trust Preferred Securities or the
Partnership Preferred Securities.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
PROSPECTUS
8,000,000 TRUST PREFERRED SECURITIES
CAPITA PREFERRED TRUST
% TRUST ORIGINATED PREFERRED SECURITIES'SM' ('TOPRS'SM'')
(LIQUIDATION AMOUNT $25 PER TRUST PREFERRED SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
[LOGO]
------------------------
The % Trust Originated Preferred SecuritiesSM (the 'TOPrS'SM'' or 'Trust
Preferred Securities') offered hereby represent preferred undivided beneficial
ownership interests in the assets of Capita Preferred Trust, a statutory
business trust formed under the laws of the State of Delaware (the 'Trust').
AT&T Capital Corporation, a Delaware corporation (the 'Company' or 'AT&T
Capital'), will own all the common securities (the 'Trust Common Securities'
and, together with the Trust Preferred Securities, the 'Trust Securities')
representing undivided beneficial ownership interests in the assets of the
Trust. The Trust exists for the sole purpose of issuing the Trust Securities and
investing the proceeds as described below and engaging in activities incident
thereto. The proceeds from the sale of the Trust Securities will be used by the
Trust to purchase Partnership Preferred Securities ('Partnership Preferred
Securities'), representing the limited partnership interests of Capita Preferred
Funding L.P., a Delaware limited partnership (the 'Partnership'). The general
partnership interest, which constitutes all of the interest in the Partnership
other than the limited partnership interests represented by the Partnership
Preferred Securities, is owned by the Company, which is the sole general partner
of the Partnership (in such capacity, the 'General Partner'). Substantially all
of the proceeds from the sale of the Partnership Preferred Securities, together
with the capital contribution from the General Partner, will be used by the
Partnership to purchase the Debentures (as defined herein), which consist of
debt instruments of the Company
(continued on next page)
SEE 'RISK FACTORS' BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE TRUST PREFERRED
SECURITIES, INCLUDING CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
Application has been made to list the Trust Preferred Securities on the New
York Stock Exchange, Inc. (the 'New York Stock Exchange'). If approved for
listing, trading of the Trust Preferred Securities on the New York Stock
Exchange is expected to commence within a 30-day period after the initial
delivery of the Trust Preferred Securities. See 'Underwriting.'
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) COMMISSION(2) TRUST(3)(4)
<S> <C> <C> <C>
Per Trust Preferred Security............ $ (3) $
Total................................... $ (3) $
</TABLE>
(1) Plus accrued distributions, if any, from October , 1996.
(2) The Trust, the Partnership and the Company have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See 'Underwriting.'
(3) In view of the fact that the proceeds of the sale of the Trust Preferred
Securities will be ultimately invested in investment instruments of the
Company and its eligible controlled affiliates, the Company has agreed to
pay to the Underwriters as compensation (the 'Underwriters' Compensation')
$ per Trust Preferred Security (or $ in the aggregate); provided
that such compensation for sales of or more Trust Preferred
Securities to a single purchaser will be $ per Trust Preferred
Security. Therefore, to the extent of such sales, the actual amount of
Underwriters' Compensation will be less than the aggregate amount specified
in the preceding sentence. See 'Underwriting.'
(4) Expenses of the offering which are payable by the Company are estimated to
be $ , of which $ will be reimbursed by the Underwriters.
------------------------
The Trust Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that delivery of the Trust Preferred Securities will be made only in book-entry
form through the facilities of The Depository Trust Company ('DTC') on or about
, 1996.
------------------------
MERRILL LYNCH & CO.
A.G. EDWARDS & SONS, INC. GOLDMAN, SACHS & CO. LEHMAN BROTHERS
PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES INCORPORATED
------------------------
The date of this Prospectus is , 1996
'SM'Trust Originated Preferred Securities' and 'TOPrS' are service marks of
Merrill Lynch & Co., Inc.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<PAGE>
(continued from cover page)
and certain of its domestic eligible controlled affiliates. In addition,
approximately one percent of the proceeds from the sale of the Partnership
Preferred Securities and the capital contribution from the General Partner will
be used to purchase certain U.S. government obligations and commercial paper of
entities not affiliated with the Company (the 'Eligible Debt Securities'). See
'Description of the Partnership Preferred Securities -- Partnership
Investments.'
Holders of the Trust Preferred Securities will be entitled to receive
cumulative cash distributions accruing from the date of original issuance and
payable quarterly in arrears on each March 31, June 30, September 30, and
December 31, commencing December 31, 1996 at an annual rate of % of the
liquidation amount of $25 per Trust Preferred Security (equivalent to $
per Trust Preferred Security) if, as and when the Trust has funds available for
payment. See 'Description of the Trust Preferred Securities -- Distributions.'
Distributions not paid on the scheduled payment date will accumulate and
compound quarterly at a rate per annum equal to %. The distribution rate
and the distribution payment dates and other payment dates for the Trust
Preferred Securities will correspond to the distribution rate and distribution
payment dates and other payment dates for the Partnership Preferred Securities,
which constitute the sole assets of the Trust. As described above, the assets of
the Partnership will initially consist only of the Debentures and, to a limited
extent, Eligible Debt Securities.
The payment of distributions by the Trust and payments on liquidation of
the Trust or the redemption of Trust Preferred Securities, as described below,
are guaranteed by the Company (the 'Trust Guarantee') to the extent the Trust
has funds available therefor as described under 'Description of the Trust
Guarantee.' The payment of distributions by the Partnership (if, as and when
declared) and payments on liquidation of the Partnership or the redemption of
Partnership Preferred Securities, as described below, are also guaranteed by the
Company (the 'Partnership Guarantee') to the extent the Partnership has funds
available therefor as described under 'Description of the Partnership
Guarantee.' In addition, payments in respect of the Debentures (other than the
Company Debenture (as defined herein)) are fully and unconditionally guaranteed,
on a subordinated basis, by the Company (the 'Investment Guarantees') for the
benefit of the holders of the Partnership Preferred Securities. The Trust
Guarantee, the Partnership Guarantee and the Investment Guarantees
(collectively, the 'Guarantees'), when taken together with the Company Debenture
and the Company's obligations to pay all fees and expenses of the Trust and the
Partnership, constitute a full and unconditional guarantee to the extent set
forth herein by the Company of the distribution, redemption and liquidation
payments payable to the holders of the Trust Preferred Securities. The
Guarantees do not apply, however, to current distributions by the Partnership
unless and until such distributions are declared by the Partnership out of funds
legally available for payment or to liquidating distributions unless there are
assets available for payment in the Partnership, each as more fully described in
the next succeeding paragraph and under 'Risk Factors -- Risk Factors Related to
TOPrS -- Insufficient Income or Assets Available to Partnership.' The Company's
obligations under the Guarantees are subordinate and junior in right of payment
to all other liabilities of the Company and rank pari passu with the most senior
preferred stock issued from time to time by the Company and with any guarantee
now or hereafter entered into by the Company in respect of any preferred stock
of any affiliate of the Company and its obligations under the Company Debenture
are subordinate and junior in right of payment to all senior indebtedness of the
Company. At September 30, 1996, the Company had outstanding consolidated senior
indebtedness aggregating approximately $7.9 billion, which would have ranked
senior to the Company's obligations under the Guarantees and the Company
Debenture. See 'Risk Factors -- Risk Factors Related to TOPrS -- Ranking of
Subordinate Obligations Under the Guarantees and the Company Debenture.'
Distributions on the Partnership Preferred Securities will be declared and
paid only as determined in the sole discretion of the Company in its capacity as
the General Partner of the Partnership. In addition, the General Partner is not
obligated to declare distributions on the Partnership Preferred Securities at
any time, including upon or following a Partnership Enforcement Event (as
defined herein). To the extent that the issuers (including, where applicable,
the Company, as guarantor) of the securities in which the Partnership invests
fail to make any payments in respect of such securities (or, if
2
<PAGE>
<PAGE>
applicable, guarantees), the Partnership will not have sufficient funds to pay
and will not declare or pay distributions on the Partnership Preferred
Securities. In addition, as described under 'Risk Factors -- Risk Factors
Related to TOPrS -- Insufficient Income or Assets Available to Partnership,' the
Partnership may not have sufficient funds to pay current or liquidating
distributions on the Partnership Preferred Securities if (i) at any time that
the Partnership is receiving current payments in respect of the securities held
by the Partnership (including the Debentures), the General Partner, in its sole
discretion, does not declare distributions on the Partnership Preferred
Securities and the Partnership receives insufficient amounts to pay the
additional compounded distributions that will accrue in respect of the
Partnership Preferred Securities, (ii) the Partnership reinvests the proceeds
received in respect of the Debentures upon their retirement or at their
maturities in Affiliate Investment Instruments and Eligible Debt Securities that
do not generate income in an amount that is sufficient to pay full distributions
in respect of the Partnership Preferred Securities or (iii) the Partnership
invests in equity or debt securities of Investment Affiliates that are not
guaranteed by the Company and that cannot be liquidated by the Partnership for
an amount sufficient to pay such distributions in full. If the Partnership does
not declare and pay distributions on the Partnership Preferred Securities out of
funds legally available for distribution, the Trust will not have sufficient
funds to make distributions on the Trust Preferred Securities, in which event
the Trust Guarantee will not apply to such distributions until the Trust has
sufficient funds available therefor. See 'Risk Factors -- Risk Factors Related
to TOPrS -- Distributions Payable Only if Declared by General Partner;
Restrictions on Certain Payments; Tax Consequences,' ' -- Risk Factors Related
to TOPrS -- Insufficient Income or Assets Available to Partnership,'
'Description of the Trust -- Preferred Securities -- Distributions' and
'Description of the Partnership Preferred Securities-Distributions.'
If (a) for any distribution period, full distributions on a cumulative
basis on any Trust Preferred Securities have not been paid, (b) an Investment
Event of Default by any Investment Affiliate in respect of any Affiliate
Investment Instrument (each as defined herein) has occurred and is continuing or
(c) the Company is in default of its obligations under any Guarantee, then
during such period the Company shall not, nor permit any majority owned
subsidiary to (i) declare or pay dividends on, make distributions with respect
to, or redeem, purchase or acquire, or make a liquidation payment with respect
to any of its capital stock or comparable equity interest (except for dividends
or distributions in shares of its capital stock, conversions or exchanges of
common stock of one class into common stock of another class and distributions
with respect to the Partnership or the Trust or dividends and distributions on
the common stock of wholly owned subsidiaries of the Company), (ii) make, or
permit the making of, any Affiliated Restricted Payments except for Permissible
Affiliated Payments (each as defined herein), and (iii) make any guarantee
payments with respect to the foregoing.
The Partnership Preferred Securities are redeemable by the Partnership, in
whole or in part, from time to time, on or after October , 2006 at an amount
per Partnership Preferred Security equal to $25 plus accrued and unpaid
distributions thereon. The Partnership Preferred Securities may also be
redeemed, in whole but not in part, at any time upon the occurrence of a
Partnership Special Event (as defined herein). If the Partnership redeems the
Partnership Preferred Securities, the Trust must redeem Trust Securities on a
pro rata basis having an aggregate liquidation amount equal to the aggregate
principal amount of the Partnership Preferred Securities so redeemed at a
redemption price corresponding to the redemption price of the Partnership
Preferred Securities (which includes all accrued and unpaid distributions
thereon to the date fixed for redemption) (the 'Redemption Price'). See
'Description of the Trust Preferred Securities -- Mandatory Redemption.' Neither
the Partnership Preferred Securities nor the Trust Preferred Securities have any
scheduled maturity or are redeemable at any time at the option of the holders
thereof.
The Trust will be dissolved upon the occurrence of a Trust Special Event
(as defined herein). Upon dissolution of the Trust, the Partnership Preferred
Securities will be distributed to the holders of the Trust Securities, on a pro
rata basis, in lieu of any cash distribution, unless the Partnership Preferred
Securities are redeemed in the limited circumstances described herein. If the
Partnership Preferred Securities are distributed to the holders of the Trust
Securities, the Company will use its best efforts to cause the Partnership
Preferred Securities to be listed on the New York Stock Exchange or such other
national securities exchange or similar organization as the Trust Preferred
Securities are then listed or
3
<PAGE>
<PAGE>
quoted. See 'Description of the Trust Preferred Securities -- Trust Special
Event Redemption or Distribution' and 'Description of the Partnership Preferred
Securities.'
In the event of any liquidation, dissolution, winding up or termination of
the Trust, the holders of the Trust Preferred Securities will be entitled to
receive for each Trust Preferred Security a liquidation amount of $25 plus
accrued and unpaid distributions thereon, except to the extent, in connection
with such dissolution, Partnership Preferred Securities are distributed to the
holders of the Trust Preferred Securities. Upon (i) the occurrence of an
Investment Event of Default by an Investment Affiliate (including the Company)
in respect of any Affiliate Investment Instrument or (ii) default by the Company
on any of its obligations under any Guarantee, the holders of the Trust
Preferred Securities will have a preference over the holders of the Trust Common
Securities with respect to payments upon liquidation of the Trust. Under no
circumstances will the investment instruments held by the Partnership be
distributed in kind to the holders of the Trust Preferred Securities or
Partnership Preferred Securities. See 'Description of the Trust Preferred
Securities -- Liquidation Distribution Upon Dissolution.'
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company, the Trust and the Partnership have filed with the Securities
and Exchange Commission (the 'Commission') a Registration Statement on Form S-3
(the 'Registration Statement,' which term shall include all amendments, exhibits
and schedules thereto), pursuant to the Securities Act of 1933, as amended (the
'Securities Act'), and the rules and regulations promulgated thereunder, with
respect to the Trust Preferred Securities offered hereby (as well as the
Partnership Preferred Securities, the Trust Guarantee and the Partnership
Guarantee). This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission, and to which reference is hereby made.
The Company is subject to the information and reporting requirements of the
Securities Exchange Act of 1934, as amended (the 'Exchange Act'), and in
accordance therewith files periodic reports and other information with the
Commission. Except for the listing of Trust Preferred Securities that is
expected to be made on the New York Stock Exchange, none of the Trust, the
Partnership or the Company has any securities that are listed on any national
securities exchange. The Registration Statement, as well as such reports and
other information filed by the Company with the Commission, may 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 regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition, copies of
such material can be obtained from the Commission's Web Site
(http://www.sec.gov). Such reports and other information concerning the Company
are also available for inspection at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
The Company beneficially owns all of the Partnership's partnership
interests (other than the Partnership Preferred Securities, which are held by
the Property Trustee (as defined herein) for the benefit of the holders of Trust
Preferred Securities) and beneficially owns all of the undivided beneficial
interests in the assets of the Trust (other than the beneficial interests
represented by the Trust Preferred Securities). See 'Capita Preferred Trust,'
'Capita Preferred Funding L.P.,' 'Description of the Trust Preferred Securities'
and 'Description of the Partnership Preferred Securities.' In future filings
under
4
<PAGE>
<PAGE>
the Exchange Act, a footnote to the Company's annual and quarterly financial
statements will state that the Trust and the Partnership are consolidated with
the Company, that the sole assets of the Trust are the Partnership Preferred
Securities, that the sole assets of the Partnership are the Affiliate Investment
Instruments and the Eligible Debt Securities and that the Guarantees, when taken
together with the Company Debenture and the Company's obligations to pay all
fees and expenses of the Trust and the Partnership, constitute a full and
unconditional guarantee to the extent set forth herein by the Company of the
distribution, redemption and liquidation payments payable to the holders of the
Trust Preferred Securities. The Guarantees do not apply, however, to current
distributions by the Partnership unless and until such distributions are
declared by the Partnership out of funds legally available for payment or to
liquidating distributions unless there are assets available for payment in the
Partnership, each as more fully described under 'Risk Factors -- Risk Factors
Related to TOPrS -- Insufficient Income or Assets Available to Partnership.' The
footnote will also set forth the principal amount or stated value of the
Affiliate Investment Instruments and Eligible Debt Securities held by the
Partnership at the end of the related period, the aggregate income received by
the Partnership in respect of the Affiliate Investment Instruments and Eligible
Debt Securities held by the Partnership during the related period and the
aggregate distributions accrued on the Partnership Preferred Securities
(including any distributions that are accumulated and unpaid ) during the
related period.
Statements made in this Prospectus concerning the provisions of any
contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such statement concerning a contract, agreement
or other document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission, reference is made to such exhibit or other filing for
a more complete description of the matter involved, and each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
and are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1995 (the '1995 Form 10-K');
(2) The Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1996 and June 30, 1996; and
(3) The Company's Current Reports on Form 8-K dated April 12, 1996,
April 30, 1996, June 6, 1996, August 20, 1996 and October 1, 1996.
The Company will provide without charge to each person, including any
beneficial owner of such person, to whom this Prospectus is delivered, upon
written or oral request, a copy of any and all information incorporated by
reference in this Prospectus (not including exhibits to the information that has
been incorporated by reference, unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Such requests should be directed to AT&T Capital Corporation, 44
Whippany Road, Morristown, NJ 07962-1983 (Telephone Number 201-397-4444),
Attention of the Investor Relations Department.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Trust Preferred Securities shall be
deemed to be incorporated by reference in this Prospectus 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.
5
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements and notes thereto appearing elsewhere or
incorporated by reference in this Prospectus. The Company operates through its
business units, which consist of its various subsidiaries and divisions within
such subsidiaries. Unless the context requires otherwise, as used herein, the
term the 'Company' or 'AT&T Capital' includes such business units. Certain terms
used in this Summary are defined elsewhere in this Prospectus. See 'Index of
Defined Terms' for a cross reference to the location in this Prospectus where
such terms are defined.
THE COMPANY
AT&T Capital Corporation ('AT&T Capital' or the 'Company') is a
full-service, diversified equipment leasing and finance company that operates
principally in the United States and also has operations in Europe, Canada, the
Asia/Pacific Region and Latin America. The Company is one of the largest
equipment leasing and finance companies in the United States and is the largest
lessor of telecommunications equipment in the United States, in each case, based
on the aggregate value of equipment leased or financed.
AT&T Capital, through its various subsidiaries, leases and finances a wide
variety of equipment, including general office, manufacturing and medical
equipment, telecommunications equipment (such as private branch exchanges,
telephone systems and voice processing units), information technology equipment
(such as personal computers, retail point of sale systems and automatic teller
machines) and transportation equipment (primarily vehicles). In addition, AT&T
Capital provides inventory financing for equipment dealers, franchise financing
for franchisees and financing collateralized by real estate. At December 31,
1995, the percentage of the Company's total assets in each of its various asset
categories was as follows: 28% were comprised of general office, manufacturing
and medical equipment; 23% were comprised of telecommunications equipment; 23%
were comprised of information technology equipment; 19% were comprised of
transportation equipment; and 7% were comprised of Small Business Administration
loans and other financings collateralized by real estate and other assets. The
Company's leasing and financing services are marketed (i) to customers of
equipment manufacturers, distributors and dealers with which the Company has a
marketing relationship for financing services and (ii) directly to end-users of
equipment. The Company's approximately 500,000 customers include large global
companies, small and mid-sized businesses and federal, state and local
governments and their agencies.
During its eleven year history, the Company has achieved significant growth
in assets, finance volume (total principal amount of loans and total cost of
equipment associated with finance and lease transactions recorded by the Company
and the increase, if any, in outstanding inventory financing and asset-based
lending transactions), revenues and net income. At December 31, 1995, the
Company's total assets were $9.5 billion, an increase of 18.9% over the prior
year-end; finance volume for 1995 was $4.6 billion, an increase of 7.4% over
1994; total revenues for 1995 were $1.6 billion, an increase of 13.9% over 1994;
and net income of $127.6 million for 1995 was 27.1% greater than the Company's
net income for 1994. Total assets at the end of the third quarter of 1996 were
$10.3 billion, representing a 7.4% increase over total assets at the end of
1995, and net income of $115.3 million for the first nine months of 1996
represented an increase of 34.9% over the net income for the corresponding
period in 1995.
AT&T Capital has two broad business strategies: (i) to enhance its position
as a leader in providing leasing and financing services that are marketed to
customers of equipment manufacturers, distributors and dealers ('vendors') with
whom the Company has a marketing relationship for financing services (the
Company's 'Global Vendor Finance' strategy); and (ii) to establish itself as a
leader in providing leasing, financing and related services that are marketed
directly to end-users of equipment, including customers of the Company's Global
Vendor Finance marketing activities (e.g., end-users acquiring general equipment
for which the Company previously financed telecommunications equipment), as well
as customers of vendors with whom the Company does not have a marketing
relationship for financing services (the Company's 'Direct Customer Finance'
strategy). For the year ended December 31, 1995,
6
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<PAGE>
the percentage of the Company's aggregate finance volume derived from the
Company's Global Vendor Finance and Direct Customer Finance programs was 58% and
42%, respectively.
AT&T Capital seeks to implement its strategies by taking advantage of what
it believes are its competitive strengths: (i) high-volume processing
capabilities that enable it to serve a large number of customers in a timely and
efficient manner; (ii) significant experience in structuring and managing Global
Vendor Finance and Direct Customer Finance programs tailored to specific
customer needs; (iii) risk management skills (including initial credit review
and residual value assessment and continuing portfolio management capabilities);
(iv) asset management skills (including equipment remarketing skills that
enhance the ability of the Company to realize the residual values of its
equipment); and (v) financial structuring capabilities. See 'Business of the
Company -- Certain Business Skills.'
The Company was founded in 1985 by AT&T Corp. ('AT&T') as a captive finance
company to assist AT&T's equipment marketing and sales efforts by providing its
customers with sophisticated financing. AT&T Capital has operated independently
since its initial public offering (the 'IPO') in 1993. Consequently, the Company
believes that the disposition by AT&T of its remaining ownership of the
Company's Common Stock, par value $.01 per share (the 'Common Stock') as a
result of the Merger referred to below will not have a material impact on the
manner in which the Company conducts its business operations, except that
following the Merger, the Company anticipates that significant changes in the
Company's financing strategy will be implemented. In particular, the Company
anticipates that approximately 30% of its financing volume originated each year
may be securitized annually pursuant to off-balance sheet securitization
transactions. See 'Business of the Company -- Business Strategy.'
The Company has a management team with significant experience with the
Company and in the equipment leasing and finance industry. At September 30,
1996, the Company and its subsidiaries had approximately 2,900 employees. The
principal executive offices of the Company are located at 44 Whippany Road,
Morristown, New Jersey 07962.
THE MERGER
On October 1, 1996, the Company consummated a merger (the 'Merger') with
Antigua Acquisition Corporation, a recently formed Delaware corporation ('Merger
Sub'), pursuant to an Agreement and Plan of Merger (the 'Merger Agreement')
among AT&T, the former indirect owner of approximately 86% of the outstanding
Common Stock of the Company, Hercules Limited, a recently formed Cayman Islands
corporation ('Holdings'), and Merger Sub, a majority-owned subsidiary of
Holdings. Pursuant to the Merger Agreement, Merger Sub was merged with and into
the Company, with the Company continuing its corporate existence under Delaware
law as the surviving corporation.
All of the outstanding common equity capital of the Company is currently
directly or indirectly owned by members of a leasing consortium (the 'Leasing
Consortium') consisting of (i) certain members of the Company's management (the
'Management Investors'), including Thomas C. Wajnert, Chairman of the Board and
Chief Executive Officer of the Company, and approximately 23 other members of
the Company's senior management, and (ii) GRS Holding Company Limited, a private
United Kingdom holding corporation engaged in the U.K. rail leasing business
('GRSH'). Following the consummation of the Merger and the related transactions,
the Management Investors own 3.3% of the Common Stock (or approximately 5.5% on
a fully diluted basis) and GRSH indirectly owns 96.7% of the Common Stock (or
approximately 94.5% on a fully diluted basis). GRSH, in turn, is 85%
beneficially owned by Nomura International plc, a wholly owned subsidiary of The
Nomura Securities Co., Ltd. ('Nomura'), and 9.5% beneficially owned by Babcock &
Brown Holdings Inc., a San Francisco based leasing, asset and project financing
advisory company ('Babcock & Brown'), in each case, through instruments
convertible into GRSH's capital stock. The principal activities of Nomura, which
was founded in 1925 in Osaka, Japan and is currently Japan's largest securities
brokerage house, include securities brokerage, trading, investment banking and
commercial banking in global financial markets.
7
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Following the Merger, on October 15, 1996, a newly established trust
sponsored by the Company issued and sold equipment receivable-backed securities
in an off-balance sheet securitization which generated net proceeds to the
Company of approximately $2.6 billion which proceeds, together with the equity
contributions relating to the Merger (approximately $0.9 billion), were used to
repay short-term notes, including approximately $1.3 billion of short-term
obligations incurred by the Company to finance a portion of the aggregate
consideration paid in respect of the Merger. See 'The Merger' for a description
of certain pro forma financial data after giving effect to the Merger and the
related transactions, including such securitization by the Company.
RELATIONSHIP WITH AT&T ENTITIES
In September 1995, AT&T announced plans to separate itself into three
publicly traded companies (AT&T, Lucent Technologies Inc. ('Lucent') and NCR
Corporation ('NCR') (collectively, the 'AT&T Entities')) and to dispose of its
approximately 86% equity interest in the Company to the general public or
another company (the 'AT&T Restructuring'). Pursuant to the AT&T Restructuring,
the Company consummated the Merger which resulted in, among other things, the
disposition by AT&T of its remaining equity interest in the Company. See 'The
Merger.'
On September 30, 1996, AT&T spun off its entire remaining interest in
Lucent to AT&T's shareholders. Lucent's businesses involve the manufacture and
distribution of public telecommunications systems, business communications
systems, micro-electronic components, and consumer telecommunications products.
In addition, AT&T has announced that it intends to distribute to its
shareholders all of its interest in NCR by the end of 1996. NCR's businesses
involve the manufacture and distribution of information technology equipment,
including automatic teller machines and point-of-sale terminal equipment.
In connection with the Company's IPO in 1993, the Company entered into a
series of agreements with AT&T to formalize the relationship between the two
companies, including the following three significant agreements, each dated as
of June 25, 1993: (i) an Operating Agreement (the 'AT&T Operating Agreement'),
(ii) an Intercompany Agreement (the 'Intercompany Agreement') and (iii) a
License Agreement (the 'License Agreement'). The Company has executed agreements
comparable to the AT&T Operating Agreement with each of Lucent and NCR (the
'Additional Operating Agreements' and, together with the AT&T Operating
Agreement, the 'Operating Agreements'). In addition, the Company has entered
into letter agreements (the 'Agreement Supplements') with Lucent and NCR
pursuant to which Lucent and NCR have agreed that various provisions of the
Intercompany Agreement and the License Agreement shall apply equally to them.
The initial term of each of the Operating Agreements, the Intercompany
Agreement, the License Agreement and the Agreement Supplements is scheduled to
end on August 4, 2000. In addition, AT&T has the right under the License
Agreement, after two years' prior notice, to require the Company to discontinue
use of the 'AT&T' trade name as part of the Company's corporate or 'doing
business' name. For additional details with respect to the terms of each of the
Operating Agreements, the Intercompany Agreement, the License Agreement and the
Agreement Supplements, see 'Relationship with AT&T Entities.'
In 1995, approximately 41% and 76% of the Company's total revenues and net
income, respectively, were attributable, directly or indirectly, to AT&T
Entities. See 'Risk Factors -- Changes in Relationship with AT&T
Entities -- Revenues and Net Income Attributable to AT&T Entities' for a
description of the Company's dependence on the revenue and net income
attributable to the Company's relationship with the AT&T Entities and their
customers and employees.
8
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THE OFFERING
<TABLE>
<S> <C>
The Trust.................................... Capita Preferred Trust, a Delaware statutory business trust. The
sole assets of the Trust will be the Partnership Preferred
Securities.
The Partnership.............................. Capita Preferred Funding L.P., a Delaware limited partnership. The
assets of the Partnership will initially consist of the
Debentures and, to a limited extent, certain Eligible Debt
Securities.
Securities Offered........................... 8,000,000 of % Trust Preferred Securities.
Distributions................................ Distributions on the Trust Preferred Securities will accrue from
the date of original issuance of the Trust Preferred Securities
and will be payable at the annual rate of % of the liquidation
amount of $25 per Trust Preferred Security if, as, and when the
Trust has funds available for payment. Distributions will be
payable quarterly in arrears on each March 31, June 30,
September 30, and December 31, commencing December 31, 1996.
Distributions not made on the scheduled payment date will
accumulate and compound quarterly at a rate per annum equal to
%.
The ability of the Trust to pay distributions on the Trust
Preferred Securities is entirely dependent on its receipt of
corresponding distributions with respect to the Partnership
Preferred Securities. The ability of the Partnership to pay
distributions on the Partnership Preferred Securities is, in
turn, dependent on its receipt of payments with respect to the
Debentures and the Eligible Debt Securities held by the
Partnership. Distributions on the Partnership Preferred
Securities will be declared and paid only as determined in the
sole discretion of the Company in its capacity as the General
Partner of the Partnership. See 'Risk Factors -- Risk Factors
Related to TOPrS -- Distributions Payable Only if Declared by
General Partner; Restrictions on Certain Payments; Tax
Consequences,' 'Description of the Trust Preferred
Securities -- Distributions' and 'Description of the Partnership
Preferred Securities -- Distributions' and ' -- Partnership
Investments.'
Rights Upon Non-Payment of Distributions and
Certain Defaults; Covenants of the
Company.................................... If, at any time, (i) arrearages on distributions on the Trust
Preferred Securities shall exist for six consecutive quarterly
distribution periods, (ii) an Investment Event of Default occurs
and is continuing on any Affiliate Investment Instrument or
(iii) the Company is in default on any of its obligations under
the Trust Guarantee, then (a) the Property Trustee, as the
holder of the Partnership Preferred Securities, will have the
right to enforce the terms of the Partnership Preferred
Securities, including the right to direct the Special
Representative (as defined herein) to enforce (1) the
Partnership's creditors' rights and other rights with respect to
the Affiliate Investment
</TABLE>
9
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<TABLE>
<S> <C>
Instruments and the Investment Guarantees and (2) the rights of
the holders of the Partnership Preferred Securities to receive
distributions (only if, as and when declared) on the Partnership
Preferred Securities, and (b) the Trust Guarantee Trustee or the
Special Representative, as the holders of the Trust Guarantee
and the Partnership Guarantee, respectively, shall have the
right to enforce such Guarantees, including the right to enforce
the covenant restricting certain payments by the Company and its
majority owned subsidiaries described below.
Under no circumstances, however, shall the Special Representative
have authority to cause the General Partner to declare
distributions on the Partnership Preferred Securities. If the
Partnership does not declare and pay distributions on the
Partnership Preferred Securities out of funds legally available
for distribution, the Trust will not have sufficient funds to
make distributions on the Trust Preferred Securities. See 'Risk
Factors -- Risk Factors Related to TOPrS -- Insufficient Income
or Assets Available to Partnership,' 'Description of the Trust
Preferred Securities -- Trust Enforcement Events' and
'Description of the Partnership Preferred
Securities -- Partnership Enforcement Events.'
The Company has agreed that if (a) for any distribution period,
full distributions on a cumulative basis on any Trust Preferred
Securities have not been paid, (b) an Investment Event of
Default by any Investment Affiliate in respect of any Affiliate
Investment Instrument has occurred and is continuing or (c) the
Company is in default of its obligations under the Trust
Guarantee, the Partnership Guarantee or any Investment
Guarantee, then, during such period the Company shall not, nor
permit any majority owned subsidiary to (i) declare or pay
dividends on, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect
to any of its capital stock or comparable equity interest
(except for dividends or distributions in shares of its capital
stock, conversions or exchanges of common stock of one class
into common stock of another class and dividends, distributions
with respect to the Partnership or the Trust or dividends and
distributions on the common stock of wholly owned subsidiaries
of the Company), (ii) make, or permit the making of, any
Affiliated Restricted Payments except for Permissible Affiliated
Payments and (iii) make any guarantee payments with respect to
the foregoing.
Liquidation Amount........................... In the event of any liquidation of the Trust, holders will be
entitled to receive $25 per Trust Preferred Security plus an
amount equal to any accrued and unpaid distributions thereon to
the date of payment (such amount being the 'Trust Liquidation
Distribution'), unless Partnership Preferred Securities are
distributed to such holders in
</TABLE>
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<TABLE>
<S> <C>
connection with a Trust Special Event. If upon a liquidation of
the Trust (in which the Partnership Preferred Securities are not
distributed to holders of the Trust Securities), the Trust
Liquidation Distribution can be paid only in part because the
Trust has insufficient assets available to pay in full the
aggregate Trust Liquidation Distribution, then the amounts
payable directly by the Trust on the Trust Preferred Securities
shall be paid on a pro rata basis. The holders of the Trust
Common Securities will be entitled to receive distributions upon
any such liquidation pro rata with the holders of the Trust
Preferred Securities, except that upon (i) the occurrence of an
Investment Event of Default by an Investment Affiliate
(including the Company) in respect of any Affiliate Investment
Instrument or (ii) default by the Company on any of its
obligations under any Guarantee, the holders of the Trust
Preferred Securities will have a preference over the holders of
the Trust Common Securities with respect to payments upon
liquidation of the Trust. See 'Description of the Trust
Preferred Securities -- Liquidation Distribution Upon
Dissolution.'
Optional Redemption.......................... The Partnership Preferred Securities will be redeemable for cash,
at the option of the Partnership, in whole or in part, from time
to time, after October , 2006, at an amount per Partnership
Preferred Security equal to $25 plus accrued and unpaid
distributions thereon. Upon any redemption of the Partnership
Preferred Securities, the Trust Preferred Securities will be
redeemed at the Redemption Price. See 'Description of the
Partnership Preferred Securities -- Optional Redemption' and
'Description of the Trust Preferred Securities -- Mandatory
Redemption.' Neither the Partnership Preferred Securities nor
the Trust Preferred Securities have any scheduled maturity or
are redeemable at any time at the option of the holders thereof.
Guarantees................................... The Company will irrevocably guarantee, on a subordinated basis,
the payment in full of (i) any accrued and unpaid distributions
on the Trust Preferred Securities to the extent of funds of the
Trust available therefor, (ii) the amount payable upon
redemption of the Trust Preferred Securities to the extent of
funds of the Trust available therefor and (iii) generally, the
liquidation amount of the Trust Preferred Securities to the
extent of the assets of the Trust available for distribution to
holders of Trust Preferred Securities. See 'Description of the
Trust Guarantee.'
The Company will also irrevocably guarantee, on a subordinated
basis and to the extent set forth herein, the payment in full of
(i) any accrued and unpaid distributions on the Partnership
Preferred Securities if, as and when declared out of funds
legally available therefor, (ii) the amount payable upon
redemption of the
</TABLE>
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<S> <C>
Partnership Preferred Securities to the extent of funds of the
Partnership legally available therefor and (iii) generally, the
liquidation amount of the Partnership Preferred Securities to
the extent of the assets of the Partnership available for
distribution to holders of Partnership Preferred Securities. See
'Description of the Partnership Guarantee.'
The Company will fully and unconditionally guarantee, on a
subordinated basis, payments in respect of the Debentures (other
than the Company Debenture) for the benefit of the holders of
the Partnership Preferred Securities, to the extent described
under 'Description of the Partnership Preferred
Securities -- Investment Guarantees.'
The Guarantees, when taken together with the Company Debenture and
the Company's obligations to pay all fees and expenses of the
Trust and the Partnership, constitute a full and unconditional
guarantee to the extent set forth herein by the Company of the
distribution, redemption and liquidation payments payable to the
holders of the Trust Preferred Securities. The Guarantees do not
apply, however, to current distributions by the Partnership
unless and until such distributions are declared by the
Partnership out of funds legally available for payment or to
liquidating distributions unless there are assets available for
payment in the Partnership, each as more fully described under
'Risk Factors -- Risk Factors Related to TOPrS --
Insufficient Income or Assets Available to Partnership.' The
Company's obligations under the Guarantees are subordinate and
junior in right of payment to all other liabilities of the
Company and rank pari passu with the most senior preferred stock
issued from time to time by the Company and with any guarantee
now or hereafter entered into by the Company in respect of any
preferred stock of any affiliate of the Company.
Voting Rights................................ Generally, holders of the Trust Preferred Securities will not have
any voting rights. The holders of a majority in liquidation
amount of the Trust Preferred Securities, however, have the
right to direct the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee, or
direct the exercise of any trust or power conferred upon the
Property Trustee under the Declaration, including the right to
direct the Property Trustee, as holder of the Partnership
Preferred Securities, (i) to exercise its rights in the manner
described above under 'Rights Upon Non-Payment of Distributions
and Certain Defaults; Covenants of the Company' and (ii) to
consent to any amendment, modification or termination of the
Limited Partnership Agreement or the Partnership Preferred
Securities where such consent shall be required. See
'Description of the Trust Preferred Securities -- Voting
Rights.'
</TABLE>
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<S> <C>
Special Event Redemptions or Distributions... Upon the occurrence of a Trust Tax Event (which event will
generally be triggered upon the occurrence of certain adverse
tax consequences or the denial of an interest deduction on the
Debentures held by the Partnership) or a Trust Investment
Company Event (which event will generally be triggered if the
Trust is considered an 'investment company' under the Investment
Company Act of 1940, as amended (the '1940 Act')), except in
certain limited circumstances, the Regular Trustees (as defined
herein) will have the right to liquidate the Trust and cause
Partnership Preferred Securities to be distributed to the
holders of the Trust Preferred Securities. In certain
circumstances involving a Partnership Tax Event (which event
will generally be triggered upon the occurrence of certain
adverse tax consequences or the denial of an interest deduction
on the Debentures held by the Partnership) or a Partnership
Investment Company Event (which event will generally be
triggered if the Partnership is considered an 'investment
company' under the 1940 Act), the Partnership will have the
right to redeem the Partnership Preferred Securities, in whole
(but not in part), at $25 per Partnership Preferred Security
plus accrued and unpaid distributions thereon, in lieu of a
distribution of the Partnership Preferred Securities, in which
event the Trust Securities will be redeemed at the Redemption
Price. See 'Description of the Trust Preferred Securities --
Trust Special Event Redemption or Distribution' and 'Description
of the Partnership Preferred Securities -- Partnership Special
Event Redemption.'
Form of Trust Preferred Securities........... The Trust Preferred Securities will be represented by a global
certificate or certificates registered in the name of Cede &
Co., as nominee for DTC. Beneficial interests in the Trust
Preferred Securities will be evidenced by, and transfers thereof
will be effected only through, records maintained by the
participants in DTC. Except as described herein, Trust Preferred
Securities in certificated form will not be issued in exchange
for the global certificate or certificates. See 'Description of
the Trust Preferred Securities -- Book-Entry Only
Issuance -- The Depository Trust Company.'
Use of Proceeds.............................. All of the proceeds from the sale of the Trust Securities will be
invested by the Trust in the Partnership Preferred Securities.
The Partnership will use the funds to make investments in the
Debentures and, to a limited extent, certain Eligible Debt
Securities. See 'Use of Proceeds.'
</TABLE>
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SUMMARY FINANCIAL DATA
The Results of Operations Data, the Balance Sheet Data and the Other Data
shown below at or for the years ended December 31, 1995, 1994 and 1993 are
derived from the Consolidated Financial Statements of the Company at such dates
or for such periods, which have been audited by Coopers & Lybrand L.L.P.,
independent accountants. Such data at or for the nine months ended September 30,
1996 and 1995 are derived from unaudited consolidated financial information. In
management's opinion, the Company's unaudited consolidated financial statements
at or for the nine months ended September 30, 1996 and 1995 include all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation. The results of operations for the nine months ended September 30,
1996 are not necessarily indicative of the results for the entire year or any
other interim period.
The summary financial data as presented below should be read in conjunction
with 'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and the Consolidated Financial Statements and related notes thereto
incorporated by reference in this Prospectus. The Company's unaudited
consolidated financial information at or for the nine months ended September 30,
1996 does not include the effects of the Merger and related transactions. For a
description of the significant impact of the Merger and related transactions on
the Company's financial position and results of operations, see 'The Merger.'
For a description of certain increased annual costs that the Company expects to
incur as a result of the Merger, see 'Risk Factors -- Risks Related to the
Termination of AT&T's Ownership Interest in the Company.'
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
RESULTS OF OPERATIONS DATA:
Total revenues................ $1,370,494 $1,140,651
Interest expense.............. 350,359 300,891
Operating and administrative
expenses.................... 375,172 351,443
Provision for credit losses... 71,454 60,359
Income before income taxes and
cumulative effect on prior
years of accounting
change...................... 182,496 143,276
Income before cumulative
effect on prior years of
accounting change and impact
of tax rate change.......... 115,290 85,466
Cumulative effect on prior
years of accounting
change(1)................... -- --
Impact of 1993 tax rate
change(1)................... -- --
Net income(1)................. 115,290 85,466
Earnings per share(1)......... 2.43 1.82
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Total revenues................$1,577,035 $1,384,079 $1,359,589
Interest expense.............. 411,040 271,812 236,335
Operating and administrative
expenses.................... 473,663 427,187 381,515
Provision for credit losses... 86,214 80,888 123,678
Income before income taxes and
cumulative effect on prior
years of accounting
change...................... 208,239 173,614 138,040
Income before cumulative
effect on prior years of
accounting change and impact
of tax rate change.......... 127,555 100,336 83,911
Cumulative effect on prior
years of accounting
change(1)................... -- -- (2,914)
Impact of 1993 tax rate
change(1)................... -- -- (12,401)
Net income(1)................. 127,555 100,336 68,596
Earnings per share(1)......... 2.70 2.14 1.60
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
----------------
1996
----------------
<S> <C>
(DOLLARS IN
THOUSANDS)
BALANCE SHEET DATA:
Total assets.................. $ 10,251,600
Total debt(2)................. 7,917,926
Total liabilities(2).......... 9,033,798
Total shareowners' equity..... 1,217,802
<CAPTION>
AT DECEMBER 31,
-----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets..................$9,541,259 $8,021,923 $6,409,726
Total debt(2)................. 6,928,409 5,556,458 4,262,405
Total liabilities(2).......... 8,425,134 7,013,705 5,485,283
Total shareowners' equity..... 1,116,125 1,008,218 924,443
</TABLE>
(table continued on next page)
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<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
OTHER DATA:
Ratio of earnings to fixed
charges(3).................. 1.51x 1.47x
Ratio of total debt to
shareowners' equity(4)...... 6.50x 6.07x
Return on average
equity(5)(7)................ 13.2% 11.0%
Return on average
assets(6)(7)................ 1.6% 1.3%
Portfolio Assets of the
Company..................... $ 10,041,020 8,892,895
Allowance for credit losses... 235,205 214,711
Net Portfolio Assets of the
Company..................... 9,805,815 $ 8,678,184
Assets of others managed by
the Company................. 2,159,316 2,428,924
Volume of equipment
financed(8)................. 3,780,000 3,088,790
Ratio of allowance for credit
losses to net
charge-offs(9).............. 3.08x 4.22x
Ratio of net charge-offs to
Portfolio Assets(9)......... 0.76% 0.57
Ratio of allowance for credit
losses to Portfolio
Assets...................... 2.34% 2.41%
Ratio of operating and
administrative expenses to
period-end total
assets(10).................. 4.88% 5.19%
<CAPTION>
AT OR FOR THE
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
OTHER DATA:
Ratio of earnings to fixed
charges(3).................. 1.50x 1.62x 1.57x
Ratio of total debt to
shareowners' equity(4)...... 6.22x 5.51x 4.61x
Return on average
equity(5)(7)................ 12.1% 10.5% 8.5%
Return on average
assets(6)(7)................ 1.5% 1.4% 1.1%
Portfolio Assets of the
Company.....................$9,328,623 $7,661,226 $6,236,624
Allowance for credit losses... 223,220 176,428 159,819
Net Portfolio Assets of the
Company..................... 9,105,403 7,484,798 6,076,805
Assets of others managed by
the Company................. 2,214,502 2,659,526 2,795,663
Volume of equipment
financed(8)................. 4,567,000 4,251,000 3,467,000
Ratio of allowance for credit
losses to net
charge-offs(9).............. 4.77x 3.18x 2.71x
Ratio of net charge-offs to
Portfolio Assets(9)......... 0.50% 0.73% 0.95%
Ratio of allowance for credit
losses to Portfolio
Assets...................... 2.39% 2.30% 2.56%
Ratio of operating and
administrative expenses to
period-end total
assets(10).................. 4.96% 5.33% 5.95%
</TABLE>
- ------------
(1) Net income and earnings per share for 1993 were adversely impacted by the
federal tax rate increase to 35% and a cumulative effect on prior years of
accounting change. See note 10 to the Consolidated Financial Statements
incorporated herein by reference to the 1995 Form 10-K. Earnings per share
without these charges for 1993 would have been $1.95 per share.
(2) Total debt does not include, and total liabilities includes, certain
interest-free loans from AT&T to the Company under certain tax agreements,
in aggregate outstanding principal amounts of $247.4 million, $248.9
million, $214.1 million and $188.6 million at September 30, 1995, December
31, 1995, 1994 and 1993, respectively. The Company no longer receives such
interest-free loans and repaid such loans in their entirety with a payment
of $247.4 million on September 30, 1996. See 'Risk Factors -- Risks Related
to the Termination of AT&T's Ownership Interest in the Company -- Tax
Deconsolidation' and note 4 below.
(3) Earnings before income taxes and cumulative effect on prior years of
accounting change plus fixed charges (the sum of interest on indebtedness
and the portion of rentals representative of the interest factor) divided
by fixed charges. Prior to the Merger, a portion of the Company's
indebtedness to AT&T did not bear interest. See note 2 above. On a pro
forma basis giving effect to the issuance of the Trust Preferred Securities
on January 1, 1995, the ratio of earnings to fixed charges for the nine
months ended September 30, 1996 and the year ended December 31, 1995 would
have been 1.49x and 1.47x, respectively. Had the Merger and related
transactions, including the issuance of the Trust Preferred Securities,
taken place on January 1, 1995, the pro forma ratio of earnings to fixed
charges for the nine months ended September 30, 1996 would have been 1.17x,
and for the year ended December 31, 1995, there would have been an earnings
deficiency of $30.0 million to cover fixed charges. See 'Ratio of Earnings
to Fixed Charges of the Company.'
(4) Total debt does not include certain interest-free loans previously made
from AT&T to the Company under certain tax agreements. The Company repaid
such loans in their entirety with a payment of $247.4 million on September
30, 1996. If such loans were so included, the ratio of total debt to
shareowners' equity would have been 6.28x, 6.45x, 5.72x and 4.81x at
September 30, 1995, December 31, 1995, 1994 and 1993, respectively. See
'Risk Factors -- Risks Related to the Termination of AT&T's Ownership
Interest in the Company -- Tax Deconsolidation' and note 2 above.
(5) Net income (annualized in the case of the nine months ended September 30,
1996 and 1995) divided by average total shareowners' equity.
(6) Net income (annualized in the case of the nine months ended September 30,
1996 and 1995) divided by average total assets.
(7) In 1993, the Company's adjusted return on average equity and return on
average assets, defined as income before cumulative effect on prior years
of accounting change and impact of tax rate change as a percentage of
average equity and average assets, respectively, was 10.3% and 1.4%,
respectively.
(8) Total principal amount of loans and total cost of equipment associated with
finance and lease transactions recorded by the Company and the increase, if
any, in outstanding inventory financing and asset-based lending
transactions.
(9) Net charge-offs at September 30, 1996 and 1995 are calculated based on the
twelve months then ended.
(10) Operating and administrative expenses (annualized for the nine months ended
September 30, 1996 and 1995) divided by period-end total assets.
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RATINGS OF SECURITIES
Standard & Poor's Ratings Group, a division of McGraw-Hill ('S&P'), will
assign a rating to the Trust Preferred Securities of 'BBB - ', Moody's Investors
Service, Inc. ('Moody's') has assigned an initial rating to the Trust Preferred
Securities of 'ba2', Duff & Phelps Credit Rating Co. ('Duff & Phelps') has
indicated it will assign a rating to the Trust Preferred Securities of 'BBB - '
and Fitch Investors Service, Inc. ('Fitch') has indicated its expected rating of
the Trust Preferred Securities as 'BBB - .'
An explanation of the significance of ratings may be obtained from the
rating agencies. Generally, rating agencies base their ratings on such material
and information, and such of their own investigations, studies and assumptions,
as they deem appropriate. A credit rating of a security is not a recommendation
to buy, sell or hold securities. There is no assurance that any rating will
apply for any given period of time or that a rating may not be adjusted or
withdrawn.
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RISK FACTORS
Prospective purchasers of the Trust Preferred Securities should consider
carefully the risk factors set forth below, as well as all other information
contained or incorporated by reference in this Prospectus, in evaluating an
investment in the Trust Preferred Securities. To the extent any of the
information contained or incorporated by reference in this Prospectus
constitutes a 'forward-looking statement' as defined in Section 27A(i)(1) of the
Securities Act, the risk factors set forth below are meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those in the forward-looking statement.
RISKS RELATED TO EXPECTED PLANS INVOLVING THE COMPANY
SECURITIZATION PROGRAM. The Company's current business plan incorporates
future securitization transactions as a key part of the Company's financing to
manage the Company's leverage ratio and to transfer credit risk. The Company
will continue to manage the securitized assets following their sale. To the
extent that the actual level of securitization deviates significantly from the
Company's current target level of securitization (currently planned at
approximately 30% of the financing volume originated in each year), there could
be a material adverse effect on the Company's results of operations and any such
significant deviation may affect the credit ratings assigned to the short-term
or long-term debt of the Company.
LEVERAGE AND DEBT SERVICE. As a result of the Merger and related
transactions, there has been a significant increase in the Company's ratio of
consolidated indebtedness to shareowners' equity. As of September 30, 1996, on a
pro forma basis for the Merger and related transactions, the Company's ratio of
consolidated indebtedness to shareowners' equity plus Company-obligated
preferred securities issued in this offering would have been 7.19x. The
increased debt-to-equity ratio will be a factor in the analyses of the Company
applied by statistical rating organizations. Any future downgrades in the credit
ratings of the Company's short-term or long-term debt would increase the
Company's cost of borrowing, limit its access to the commercial paper market
(the Company's traditional funding source) and reduce its competitiveness,
particularly if any such rating is in a generic rating category that signifies
that the relevant debt of the Company is less than investment grade, and certain
ratings downgrades below 'BB+' by S&P or below 'Ba1' by Moody's could result in
the termination of one or more of the License Agreements with AT&T, Lucent and
NCR. See 'Relationship with AT&T Entities -- Operating and Certain Other
Agreements with AT&T Entities' below. Any such downgrading could have a material
adverse effect on the Company.
CHANGES IN RELATIONSHIP WITH AT&T ENTITIES
REVENUES AND NET INCOME ATTRIBUTABLE TO AT&T ENTITIES. A substantial
portion of the Company's revenues and a substantial majority of its net income
are attributable to the financing provided by the Company to customers of AT&T,
Lucent and NCR (the 'Customers of the AT&T Entities') with respect to products
manufactured or distributed by them (the 'AT&T Entities Products') and, to a
lesser extent, to transactions where the AT&T Entities or their employees are
customers of the Company (the 'AT&T Entities as End-User'), primarily with
respect to the lease of information technology and other equipment or vehicles
to them as end-users and to the administration and management of certain leased
assets on behalf of AT&T. The Company's commercial relationships with the AT&T
Entities are currently governed by certain important agreements described below
and in 'Relationship with AT&T Entities.'
For the nine months ended September 30, 1996, approximately 30.5% and 59.7%
(or $418.4 million and $68.8 million) of the Company's total revenues and net
income, respectively, were attributable to lease and other financing provided by
the Company to the Customers of the AT&T Entities with respect to the AT&T
Entities Products. An additional approximately 7.2% and 7.6% (or $99.2 million
and $8.8 million) of total revenues and net income, respectively, for the nine
months ended September 30, 1996 were attributable to transactions with the AT&T
Entities as End-Users. The Company's non-AT&T Entities related business
generated 62.3% and 32.7% (or $852.9 million and $37.7 million) of total
revenues and net income, respectively, for the nine months ended September 30,
1996
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(approximately 30.9% of net income for the period without giving effect to a
securitization of lease receivables effected by the Company in the first quarter
of 1996).
In 1995, approximately 32.7% and 67.9% (or $516.2 million and $86.6
million) of the Company's total revenues and net income, respectively, were
attributable to lease and other financing provided by the Company to the
Customers of the AT&T Entities with respect to the AT&T Entities Products. An
additional approximately 8.3% and 8.2% (or $130.6 million and $10.5 million) of
total revenues and net income, respectively, in 1995 were attributable to
transactions with the AT&T Entities as End-Users. In 1995, the Company's
non-AT&T Entities related business generated approximately 59.0% and 23.9% (or
$930.2 million and $30.5 million) of total revenues and net income,
respectively. The foregoing net income amounts were calculated based upon an
allocation of interest, income taxes and certain corporate overhead expenses
that the Company believes to be reasonable. See 'Business of the
Company -- General.'
Accordingly, while the proportion of the Company's total revenues and net
income from non-AT&T Entities related business has grown over the last several
years, a substantial portion of the Company's total revenues, and a substantial
majority of the Company's net income, have been generated by the Company's
relationship with the AT&T Entities. A substantial majority of such revenues and
substantially all such net income have been attributable to transactions with
customers of Lucent and its subsidiaries (and the business related to these
transactions have been generally among the most profitable for the Company). A
significant decrease in the portion of the sales of the AT&T Entities Products
(the 'AT&T Entities Product Sales') that are financed by the Company, or in the
absolute amount of the AT&T Entities Product Sales (in either case, particularly
with respect to Lucent), or in the amount of transactions effected by the
Company with the AT&T Entities as End-User (particularly with respect to AT&T)
would have a material adverse effect on the Company's results of operations and
financial condition.
OPERATING AND CERTAIN OTHER AGREEMENTS WITH AT&T ENTITIES. The initial
terms of each of the Operating Agreements (pursuant to which, among other
things, the Company serves as preferred provider of financing services and has
certain related and other rights and privileges in connection with the financing
of equipment to the Customers of the AT&T Entities) will expire on August 4,
2000, but will be automatically renewed for successive two-year periods unless
either party thereto gives the other a non-renewal notice at least one year
prior to the end of the initial or renewal term. None of the AT&T Entities is
required to renew the term of its Operating Agreement beyond the expiration of
the current term on August 4, 2000.
Although the Company will seek to maintain and improve its existing
relationships with Lucent, NCR and AT&T and seek to extend each of the Operating
Agreements beyond August 4, 2000, no assurance can be given that the Operating
Agreements, or any of them, will be extended beyond such date or, if extended,
that the terms and conditions thereof will not be modified in a manner adverse
to the Company. Failure to renew NCR's and Lucent's Operating Agreements on
terms not adverse to the Company could have a material adverse effect on the
Company. Moreover, in certain circumstances, the Operating Agreements may be
terminated prior to their expiration. See 'Relationship with AT&T Entities' for
a summary of certain important terms of the Operating Agreements, including a
description of the scope (and limitations) of the Company's 'preferred provider'
status under such agreements.
To provide additional incentive for Lucent to assist the Company in the
financing of products manufactured or distributed by Lucent, in recent years the
Company has paid Lucent a sales assistance fee equal to a designated percentage
of the aggregate sales prices and other charges ('volumes') of Lucent products
financed by the Company. In early 1996, following Lucent's request, the Company
agreed to pay a substantial increase in the Lucent sales assistance fee for
1995, both as an absolute amount and as a percentage of volumes attributable to
Lucent. After giving effect to the increase, the sales assistance fee paid by
the Company to Lucent for 1995 was approximately double the 1994 fee. The
Company and Lucent recently agreed to a modified formula for calculating the
sales assistance fee for the remaining years of the term of Lucent's Operating
Agreement (retroactive to January 1, 1996). The revised formula is expected to
result in aggregate annual sales assistance fees which are approximately double
the amounts that would have been paid if the pre-1995 formula had been
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maintained. No assurance can be given that Lucent will not seek higher sales
assistance fees in 1996 or future years (or otherwise attempt to share in the
revenues of the Company associated with the leasing of Lucent products) or seek
to use alternative providers of financing. Similarly, although neither AT&T nor
NCR has requested any sales assistance fees or other similar benefits from the
Company by reason of the financing by the Company of their respective products,
no assurance can be given that AT&T or NCR will not do so in the future. Any
such action by Lucent, alone or in combination with similar action by AT&T or
NCR, could have a material adverse effect on the Company.
The Operating Agreements do not require that the Company be the sole
provider of financing in connection with the AT&T Entities Product Sales. Also,
such Operating Agreements provide no assurance that the percentage of such sales
for which the Company provides financing will not decrease in the future.
Subject to certain restrictions, the Operating Agreements permit the AT&T
Entities to use or promote an alternative financing program offered by an
unaffiliated company that provides better terms than those offered by the
Company, without providing the Company an opportunity to match such better
terms. In addition, none of the Operating Agreements is generally required to be
assumed by the purchaser or other transferee of all or any portion of the
relevant AT&T Entity's product manufacturing business upon any sale or other
disposition thereof by such AT&T Entity, although such AT&T Entity is required
to use reasonable efforts to cause the related Operating Agreement to be so
assumed. Moreover, each Operating Agreement provides that the relevant AT&T
Entity may terminate the Company's 'preferred provider' status and organize
their own 'captive' finance subsidiaries if the Company's Financing Penetration
Rate (as defined in the respective Operating Agreements) decreases by certain
specified amounts or if the Company becomes a subsidiary of a person other than
Holdings or one of its affiliates. The Company does not expect its Financing
Penetration Rate under its Operating Agreements with Lucent and NCR to decrease
during the remainder of the initial term thereof by an amount that would permit
Lucent or NCR, as the case may be, to terminate the Company's 'preferred
provider' status, although no assurance can be given in that regard.
The Company's ability to capture a significant portion of the AT&T Entities
Product Sales is augmented by the provisions of the Agreement Supplements with
Lucent and NCR pursuant to which Lucent and NCR have licensed certain trade
names and service marks, including the 'Lucent Technologies' and 'NCR' trade
names, to the Company for use in the business of the Company and certain of its
subsidiaries. The Company's License Agreement with AT&T also has similar
provisions. The initial term of the License Agreement and Agreement Supplements
expires on August 4, 2000 but will be automatically renewed in the event of a
renewal of the relevant Operating Agreement, for a term equal to any renewal
term of that Operating Agreement. Each License Agreement may be terminated prior
to the end of its term upon the occurrence of certain events (including upon the
termination of the applicable Operating Agreement and the occurrence of certain
ratings downgrades below 'BB+' by S&P or below 'Ba1' by Moody's). In addition,
AT&T may require the Company to discontinue, following two years' prior notice,
use of (i) the 'AT&T' trade name as part of the Company's corporate name and
(ii) the other service marks licensed by AT&T to the Company. The Company's
subsidiaries may, in such event, continue to use the 'AT&T' trade name and
service marks in connection with the provision of financing services and
otherwise in accordance with the terms of the License Agreement, which include
extensive restrictions on the use thereof in connection with the issuance of
securities.
The Operating Agreements do not apply to the Company's relationship with
the AT&T Entities as end-users of information technology and other equipment or
vehicles financed by the Company. Although the Intercompany Agreement and
Agreement Supplements provides that each AT&T Entity will view the Company as
its preferred provider of financing, the Intercompany Agreement and Agreement
Supplements do not require any of the AT&T Entities to continue to use the
Company as its financing source for its own acquisitions of such equipment or
vehicles if competitors of the Company offer financing on more attractive terms.
See 'Relationship with AT&T Entities.'
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RISKS RELATED TO THE TERMINATION OF AT&T'S OWNERSHIP INTEREST IN THE COMPANY
BUSINESS RELATIONSHIP. Prior to the consummation of the Merger, AT&T had an
approximately 86% economic interest in the Company. The Company believes that it
has benefitted from that interest because approximately 86% of the profits
derived by the Company from its commercial relationship with the AT&T Entities
(the Company's most important commercial relationship -- see ' -- Changes in
Relationship with AT&T Entities -- Revenues and Net Income Attributable to AT&T
Entities' above) directly or indirectly benefitted AT&T. Following the AT&T
Restructuring and the consummation of the Merger, the Company's relationship
with AT&T, Lucent and NCR as its principal customers and sources of business
will be based entirely on commercial dealings and its contract rights, without
any ownership interest by AT&T, Lucent or NCR in the Company. To the extent that
this change causes the relations of AT&T, Lucent and NCR with the Company to be
less favorable than in the past, there will be an adverse effect on the Company.
CERTAIN INCREASED COSTS AND EXPENSES.
General. In connection with the consummation of the Merger and related
transactions pursuant to which AT&T sold its entire indirect equity interest in
the Company (see 'The Merger'), certain of the Company's annual expenses are
expected to increase. A summary of the significant increases follows.
Borrowing Costs. While it is difficult to predict the response of investors
to the Company's medium and long-term note and commercial paper programs and,
therefore, it is difficult to quantify such effect of the Merger and related
transactions and consequent downgrading of ratings on the Company's debt with
reasonable accuracy, the Company has estimated an increase in borrowing costs of
approximately 20 basis points relating to its commercial paper program and 25
basis points relating to its medium and long-term debt issuances. Assuming such
an increase in borrowing costs, had the Merger occurred on January 1, 1995, the
Company's 1995 interest expense would have increased by $7.4 million. The
increase in interest expense was calculated using the 1995 average commercial
paper balance outstanding and the 1995 issuances of medium and long-term debt
multiplied by the respective incremental borrowing costs. To illustrate the
Company's sensitivity to interest rates, had the increase in such borrowing
costs been 10 basis points lower or higher than the assumed respective increases
in borrowing costs referred to above the Company's interest expense increase
would have been $4.1 million or $10.7 million, respectively.
Tax Deconsolidation. The Company was formerly a member of AT&T's
consolidated group for federal income tax purposes, but immediately after the
Merger ceased to be a member of such tax group (the 'Tax Deconsolidation'). The
Tax Deconsolidation is expected to have certain adverse effects on the Company
as described below.
Most financings by the Company of products manufactured by the AT&T
Entities involve the purchase of such products by the Company and the
contemporaneous lease of such products by the Company to third parties. Because
the Company and the AT&T Entities are no longer affiliated, sales of such
products to the Company by the AT&T Entities will generate current taxable
income for AT&T or the affiliate of AT&T manufacturing such products, together
with a liability of AT&T or such affiliate to pay federal income tax on such
income. Notwithstanding such sales of products, while the Company was a part of
the AT&T consolidated federal income tax group at the time of such sale, the
payment of such taxes had been deferred (the amount of such previously deferred
taxes being herein called 'Gross Profit Tax Deferral') generally until the
Company claimed depreciation on the products, or sold the products outside the
group. Pursuant to one of the former tax agreements between AT&T and the
Company, AT&T had extended interest-free loans to the Company in an amount equal
to the then outstanding amount of Gross Profit Tax Deferral, as well as certain
other intercompany transactions.
As a result of the Tax Deconsolidation, the Company no longer receives such
loans, which had constituted a competitive advantage to the Company in financing
the AT&T Entities Products. In addition, the Company was required to repay all
such outstanding loans immediately prior to the Tax Deconsolidation. The
aggregate outstanding principal amount of the interest-free loans associated
with Gross Profit Tax Deferral which were repaid by the Company in connection
with the Tax Deconsolidation equaled approximately $247.4 million. Additionally,
as a result of Tax Deconsolidation,
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the Company made a payment to AT&T of $35 million in exchange for AT&T's
assumption of certain federal and combined state tax liabilities of the Company
relating to periods prior to the Merger.
Operating and Administrative Expenses. The Company's annual expenses for
operating and administrative expenses are expected to increase after the Merger
as a result of the Company no longer being entitled to the discounts accorded to
AT&T and its subsidiaries or received directly from AT&T. The incremental and
recurring costs in the Company's operating and administrative expenses for which
the Company received such discounts include services for telecommunication,
certain information processing, travel, human resources, real estate, express
mail and insurance services. In addition, annual management and advisory fees of
initially $3.0 million will be paid to Nomura. The Company estimates the total
increase in operating and administrative expenses to be $5.9 million annually
(including such management and advisory fees).
Compensation and Benefit Plans. Under the Company's Share Performance
Incentive Plan ('SPIP'), approximately 120 employees had the right to receive
cash awards at the end of five, 3-year performance periods. The first such
period ended on June 30, 1996, with each of the other performance periods ending
on the annual anniversary of such date through and including June 30, 2000. In
connection with the Merger, nearly all of these cash awards for the second
through the fifth performance periods were accelerated and paid at the closing
of the Merger, resulting in an aggregate payment of approximately $50.9 million.
In addition, approximately $9.9 million is expected to be paid to certain
officers and other key employees of the Company in connection with the waiver
and modification of the Company's Leadership Guarantee Plan and other
termination and compensation related payments effective upon closing of the
Merger.
Transaction Costs. The Company will incur an $11.3 million after-tax
expense relating to the Company's Merger-related and other transaction costs.
COMPETITION
The equipment leasing and finance industry in which the Company operates is
highly competitive and has been undergoing a process of consolidation. As a
result, certain of the Company's competitors' relative cost bases have been
reduced. Participants in the industry compete through price (including the
ability to control costs), risk management, innovation and customer services.
Principal cost factors include the cost of funds, the cost of selling to or
obtaining new end-user customers and vendors and the cost of managing
portfolios. The Company's competitors include captive or related leasing
companies (such as General Electric Capital Corporation and IBM Credit
Corporation), independent leasing companies (such as Comdisco, Inc.), certain
banks engaged in leasing, lease brokers and investment banking firms that
arrange for the financing of leased equipment, and manufacturers and vendors
which lease their own products to customers. Many of the competitors of the
Company are large companies that have substantial capital, technological and
marketing resources; some of these competitors are significantly larger than the
Company and have access to debt at a lower cost than the Company.
CERTAIN OTHER RISKS
The Company is subject to certain other risks including the risk that its
allowance for credit losses may not prove adequate to cover ultimate losses and
that its estimated residual values will not be realized at the end of the lease
terms. On an aggregate basis, the Company has historically realized proceeds
from the sale of equipment during the lease term and at lease termination in
excess of the Company's recorded residual values. There can be no assurance,
however, that credit allowances will prove adequate to cover losses in
connection with the Company's investment in finance receivables, capital leases
and operating leases ('Portfolio Assets', and net of allowance for credit
losses, 'Net Portfolio Assets') or that such residual values will be realized in
the future. See 'Business of the Company -- Certain Business Skills.'
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RISK FACTORS RELATED TO TOPRS
DISTRIBUTIONS PAYABLE ONLY IF DECLARED BY GENERAL PARTNER; RESTRICTIONS ON
CERTAIN PAYMENTS; TAX CONSEQUENCES
Distributions on the Partnership Preferred Securities will be payable only
if, as and when declared by the General Partner in its sole discretion. If
interest payments on the Debentures are deferred as permitted thereby, or if
such interest payments are not paid to the Partnership according to their terms
(and guarantee payments on the Investment Guarantees are not made by the
Company), the Partnership will generally lack funds to pay distributions on the
Partnership Preferred Securities. If the Partnership does not make current
distributions on the Partnership Preferred Securities, either because the
General Partner does not declare distributions to be made or because the
Partnership lacks sufficient funds, the Trust will not have funds available to
make current distributions on the Trust Preferred Securities.
As described under 'Description of the Trust Guarantee -- Certain Covenants
of the Company,' the Company will be restricted from, among other things, paying
any dividends on its Common Stock or (subject to certain exceptions) making
payments to Affiliates if full distributions on the Trust Preferred Securities
have not been paid. However, the Company has no current intention to pay
dividends on its Common Stock at any time in the foreseeable future. Therefore,
although the Company's intention as to its dividend policy can and may change at
any time in the future at the discretion of the Company's Board of Directors
(subject to applicable requirements of law), the restriction on dividend
payments that would be imposed on the Company if distributions are not made on
the Trust Preferred Securities would not materially affect the manner in which
the Company intends to operate its business. In addition, as a consequence of
the Merger, the Company's Common Stock is no longer listed on the New York Stock
Exchange and there is no longer a public market for the Common Stock; the
absence of such public market, together with the current policy of the Company
not to pay dividends, reduces the effectiveness of the dividend restriction
described above in deterring the Company, as General Partner, from failing to
declare distributions on the Partnership Preferred Securities.
Should the Partnership fail to pay current distributions on the Partnership
Preferred Securities, each holder of Trust Preferred Securities will generally
be required to accrue income, for United States federal income tax purposes, in
respect of the cumulative deferred distributions (including interest thereon)
allocable to its proportionate share of the Partnership Preferred Securities. As
a result, each holder of Trust Preferred Securities will recognize income for
United States federal income tax purposes in advance of the receipt of cash and
will not receive the cash from the Trust related to such income if such holder
disposes of its Trust Preferred Securities prior to the record date for the date
on which distributions of such amounts are made by the Trust. See 'Certain
Federal Income Tax Considerations.'
INSUFFICIENT INCOME OR ASSETS AVAILABLE TO PARTNERSHIP
The Trust Preferred Securities are subject to the risk of a current or
liquidating distribution rate mismatch between the rate paid on the Trust
Preferred Securities and the rate paid on the securities held by the
Partnership, including the Debentures and any additional securities acquired by
the Partnership in the future. Such mismatch could occur if (i) at any time that
the Partnership is receiving current payments in respect of the securities held
by the Partnership (including the Debentures), the General Partner, in its sole
discretion, does not declare distributions on the Partnership Preferred
Securities and the Partnership receives insufficient amounts to pay the
additional compounded distributions that will accrue in respect of the
Partnership Preferred Securities, (ii) the Partnership reinvests the proceeds
received in respect of the Debentures upon their retirement or at their
maturities in Affiliate Investment Instruments or Eligible Debt Securities that
do not generate income in an amount that is sufficient to pay full distributions
in respect of the Partnership Preferred Securities at a rate of % per annum
or (iii) the Partnership invests in equity or debt securities of Investment
Affiliates that are not guaranteed by the Company and that cannot be liquidated
by the Partnership for an amount sufficient to pay such distributions in full.
If the reinvestments in the Investment Affiliates contemplated by the General
Partner do not meet the eligibility criteria for Affiliate Investment
Instruments described under 'Description of the Partnership Preferred
Securities -- Partnership
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Investments,' the Partnership shall invest funds available for reinvestment in
Eligible Debt Securities. To the extent that the Partnership lacks sufficient
funds to make current or liquidating distributions on the Partnership Preferred
Securities in full, the Trust will not have sufficient funds available to pay
full current or liquidating distributions on the Trust Preferred Securities.
DEPENDENCE ON AFFILIATE INVESTMENT INSTRUMENTS
Approximately 99% of the proceeds from the issuance of the Partnership
Preferred Securities and the General Partner's capital contribution will be
invested in the Debentures, which consist of debt instruments of the Company and
two domestic eligible controlled affiliates.
PROPOSED TAX LEGISLATION
On March 19, 1996, as part of President Clinton's Fiscal 1997 Budget
Proposal, the Treasury Department proposed legislation (the 'Proposed
Legislation') that would, among other things, deny the borrower an interest
deduction with respect to certain types of debt instruments that are payable in
stock of the issuer or a related party. The Proposed Legislation also would
treat as equity for United States federal income tax purposes instruments with a
maximum term of more than 20 years that are not shown as indebtedness on the
consolidated balance sheet of the issuer. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth and House Ways and Means Committee Chairman
Bill Archer issued a joint statement (the 'Joint Statement') indicating their
intent that certain legislative proposals initiated by the Clinton
administration, including the Proposed Legislation, that may be adopted by
either of the tax-writing committees of Congress, would have an effective date
that is no earlier than the date of 'appropriate Congressional action'. In
addition, subsequent to the publication of the Joint Statement, Senator Daniel
Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote
letters to Treasury Department officials concurring with the view expressed in
the Joint Statement (the 'Democrat Letters'). If the principles contained in the
Joint Statement and the Democrat Letters were followed and the Proposed
Legislation were enacted, such legislation would not apply to the Debentures.
There can be no assurances, however, that legislation enacted after the date
hereof will not adversely affect the tax treatment of the Debentures, or whether
such tax treatment would cause a Partnership Tax Event or a Trust Tax Event that
may result in the redemption of the Partnership Preferred Securities and,
consequently, the Trust Preferred Securities.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Trust Special Event or a Partnership Special Event
(each of which will generally be triggered either upon (i) the occurrence of
certain adverse tax consequences to the Trust or the Partnership, as the case
may be, or the denial of an interest deduction by the related Investment
Affiliate on the Debentures held by the Partnership or (ii) the Trust or
Partnership being considered an 'investment company' under the 1940 Act) (each,
a 'Special Event'), the Trust will be dissolved with the result, except in the
limited circumstances described below, that the Partnership Preferred Securities
would be distributed to the holders of the Trust Preferred Securities in
connection with the liquidation of the Trust. In certain circumstances, the
Partnership shall have the right to redeem the Partnership Preferred Securities,
in whole (but not in part), in lieu of a distribution of the Partnership
Preferred Securities by the Trust, in which event the Trust will redeem the
Trust Preferred Securities for cash. See 'Description of the Trust Preferred
Securities -- Trust Special Event Redemption or Distribution' and 'Description
of the Partnership Preferred Securities -- Partnership Special Event
Redemption.'
Unless the liquidation of the Trust occurs as a result of the Trust being
subject to United States federal income tax with respect to income on the
Partnership Preferred Securities, a distribution of the Partnership Preferred
Securities upon the dissolution of the Trust would not be a taxable event to
holders of the Trust Preferred Securities. If, however, the liquidation of the
Trust were to occur because the Trust is subject to United States federal income
tax with respect to income accrued or received on the Partnership Preferred
Securities, the distribution of Partnership Preferred Securities to holders by
the Trust would be a taxable event to each such holder, and a holder would
recognize gain or loss as if the holder had exchanged its Trust Preferred
Securities for the Partnership Preferred Securities it received upon the
liquidation of the Trust. Similarly, the holders of the Trust Preferred
Securities would
23
<PAGE>
<PAGE>
recognize gain or loss if the Trust dissolves upon an occurrence of a
Partnership Special Event and the holders of Trust Preferred Securities receive
cash in exchange for their Trust Preferred Securities. See 'Certain United
States Federal Income Tax Considerations -- Redemption of Trust Preferred
Securities for Cash.'
There can be no assurance as to the market prices for the Partnership
Preferred Securities that may be distributed in exchange for Trust Preferred
Securities if a dissolution or liquidation of the Trust were to occur.
Accordingly, the Trust Preferred Securities that an investor may purchase,
whether pursuant to the offer made hereby or in the secondary market, or the
Partnership Preferred Securities that a holder of Trust Preferred Securities may
receive upon dissolution and liquidation of the Trust, may trade at a discount
to the price that the investor paid to purchase the Trust Preferred Securities
offered hereby. Because holders of Trust Preferred Securities may receive
Partnership Preferred Securities upon the occurrence of a Special Event,
prospective purchasers of Trust Preferred Securities also are making an
investment decision with regard to the Partnership Preferred Securities and
should carefully review all the information regarding the Partnership Preferred
Securities contained herein. See 'Description of the Partnership Preferred
Securities -- Partnership Special Event Redemption' and 'Description of the
Partnership Preferred Securities -- General.'
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEES AND THE COMPANY
DEBENTURE
The Company's obligations under the Trust Guarantee, the Partnership
Guarantee and the Investment Guarantees are subordinate and junior in right of
payment to all liabilities of the Company and will rank pari passu with the most
senior preferred stock issued, if any, from time to time by the Company and with
any guarantee now or hereafter entered into by the Company in respect of any
preferred stock of any affiliate of the Company and its obligations under the
Company Debenture are subordinate and junior in right of payment to all senior
indebtedness of the Company. As of September 30, 1996, consolidated senior
indebtedness of AT&T Capital aggregated approximately $7.9 billion. Except under
certain limited circumstances described under 'Description of the Partnership
Preferred Securities -- Partnership Investments' with respect to the Company
Debenture, there are no terms in the Trust Preferred Securities, the Partnership
Preferred Securities, the Guarantees or the Debentures that limit the Company's
ability to incur additional indebtedness, including indebtedness that ranks
senior to the Guarantees. See 'Description of the Partnership Preferred
Securities -- Partnership Investments' and ' -- Investment Guarantees,'
'Description of the Trust Guarantee' and 'Description of the Partnership
Guarantee.'
ENFORCEMENT OF CERTAIN RIGHTS BY OR ON BEHALF OF HOLDERS OF TRUST PREFERRED
SECURITIES
If a Trust Enforcement Event occurs and is continuing, then (a) the holders
of Trust Preferred Securities would rely on the enforcement by the Property
Trustee of its rights, as a holder of the Partnership Preferred Securities,
against the Company, including the right to direct the Special Representative to
enforce (i) the Partnership's creditors' rights and other rights with respect to
the Affiliate Investment Instruments and the Investment Guarantees, (ii) the
rights of the holders of the Partnership Preferred Securities under the
Partnership Guarantee, and (iii) the rights of the holders of the Partnership
Preferred Securities to receive distributions (only if and to the extent
declared out of funds legally available therefor) on the Partnership Preferred
Securities, and (b) the Trust Guarantee Trustee shall have the right to enforce
the terms of the Trust Guarantee, including the right to enforce the covenant
restricting certain payments by the Company and its majority owned subsidiaries.
Under no circumstances, however, shall the Special Representative have authority
to cause the General Partner to declare distributions on the Partnership
Preferred Securities. As a result, although the Special Representative may be
able to enforce the Partnership's creditors' rights to accelerate and receive
payments in respect of the Affiliate Investment Instruments and the Investment
Guarantees, the Partnership would be entitled to reinvest such payments in
additional Affiliate Investment Instruments, subject to satisfying the
reinvestment criteria described under 'Description of the Partnership Preferred
Securities -- Partnership Investments,' and the Eligible Debt Securities, rather
than declaring and making distributions on the Partnership Preferred Securities.
See 'Description of the Trust Preferred Securities -- Trust Enforcement Events.'
24
<PAGE>
<PAGE>
LIMITED VOTING RIGHTS
Holders of the Trust Preferred Securities will have limited voting rights
and will not be entitled to vote to appoint, remove or replace, or to increase
or decrease the number of, Trustees, which voting rights are vested exclusively
in the holder of the Trust Common Securities. See 'Description of the Trust
Preferred Securities -- Voting Rights.'
TRADING CHARACTERISTICS OF TRUST PREFERRED SECURITIES
The price at which the Trust Preferred Securities may trade may not fully
reflect the value of the accrued but unpaid distributions on the Trust Preferred
Securities (which will equal the accrued but unpaid distributions on the
Partnership Preferred Securities). In addition, as a result of the right of the
General Partner to not declare current distributions on the Partnership
Preferred Securities, the market price of the Trust Preferred Securities (which
represent undivided beneficial ownership interests in the Partnership Preferred
Securities) may be more volatile than other similar securities where there is no
such right to defer current distributions. A holder who disposes of its Trust
Preferred Securities will be required to include for United States federal
income tax purposes accrued but unpaid distributions on the Partnership
Preferred Securities through the date of disposition in income as ordinary
income, and to add such amount to its adjusted tax basis in its pro rata share
of the Partnership Preferred Securities deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (which will include
all accrued but unpaid distributions), a holder will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes. See
'Certain Federal Income Tax Considerations.'
NO PRIOR MARKET FOR THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities constitute a new issue of securities with no
established trading market. Application has been made to list the Trust
Preferred Securities on the New York Stock Exchange. There can be no assurance
that an active market for the Trust Preferred Securities will develop or be
sustained in the future on the New York Stock Exchange. Although the
Underwriters have indicated to the Company that they intend to make a market in
the Trust Preferred Securities, as permitted by applicable laws and regulations,
they are not obligated to do so and may discontinue any such market-making at
any time without notice. Accordingly, no assurance can be given as to the
liquidity of, or trading markets for, the Trust Preferred Securities.
25
<PAGE>
<PAGE>
USE OF PROCEEDS
The proceeds to be received by the Trust from the sale of the Trust
Preferred Securities and the Trust Common Securities will be used by the Trust
to purchase Partnership Preferred Securities, and will be applied by the
Partnership to invest in the Debentures and Eligible Debt Securities. See
'Description of the Partnership Preferred Securities -- Partnership
Investments.' After payment of the Underwriters' Compensation (as defined under
'Underwriting') and other expenses of this offering, the Company will, and will
cause the subsidiaries of the Company which are the issuers of the Debentures
to, use the proceeds from the sale of such Debentures to the Partnership of $200
million to repay certain outstanding indebtedness.
CAPITALIZATION
The following table sets forth the short-term notes and capitalization of
the Company as of September 30, 1996, pro forma for the Merger and related
transactions (excluding the effects of this offering) as described below under
'The Merger', and as adjusted to give effect to the sale of the Trust Preferred
Securities offered hereby and the application of the proceeds therefrom. This
table should be read in conjunction with the Consolidated Financial Statements
and the related notes thereto incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA AS ADJUSTED FOR
ACTUAL FOR MERGER(1) THE OFFERING
---------- ------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Short-term notes, less unamortized discounts....................... $3,021,459 $ 1,714,859 $ 1,514,859
Medium and long-term debt.......................................... 4,896,467 4,896,467 4,896,467
Company-obligated preferred securities of subsidiary(2)............ -- -- 200,000
Shareowners' equity:
Preferred Stock, $.01 par value, authorized 10,000,000 shares;
no shares issued and outstanding............................ -- -- --
Common Stock, $.01 par value, authorized 100,000,000 shares;
issued and outstanding 47,097,447 shares (150,000,000 shares
authorized and 90,000,000 shares issued and outstanding on a
pro forma basis)............................................ 471 900 900
Additional paid-in capital......................................... 786,163 624,206 624,206
Foreign currency translation adjustment............................ (2,804) (2,804) (2,804)
Retained earnings.................................................. 454,895 84,900 84,900
Recourse loans to senior executives(3)............................. (20,923) (15,423) (15,423)
---------- ------------- ---------------
Total shareowners' equity..................................... 1,217,802 691,779 691,779
---------- ------------- ---------------
Total capitalization.......................................... $9,135,728 $ 7,303,105 $7,303,105
---------- ------------- ---------------
---------- ------------- ---------------
</TABLE>
- ------------
(1) Gives effect to the Merger and related transactions (excluding the effects
of this offering), which are described below under 'The Merger.'
(2) As described herein, the assets of the Trust will be comprised of the
Partnership Preferred Securities issued by the Partnership, and the assets
of the Partnership will initially be comprised of the Debentures and the
Eligible Debt Securities. Except to the extent described under 'Risk
Factors -- Risk Factors Related to TOPrS -- Insufficient Income or Assets
Available to Partnership,' the Guarantees, when taken together with the
Company Debenture and the Company's obligations to pay all fees and expenses
of the Trust and the Partnership, constitute a full and unconditional
guarantee by the Company of the distribution, redemption and liquidation
payments payable to the holders of the Trust Preferred Securities.
(3) These recourse loans to senior executives were made pursuant to the
Company's 1993 Leveraged Stock Purchase Plan and the 1993 Long Term
Incentive Plan. Most of these loans remain outstanding following the Merger.
26
<PAGE>
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES OF THE COMPANY
<TABLE>
<CAPTION>
PRO FORMA FOR OFFERING(1)
-----------------------------
NINE MONTHS NINE MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, -----------------------------------------
1996 1995 1996 1995 1994 1993 1992 1991
------------- ------------ ------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges......... 1.49x 1.47x 1.51x 1.50x 1.62x 1.57x 1.44x 1.29x
</TABLE>
- ------------
(1) The pro forma data represents the Company's results as if the issuance of
the Trust Preferred Securities had taken place on January 1, 1995. Had the
Merger and related transactions, including the issuance of the Trust
Preferred Securities, taken place on January 1, 1995, the pro forma ratio of
earnings to fixed charges for the nine months ended September 30, 1996 would
have been 1.17x, and for the year ended December 31, 1995 there would have
been an earnings deficiency of $30.0 million to cover fixed charges. See
'The Merger' for a description of the Merger and the transactions related to
the Merger reflected in this pro forma presentation.
Earnings consist of income before income taxes and cumulative effect on
prior years of accounting change plus fixed charges. Fixed charges consist of
interest on indebtedness and the portion of rentals representative of the
interest factor.
27
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
The Results of Operations Data, the Balance Sheet Data and the Other Data
shown below at or for the years ended December 31, 1995, 1994, 1993, 1992 and
1991 are derived from the Consolidated Financial Statements of the Company at
such dates or for such periods, which have been audited by Coopers & Lybrand
L.L.P., independent accountants. Such data at or for the nine months ended
September 30, 1996 and 1995 are derived from unaudited consolidated financial
information. In management's opinion, the Company's unaudited consolidated
financial statements at or for the nine months ended September 30, 1996 and 1995
include all adjustments (consisting of normal recurring adjustments) necessary
for a fair presentation. The results of operations for the nine months ended
September 30, 1996 are not necessarily indicative of the results for the entire
year or any other interim period.
The selected financial data as presented below should be read in
conjunction with 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' and the Consolidated Financial Statements and related
notes thereto incorporated by reference in this Prospectus. The Company's
unaudited consolidated financial information at or for the nine months ended
September 30, 1996 does not include the effects of the Merger and related
transactions. For a description of the significant impact of the Merger and
related transactions on the Company's financial position and results of
operations, see 'The Merger.' For a description of certain increased annual
costs that the Company expects to incur as a result of the Merger, see 'Risk
Factors -- Risks Related to the Termination of AT&T's Ownership Interest in the
Company.'
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1996 1995
----------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
RESULTS OF OPERATIONS DATA:
Total revenues..................... $ 1,370,494 $1,140,651
Interest expense................... 350,359 300,891
Operating and administrative
expenses......................... 375,172 351,443
Provision for credit losses........ 71,454 60,359
Income before income taxes and
cumulative effect on prior years
of accounting change............. 182,496 143,276
Income before cumulative effect on
prior years of accounting change
and impact of tax rate change.... 115,290 85,466
Cumulative effect on prior years of
accounting change(1)............. -- --
Impact of 1993 tax rate
change(1)........................ -- --
Net income(1)...................... 115,290 85,466
Earnings per share(1).............. 2.43 1.82
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Total revenues..................... $1,577,035 $1,384,079 $1,359,589 $1,265,526 $1,160,150
Interest expense................... 411,040 271,812 236,335 252,545 275,650
Operating and administrative
expenses......................... 473,663 427,187 381,515 359,689 298,833
Provision for credit losses........ 86,214 80,888 123,678 111,715 108,635
Income before income taxes and
cumulative effect on prior years
of accounting change............. 208,239 173,614 138,040 114,875 82,559
Income before cumulative effect on
prior years of accounting change
and impact of tax rate change.... 127,555 100,336 83,911 73,572 54,199
Cumulative effect on prior years of
accounting change(1)............. -- -- (2,914) -- --
Impact of 1993 tax rate
change(1)........................ -- -- (12,401) -- --
Net income(1)...................... 127,555 100,336 68,596 73,572 54,199
Earnings per share(1).............. 2.70 2.14 1.60 1.83 1.35
</TABLE>
<TABLE>
<CAPTION>
AT
DECEMBER
AT SEPTEMBER 30, 31,
---------------- ----------
1996 1995
---------------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Total assets................... $ 10,251,600 $9,541,259
Total debt(2).................. 7,917,926 6,928,409
Total liabilities(2)........... 9,033,798 8,425,134
Total shareowners' equity...... 1,217,802 1,116,125
(table continued on next page)
<CAPTION>
1994 1993 1992 1991
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................... $8,021,923 $6,409,726 $5,895,429 $5,197,245
Total debt(2).................. 5,556,458 4,262,405 4,089,483 3,594,247
Total liabilities(2)........... 7,013,705 5,485,283 5,158,808 4,647,979
Total shareowners' equity...... 1,008,218 924,443 736,621 549,266
</TABLE>
28
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
------------------------------
1996 1995
---------------- ----------
(DOLLARS IN THOUSANDS)
OTHER DATA:
<S> <C> <C>
Ratio of earnings to fixed
charges(3)................... 1.51x 1.47x
Ratio of total debt to
shareowners' equity(4)....... 6.50x 6.07x
Return on average
equity(5)(7)................. 13.2% 11.0%
Return on average
assets(6)(7)................. 1.6% 1.3%
Portfolio Assets of the
Company...................... $ 10,041,020 8,892,895
Allowance for credit losses.... 235,205 214,711
Net Portfolio Assets of the
Company...................... 9,805,815 $8,678,184
Assets of others managed by the
Company...................... 2,159,316 2,428,924
Volume of equipment
financed(8).................. 3,780,000 3,088,790
Ratio of allowance for credit
losses to net
charge-offs(9)............... 3.08x 4.22x
Ratio of net charge-offs to
Portfolio Assets(9).......... 0.76% 0.57%
Ratio of allowance for credit
losses to Portfolio Assets... 2.34% 2.41%
Ratio of operating and
administrative expenses to
period-end total assets(10).. 4.88% 5.19%
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
OTHER DATA:
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed
charges(3)................... 1.50x 1.62x 1.57x 1.44x 1.29x
Ratio of total debt to
shareowners' equity(4)....... 6.22x 5.51x 4.61x 5.55x 6.54x
Return on average
equity(5)(7)................. 12.1% 10.5% 8.5% 11.4% 10.7%
Return on average
assets(6)(7)................. 1.5% 1.4% 1.1% 1.3% 1.1%
Portfolio Assets of the
Company...................... $9,328,623 $7,661,226 $6,236,624 $5,724,702 $5,050,797
Allowance for credit losses.... 223,220 176,428 159,819 123,961 93,967
Net Portfolio Assets of the
Company...................... 9,105,403 7,484,798 6,076,805 5,600,741 4,956,830
Assets of others managed by the
Company...................... 2,214,502 2,659,526 2,795,663 1,374,354 649,014
Volume of equipment
financed(8).................. 4,567,000 4,251,000 3,467,000 3,253,000 2,453,000
Ratio of allowance for credit
losses to net
charge-offs(9)............... 4.77x 3.18x 2.71x 1.58x 1.15x
Ratio of net charge-offs to
Portfolio Assets(9).......... 0.50% 0.73% 0.95% 1.37% 1.62%
Ratio of allowance for credit
losses to Portfolio Assets... 2.39% 2.30% 2.56% 2.17% 1.86%
Ratio of operating and
administrative expenses to
period-end total assets(10).. 4.96% 5.33% 5.95% 6.10% 5.75%
</TABLE>
- ------------
(1) Net income and earnings per share for 1993 were adversely impacted by the
federal tax rate increase to 35% and a cumulative effect on prior years of
accounting change. See note 10 to the Consolidated Financial Statements
incorporated herein by reference to the 1995 Form 10-K. Earnings per share
without these charges for 1993 would have been $1.95 per share. See 'Risk
Factors -- Risks Related to the Termination of AT&T's Ownership Interest in
the Company' for a description of certain increased annual costs that the
Company might incur as a result of the Merger.
(2) Total debt does not include, and total liabilities includes, certain
interest-free loans from AT&T to the Company under certain tax agreements,
in aggregate outstanding principal amounts of $247.4 million, $248.9
million, $214.1 million, $188.6 million, $193.1 million and $206.6 million
at September 30, 1995, December 31, 1995, 1994, 1993, 1992 and 1991,
respectively. The Company no longer receives such interest-free loans and
repaid such loans in their entirety with a payment of $247.4 million on
September 30, 1996. See 'Risk Factors -- Risks Related to the Termination
of AT&T's Ownership Interest in the Company -- Tax Deconsolidation' and
note 4 below.
(3) Earnings before income taxes and cumulative effect on prior years of
accounting change plus fixed charges (the sum of interest on indebtedness
and the portion of rentals representative of the interest factor) divided
by fixed charges. Prior to the Merger, a portion of the Company's
indebtedness to AT&T did not bear interest. See note 2 above. On a pro
forma basis giving effect to the issuance of the Trust Preferred Securities
on January 1, 1995, the ratio of earnings to fixed charges for the nine
months ended September 30, 1996 and the year ended December 31, 1995 would
have been 1.49x and 1.47x, respectively. Had the Merger and related
transactions, including the issuance of the Trust Preferred Securities,
taken place on January 1, 1995, the pro forma ratio of earnings to fixed
charges for the nine months ended September 30, 1996 would have been 1.17x
and for the year ended December 31, 1995, there would have been an earnings
deficiency of $30.0 million to cover fixed charges. See 'Ratio of Earnings
to Fixed Charges of the Company.'
(4) Total debt did not include certain interest-free loans previously made from
AT&T to the Company under certain tax agreements. The Company repaid such
loans in their entirety with a payment of $247.4 million on September 30,
1996. If such loans were so included, the ratio of total debt to
shareowners' equity would have been 6.28x, 6.45x, 5.72x, 4.81x, 5.81x and
6.92x at September 30, 1995, December 31, 1995, 1994, 1993, 1992 and 1991,
respectively. See 'Risk Factors -- Risks Related to the Termination of
AT&T's Ownership Interest in the Company -- Tax Deconsolidation' and note 2
above.
(5) Net income (annualized in the case of the nine months ended September 30,
1996 and 1995) divided by average total shareowners' equity.
(6) Net income (annualized in the case of the nine months ended September 30,
1996 and 1995) divided by average total assets.
(7) In 1993, the Company's adjusted return on average equity and return on
average assets, defined as income before cumulative effect on prior years
of accounting change and impact of tax rate change as a percentage of
average equity and average assets, respectively, was 10.3% and 1.4%,
respectively.
(8) Total principal amount of loans and total cost of equipment associated with
finance and lease transactions recorded by the Company and the increase, if
any, in outstanding inventory financing and asset-based lending
transactions.
(9) Net charge-offs at September 30, 1996 and 1995 are calculated based on the
twelve months then ended.
(10) Operating and administrative expenses (annualized for the nine months ended
September 30, 1996 and September 30, 1995) divided by period-end total
assets.
29
<PAGE>
<PAGE>
BUSINESS OF THE COMPANY
The following information should be read in conjunction with the
description of the Company's business in the 1995 Form 10-K of the Company
incorporated herein by reference.
GENERAL
AT&T Capital is a full-service, diversified equipment leasing and finance
company with a presence in more than 20 countries in North America, Europe,
Canada, the Asia/Pacific Region and Latin America. The Company is one of the
largest equipment leasing and finance companies in the United States and is the
largest lessor of telecommunications equipment in the United States, in each
case, based on the aggregate value of equipment leased or financed.
AT&T Capital leases and finances equipment manufactured and distributed by
numerous vendors, including Lucent and NCR. In addition, the Company provides
equipment leasing and financing and related services directly to end-user
customers. The Company's approximately 500,000 customers include large global
companies, small and mid-size businesses and federal, state and local
governments and their agencies.
A significant portion of the Company's total assets and revenues and a
substantial majority of its net income are attributable to financing provided by
the Company to Customers of the AT&T Entities with respect to AT&T Entities
Products and, to a lesser extent, transactions with the AT&T Entities as
End-Users, primarily with respect to the lease of information technology and
other equipment or vehicles to them as end-users and the administration and
management of certain leased assets on behalf of AT&T.
The following table shows the respective percentages of the Company's total
assets, revenues and net income (loss) related to its United States and foreign
operations that are attributable to (i) leasing and financing services provided
by the Company to Customers of the AT&T Entities, (ii) transactions involving
the AT&T Entities as End-User and (iii) the Company's non-AT&T Entities related
business, in each case at or for the nine months ended September 30, 1996 and at
or for the years ended December 31, 1995, 1994 and 1993. A substantial majority
of the assets and revenues, and substantially all the Company's net income, that
were attributable to Customers of the AT&T Entities were attributable to leasing
and financing services provided by the Company to customers of Lucent and its
subsidiaries. The net income (loss) shown below were calculated based upon what
the Company believes to be a reasonable allocation of interest, income taxes and
certain corporate overhead expenses.
<TABLE>
<CAPTION>
AT OR FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
----------------------------------------------------
% OF ASSETS % OF TOTAL REVENUES
------------------------ ------------------------
U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL
---- ------- ----- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Customers of the AT&T
Entities.................... 27.7 0.6 28.3 30.0 0.5 30.5
AT&T Entities as End-User..... 4.0 -- 4.0 7.2 -- 7.2
Non-AT&T Entities Related
Business.................... 49.0 18.7 67.7 49.3 13.0 62.3
---- ------- ----- ---- ------- -----
Total............... 80.7 19.3 100.0 86.5 13.5 100.0
---- ------- ----- ---- ------- -----
---- ------- ----- ---- ------- -----
<CAPTION>
% OF NET INCOME (LOSS)
--------------------------
U.S. FOREIGN TOTAL
------ ------- ------
<S> <C> <C> <C>
Customers of the AT&T
Entities.................... 59.6 0.1 59.7
AT&T Entities as End-User..... 7.6 -- 7.6
Non-AT&T Entities Related
Business.................... 36.8 (4.1) 32.7
------ ------- ------
Total............... 104.0 (4.0) 100.0
------ ------- ------
------ ------- ------
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------
% OF ASSETS % OF TOTAL REVENUES
------------------------ ------------------------
U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL
---- ------- ----- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Customers of the AT&T
Entities.................... 29.4 0.1 29.5 32.3 0.4 32.7
AT&T Entities as End-User..... 5.3 -- 5.3 8.3 -- 8.3
Non-AT&T Entities Related
Business.................... 47.8 17.4 65.2 46.3 12.7 59.0
---- ------- ----- ---- ------- -----
Total............... 82.5 17.5 100.0 86.9 13.1 100.0
---- ------- ----- ---- ------- -----
---- ------- ----- ---- ------- -----
<CAPTION>
% OF NET INCOME (LOSS)
-------------------------
U.S. FOREIGN TOTAL
------ ------- -----
<S> <C> <C> <C>
Customers of the AT&T
Entities.................... 67.2 0.7 67.9
AT&T Entities as End-User..... 8.2 -- 8.2
Non-AT&T Entities Related
Business.................... 27.0 (3.1) 23.9
------ ------- -----
Total............... 102.4 (2.4) 100.0
------ ------- -----
------ ------- -----
</TABLE>
30
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<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------
% OF ASSETS % OF TOTAL REVENUES
------------------------ ------------------------
U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL
---- ------- ----- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Customers of the AT&T
Entities.................... 34.3 0.3 34.6 33.1 0.3 33.4
AT&T Entities as End-User..... 6.8 -- 6.8 9.5 -- 9.5
Non-AT&T Entities Related
Business.................... 48.0 10.6 58.6 47.8 9.3 57.1
---- ------- ----- ---- ------- -----
Total............... 89.1 10.9 100.0 90.4 9.6 100.0
---- ------- ----- ---- ------- -----
---- ------- ----- ---- ------- -----
<CAPTION>
% OF NET INCOME (LOSS)
-------------------------
U.S. FOREIGN TOTAL
------ ------- -----
<S> <C> <C> <C>
Customers of the AT&T
Entities.................... 83.9 (1.4) 82.5
AT&T Entities as End-User..... 8.5 -- 8.5
Non-AT&T Entities Related
Business.................... 11.8 (2.8) 9.0
------ ------- -----
Total............... 104.2 (4.2) 100.0
------ ------- -----
------ ------- -----
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1993
----------------------------------------------------
% OF ASSETS % OF TOTAL REVENUES
------------------------ ------------------------
U.S. FOREIGN TOTAL U.S. FOREIGN TOTAL
---- ------- ----- ---- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Customers of the AT&T
Entities.................... 38.1 0.3 38.4 31.1 0.2 31.3
AT&T Entities as End-User..... 9.5 -- 9.5 14.9 -- 14.9
Non-AT&T Entities Related
Business.................... 46.1 6.0 52.1 47.8 6.0 53.8
---- ------- ----- ---- ------- -----
Total............... 93.7 6.3 100.0 93.8 6.2 100.0
---- ------- ----- ---- ------- -----
---- ------- ----- ---- ------- -----
<CAPTION>
% OF NET INCOME (LOSS)
-------------------------
U.S. FOREIGN TOTAL
------ ------- -----
<S> <C> <C> <C>
Customers of the AT&T
Entities.................... 99.8 (1.7) 98.1(1)
AT&T Entities as End-User..... 20.8 -- 20.8(1)
Non-AT&T Entities Related
Business.................... (6.9) (12.0) (18.9)(1)
------ ------- -----
Total............... 113.7 (13.7) 100.0
------ ------- -----
------ ------- -----
</TABLE>
- ------------
(1) In 1993, the Customers of the AT&T Entities, AT&T Entities as End-User and
non-AT&T Entities related business net income (loss) accounted for 89.0%,
20.2% and (9.2%), respectively, of the Company's net income before
cumulative effect of the 1993 accounting change and impact of the tax rate
change. For a description of the 1993 accounting change and impact of the
tax rate change, see Note 10 to the Consolidated Financial Statements which
are included in the 1995 Form 10-K incorporated herein by reference.
The increases in 1995 in the non-AT&T Entities related business assets and
revenues (as a percentage of total assets and revenues) were generated almost
equally from United States and foreign operations. The significant increase in
1995 in the Company's United States non-AT&T Entities related business net
income was primarily generated from large-ticket specialty and structured
finance activities, Small Business Administration loan sales and growth in the
vehicle portfolio. Net losses from foreign non-AT&T Entities related business
somewhat offset the strong United States results.
The securitization of certain non-AT&T Entities related Portfolio Assets
positively affected net income of the non-AT&T Entities related business in all
years presented as well as in the nine months ended September 30, 1996. However,
the Company decreased significantly the amount of securitization each year from
1993 through 1995. Partly as a result of the reduction in securitized assets,
the portion of the Company's non-AT&T Entities related business net income
attributable to securitization has decreased by 88.7% from 1993 to 1995. See
Note 6 to the Consolidated Financial Statements in the 1995 Form 10-K
incorporated herein by reference. The Company's non-AT&T Entities related
business contributed 30.9% of the Company's net income for the nine months ended
September 30, 1996 without giving effect to a securitization of non-AT&T
Entities related business Portfolio Assets effected by the Company during such
period. No similar securitization was effected during the nine months ended
September 30, 1995. See ' -- Business Strategy' below for a discussion of the
Company's current securitization plans.
BUSINESS STRATEGY
AT&T Capital has two broad business strategies: (i) to enhance its position
as a leader in providing leasing and financing services that are marketed to
customers of equipment manufacturers, distributors and dealers with whom the
Company has a marketing relationship for financing services (the Company's
'Global Vendor Finance' strategy); and (ii) to establish itself as a leader in
providing leasing, financing and related services that are marketed directly to
end-users of equipment, including customers of the Company's Global Vendor
Finance marketing activities (e.g., end-users acquiring general equipment for
which the Company previously financed telecommunications equipment), as well as
customers of
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vendors with whom the Company does not have a marketing relationship for
financing services (the Company's 'Direct Customer Finance' strategy).
In 1995, Global Vendor Finance constituted 58% of the Company's total
financing volume (24% attributable to the AT&T Entities and 34% attributable to
other vendors) and represented 56% of the Company's year-end total assets (29%
attributable to the AT&T Entities and 27% attributable to other vendors). In
1995, Direct Customer Finance constituted 42% of the Company's total financing
volume (4% attributable to AT&T Entities and their employees as end-users and
38% to other end-users) and 44% of the Company's year-end total assets (5%
attributable to the AT&T Entities and their employees as end-users and 39% to
other end-users).
The Company anticipates that significant changes in the Company's financing
strategy will be implemented. In particular, the Company anticipates that
approximately 30% of its financing volume originated each year may be
securitized annually pursuant to off-balance sheet securitization transactions.
To the extent that the actual level of securitization deviates significantly
from the planned level, there could be a material adverse effect on the Company.
See 'Risk Factors -- Risks Related to Expected Plans Involving the
Company-Securitization Program.' The Company anticipates that the cost of the
Company's on-balance sheet financing will increase by virtue of its
disaffiliation from AT&T and its lower debt ratings. See 'Risk Factors -- Risks
Related to the Termination of AT&T's Ownership Interest in the Company.'
However, such increase in borrowing costs is expected to be offset in
significant part by the lower financing rates associated with the Company's
planned off-balance sheet securitization program.
CERTAIN BUSINESS SKILLS
The Company has developed a number of business skills and competencies that
management believes make the Company an effective competitor in the leasing and
finance industry. For example, in connection with its Global Vendor Finance
relationship with the AT&T Entities, the Company has developed the capabilities
necessary to service large numbers of customers on an efficient and timely
basis. In general, the Company has linked its telecommunications and data
systems with those of the sales and marketing offices of the AT&T Entities and
has placed its own personnel and equipment at these offices. These linkages and
on-site presence, in conjunction with the Company's credit review and scoring
capabilities (see ' -- Vendor Relationship Management Skills -- Credit
Management Skills' below), enable the Company to receive and process a large
volume of applications, provide related credit review and approval and otherwise
efficiently service a high volume of transactions at what the Company believes
is a relatively low cost per transaction. This process allows the Company to
respond on a timely basis to credit inquiries (generally within 10 minutes for
routine financings under $50,000).
VENDOR RELATIONSHIP MANAGEMENT SKILLS
As a result of its Global Vendor Finance and Direct Customer Finance
relationships, the Company has, in addition to its credit management skills and
asset management skills described below, gained significant experience in
structuring and managing vendor finance and direct customer finance programs
tailored to specific customer needs. The Company has tailored programs to
specific customer needs by providing a number of specialized products and
programs, including (i) customer financing products; (ii) specialized sales aid
services, including training of vendor personnel and point-of-sale support;
(iii) tailored private label programs, in which financing is provided to the
vendor's customers under the vendor's name; (iv) specialized customer operations
support and interfaces; (v) alternate channel programs; (vi) inventory
financing; and (vii) support for value-added retailers or distributions.
CREDIT MANAGEMENT SKILLS. The Company has adopted policies and procedures
that management believes allow the Company to review carefully the
creditworthiness of its customers under procedures that management believes are
efficient and timely. Management of key risks is initially the responsibility of
business unit operating personnel and is further coordinated throughout the
Company by the Risk Management Department, which has established policies and
procedures for tracking credit performance results on a monthly basis.
Consistent with its strategy, the Company has diversified its credit risk
associated with its Portfolio Assets by customer, industry segment, equipment
type, geographic location
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and transaction maturity. Small transactions are generally credit scored by
operating personnel utilizing innovative expert systems credit scoring
technology developed in conjunction with the Bell Laboratories Operations
Research Department. This credit scoring technology supports decisions and
associated strategies for credit risk management throughout the customers'
financing lifecycle. Larger transactions are individually reviewed by
experienced credit officers. This system, when combined with the Company's
ongoing risk management review process, provides overall risk management
techniques that management believes position the Company favorably in the
marketplace.
ASSET MANAGEMENT SKILLS. The Company's asset management skills include its
equipment remarketing capabilities, its in-house equipment refurbishing
facilities and its knowledge of developing technologies and products and
obsolescence trends, particularly with respect to information technology
equipment. These skills assist the Company in its efforts to establish residual
values, to maximize the value of equipment that is returned to the Company at
the end of a lease and to help reduce the Company's risks in connection with its
residual values. Estimates of residual values are determined by the Company
from, among other things, studies prepared by the Company, professional
appraisals, historical experience, industry data, market information on sales of
used equipment, end-of-lease customer behavior and estimated obsolescence
trends. The Company actively manages its residuals by working with lessees and
vendors during the lease term to encourage lessees to extend their leases or
upgrade and enhance their leased equipment, as appropriate, and by monitoring
the various equipment industries, particularly the information technology
industries, for obsolescence trends. The Company strategically manages its
portfolio to ensure a broad diversification of residual value risk by equipment
type and lease expiration.
FINANCIAL STRUCTURING CAPABILITIES. The Company manages approximately $1.4
billion in lease finance assets (consisting principally of equity interests in
leveraged leases of commercial aircraft and project finance transactions) for
AT&T. The personnel that structured and negotiated the transactions under which
the lease finance assets were acquired, in addition to providing services
relating to the management of the lease finance assets, assist other segments of
the Company's business in structuring transactions that require use of complex
financial expertise, including transactions in specialty product areas that the
Company believes are not currently being served adequately by the industry.
THE MERGER
On October 1, 1996, the Company consummated the Merger with Merger Sub,
pursuant to the Merger Agreement among AT&T, the former indirect owner of
approximately 86% of the outstanding Common Stock of the Company, Holdings and
Merger Sub. Pursuant to the Merger Agreement, Merger Sub was merged with and
into the Company, with the Company continuing its corporate existence under
Delaware law as the surviving corporation.
All of the outstanding common equity capital of the Company is currently
directly or indirectly owned by the members of the Leasing Consortium consisting
of (i) the Management Investors, including Thomas C. Wajnert, Chairman of the
Board and Chief Executive Officer of the Company, and approximately 23 other
members of the Company's senior management, and (ii) GRSH. Following the
consummation of the Merger and the related transactions, the Management
Investors own 3.3% of the Common Stock (or approximately 5.5% on a fully diluted
basis) and GRSH indirectly owns 96.7% of the Common Stock (or approximately
94.5% on a fully diluted basis).
The Merger and related transactions had a significant impact on the
Company's financial position and results of operations. Had the Merger and
related transactions occurred on September 30, 1996, on a pro forma basis, the
Company's total assets, debt, total liabilities and shareowners' equity would
have been $8.1 billion, $6.4 billion, $7.2 billion and $0.7 billion,
respectively. Had the Merger and related transactions occurred on January 1,
1995, the Company's revenues for the nine months ended September 30, 1996 and
the year ended December 31, 1995 would have been $1.2 billion and $1.3 billion,
respectively, and the Company's net income (loss) for the nine months ended
September 30, 1996 and the year ended December 31, 1995 would have been $38.4
million and $(16.4) million, respectively. The transactions related to the
Merger include: (i) the securitization of approximately $3.1 billion of lease
and loan receivables which occurred on October 15, 1996, and the application of
the net proceeds therefrom principally to repay short-term borrowings of
approximately $1.3 billion incurred as
33
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<PAGE>
part of the financing of the Merger; (ii) the conversion of the Company's then
outstanding common stock to the right to receive $45 per share in cash pursuant
to the Merger Agreement; (iii) the issuance and sale of the Trust Preferred
Securities by the Trust and the application of the net proceeds therefrom; (iv)
the Tax Deconsolidation from AT&T (see 'Risk Factors -- Risks Related to the
Termination of AT&T's Ownership Interest in the Company -- Tax
Deconsolidation'), including the repayment of approximately $247.4 million of
non-interest bearing notes held by AT&T and the payment by the Company to AT&T
of $35.0 million in exchange for AT&T's assumption of all federal and combined
state tax liabilities of the Company relating to periods prior to the Merger;
(v) effects of an Internal Revenue Code of 1986, as amended (the 'Code') Section
338(h)(10) election, including the deferred tax effects relating to the Merger
and the Section 338(h)(10) election; (vi) the issuance of short-term notes and
the incurrence of liabilities for payments under certain benefit plans, other
payments to certain employees and for Merger related transaction costs; (vii)
the expected increase in the Company's borrowing cost resulting from the Merger;
(viii) the expected increase in the Company's annual expenses for operating and
administrative expenses resulting from the Company no longer being entitled to
the discounts accorded to AT&T and its subsidiaries or received directly from
AT&T; (ix) the payment of certain annual transaction management and advisory
fees; and (x) payments associated with acceleration of amounts payable under
compensation and benefit plans.
The Company's pro forma revenues and net income results for the periods
described above do not reflect the Company's proposed future strategy of
increasing its use of periodic securitizations of lease and loan receivables as
a funding source. In addition, such pro forma results do not reflect the
significant gain associated with the Company's October 15, 1996 asset
securitization. Had the securitization taken place on January 1, 1995 and had
such gain been included in the Company's pro forma results, the Company's
revenues for the year ended December 31, 1995 would have been $1.4 billion, and
the Company's net income for the year ended December 31, 1995 would have been
$68.5 million (excluding other non-recurring expenses of $39.4 million).
In addition to asset sales in connection with the Company's anticipated
securitization transactions described in this Prospectus, the Company may review
opportunities from time to time to dispose of certain assets depending upon
market conditions and other circumstances at such time, although the Company
does not currently have any agreements for such dispositions. The Company's
Board of Directors and management will continue to evaluate the Company's
corporate structure, business, management composition, operations, organization
and other matters and make such changes as the Board deems appropriate.
The Company's Current Report on Form 8-K dated October 1, 1996, which is
incorporated by reference into this Prospectus, contains unaudited pro forma
consolidated financial information with respect to the Company. Such unaudited
pro forma consolidated financial information gives effect to the Merger and
related transactions described above.
RELATIONSHIP WITH AT&T ENTITIES
In September 1995, AT&T announced plans to effect the AT&T Restructuring,
which was comprised of separating itself into three publicly traded companies
(AT&T, Lucent and NCR) and disposing of its approximately 86% equity interest in
the Company to the general public or another company. Pursuant to the AT&T
Restructuring, the Company consummated the Merger which resulted in, among other
things, the disposition by AT&T of its remaining equity interest in the Company.
See 'The Merger.'
On September 30, 1996, AT&T spun off its entire remaining interest in
Lucent to AT&T's shareholders. Lucent's businesses involve the manufacture and
distribution of public telecommunications systems, business communications
systems, micro-electronic components, and consumer telecommunications products.
In addition, AT&T has announced that it intends to distribute to its
shareholders all of its interest in NCR by the end of 1996. NCR's businesses
involve the manufacture and distribution of information technology equipment,
including automatic teller machines and point-of-sale terminal equipment.
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In connection with the Company's IPO in 1993, the Company entered into a
series of agreements with AT&T to formalize the relationship between the two
companies, including the following three significant agreements, each dated as
of June 25, 1993: (i) the Operating Agreement, (ii) the Intercompany Agreement
and (iii) the License Agreement. Each of these agreements, together with the
Agreement Supplements entered into with Lucent and NCR, are described below. The
descriptions of such agreements set forth herein do not purport to be complete
and are subject in their entirety to the actual terms of such agreements, copies
of which have been filed with the Commission. See 'Available Information.'
The AT&T Operating Agreement provides, among other things, that (i) the
Company serves as AT&T's 'preferred provider' of financing services and has
certain related and other rights and privileges in connection with the financing
of AT&T equipment to AT&T's customers and (ii) subject to various exceptions,
the AT&T Entities shall not compete or maintain an ownership interest in any
business that competes with the Company and its subsidiaries. The Company has
executed agreements comparable to the AT&T Operating Agreement with each of
Lucent and NCR.
As the 'preferred provider' of financing services for customers of Lucent,
NCR and AT&T, the Company receives a number of significant benefits, including
the receipt by the Company of information from Lucent and NCR relating to their
product development and marketing plans, the promotion and support by Lucent and
NCR of the efforts of the Company to market its leasing and financing services
to their customers and dealers, the provision of space at the Lucent and NCR
sales sites for personnel and equipment of the Company and the right of the
Company to maintain computer and telecommunication linkages with Lucent and NCR
in connection with the offering, documenting and monitoring of the Company's
leasing and financing services. The Company endeavors to take advantage of these
benefits, and has, over the past eleven years, invested significant resources in
creating a financing organization dedicated to and integrated (through such
computer and telecommunication linkages) with the sales forces of Lucent and, to
a lesser extent, NCR. In addition, the Company has developed relationships with
the organizations of the AT&T Entities (particularly Lucent), has developed and
maintained comprehensive, proprietary customer databases and has gained a
significant position with respect to the aftermarket for Lucent and NCR
equipment. The Company believes that Lucent and NCR are likewise the recipients
of significant benefits as a result of AT&T Capital's preferred provider status,
although there can be no assurance that any of such agreements will be extended
beyond the expiration of their initial term on August 4, 2000, or, if extended,
that the terms and conditions thereof will not be modified in a manner adverse
to the Company. See 'Risk Factors -- Changes in Relationship with AT&T
Entities -- Operating and Certain Other Agreements with AT&T Entities.'
In connection with its financing business for Lucent, the Company provides
an additional incentive, in the form of a sales assistance fee, for Lucent to
assist the Company in the financing of products manufactured or distributed by
Lucent. The sales assistance fee is based on designated percentages of the
aggregate sales prices and other charges ('volumes') of Lucent products financed
by the Company. In early 1996, the Company agreed to increase the designated
percentage for the sales assistance fee from the percentage paid by the Company
in prior years. After giving effect to the changes in the fee for 1995, the
sales assistance fee paid by the Company to Lucent for 1995 was approximately
double the 1994 fee. The Company and Lucent recently agreed to a modified
formula for calculating the sales assistance fee for the remaining years of the
term of Lucent's Operating Agreement (retroactive to 1996). The revised formula
is expected to result in aggregate annual sales assistance fees which are
approximately double the amounts that would have been paid if the pre-1995
formula had been maintained.
The Intercompany Agreement provides, among other things, that the Company
will administer for a fee various portfolios of financing and leasing assets,
including certain portfolios which prior to the Company's IPO had been owned by
the Company. In addition, the Company has entered into the Agreement Supplements
with Lucent and NCR pursuant to which Lucent and NCR have agreed that various
provisions of the Intercompany Agreement shall equally apply to them.
Pursuant to the License Agreement, AT&T has licensed certain trade names
and service marks, including the 'AT&T' trade name, to the Company for use in
the leasing and financing business of the
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Company and certain of its subsidiaries and, in the case of the 'AT&T' trade
name, to use as part of the corporate names of the Company and certain
subsidiaries. Pursuant to the Agreement Supplements, Lucent and NCR have
similarly licensed to the Company certain trade names and service marks,
including the 'Lucent Technologies' and 'NCR' trade names.
The initial term of each of the Operating Agreements, the Intercompany
Agreement, the License Agreement and the Agreement Supplements is scheduled to
end on August 4, 2000, subject to early termination rights. In addition, AT&T
has the right under the License Agreement, after two years' prior notice, to
require the Company to discontinue use of the 'AT&T' trade name as part of the
Company's corporate or assumed or 'doing business' name.
See 'Risk Factors -- Changes in Relationship with AT&T Entities -- Revenues
and Net Income Attributable to AT&T Entities' for a description of the Company's
dependence on the revenue and net income attributable to the Company's
relationship with the AT&T Entities and their customers and employees.
CAPITA PREFERRED TRUST
Capita Preferred Trust (the 'Trust') is a statutory business trust formed
under the Delaware Business Trust Act, as amended (the 'Trust Act'), pursuant to
a declaration of trust and the filing of a certificate of trust with the
Secretary of State of the State of Delaware; such declaration will be amended
and restated in its entirety (as so amended and restated, the 'Declaration')
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. The Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the 'Trust
Indenture Act'). Upon issuance of the Trust Preferred Securities, the purchasers
thereof will own all the Trust Preferred Securities. See 'Description of the
Trust Preferred Securities.' The Company will acquire Trust Common Securities in
an aggregate liquidation amount equal to at least 3% of the total capital of the
Trust. The Trust will use all the proceeds derived from the issuance of the
Trust Securities to purchase the Partnership Preferred Securities from the
Partnership and, accordingly the assets of the Trust will consist solely of the
Partnership Preferred Securities. The Trust exists for the exclusive purpose of
(i) issuing the Trust Securities representing undivided beneficial ownership
interests in the assets of the Trust, (ii) investing the gross proceeds of the
Trust Securities in the Partnership Preferred Securities, and (iii) engaging in
only those other activities necessary or incidental thereto.
Pursuant to the Declaration, there will initially be five trustees (the
'Trustees') for the Trust. Three of the Trustees (the 'Regular Trustees') will
be individuals who are employees or officers of or who are affiliated with the
Company. The fourth trustee will be a financial institution that is unaffiliated
with the Company and is indenture trustee for purposes of compliance with the
provisions of the Trust Indenture Act (the 'Property Trustee'). The fifth
trustee will be an entity that maintains its principal place of business in the
State of Delaware (the 'Delaware Trustee'). Initially, The First National Bank
of Chicago, N.A., a national banking association, will act as Property Trustee,
and its affiliate, First Chicago Delaware Inc., a Delaware corporation, will act
as Delaware Trustee until, in each case, removed or replaced by the holder of
the Trust Common Securities. For purposes of compliance with the Trust Indenture
Act, The First National Bank of Chicago, N.A. will also act as trustee under the
Trust Guarantee (the 'Trust Guarantee Trustee').
The Property Trustee will hold title to the Partnership Preferred
Securities for the benefit of the holders of the Trust Securities, and the
Property Trustee will have the power to exercise all rights, powers and
privileges with respect to the Partnership Preferred Securities under the
Amended and Restated Agreement of Limited Partnership to be entered into by the
Company and the Trust (the 'Limited Partnership Agreement') as the holder of the
Partnership Preferred Securities. In addition, the Property Trustee will
maintain exclusive control of a segregated non-interest bearing bank account
(the 'Property Account') to hold all payments made in respect of the Partnership
Preferred Securities for the benefit of the holders of the Trust Securities. The
Trust Guarantee Trustee will hold the Trust Guarantee for the benefit of the
holders of the Trust Preferred Securities. The Company, as the holder of all the
Trust Common Securities, will have the right to appoint, remove or replace any
of the Trustees and to increase or decrease the number of trustees, provided
that the number of trustees shall be at
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least three; provided further that at least one trustee shall be a Delaware
Trustee, at least one trustee shall be the Property Trustee and at least one
Trustee shall be a Regular Trustee. The Company will pay all fees and expenses
related to the organization and operations of the Trust (including any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States or any other domestic taxing
authority upon the Trust) and the offering of the Trust Preferred Securities and
be responsible for all debts and obligations of the Trust (other than with
respect to the Trust Securities).
For so long as the Trust Preferred Securities remain outstanding, the
Company will covenant (i) to maintain directly 100% ownership of the Trust
Common Securities, (ii) to cause the Trust to remain a statutory business trust
and not to voluntarily dissolve, wind-up, liquidate or be terminated, except as
permitted by the Declaration of the Trust, (iii) to use its commercially
reasonable efforts to ensure that the Trust will not be an 'investment company'
for purposes of the 1940 Act and (iv) to take no action which would be
reasonably likely to cause the Trust to be classified as an association or a
publicly traded partnership taxable as a corporation for United States federal
income tax purposes.
The rights of the holders of the Trust Preferred Securities, including
economic rights, rights to information and voting rights, are as set forth in
the Declaration and the Trust Act. See 'Description of the Trust Preferred
Securities.' The Declaration and the Trust Guarantee also incorporate by
reference the terms of the Trust Indenture Act.
The location of the principal executive office of the Trust is c/o AT&T
Capital Corporation, 44 Whippany Road, Morristown, NJ 07962, and its telephone
number is (201) 397-3000.
CAPITA PREFERRED FUNDING L.P.
Capita Preferred Funding L.P. (the 'Partnership') is a limited partnership
that was formed under the Delaware Revised Uniform Limited Partnership Act, as
amended (the 'Partnership Act'), on August 29, 1996. Pursuant to the certificate
of limited partnership, as amended, and the Limited Partnership Agreement, the
Company is the sole general partner of the Partnership (in such capacity the
'General Partner'). Upon the issuance of the Partnership Preferred Securities,
which securities represent limited partner interests in the Partnership, the
Trust will be the sole limited partner of the Partnership. Contemporaneous with
the issuance of the Partnership Preferred Securities, the General Partner will
contribute capital to the Partnership in an amount sufficient to establish its
initial capital account at an amount equal to at least 15% of the total capital
of the Partnership.
The Partnership is managed by the General Partner and exists for the sole
purpose of (i) issuing its partnership interests, (ii) investing the proceeds
thereof in Affiliate Investment Instruments and Eligible Debt Securities and
(iii) engaging in only those other activities necessary or incidental thereto.
To the extent that aggregate payments to the Partnership on the Affiliate
Investment Instruments and on Eligible Debt Securities exceeds distributions
payable with respect to the Partnership Preferred Securities, the Partnership
may at times have excess funds which shall be allocated to and may, in the
General Partner's sole discretion, be distributed to the General Partner.
For so long as the Partnership Preferred Securities remain outstanding, the
Company will covenant in the Limited Partnership Agreement (i) to remain the
sole general partner of the Partnership and to maintain directly 100% ownership
of the General Partner's interest in the Partnership, which interest will at all
times represent at least 1% of the total capital of the Partnership; (ii) to
cause the Partnership to remain a limited partnership and not to voluntarily
dissolve, liquidate, wind-up or be terminated, except as permitted by the
Limited Partnership Agreement, (iii) to use its commercially reasonable efforts
to ensure that the Partnership will not be an 'investment company' for purposes
of the 1940 Act and (iv) to take no action which would be reasonably likely to
cause the Partnership to be classified as an association or a publicly traded
partnership taxable as a corporation for United States federal income tax
purposes.
The rights of the holders of the Partnership Preferred Securities,
including economic rights, rights to information and voting rights, are set
forth in the Limited Partnership Agreement and the Partnership Act. See
'Description of the Partnership Preferred Securities.'
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The Limited Partnership Agreement provides that the General Partner will
have liability for the fees and expenses of the Partnership (including any
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the United States or any other domestic
taxing authority upon the Partnership and be responsible for all debts and
obligations of the Partnership (other than with respect to the Partnership
Preferred Securities). Under Delaware law, assuming a limited partner in a
Delaware limited partnership such as the Partnership (i.e., a holder of the
Partnership Preferred Securities) does not participate in the control of the
business of the limited partnership, such limited partner will not be personally
liable for the debts, obligations and liabilities of such limited partnership,
whether arising in contract, tort or otherwise, solely by reason of being a
limited partner of such limited partnership (subject to any obligation such
limited partner may have to repay any funds that may have been wrongfully
distributed to it). The Partnership's business and affairs will be conducted by
the General Partner.
The location of the principal executive offices of the Partnership is c/o
AT&T Capital Corporation, 44 Whippany Road, Morristown, NJ 07962 and its
telephone number is (201) 397-3000.
DESCRIPTION OF THE TRUST PREFERRED SECURITIES
The Trust Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, The First National Bank of Chicago, N.A.,
will act as trustee for the Trust Preferred Securities under the Declaration for
purposes of compliance with the provisions of the Trust Indenture Act. The terms
of the Trust Preferred Securities will include those stated in the Declaration
and those made part of the Declaration by the Trust Indenture Act. The following
summary of the material terms and provisions of the Trust Preferred Securities
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the Declaration, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus is a part, the Trust Act and the
Trust Indenture Act.
GENERAL
The Trust Preferred Securities will be issued in fully registered form
without coupons. Trust Preferred Securities will not be issued in bearer form.
See ' -- Book-Entry Only Issuance -- The Depository Trust Company.'
The Declaration authorizes the Regular Trustees of the Trust to issue the
Trust Securities, which represent undivided beneficial ownership interests in
the assets of the Trust. Title to the Partnership Preferred Securities will be
held by the Property Trustee for the benefit of the holders of the Trust
Securities. The Declaration does not permit the Trust to acquire any assets
other than the Partnership Preferred Securities or the issuance by the Trust of
any securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. The payment of distributions out of money held by the
Trust, and payments out of money held by the Trust upon redemption of the Trust
Preferred Securities or liquidation of the Trust, are guaranteed by the Company
to the extent described under 'Description of the Trust Guarantee.' The Trust
Guarantee will be held by The First National Bank of Chicago, N.A., the Trust
Guarantee Trustee, for the benefit of the holders of the Trust Preferred
Securities. The Trust Guarantee does not cover payment of distributions when the
Trust does not have sufficient available funds to pay such distributions. In
such event, holders of Trust Preferred Securities will have the remedies
described below under ' -- Trust Enforcement Events.'
DISTRIBUTIONS
The distribution rate on Trust Preferred Securities will be fixed at a rate
per annum of % of the stated liquidation amount of $25 per Trust Preferred
Security if, as and when the Trust has funds available for payment.
Distributions not paid on the scheduled payment date will accumulate and
compound quarterly at a rate per annum equal to %. The term 'distribution'
as used herein includes any such compounded amounts unless otherwise stated or
the context otherwise requires. The amount of distributions payable for any
period will be computed on the basis of a 360-day year of twelve 30-day months.
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Distributions on the Trust Preferred Securities will be cumulative, will
accrue from the date of initial issuance and will be payable quarterly in
arrears on each March 31, June 30, September 30 and December 31, commencing
December 31, 1996, if, as and when available for payment, by the Property
Trustee, except as otherwise described below. If distributions are not paid when
scheduled, the accrued distributions shall be paid to the holders of record of
Trust Preferred Securities as they appear on the books and records of the Trust
on the record date with respect to the payment date for the Trust Preferred
Securities which corresponds to the payment date fixed by the Partnership with
respect to the payment of cumulative distributions on the Partnership Preferred
Securities.
Distributions on the Trust Preferred Securities will be made to the extent
that the Trust has funds available for the payment of such distributions in the
Property Account. Amounts available to the Trust for distribution to the holders
of the Trust Preferred Securities will be limited to payments received by the
Trust from the Partnership with respect to the Partnership Preferred Securities
or from the Company on the Partnership Guarantee or the Trust Guarantee.
Distributions on the Partnership Preferred Securities will be paid only if, as
and when declared in the sole discretion of the Company, as the General Partner
of the Partnership. Pursuant to the Limited Partnership Agreement, the General
Partner is not obligated to declare distributions on the Partnership Preferred
Securities at any time, including upon or following a Partnership Enforcement
Event. See 'Description of Partnership Preferred Securities -- Partnership
Enforcement Events.'
The assets of the Partnership consist only of Affiliate Investment
Instruments (which initially will be the Debentures) and Eligible Debt
Securities. To the extent that the issuers (including, where applicable, the
Company, as guarantor) of the securities in which the Partnership invests fail
to make any payment in respect of such securities (or, if applicable, such
guarantees), the Partnership will not have sufficient funds to pay and will not
declare or pay distributions on the Partnership Preferred Securities. If the
Partnership does not declare and pay distributions on the Partnership Preferred
Securities out of funds legally available for distribution, the Trust will not
have sufficient funds to make distributions on the Trust Preferred Securities,
in which event the Trust Guarantee will not apply to such distributions until
the Trust has sufficient funds available therefor. See 'Description of the
Partnership Preferred Securities -- Distributions' and 'Description of the Trust
Guarantee.' In addition, as described under 'Risk Factors -- Risk Factors
Related to TOPrS -- Insufficient Income or Assets Available to Partnership,' the
Partnership may not have sufficient funds to pay current or liquidating
distributions on the Partnership Preferred Securities if (i) at any time that
the Partnership is receiving current payments in respect of the securities held
by the Partnership (including the Debentures), the General Partner, in its sole
discretion, does not declare distributions on the Partnership Preferred
Securities and the Partnership receives insufficient amounts to pay the
additional compounded distributions that will accrue in respect of the
Partnership Preferred Securities, (ii) the Partnership reinvests the proceeds
received in respect of the Debentures upon their retirement or at their
maturities in Affiliate Investment Instruments that do not generate income in an
amount that is sufficient to pay full distributions in respect of the
Partnership Preferred Securities or (iii) the Partnership invests in equity or
debt securities of Investment Affiliates that are not guaranteed by the Company
and that cannot be liquidated by the Partnership for an amount sufficient to pay
such distributions in full.
Distributions on the Trust Preferred Securities will be payable to the
holders thereof as they appear on the books and records of the Trust on the
relevant record dates, which will be one Business Day (as defined herein) prior
to the relevant payment dates. Such distributions will be paid through the
Property Trustee who will hold amounts received in respect of the Partnership
Preferred Securities in the Property Account for the benefit of the holders of
the Trust Securities. Subject to any applicable laws and regulations and the
provisions of the Declaration, each such payment will be made as described under
' -- Book-Entry Only Issuance -- The Depository Trust Company' below. In the
event that the Trust Preferred Securities do not remain in book-entry only form,
the relevant record dates shall be the 15th day of the month of the relevant
payment dates. In the event that any date on which distributions are payable on
the Trust Preferred Securities is not a Business Day, payment of the
distribution payable on such date will be made on the next succeeding day which
is a Business Day (without any interest or other payment in respect of any such
delay) except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date. A 'Business
Day'
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shall mean any day other than a day on which banking institutions in The City of
New York are authorized or required by law to close.
TRUST ENFORCEMENT EVENTS
The occurrence, at any time, of (i) arrearages on distributions on the
Trust Preferred Securities that shall exist for six quarterly distribution
periods, (ii) a default by the Company in respect of any of its obligations
under the Trust Guarantee or (iii) a Partnership Enforcement Event under the
Limited Partnership Agreement, will constitute an enforcement event under the
Declaration with respect to the Trust Securities (a 'Trust Enforcement Event');
provided, that pursuant to the Declaration, the holder of the Trust Common
Securities will be deemed to have waived any Trust Enforcement Event with
respect to the Trust Common Securities until all Trust Enforcement Events with
respect to the Trust Preferred Securities have been cured, waived or otherwise
eliminated. Until such Trust Enforcement Events with respect to the Trust
Preferred Securities have been so cured, waived or otherwise eliminated, the
Property Trustee will be deemed to be acting solely on behalf of the holders of
the Trust Preferred Securities and only the holders of the Trust Preferred
Securities will have the right to direct the Property Trustee with respect to
certain matters under the Declaration and, therefore, the Special Representative
with respect to certain matters under the Limited Partnership Agreement. See
'Description of the Partnership Preferred Securities -- Partnership Enforcement
Events' for a description of the events which will trigger the occurrence of a
Partnership Enforcement Event.
Upon the occurrence of a Trust Enforcement Event, (a) the Property Trustee,
as the holder of the Partnership Preferred Securities, shall have the right to
enforce the terms of the Partnership Preferred Securities, including the right
to direct the Special Representative to enforce (i) the Partnership's creditors'
rights and other rights with respect to the Affiliate Investment Instruments and
the Investment Guarantees, (ii) the rights of the holders of the Partnership
Preferred Securities under the Partnership Guarantee and (iii) the rights of the
holders of the Partnership Preferred Securities to receive distributions (only
if and to the extent declared out of funds legally available therefor) on the
Partnership Preferred Securities, and (b) the Trust Guarantee Trustee shall have
the right to enforce the terms of the Trust Guarantee, including the right to
enforce the covenant restricting certain payments by the Company and its
majority owned subsidiaries.
If the Property Trustee fails to enforce its rights under the Partnership
Preferred Securities after a holder of Trust Preferred Securities has made a
written request, such holder of record of Trust Preferred Securities may
directly institute a legal proceeding against the Partnership and the Special
Representative to enforce the Property Trustee's rights under the Partnership
Preferred Securities without first instituting any legal proceeding against the
Property Trustee, the Trust or any other person or entity. In addition, for so
long as the Trust holds any Partnership Preferred Securities, if the Special
Representative fails to enforce its rights on behalf of the Partnership under
the Affiliate Investment Instruments after a holder of Trust Preferred
Securities has made a written request, a holder of record of Trust Preferred
Securities may on behalf of the Partnership directly institute a legal
proceeding against the Investment Affiliates under the Affiliate Investment
Instruments, without first instituting any legal proceeding against the Property
Trustee, the Trust, the Special Representative or the Partnership. In any event,
for so long as the Trust is the holder of any Partnership Preferred Securities,
if a Trust Enforcement Event has occurred and is continuing and such event is
attributable to the failure of an Investment Affiliate to make any required
payment when due on any Affiliate Investment Instrument or the failure of the
Company to make any required payment when due on any Investment Guarantee, then
a holder of Trust Preferred Securities may on behalf of the Partnership directly
institute a proceeding against such Investment Affiliate with respect to such
Affiliate Investment Instrument or against the Company with respect to any such
Investment Guarantee, in each case for enforcement of payment.
Under no circumstances, however, shall the Special Representative have
authority to cause the General Partner to declare distributions on the
Partnership Preferred Securities. As a result, although the Special
Representative may be able to enforce the Partnership's creditors' rights to
accelerate and receive payments in respect of the Affiliate Investment
Instruments and the Investment Guarantees, the Partnership would be entitled to
reinvest such payments in additional Affiliate Investment Instruments,
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subject to satisfying the reinvestment criteria described under 'Description of
the Partnership Preferred Securities -- Partnership Investments,' and Eligible
Debt Securities, rather than declaring and making distributions on the
Partnership Preferred Securities.
The Company and the Trust are each required to file annually with the
Property Trustee an officer's certificate as to its compliance with all
conditions and covenants under the Declaration.
MANDATORY REDEMPTION
The Partnership Preferred Securities may be redeemed by the Partnership at
the option of the General Partner, in whole or in part, at any time on or after
October , 2006 or at any time in certain circumstances upon the occurrence of
a Partnership Special Event. Upon the repayment of the Partnership Preferred
Securities upon such redemption (either at the option of the General Partner or
pursuant to a Partnership Special Event), the proceeds from such repayment shall
simultaneously be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the Partnership Preferred Securities so repaid at an
amount equal to the amount received in respect of the redeemed Partnership
Preferred Securities; provided, that holders of the Trust Securities shall be
given not less than 30 nor more than 60 days' notice of such redemption. See
'Description of the Partnership Preferred Securities -- General' and
'Description of the Partnership Preferred Securities -- Optional Redemption.'
TRUST SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a Trust Tax Event or a Trust Investment Company Event
(each as hereinafter defined, and each, a 'Trust Special Event') shall occur and
be continuing, the Regular Trustees shall, unless the Partnership Preferred
Securities are redeemed in the limited circumstances described below, within 90
days following the occurrence of such Trust Special Event elect to either (i)
dissolve the Trust upon not less than 30 nor more than 60 days' notice with the
result that, after satisfaction of creditors of the Trust, if any, Partnership
Preferred Securities with an aggregate principal amount equal to the aggregate
stated liquidation amount of, with a distribution rate identical to the
distribution rate of, and accrued and unpaid distributions equal to accrued and
unpaid distributions on, and having the same record date for payment as, the
Trust Preferred Securities and the Trust Common Securities outstanding at such
time would be distributed on a pro rata basis to the holders of the Trust
Preferred Securities and the Trust Common Securities in liquidation of such
holders' interests in the Trust; provided, however, that if at the time there is
available to the Trust the opportunity to eliminate, within such 90-day period,
the Trust Special Event by taking some ministerial action, such as filing a form
or making an election, or pursuing some other similar reasonable measure which
in the sole judgment of the Company has or will cause no adverse effect on the
Trust, the Partnership, the Company or the holders of the Trust Securities and
will involve no material cost, the Trust will pursue such measure in lieu of
dissolution or (ii) cause the Trust Preferred Securities to remain outstanding,
provided that in the case of this clause (ii), the Company shall pay any and all
expenses incurred by or payable by the Trust attributable to the Trust Special
Event. Furthermore, if in the case of the occurrence of a Trust Tax Event, the
Regular Trustees have received an opinion (a 'Trust Redemption Tax Opinion') of
nationally recognized independent tax counsel experienced in such matters that
there is more than an insubstantial risk that interest payable by one or more of
the Investment Affiliates with respect to the Debentures issued by such
Investment Affiliate is not, or will not be, deductible by such Investment
Affiliate for United States federal income tax purposes even if the Partnership
Preferred Securities were distributed to the holders of the Trust Securities in
liquidation of such holders' interests in the Trust as described above, then the
General Partner shall have the right, within 90 days following the occurrence of
such Trust Tax Event, to elect to cause the Partnership to redeem the
Partnership Preferred Securities in whole (but not in part) for cash upon not
less than 30 nor more than 60 days' notice and promptly following such
redemption, the Trust Preferred Securities and Trust Common Securities will be
redeemed by the Trust at the Redemption Price.
'Trust Tax Event' means that the Company shall have requested and received
and shall have delivered to the Regular Trustees an opinion of nationally
recognized independent tax counsel experienced in such matters (a 'Trust
Dissolution Tax Opinion') to the effect that there has been (a) an
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amendment to, change in or announced proposed change in the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, (b) a judicial decision interpreting,
applying, or clarifying such laws or regulations, (c) an administrative
pronouncement or action that represents an official position (including a
clarification of an official position) of the governmental authority or
regulatory body making such administrative pronouncement or taking such action,
or (d) a threatened challenge asserted in connection with an audit of the
Company or any of its subsidiaries, the Partnership, or the Trust, or a
threatened challenge asserted in writing against any other taxpayer that has
raised capital through the issuance of securities that are substantially similar
to the Debentures, the Partnership Preferred Securities, or the Trust Preferred
Securities, which amendment or change is adopted or which proposed change,
decision or pronouncement is announced or which action, clarification or
challenge occurs on or after the date of this Prospectus (collectively a 'Tax
Action'), which Tax Action relates to any of the items described in (i) through
(iii) below, and that there is more than an insubstantial risk that (i) the
Trust is, or will be subject to United States federal income tax with respect to
income accrued or received on the Partnership Preferred Securities, (ii) the
Trust is, or will be subject to more than a de minimis amount of other taxes,
duties or other governmental charges or (iii) interest payable by an Investment
Affiliate with respect to the Debenture issued by such Investment Affiliate is
not, or will not be, deductible by such Investment Affiliate for United States
federal income tax purposes.
'Trust Investment Company Event' means that the Company shall have
requested and received and shall have delivered to the Regular Trustees an
opinion of nationally recognized independent legal counsel experienced in such
matters to the effect that as a result of the occurrence on or after the date
hereof of a change in law or regulation or a change in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority (a 'Change in 1940 Act Law'), the Trust is or
will be considered an 'investment company' which is required to be registered
under the 1940 Act.
If the Partnership Preferred Securities are distributed to the holders of
the Trust Preferred Securities, the Company will use its best efforts to cause
the Partnership Preferred Securities to be listed on the New York Stock Exchange
or on such other national securities exchange or similar organization as the
Trust Preferred Securities are then listed or quoted.
On the date fixed for any distribution of Partnership Preferred Securities,
upon dissolution of the Trust, (i) the Trust Preferred Securities and the Trust
Common Securities will no longer be deemed to be outstanding and (ii)
certificates representing Trust Securities will be deemed to represent the
Partnership Preferred Securities having an aggregate principal amount equal to
the stated liquidation amount of, and bearing accrued and unpaid distributions
equal to accrued and unpaid distributions on, such Trust Securities until such
certificates are presented to the Company or its agent for transfer or
reissuance.
There can be no assurance as to the market price for the Partnership
Preferred Securities which may be distributed in exchange for Trust Preferred
Securities if a dissolution and liquidation of the Trust were to occur.
Accordingly, the Partnership Preferred Securities which an investor may
subsequently receive on dissolution and liquidation of the Trust may trade at a
discount to the price of the Trust Preferred Securities exchanged.
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Trust Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Trust Preferred Securities for all quarterly distribution periods terminating on
or prior to the date of redemption.
If the Trust gives a notice of redemption in respect of Trust Preferred
Securities (which notice will be irrevocable), and if the Company has paid to
the Property Trustee a sufficient amount of cash in connection with the related
redemption of the Partnership Preferred Securities, then, by 12:00 noon, New
York time, on the redemption date, the Trust will irrevocably deposit with the
DTC funds sufficient to pay the amount payable on redemption of all book-entry
certificates and will give DTC irrevocable instructions and authority to pay
such amount to holders of the Trust Preferred Securities.
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See ' -- Book-Entry Only Issuance -- The Depository Trust Company.' If notice of
redemption shall have been given and funds are deposited as required, then upon
the date of such deposit, all rights of holders of such Trust Preferred
Securities so called for redemption will cease, except the right of the holders
of such Trust Preferred Securities to receive the Redemption Price, but without
interest on such Redemption Price. In the event that any date fixed for
redemption of Trust Preferred Securities is not a Business Day, then payment of
the amount payable on such date will be made on the next succeeding day which is
a Business Day (without any interest or other payment in respect of any such
delay), except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day. In the event
that payment of the Redemption Price in respect of Trust Preferred Securities is
improperly withheld or refused and not paid either by the Trust or by the
Company pursuant to the Trust Guarantee described under 'Description of the
Trust Guarantee,' distributions on such Trust Preferred Securities will continue
to accrue at the then applicable rate, from the original redemption date to the
date of payment.
In the event that fewer than all of the outstanding Trust Preferred
Securities are to be redeemed, the Trust Preferred Securities will be redeemed
in accordance with the procedures of DTC. See ' -- Book-Entry Only
Issuance -- The Depository Trust Company.'
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or its subsidiaries may at
any time and from time to time purchase outstanding Trust Preferred Securities
by tender, in the open market or by private agreement.
SUBORDINATION OF TRUST COMMON SECURITIES
Payment of amounts upon liquidation of the Trust Securities shall be made
pro rata based on the liquidation amount of the Trust Securities; provided,
however, that upon (i) the occurrence of an Investment Event of Default by an
Investment Affiliate (including the Company) in respect of any Affiliate
Investment Instrument or (ii) default by the Company on any of its obligations
under any Guarantee, the holders of the Trust Preferred Securities will have a
preference over the holders of the Trust Common Securities with respect to
payments upon liquidation of the Trust.
In the case of any Trust Enforcement Event, the holder of Trust Common
Securities will be deemed to have waived any such Trust Enforcement Event until
all such Trust Enforcement Events with respect to the Trust Preferred Securities
have been cured, waived or otherwise eliminated. Until all Trust Enforcement
Events with respect to the Trust Preferred Securities have been so cured, waived
or otherwise eliminated, the Property Trustee shall act solely on behalf of the
holders of the Trust Preferred Securities and not on behalf of the holder of the
Trust Common Securities, and only the holders of the Trust Preferred Securities
will have the right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a 'Trust Liquidation'), the then
holders of the Trust Preferred Securities will be entitled to receive out of the
assets of the Trust, after satisfaction of liabilities to creditors,
distributions in cash or other immediately available funds in an amount equal to
the aggregate of the stated liquidation amount of $25 per Trust Preferred
Security plus accrued and unpaid distributions thereon to the date of payment
(the 'Trust Liquidation Distribution'), unless, in connection with such Trust
Liquidation, Partnership Preferred Securities in an aggregate stated principal
amount equal to the aggregate stated liquidation amount of, with a distribution
rate identical to the distribution rate of, and accrued and unpaid distributions
equal to accrued and unpaid distributions on, the Trust Preferred Securities
have been distributed on a pro rata basis to the holders of the Trust Preferred
Securities.
If, upon any such Trust Liquidation, the Trust Liquidation Distribution can
be paid only in part because the Trust has insufficient assets available to pay
in full the aggregate Trust Liquidation Distribution, then the amounts payable
directly by the Trust on the Trust Preferred Securities shall be paid on a pro
rata basis. The holders of the Trust Common Securities will be entitled to
receive distributions upon any such liquidation pro rata with the holders of the
Trust Preferred Securities,
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except in the limited circumstances described above under ' -- Subordination of
Trust Common Securities.'
Pursuant to the Declaration, the Trust shall terminate (i) upon the
bankruptcy of the Company, (ii) upon the filing of a certificate of dissolution
or the equivalent with respect to the Company, the filing of a certificate of
cancellation with respect to the Trust after having obtained the consent of at
least a majority in liquidation amount of the Trust Securities, voting together
as a single class, to file such certificate of cancellation, or the revocation
of the charter of the Company and the expiration of 90 days after the date of
revocation without a reinstatement thereof, (iii) upon the distribution of all
of the Partnership Preferred Securities upon the occurrence of a Trust Special
Event, (iv) upon the entry of a decree of a judicial dissolution of the Company
or the Trust, or (v) upon the redemption of all the Trust Securities.
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act
and under 'Description of the Trust Guarantee -- Amendments and Assignment,' and
as otherwise required by law and the Declaration, the holders of the Trust
Preferred Securities will have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax opinion
as set forth in the last sentence of this paragraph, the holders of a majority
in liquidation amount of the Trust Preferred Securities have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Property Trustee, or direct the exercise of any trust or power conferred
upon the Property Trustee under the Declaration, including the right to direct
the Property Trustee, as holder of the Partnership Preferred Securities, to (i)
exercise the remedies available to it under the Limited Partnership Agreement as
a holder of the Partnership Preferred Securities, including the right to direct
the Special Representative to exercise its rights in the manner described above
under ' -- Trust Enforcement Events' and (ii) consent to any amendment,
modification, or termination of the Limited Partnership Agreement or the
Partnership Preferred Securities where such consent shall be required; provided,
however, that where a consent or action under the Limited Partnership Agreement
would require the consent or act of the holders of more than a majority of the
aggregate liquidation amount of Partnership Preferred Securities affected
thereby, only the holders of the percentage of the aggregate stated liquidation
amount of the Trust Securities which is at least equal to the percentage
required under the Limited Partnership Agreement may direct the Property Trustee
to give such consent or take such action on behalf of the Trust. See
'Description of the Partnership Preferred Securities -- Voting Rights.' The
Property Trustee shall notify all holders of the Trust Preferred Securities of
any notice of any Partnership Enforcement Event received from the General
Partner with respect to the Partnership Preferred Securities and the Affiliate
Investment Instruments. Such notice shall state that such Partnership
Enforcement Event also constitutes a Trust Enforcement Event. Except with
respect to directing the time, method, and place of conducting a proceeding for
a remedy as described above, the Property Trustee shall be under no obligation
to take any of the actions described in clauses (i) or (ii) above unless the
Property Trustee has obtained an opinion of independent tax counsel to the
effect that as a result of such action, the Trust will not fail to be classified
as a grantor trust for United States federal income tax purposes and each holder
will be treated as owning an undivided beneficial ownership interest in the
Partnership Preferred Securities.
A waiver of a Partnership Enforcement Event with respect to the Partnership
Preferred Securities held by the Property Trustee will constitute a waiver of
the corresponding Trust Enforcement Event.
Any required approval or direction of holders of Trust Preferred Securities
may be given at a separate meeting of holders of Trust Preferred Securities
convened for such purpose, at a meeting of all of the holders of Trust
Securities or pursuant to written consent. The Regular Trustees will cause a
notice of any meeting at which holders of Trust Preferred Securities are
entitled to vote, or of any matter upon which action by written consent of such
holders is to be taken, to be mailed to each holder of record of Trust Preferred
Securities. Each such notice will include a statement setting forth the
following information: (i) the date of such meeting or the date by which such
action is to be taken; (ii) a description of any resolution proposed for
adoption at such meeting on which such holders are entitled to vote or of such
matter upon which written consent is sought; and (iii) instructions for the
delivery of
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proxies or consents. No vote or consent of the holders of Trust Preferred
Securities will be required for the Trust to redeem and cancel Trust Preferred
Securities or distribute Partnership Preferred Securities in accordance with the
Declaration.
Notwithstanding that holders of Trust Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the Trust
Securities that are owned at such time by the Company or any entity directly or
indirectly controlled by, or under direct or indirect common control with, the
Company, shall not be entitled to vote or consent and shall, for purposes of
such vote or consent, be treated as if such Trust Securities were not
outstanding; provided however that persons (other than affiliates of the
Company) to whom the Company or any of its subsidiaries have pledged Trust
Preferred Securities may vote or consent with respect to such pledged Trust
Preferred Securities under any of the circumstances described herein.
The procedures by which holders of Trust Preferred Securities represented
by the global certificates may exercise their voting rights are described below.
See ' -- Book-Entry Only Issuance -- The Depository Trust Company.'
Holders of the Trust Preferred Securities will have no rights to appoint or
remove the Regular Trustees, who may be appointed, removed or replaced solely by
the Company, as the holder of all of the Trust Common Securities.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other entity, except as
described below. The Trust may, with the consent of a majority of the Regular
Trustees and without the consent of the holders of the Trust Securities, the
Property Trustee or the Delaware Trustee consolidate, amalgamate, merge with or
into, or be replaced by a trust organized as such under the laws of any State of
the United States; provided, that (i) if the Trust is not the survivor, such
successor entity either (x) expressly assumes all of the obligations of the
Trust under the Trust Securities or (y) substitutes for the Trust Preferred
Securities other securities having substantially the same terms as the Trust
Preferred Securities (the 'Successor Securities'), so long as the Successor
Securities rank the same as the Trust Securities rank with respect to
distributions, assets and payments, (ii) the Company expressly acknowledges a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Partnership Preferred Securities, (iii)
the Trust Preferred Securities or any Successor Securities are listed, or any
Successor Securities will be listed upon notification of issuance, on any
national securities exchange or with another organization on which the Trust
Preferred Securities are then listed or quoted, (iv) such merger, consolidation,
amalgamation or replacement does not cause the Trust Preferred Securities
(including any Successor Securities) to be downgraded by any nationally
recognized statistical rating organization, (v) such merger, consolidation,
amalgamation or replacement does not adversely affect the rights, preferences
and privileges of the holders of the Trust Preferred Securities (including any
Successor Securities) in any material respect, (vi) such successor entity has a
purpose substantially identical to that of the Trust, (vii) the Company
guarantees the obligations of such successor entity under the Successor
Securities to the same extent as provided by the Trust Guarantee, (viii) prior
to such merger, consolidation, amalgamation or replacement, the Company has
received an opinion of a nationally recognized independent counsel to the Trust
experienced in such matters to the effect that: (A) such merger, consolidation,
amalgamation or replacement will not adversely affect the rights, preferences
and privileges of the holders of the Trust Preferred Securities (including any
Successor Securities) in any material respect (other than with respect to any
dilution of the holders' interest in the new entity), (B) following such merger,
consolidation, amalgamation or replacement, neither the Trust nor such successor
entity will be required to register as an investment company under the 1940 Act,
(C) following such merger, consolidation, amalgamation or replacement, the Trust
(or such successor trust) will not be treated as an association or a publicly
traded partnership taxable as a corporation for United States federal income tax
purposes and (D) following such merger, consolidation, amalgamation or
replacement, the Partnership will not be classified as an association or a
publicly traded partnership taxable as a corporation for United States federal
income tax purposes. Notwithstanding the foregoing, the Trust shall not, except
with the consent of holders of
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100% in liquidation amount of the Trust Preferred Securities, consolidate,
amalgamate, merge with or into, or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it, if
such consolidation, amalgamation, merger or replacement would cause the Trust or
the successor entity to be classified as an association or a publicly traded
partnership taxable as a corporation for United States federal income tax
purposes.
MODIFICATION OF THE DECLARATION
The Declaration may be modified and amended if approved by a majority of
the Regular Trustees (and in certain circumstances the Property Trustee and the
Delaware Trustee), provided, that if any proposed amendment provides for, or the
Regular Trustees otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise or (ii)
the dissolution, winding-up or termination of the Trust other than pursuant to
the terms of the Declaration, then the holders of the Trust Securities voting
together as a single class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with the
approval of at least a majority in liquidation amount of the Trust Securities
affected thereby; provided, further that if any amendment or proposal referred
to in clause (i) above would adversely affect only the Trust Preferred
Securities or the Trust Common Securities, then only the affected class will be
entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of a majority in liquidation
amount of such class of Trust Securities.
The Declaration may be amended without the consent of the holders of the
Trust Securities to (i) cure any ambiguity, (ii) correct or supplement any
provision in the Declaration that may be defective or inconsistent with any
other provision of the Declaration, (iii) add to the covenants, restrictions or
obligations of the Sponsor, (iv) conform to any change in the 1940 Act, the
Trust Indenture Act or the rules or regulations of either such Act and (v)
modify, eliminate and add to any provision of the Declaration to such extent as
may be necessary or desirable; provided that no such amendment shall have a
material adverse effect on the rights, preferences or privileges of the holders
of the Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
fail to be classified as a grantor trust for United States federal income tax
purposes, (ii) cause the Partnership to be classified as an association or
publicly traded partnership taxable as a corporation for such purposes, (iii)
reduce or otherwise adversely affect the powers of the Property Trustee or (iv)
cause the Trust or the Partnership to be deemed an 'investment company' which is
required to be registered under the 1940 Act.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ('DTC') will act as securities depository (the
'Depository') for the Trust Preferred Securities and, to the extent distributed
to the holders of Trust Preferred Securities, the Partnership Preferred
Securities. The Trust Preferred Securities will be issued only as fully-
registered securities registered in the name of Cede & Co. (DTC's nominee). One
or more fully-registered global Trust Preferred Securities certificates ('Global
Certificates'), representing the total aggregate number of Trust Preferred
Securities, will be issued and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a 'banking organization' within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a 'clearing corporation' within the
meaning of the New York Uniform Commercial Code, and a 'clearing agency'
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ('Participants') deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Participants in DTC
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. DTC is owned by a number of its
Participants and by the New York Stock Exchange, the
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American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ('Indirect Participants'). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Trust Preferred Securities within the DTC system must be made
by or through Participants, which will receive a credit for the Trust Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
Trust Preferred Securities ('Beneficial Owner') is in turn to be recorded on the
Participants' and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchases, but Beneficial Owners
are expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Participants or Indirect Participants through which the Beneficial Owners
purchased Trust Preferred Securities. Transfers of ownership interests in the
Trust Preferred Securities are to be accomplished by entries made on the books
of Participants and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Trust Preferred Securities, except in the event that use of the
book-entry system for the Trust Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Trust Preferred
Securities; DTC's records reflect only the identity of the Participants to whose
accounts such Trust Preferred Securities are credited, which may or may not be
the Beneficial Owners. The Participants and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Trust Preferred Securities represented thereby
for all purposes under the Declaration and the Trust Preferred Securities. No
beneficial owner of an interest in a Global Certificate will be able to transfer
that interest except in accordance with DTC's applicable procedures, in addition
to those provided for under the Declaration.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Trust Preferred Securities (including the presentation of
Trust Preferred Securities for exchange as described below) only at the
direction of one or more Participants to whose account the DTC interests in the
Global Certificates are credited and only in respect of such portion of the
aggregate liquidation amount of Trust Preferred Securities as to which such
Participant or Participants has or have given such direction. However, if there
is a Trust Enforcement Event under the Trust Preferred Securities, DTC will
exchange the Global Certificates for Certificated Securities, which it will
distribute to its Participants in accordance with its customary procedures.
Conveyance of notices and other communications by DTC to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices in respect of the Trust Preferred Securities held in
book-entry form will be sent to Cede & Co. If less than all of the Trust
Preferred Securities are being redeemed, DTC will determine the amount of the
interest of each Participant to be redeemed in accordance with its procedures.
Although voting with respect to the Trust Preferred Securities is limited,
in those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Trust Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Participants to whose accounts the Trust Preferred
Securities are allocated on the record date (identified in a listing attached to
the Omnibus Proxy).
Distributions on the Trust Preferred Securities held in book-entry form
will be made to DTC in immediately available funds. DTC's practice is to credit
Participants' accounts on the relevant payment date in accordance with their
respective holdings shown on DTC's records unless DTC has reason to
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believe that it will not receive payments on such payment date. Payments by
Participants and Indirect Participants to Beneficial Owners will be governed by
standing instructions and customary practices and will be the responsibility of
such Participants and Indirect Participants and not of DTC, the Trust or the
Company, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of any distributions to DTC is the responsibility of
the Trust, disbursement of such payments to Participants is the responsibility
of DTC, and disbursement of such payments to the Beneficial Owners is the
responsibility of Participants and Indirect Participants.
Except as provided herein, a Beneficial Owner of an interest in a Global
Certificate will not be entitled to receive physical delivery of Trust Preferred
Securities. Accordingly, each Beneficial Owner must rely on the procedures of
DTC to exercise any rights under the Trust Preferred Securities.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificates among Participants of DTC, DTC
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company nor the
Trust will have any responsibility for the performance by DTC or its
Participants or Indirect Participants under the rules and procedures governing
DTC. DTC may discontinue providing its services as securities depository with
respect to the Trust Preferred Securities at any time by giving notice to the
Trust. Under such circumstances, in the event that a successor securities
depository is not obtained, Trust Preferred Security certificates are required
to be printed and delivered to the Property Trustee. Additionally, the Trust
(with the consent of the Company) may decide to discontinue use of the system of
book-entry transfers through DTC or any successor depository. In that event,
certificates for the Trust Preferred Securities will be printed and delivered to
the Property Trustee. In each of the above circumstances, the Company will
appoint a paying agent with respect to the Trust Preferred Securities.
The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. Such laws
may impair the ability to transfer beneficial interests in the global Trust
Preferred Securities as represented by a Global Certificate.
PAYMENT
Payments in respect of the Trust Preferred Securities represented by the
Global Certificates shall be made to DTC, which shall credit the relevant
accounts at DTC on the scheduled payment dates or, in the case of certificated
securities, if any, such payments shall be made by check mailed to the address
of the holder entitled thereto as such address shall appear on the register. The
Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written
notice to the Regular Trustees. In the event that The First National Bank of
Chicago, N.A. shall no longer be the Paying Agent, the Regular Trustees shall
appoint a successor to act as Paying Agent (which shall be a bank or trust
company).
REGISTRAR, TRANSFER AGENT, AND PAYING AGENT
The Property Trustee will act as Registrar, Transfer Agent and Paying Agent
for the Trust Preferred Securities.
Registration of transfers of Trust Preferred Securities will be effected
without charge by or on behalf of the Trust, but upon payment (with the giving
of such indemnity as the Trust or the Company may require) in respect of any tax
or other government charges which may be imposed in relation to it.
The Trust will not be required to register or cause to be registered the
transfer of Trust Preferred Securities after such Trust Preferred Securities
have been called for redemption.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities, undertakes to perform only such duties as are specifically
set forth in the Declaration and, after default, shall exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Property Trustee is under no obligation
to exercise any of the powers vested in it by the Declaration at the request of
any holder of Trust Preferred Securities,
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unless offered reasonable indemnity by such holder against the costs, expenses
and liabilities which might be incurred thereby. The holders of Trust Preferred
Securities will not be required to offer such indemnity in the event such
holders, by exercising their voting rights, direct the Property Trustee to take
any action following a Trust Enforcement Event.
GOVERNING LAW
The Declaration and the Trust Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to conduct the affairs of
and to operate the Trust in such a way that the Trust will not be deemed to be
an 'investment company' required to be registered under the 1940 Act or
characterized as other than a grantor trust for United States federal income tax
purposes. In this connection, the Regular Trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of trust or the
Declaration that the Regular Trustees determine in their discretion to be
necessary or desirable for such purposes as long as such action does not
adversely affect the interests of the holders of the Trust Preferred Securities.
Holders of the Trust Preferred Securities have no preemptive rights.
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DESCRIPTION OF THE TRUST GUARANTEE
Set forth below is a summary of information concerning the Trust Guarantee
which will be executed and delivered by the Company for the benefit of the
holders from time to time of Trust Preferred Securities. The summary does not
purport to be complete and is subject in all respects to the provisions of, and
is qualified in its entirety by reference to, the Trust Guarantee, which is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The Trust Guarantee incorporates by reference the terms of, and will be
qualified as an indenture under, the Trust Indenture Act. The First National
Bank of Chicago, N.A., as the Trust Guarantee Trustee, will hold the Trust
Guarantee for the benefit of the holders of the Trust Preferred Securities and
will act as indenture trustee for the purposes of compliance with the Trust
Indenture Act.
GENERAL
Pursuant to the Trust Guarantee, the Company will irrevocably agree, on a
subordinated basis and to the extent set forth therein, to pay in full to the
holders of the Trust Preferred Securities (except to the extent paid by the
Trust), as and when due, regardless of any defense, right of set off or
counterclaim which the Trust may have or assert, the following payments (the
'Trust Guarantee Payments'), without duplication: (i) any accrued and unpaid
distributions on the Trust Preferred Securities to the extent the Trust has
funds available therefor, (ii) the Redemption Price with respect to any Trust
Preferred Securities called for redemption by the Trust, to the extent the Trust
has funds available therefor and (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Trust (other than in connection
with the distribution of Partnership Preferred Securities to the holders of
Trust Preferred Securities or the redemption of all of the Trust Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Trust Preferred Securities and (b) the
amount of assets of the Trust remaining available for distribution to holders of
Trust Preferred Securities upon the liquidation of the Trust. The Company's
obligation to make a Trust Guarantee Payment may be satisfied by direct payment
of the required amounts by the Company to the holders of Trust Preferred
Securities or by causing the Trust to pay such amounts to such holders.
The Trust Guarantee will be a guarantee on a subordinated basis with
respect to the Trust Preferred Securities from the time of issuance of such
Trust Preferred Securities but will only apply to any payment of distributions
or Redemption Price, or to payments upon the dissolution, winding-up or
termination of the Trust, to the extent the Trust shall have funds available
therefor. If the Partnership fails to declare distributions on Partnership
Preferred Securities, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Trust Preferred Securities
or otherwise, and in such event holders of the Trust Preferred Securities would
not be able to rely upon the Trust Guarantee for payment of such amounts.
Instead, holders of the Trust Preferred Securities will have the remedies
described herein under 'Description of the Trust Preferred Securities -- Trust
Enforcement Events', including the right to direct the Trust Guarantee Trustee
to enforce the covenant restricting certain payments by the Company and its
majority owned subsidiaries. See ' -- Certain Covenants of the Company' below.
The Guarantees, when taken together with the Company Debenture and the
Company's obligations to pay all fees and expenses of the Trust and the
Partnership, constitute a full and unconditional guarantee to the extent set
forth herein by the Company of the distribution, redemption and liquidation
payments payable to the holders of the Trust Preferred Securities. The
Guarantees do not apply, however, to current distributions by the Partnership
unless and until such distributions are declared by the Partnership out of funds
legally available for payment or to liquidating distributions unless there are
assets available for payment in the Partnership, each as more fully described
under 'Risk Factors -- Risk Factors Related to TOPrS -- Insufficient Income or
Assets Available to Partnership.'
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CERTAIN COVENANTS OF THE COMPANY
The Company will covenant in the Trust Guarantee that, if (a) for any
distribution period, full distributions on a cumulative basis on any Trust
Preferred Securities have not been paid, (b) an Investment Event of Default by
any Investment Affiliate in respect of any Affiliate Investment Instrument has
occurred and is continuing or (c) the Company is in default of its obligations
under the Trust Guarantee, the Partnership Guarantee or any Investment
Guarantee, then, during such period the Company shall not, nor permit any
majority owned subsidiary to (i) declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a liquidation payment
with respect to any of its capital stock or comparable equity interest (except
for dividends or distributions in shares of its capital stock, conversions or
exchanges of common stock of one class into common stock of another class and
dividends, distributions with respect to the Partnership or the Trust or
dividends and distributions on the common stock of wholly owned subsidiaries of
the Company), (ii) make, or permit the making of, any Affiliated Restricted
Payments except for Permissible Affiliated Payments, and (iii) make any
guarantee payments with respect to the foregoing.
'Affiliated Restricted Payments' means any payment (including, without
limitation, payments for the sale, purchase or lease of any assets or properties
or the rendering of any services) to any Affiliate of the Company, except for
Permissible Affiliated Payments. 'Affiliate' means, with respect to any
specified person, any other person that directly or indirectly controls or is
controlled by, or is under common control with, such specified person, provided,
that, with respect to the Company, 'Affiliate' shall be deemed to also include
any entity of which at least 20% of the capital stock is owned by a person that
directly or indirectly controls the Company. 'Permissible Affiliated Payments'
means (i) payments by the Company or its subsidiaries (other than the
Partnership or the Trust) to Affiliates of the Company for management or other
advisory services not to exceed $10 million per annum and (ii) transactions made
in good faith the terms of which are fair and reasonable to the Company or such
majority owned subsidiary, as the case may be, and are at least as favorable as
terms which could be obtained by the Company or such majority owned subsidiary,
as the case may be, in a comparable transaction made on an arm's length basis
with persons which are not Affiliates of the Company; provided, that with
respect to a payment or a series of payments not greater than $1 million, such
payment or payments shall be conclusively deemed to be on terms which are fair
and reasonable to the Company or any of its majority owned subsidiaries and on
terms which are at least as favorable as the terms which could be obtained on an
arm's length basis with persons who are not Affiliates if such payment or
payments are approved by a majority of the Company's independent directors;
provided, further, that with respect to a payment or a series of related
payments in excess of $1 million, the Company or such subsidiary shall either
(A) have received a written opinion of a nationally recognized investment bank
stating that the terms of such payment are fair to the Company or such
subsidiary, as the case may be, from a financial point of view, or (B) have
selected the Affiliate or Affiliates which are to receive such payments based
upon a competitive bid procedure in which the Company or such subsidiary shall
have received at least two independent bids, administered in good faith and on
commercially reasonable terms by the Company or such subsidiary.
EVENTS OF DEFAULT; ENFORCEMENT OF TRUST GUARANTEE
An event of default under the Trust Guarantee will occur upon the failure
of the Company to perform any of its payment or other obligations thereunder.
The holders of a majority in liquidation amount of the Trust Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trust Guarantee Trustee or to direct
the exercise of any trust or power conferred upon the Trust Guarantee Trustee
under the Trust Guarantee. If the Trust Guarantee Trustee fails to enforce its
rights under the Trust Guarantee after a holder of Trust Preferred Securities
has made a written request, such holder may institute a legal proceeding
directly against the Company to enforce the Trust Guarantee Trustee's rights
under the Trust Guarantee, without first instituting a legal proceeding against
the Trust, the Trust Guarantee Trustee or any other person or entity. In any
event, if the Company has failed to make a guarantee payment under the Trust
Guarantee, a holder of Trust Preferred Securities may directly
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institute a proceeding in such holder's own name against the Company for
enforcement of the Trust Guarantee for such payment.
STATUS OF THE TRUST GUARANTEE; SUBORDINATION
The Trust Guarantee will constitute an unsecured obligation of the Company
and will rank subordinate and junior to all other liabilities of the Company and
will rank pari passu with the most senior preferred stock issued from time to
time by the Company and with any guarantee now or hereafter entered into by the
Company in respect of any preferred stock of any affiliate of the Company. The
terms of the Trust Preferred Securities provide that each holder of Trust
Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Trust Guarantee.
The Trust Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may directly institute a legal
proceeding against the Company to enforce its rights under the Trust Guarantee
without instituting a legal proceeding against any other person or entity).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of Trust Preferred Securities (in which case no vote will
be required), the Trust Guarantee may be amended only with the prior approval of
the holders of at least a majority in liquidation amount of all the outstanding
Trust Preferred Securities. The manner of obtaining any such approval of holders
of the Trust Preferred Securities will be as set forth under 'Description of the
Trust Preferred Securities -- Voting Rights.' All guarantees and agreements
contained in the Trust Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Company and shall inure to the benefit of
the holders of the Trust Preferred Securities then outstanding. Except in
connection with any permitted merger or consolidation of the Company with or
into another entity or any permitted sale, transfer or lease of the Company's
assets to another entity as described below under 'Description of the
Partnership Preferred Securities -- Merger, Consolidation or Amalgamation of the
Partnership,' the Company may not assign its rights or delegate its obligations
under the Trust Guarantee without the prior approval of the holders of at least
a majority of the aggregate stated liquidation amount of the Trust Preferred
Securities then outstanding.
TERMINATION OF THE TRUST GUARANTEE
The Trust Guarantee will terminate as to each holder of Trust Preferred
Securities upon (i) full payment of the Redemption Price of all Trust Preferred
Securities, (ii) distribution of the Partnership Preferred Securities held by
the Trust to the holders of the Trust Preferred Securities or (iii) full payment
of the amounts payable in accordance with the Declaration upon liquidation of
the Trust. The Trust Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of Trust Preferred
Securities must restore payment of any sum paid under such Trust Preferred
Securities or such Trust Guarantee.
INFORMATION CONCERNING THE TRUST GUARANTEE TRUSTEE
The Trust Guarantee Trustee, prior to the occurrence of a default with
respect to the Trust Guarantee, undertakes to perform only such duties as are
specifically set forth in the Trust Guarantee and, after default with respect to
the Trust Guarantee, shall exercise the same degree of care as a prudent man
would exercise in the conduct of his own affairs. Subject to such provision, the
Trust Guarantee Trustee is under no obligation to exercise any of the powers
vested in it by the Trust Guarantee at the request of any holder of Trust
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
GOVERNING LAW
The Guarantee will be governed by, and construed in accordance with, the
laws of the State of New York.
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DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIES
GENERAL
All of the partnership interests in the Partnership other than the
Partnership Preferred Securities acquired by the Trust are owned directly by the
Company. The Company is the sole general partner of the Partnership. The Limited
Partnership Agreement authorizes and creates the Partnership Preferred
Securities, which represent limited partnership interests in the Partnership.
The limited partnership interests represented by the Partnership Preferred
Securities will have a preference with respect to distributions and amounts
payable on redemption or liquidation over the General Partner's interest in the
Partnership. Except as otherwise described herein or provided in the Limited
Partnership Agreement, the Limited Partnership Agreement does not permit the
issuance of any additional partnership interests, or the incurrence of any
indebtedness by the Partnership.
The summary of certain material terms and provisions of the Partnership
Preferred Securities set forth below does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Limited
Partnership Agreement, which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part, and the Partnership Act.
DISTRIBUTIONS
Holders of Partnership Preferred Securities will be entitled to receive
cumulative cash distributions, if, as and when declared by the General Partner
in its sole discretion out of assets of the Partnership legally available for
payment. The distributions payable on each Partnership Preferred Security will
be fixed at a rate per annum of % of the stated liquidation preference of $25
per Partnership Preferred Security. Distributions not paid on the scheduled
payment date will accumulate and compound quarterly at the rate per annum equal
to %. The amount of distributions payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months.
Distributions on the Partnership Preferred Securities will be payable
quarterly in arrears on March 31, June 30, September 30, and December 31 of each
year, commencing December 31, 1996. If distributions are not declared and paid
when scheduled, the accrued distributions shall be paid to the holders of record
of Partnership Preferred Securities as they appear on the books and records of
the Partnership on the record date with respect to the payment date for the
Partnership Preferred Securities.
The Partnership's earnings available for distribution to the holders of the
Partnership Preferred Securities will be limited to payments made on the
Affiliate Investment Instruments and Investment Guarantees and payments on
Eligible Debt Securities in which the Partnership has invested from time to
time. See ' -- Partnership Investments.' To the extent that the issuers
(including, where applicable, the Company, as guarantor) of the securities in
which the Partnership invests fail to make any payment in respect of such
securities (or, if applicable, such guarantees), the Partnership will not have
sufficient funds to pay and will not declare or pay distributions on the
Partnership Preferred Securities, in which event the Partnership Guarantee will
not apply to such distributions until the Partnership has sufficient funds
available therefor. See 'Description of the Partnership Guarantee.' In addition,
distributions on the Partnership Preferred Securities may be declared and paid
only as determined in the sole discretion of the Company, as the General Partner
of the Partnership. If the Partnership fails to declare and pay distributions on
the Partnership Preferred Securities out of funds legally available for
distribution, the Trust will not have sufficient funds to make distributions on
the Trust Preferred Securities, in which event the Trust Guarantee will not
apply to such distributions until the Trust has sufficient funds available
therefor. In addition, as described under 'Risk Factors -- Risk Factors Related
to TOPrS -- Insufficient Income or Assets Available to Partnership,' the
Partnership may not have sufficient funds to pay current or liquidating
distributions on the Partnership Preferred Securities if (i) at any time that
the Partnership is receiving current payments in respect of the securities held
by the Partnership (including the Debentures), the General Partner, in its sole
discretion, does not declare distributions on the Partnership Preferred
Securities and the Partnership receives insufficient amounts to pay the
additional compounded distributions that will accrue in respect of the
Partnership Preferred Securities, (ii) the Partnership reinvests the proceeds
received in respect of the Debentures upon their retirement
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or at their maturities in Affiliate Investment Instruments that do not generate
income in an amount that is sufficient to pay full distributions in respect of
the Partnership Preferred Securities or (iii) the Partnership invests in equity
or debt securities of Investment Affiliates that are not guaranteed by the
Company and that cannot be liquidated by the Partnership for an amount
sufficient to pay such distributions in full.
Distributions on the Partnership Preferred Securities will be payable to
the holders thereof as they appear on the books and records of the Partnership
on the relevant record dates, which, as long as the Trust Preferred Securities
remain (or, in the event that the Trust is liquidated in connection with a Trust
Special Event, as long as the Partnership Preferred Securities remain) in
book-entry-only form, will be one Business Day prior to the relevant payment
dates. In the event the Trust Preferred Securities (or in the event that the
Trust is liquidated in connection with a Trust Special Event, the Partnership
Preferred Securities) shall not continue to remain in book-entry only form, the
relevant record dates shall be the 15th day of the month of the relevant payment
dates. In the event that any date on which distributions are payable on the
Partnership Preferred Securities is not a Business Day, then payment of the
distribution payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay) except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date.
PARTNERSHIP ENFORCEMENT EVENTS
If one or more of the following events shall occur and be continuing (each
a 'Partnership Enforcement Event'): (i) arrearages on distributions on the
Partnership Preferred Securities shall exist for six consecutive quarterly
distribution periods, (ii) the Company is in default on any of its obligations
under the Partnership Guarantee or any Investment Guarantee or (iii) an
Investment Event of Default occurs and is continuing on any Affiliate Investment
Instrument, then holders of the Partnership Preferred Securities will be
entitled by the vote of a majority in aggregate liquidation preference of such
holders (or, for so long as the Partnership Preferred Securities are held by the
Property Trustee), the Property Trustee, as the holder of the Partnership
Preferred Securities, will have the right (a) under the Limited Partnership
Agreement to enforce the terms of the Partnership Preferred Securities,
including the right to appoint and authorize a special representative of the
Partnership and the limited partners (a 'Special Representative') to enforce (1)
the Partnership's creditors' rights and other rights with respect to the
Affiliate Investment Instruments and the Investment Guarantees, (2) the rights
of the holders of the Partnership Preferred Securities under the Partnership
Guarantee and (3) the rights of the holders of the Partnership Preferred
Securities to receive distributions (only if and to the extent declared out of
funds legally available therefor) on the Partnership Preferred Securities, and
(b) under the Partnership Guarantee to enforce the terms of the Partnership
Guarantee, including the right to enforce the covenant restricting certain
payments by the Company and its majority owned subsidiaries.
If the Special Representative fails to enforce its rights under the
Affiliate Investment Instruments after a holder of Partnership Preferred
Securities has made a written request, such holder of record of Partnership
Preferred Securities may directly institute a legal proceeding against the
Company to enforce the rights of the Special Representative and the Partnership
under the Affiliate Investment Instruments without first instituting any legal
proceeding against the Special Representative, the Partnership or any other
person or entity. In any event, if a Partnership Enforcement Event has occurred
and is continuing and such event is attributable to the failure of an Investment
Affiliate to make any required payment when due on any Affiliate Investment
Instrument, then a holder of Partnership Preferred Securities may on behalf of
the Partnership directly institute a proceeding against such Investment
Affiliate with respect to such Affiliate Investment Instrument for enforcement
of payment. A holder of Partnership Preferred Securities may also bring a direct
action against the Company to enforce such holder's right under the Partnership
Guarantee. See 'Description of the Partnership Guarantee -- Events of Default;
Enforcement of Partnership Guarantee.'
Under no circumstances, however, shall the Special Representative have
authority to cause the General Partner to declare distributions on the
Partnership Preferred Securities. As a result, although the Special
Representative may be able to enforce the Partnership's creditors' rights to
accelerate and
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receive payments in respect of the Affiliate Investment Instruments and the
Investment Guarantees, the Partnership would be entitled to reinvest such
payments in additional Affiliate Investment Instruments, subject to satisfying
the reinvestment criteria described under 'Description of the Partnership
Preferred Securities -- Partnership Investments,' and the Eligible Debt
Securities, rather than declaring and making distributions on the Partnership
Preferred Securities. The Special Representative shall not, by virtue of acting
in such capacity, be admitted as a general partner in the Partnership or
otherwise be deemed to be a general partner in the Partnership and shall have no
liability for the debts, obligations or liabilities of the Partnership.
PARTNERSHIP INVESTMENTS
Approximately 99% of the proceeds from the issuance of the Partnership
Preferred Securities and the General Partner's contemporaneous capital
contribution (the 'Initial Partnership Proceeds') will be used by the
Partnership to purchase the Debentures and the remaining 1% of the Initial
Partnership Proceeds will be used to purchase Eligible Debt Securities. The
purchase of the Debentures by the Partnership will occur contemporaneously with
the issuance of the Partnership Preferred Securities.
The initial Affiliate Investment Instruments purchased by the Partnership
will consist of three debt instruments (the 'Debentures'). Approximately 85% of
the of the Initial Partnership Proceeds will be used to purchase a Debenture of
the Company (the 'Company Debenture'), and approximately 14% of the Initial
Partnership Proceeds will be used to purchase Debentures of two domestic wholly
owned subsidiaries of the Company (the 'Affiliate Debentures'). Each Debenture
is expected to have a term of 20 years and to provide for interest payable at
market rates for such Debentures. The Debentures will be general unsecured debt
obligations of the relevant issuer, except that the Company Debenture will rank
subordinate and junior to all senior indebtedness of the Company.
The payment of interest on each of the Debentures may be deferred at any
time, and from time to time, by the relevant issuer for a period not exceeding
six consecutive quarters. If an issuer were to so defer the payment of interest,
interest would continue to accrue and compound at the stated interest rate on
such Debenture. The Debentures will contain covenants appropriate for unsecured
debt securities issued by similar borrowers pursuant to a public offering or
private placement under Rule 144A of a comparable debt security, including a
limitation on consolidation, merger, sale or conveyance of assets of the
relevant issuer and a limitation on incurrence of secured debt and, in the case
of the Company Debenture, a limitation on its ability to incur senior
indebtedness unless at least one nationally recognized rating agency rates the
Company's long-term senior unsecured indebtedness in one of its generic rating
categories which signifies investment grade. The Debentures will contain a
mandatory redemption provision that is triggered upon a change of control of the
relevant issuer, as well as redemption provisions that correspond to the
redemption provisions applicable to the Partnership Preferred Securities,
including an option to redeem the Debentures by the relevant issuer, in whole or
in part, from time to time, on or after October , 2006, and following the
occurrence of a Partnership Special Event, in each case, in the same manner
described under ' -- Optional Redemption' and ' -- Partnership Special Event
Redemption.' The Debentures, and any other Affiliate Investment Instruments that
are debt instruments acquired by the Partnership in the future, will also
contain customary events of default (the 'Investment Events of Default'),
including events of default for defaults in payments on such securities when due
(provided that no default shall occur upon a valid deferral of an interest
payment by an issuer), defaults in the performance of the relevant issuer's
obligations under its Debenture or Affiliate Investment Instruments, as the case
may be, and certain bankruptcy, insolvency or reorganization events (subject to
customary exceptions and grace periods).
The payment of interest and principal when due and other payment terms of
the Debentures (other than the Company Debenture), will be guaranteed to the
extent described herein (each, an 'Investment Guarantee') by the Company for the
benefit of the holders of Partnership Preferred Securities. See ' -- Investment
Guarantees.'
Approximately 1% of the Initial Partnership Proceeds will be invested in
Eligible Debt Securities. 'Eligible Debt Securities' means cash or book-entry
securities, negotiable instruments, or other securities of entities not
affiliated with the Company represented by instruments in registered form which
evidence any of the following: (a) any security issued or guaranteed as to
principal or interest by
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the United States, or by a person controlled or supervised by and acting as an
instrumentality of the Government of the United States pursuant to authority
granted by the Congress of the United States, or any certificate of deposit for
any of the foregoing; (b) commercial paper issued pursuant to Section 3(a)(3) of
the Securities Act of 1933 (the 'Securities Act') and having, at the time of the
investment or contractual commitment to invest therein, a rating from each of
S&P and Moody's in the highest investment rating category granted by such rating
agency and having a maturity not in excess of nine months; (c) demand deposits,
time deposits and certificates of deposit which are fully insured by the Federal
Deposit Insurance Corporation ('FDIC'); (d) repurchase obligations with respect
to any security that is a direct obligation of, or fully guaranteed by, the
Government of the United States of America or any agency or instrumentality
thereof, the obligations of which are backed by the full faith and credit of the
United States of America, in either case entered into with a depository
institution or trust company which is an Eligible Institution (as defined
herein) and the deposits of which are insured by the FDIC; and (e) any other
security which is identified as a permitted investment of a finance subsidiary
pursuant to Rule 3a-5 under the 1940 Act at the time it is acquired by the
Partnership.
'Eligible Institution' means (a) a depository institution organized under
the laws of the United States or any one of the states thereof or the District
of Columbia (or any domestic branch of a foreign bank), (1) (i) which has either
(A) a long-term unsecured debt rating of AA or better by S&P and Aa or better by
Moody's or (B) a short-term unsecured debt rating or a certificate of deposit
rating of A-1+ by S&P and P-1 by Moody's and (ii) whose deposits are insured by
the FDIC or (2) (i) the parent of which has a long-term or short-term unsecured
debt rating which signifies investment grade and (ii) whose deposits are insured
by the FDIC.
The Partnership may, from time to time and subject to the restrictions
described below, reinvest payments received with respect to the Affiliate
Investment Instruments (including the Debentures) and the Eligible Debt
Securities in additional Affiliate Investment Instruments and Eligible Debt
Securities. As of the date of this Prospectus, the Company, as the General
Partner, does not intend to cause the Partnership to reinvest payments received
by the Partnership in the manner described below, although there can be no
assurance that the General Partner's intention in respect of such reinvestments
will not change in the future.
The specific terms of all Affiliate Investment Instruments (including the
Debentures) will be determined by a nationally recognized investment banking
firm that does not (and whose directors, officers, employees and affiliates do
not) have a direct or indirect material equity interest in the Company or any of
its subsidiaries and which is either among the five largest underwriters of debt
or preferred securities in the United States or was selected by the Company and
approved by the holders of a majority in liquidation amount of the Partnership
Preferred Securities (the 'Independent Financial Advisor'). Merrill Lynch & Co.
will serve as the initial Independent Financial Advisor.
The Partnership may reinvest in additional Affiliate Investment Instruments
only if certain procedures and criteria are satisfied with respect to such
Affiliate Investment Instrument, including the satisfaction of the following
conditions: (i) the Partnership did not hold debt or equity securities of the
issuer of the proposed Affiliate Investment Instrument within the three-year
period ending on the date of such proposed investment; (ii) there was never a
default on any debt obligation of, or arrearages of dividends on preferred stock
issued by, the issuer of the proposed Affiliate Investment Instrument that was
previously or is currently owned by the Partnership; and (iii) the applicable
terms and provisions with respect to the proposed Affiliate Investment
Instrument have been determined by the Independent Financial Advisor to be at
least as favorable as terms which could be obtained by the Partnership in a
public offering or private placement under Rule 144A of a comparable security
issued by the relevant Investment Affiliate and (iv) the requesting Investment
Affiliate shall not be deemed to be an investment company by reason of Section
3(a) or 3(b) of the 1940 Act. The term 'Investment Affiliate' means the Company
or any corporation, partnership, limited liability company or other entity
(other than the Partnership or the Trust) that is controlled by the Company. If
the Partnership is unable to reinvest payments and proceeds from Affiliate
Investment Instruments in additional Affiliate Investment Instruments meeting
the above criteria, the Partnership may only invest such funds in Eligible Debt
Securities (subject to restrictions of applicable law, including the 1940 Act).
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INVESTMENT GUARANTEES
General
The Company will agree, on a subordinated basis and to the extent set forth
therein, to execute and deliver an Investment Guarantee for the benefit of the
holders of Partnership Preferred Securities with respect to each Debenture
issued by an Investment Affiliate (other than the Company Debenture) to the
extent set forth below. The Investment Guarantees shall be enforceable
regardless of any defense, right of set-off or counterclaim that the Company may
have or assert. The Investment Guarantees will be full and unconditional
guarantees with respect to the applicable Debentures from the time of issuance.
To the extent that, as described above, the Partnership invests in additional
Affiliate Investment Instruments, the determination as to whether such Affiliate
Investment Instrument will contain an Investment Guarantee will be made at the
date of its issuance and will be based, among other things, upon its approval by
the Independent Financial Advisor in accordance with the reinvestment criteria
described above.
The Investment Guarantees will constitute guarantees of payment and not of
collection (that is, the guaranteed party may directly institute a legal
proceeding against the Company to enforce its rights under the applicable
Investment Guarantee without instituting a legal proceeding against any other
person or entity). If no Special Representative has been appointed to enforce
any Investment Guarantee, the General Partner has the right to enforce such
Investment Guarantee on behalf of the holders of the Partnership Preferred
Securities. The holders of not less than a majority in aggregate liquidation
preference of the Partnership Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available in
respect of any Investment Guarantee, including the giving of directions to the
General Partner or the Special Representative, as the case may be. If the
General Partner or the Special Representative fails to enforce any Investment
Guarantee as above provided, any holder of Trust Preferred Securities may
institute its own legal proceeding to enforce such Investment Guarantee. No
Investment Guarantee will be discharged except by payment in full of all amounts
guaranteed by such Investment Guarantee (without duplication of amounts
theretofore paid by the relevant Investment Affiliate).
Amendments and Assignment
Except with respect to any changes that do not adversely affect the rights
of holders of Partnership Preferred Securities (in which case no consent will be
required), the Investment Guarantees may be amended only with the prior approval
of the holders of not less than a majority in liquidation preference of the
outstanding Partnership Preferred Securities, provided that for so long as the
Property Trustee of the Trust is the holder of the Partnership Preferred
Securities, such amendment will not be effective without the prior written
approval of a majority in liquidation preference of the outstanding Trust
Preferred Securities. All guarantees and agreements contained in the Investment
Guarantees shall bind the successors, assigns, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
Partnership Preferred Securities.
Status of the Investment Guarantees
The Company's obligations under the Investment Guarantees will constitute
unsecured obligations of the Company and will rank subordinate and junior to all
other liabilities of the Company and will rank pari passu with the most senior
preferred stock issued from time to time by the Company and with any guarantee
now or hereafter entered into by the Company in respect of any preferred stock
of any affiliate of the Company.
Governing Law
The Investment Guarantees will be governed by and construed in accordance
with the laws of the State of New York.
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OPTIONAL REDEMPTION
The Partnership Preferred Securities are redeemable, at the option of the
General Partner, in whole or in part, from time to time, on or after October ,
2006, upon not less than 30 nor more than 60 days' notice, at an amount per
Partnership Preferred Security equal to $25 plus accrued and unpaid
distributions thereon. If the Partnership redeems Partnership Preferred
Securities in accordance with the terms thereof, Trust Securities will be
mandatorily redeemed at the Redemption Price. If a partial redemption would
result in the delisting of the Trust Preferred Securities (or, if the Trust is
liquidated in connection with a Trust Special Event, the delisting of the
Partnership Preferred Securities), the Partnership may only redeem the
Partnership Preferred Securities in whole.
PARTNERSHIP SPECIAL EVENT REDEMPTION
If, at any time, a Partnership Tax Event or a Partnership Investment
Company Event (each as hereinafter defined, and each a 'Partnership Special
Event') shall occur and be continuing, the General Partner shall, within 90 days
following the occurrence of such Partnership Special Event, elect to either (i)
redeem the Partnership Preferred Securities in whole (but not in part), upon not
less than 30 or more than 60 days' notice at the Redemption Price, provided
that, if at the time there is available to the Partnership the opportunity to
eliminate, within such 90-day period, the Partnership Special Event by taking
some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable such measure that in the sole judgment of
the Company has or will cause no adverse effect on the Partnership, the Trust or
the Company, the General Partner will pursue such measure in lieu of redemption;
or (ii) cause the Partnership Preferred Securities to remain outstanding,
provided that in the case of this clause (ii), the General Partner shall pay any
and all costs and expenses incurred by or payable by the Partnership
attributable to the Partnership Special Event.
'Partnership Tax Event' means that the General Partner shall have requested
and received an opinion of nationally recognized independent tax counsel
experienced in such matters to the effect that there has been a Tax Action which
affects any of the events described in (i) through (iii) below and that there is
more than an insubstantial risk that (i) the Partnership is, or will be, subject
to United States federal income tax with respect to income accrued or received
on the Affiliate Investment Instruments or the Eligible Debt Securities, (ii)
the Partnership is, or will be, subject to more than a de minimis amount of
other taxes, duties or other governmental charges or (iii) interest payable by
an Investment Affiliate with respect to the Debenture issued by such Investment
Affiliate to the Partnership is not, or will not be, deductible by such
Investment Affiliate for United States federal income tax purposes.
'Partnership Investment Company Event' means that the General Partner shall
have requested and received an opinion of nationally recognized independent
legal counsel experienced in such matters to the effect that as a result of the
occurrence on or after the date hereof of a Change in 1940 Act Law, the
Partnership is or will be considered an 'investment company' which is required
to be registered under the 1940 Act.
REDEMPTION PROCEDURES
The Partnership may not redeem fewer than all the outstanding Partnership
Preferred Securities unless all accrued and unpaid distributions have been paid
on all Partnership Preferred Securities for all quarterly distribution periods
terminating on or prior to the date of redemption.
If the Partnership gives a notice of redemption in respect of Partnership
Preferred Securities (which notice will be irrevocable) then, by 12:00 noon, New
York City time, on the redemption date, the Partnership (i) if the Partnership
Preferred Securities are in book entry form with DTC, will deposit irrevocably
with DTC funds sufficient to pay the applicable Redemption Price and will give
DTC irrevocable instructions and authority to pay the Redemption Price in
respect of the Partnership Preferred Securities held through DTC in global form
or (ii) if the Partnership Preferred Securities are held in certificated form,
will deposit with the paying agent for the Partnership Preferred Securities
funds sufficient to pay such amount in respect of any Partnership Preferred
Securities in certificated form and will give such paying agent irrevocable
instructions and authority to pay such amounts to the
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holders of Partnership Preferred Securities upon surrender of their
certificates. See ' -- Book-Entry-Only Issuance -- The Depository Trust
Company.'
If notice of redemption shall have been given and funds deposited as
required, then upon the date of such deposit, all rights of holders of such
Partnership Preferred Securities so called for redemption will cease, except the
right of the holders of such Partnership Preferred Securities to receive the
Redemption Price, but without interest on such Redemption Price. In the event
that any date fixed for redemption of Partnership Preferred Securities is not a
Business Day, then payment of the Redemption Price payable on such date will be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay) except that, if such Business Day
falls in the next calendar year, such payment will be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date fixed for redemption. In the event that payment of the Redemption
Price in respect of Partnership Preferred Securities is improperly withheld or
refused and not paid either by the Partnership or by the Company pursuant to the
Partnership Guarantee described under 'Description of the Partnership
Guarantee,' distributions on such Partnership Preferred Securities will continue
to accrue, from the original redemption date to the date of payment.
Subject to the foregoing and applicable law (including, without limitation,
United States federal securities laws), the Company or any of its subsidiaries
may at any time and from time to time purchase outstanding Partnership Preferred
Securities by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution, winding-up or
termination of the Partnership, the holders of the Partnership Preferred
Securities at the time will be entitled to receive out of the assets of the
Partnership available for distribution to partners after satisfaction of
liabilities of creditors as required by the Partnership Act, before any
distribution of assets is made to the General Partner, an amount equal to, in
the case of holders of Partnership Preferred Securities, the aggregate of the
stated liquidation preference of $25 per Partnership Preferred Security plus
accrued and unpaid distributions thereon to the date of payment (such amount
being the 'Partnership Liquidation Distribution').
Pursuant to the Limited Partnership Agreement, the Partnership shall be
dissolved and its affairs shall be wound up: (i) upon the bankruptcy of the
General Partner, (ii) upon the assignment by the General Partner of its entire
interest in the Partnership when the assignee is not admitted to the Partnership
as a general partner of the Partnership in accordance with the Limited
Partnership Agreement, or the filing of a certificate of dissolution or its
equivalent with respect to the General Partner, or the revocation of the General
Partner's charter and the expiration of 90 days after the date of notice to the
General Partner of revocation without a reinstatement of its charter, or if any
other event occurs that causes the General Partner to cease to be a general
partner of the Partnership under the Partnership Act, unless the business of the
Partnership is continued in accordance with the Partnership Act, (iii) if the
Partnership has redeemed or otherwise purchased all the Partnership Preferred
Securities, (iv) upon the entry of a decree of judicial dissolution or (v) upon
the written consent of all partners of the Partnership.
VOTING RIGHTS
Except as provided below and under 'Description of the Partnership
Guarantee -- Amendments and Assignment' and as otherwise required by law and the
Limited Partnership Agreement, the holders of the Partnership Preferred
Securities will have no voting rights.
Not later than 30 days after any Partnership Enforcement Event occurs, the
General Partner will convene a meeting for the purpose of appointing a Special
Representative. If the General Partner fails to convene such meeting within such
30-day period, the holders of 10% in liquidation preference of the outstanding
Partnership Preferred Securities will be entitled to convene such meeting. The
provisions of the Limited Partnership Agreement relating to the convening and
conduct of the meetings of the partners will apply with respect to any such
meeting. In the event that, at any such meeting, holders of less than a majority
in aggregate liquidation preference of Partnership Preferred Securities entitled
to
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vote for the appointment of a Special Representative vote for such appointment,
no Special Representative shall be appointed. Any Special Representative
appointed shall cease to be a Special Representative of the Partnership and the
limited partners if (1) the Partnership (or the Company pursuant to the
Partnership Guarantee) shall have paid in full all accrued and unpaid
distributions on the Partnership Preferred Securities, (2) such Investment Event
of Default, as the case may be, shall have been cured, and (3) the Company is in
compliance with all its obligations under the Partnership Guarantee and the
Company, in its capacity as the General Partner, shall continue the business of
the Partnership without dissolution. Notwithstanding the appointment of any such
Special Representative, the Company shall continue as General Partner and shall
retain all rights under the Limited Partnership Agreement, including the right
to declare, in its sole discretion, the payment of distributions on the
Partnership Preferred Securities for which the failure of such declaration would
not constitute a default under the Limited Partnership Agreement.
If any proposed amendment to the Limited Partnership Agreement provides
for, or the General Partner otherwise proposes to effect, (i) any action that
would adversely affect the powers, preferences or special rights of the
Partnership Preferred Securities, whether by way of amendment to the Limited
Partnership Agreement or otherwise (including, without limitation, the
authorization or issuance of any limited partner interests in the Partnership
ranking, as to participation in the profits or distributions or in the assets of
the Partnership, senior to the Partnership Preferred Securities), or (ii) the
dissolution, winding-up or termination of the Partnership, other than (x) in
connection with the occurrence of a Partnership Special Event or (y) as
described under 'Merger, Consolidation or Amalgamation of the Partnership'
above, then the holders of outstanding Partnership Preferred Securities will be
entitled to vote on such amendment or proposal of the General Partner (but not
on any other amendment or proposal) as a class, and such amendment or proposal
shall not be effective except with the approval of the holders of a majority in
liquidation preference of such outstanding Partnership Preferred Securities
having a right to vote on the matter; provided, however, that if the Property
Trustee on behalf of the Trust is the holder of the Partnership Preferred
Securities, any such amendment or proposal not excepted by clauses (x) and (y)
above shall not be effective without the prior or concurrent approval of the
holders of a majority in liquidation amount of the outstanding Trust Preferred
Securities having a right to vote on such matters.
The General Partner shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available, (ii) waive any Investment
Event of Default that is waivable under the Affiliate Investment Instruments,
(iii) exercise any right to rescind or annul a declaration that the principal of
any Affiliate Investment Instruments which are debt instruments shall be due and
payable, (iv) waive the breach of the covenant by the Company to restrict
certain payments by the Company and its majority owned subsidiaries, or (v)
consent to any amendment, modification termination of any Affiliate Investment
Instrument, where such consent shall be required from the investor, without, in
each case, obtaining the prior approval of the holders of at least a majority in
liquidation preference of the Partnership Preferred Securities; provided,
however, that if the Property Trustee on behalf of the Trust is the holder of
the Partnership Preferred Securities, such waiver, consent or amendment or other
action shall not be effective without the prior or concurrent approval of at
least a majority in liquidation amount of the outstanding Trust Preferred
Securities having a right to vote on such matters. The General Partner shall not
revoke any action previously authorized or approved by a vote of the holders of
the Partnership Preferred Securities. The General Partner shall notify all
holders of the Partnership Preferred Securities of any notice of an Investment
Event of Default received with respect to any Affiliate Investment Instrument.
Any required approval of holders of Partnership Preferred Securities may be
given at a separate meeting of holders of Partnership Preferred Securities
convened for such purpose, at a meeting of all of the partners in the
Partnership or pursuant to written consent. The Partnership will cause a notice
of any meeting at which holders of Partnership Preferred Securities are entitled
to vote, or of any matter upon which action by written consent of such holders
is to be taken, to be mailed to each holder of record of Partnership Preferred
Securities. Each such notice will include a statement setting forth (i) the date
of such meeting or the date by which such action is to be taken, (ii) a
description of any resolution proposed for adoption at such meeting on which
such holders are entitled to vote or of such matters upon which written consent
is sought and (iii) instruction for the delivery of proxies or consents.
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No vote or consent of the holders of Partnership Preferred Securities will
be required for the Partnership to redeem and cancel Partnership Preferred
Securities in accordance with the Limited Partnership Agreement.
Notwithstanding that holders of Partnership Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Partnership Preferred Securities at such time that are owned by the
Company or by any entity more than 50% of which is owned by the Company, either
directly or indirectly, shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding;
provided, however, that persons (other than affiliates of the Company) to whom
the Company or any of its subsidiaries have pledged Trust Preferred Securities
may vote or consent with respect to such pledged Trust Preferred Securities
under any of the circumstances described herein.
Holders of the Partnership Preferred Securities will have no rights to
remove or replace the General Partner.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE PARTNERSHIP
The Partnership may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other body, except as
described below. The Partnership may, without the consent of the holders of the
Partnership Preferred Securities, consolidate, amalgamate, merge with or into,
or be replaced by a limited partnership, limited liability company or trust
organized as such under the laws of any state of the United States of America,
provided that (i) such successor entity either (x) expressly assumes all of the
obligations of the Partnership under the Partnership Preferred Securities or (y)
substitutes for the Partnership Preferred Securities other securities having
substantially the same terms as the Partnership Preferred Securities (the
'Partnership Successor Securities') so long as the Partnership Successor
Securities are not junior to any other equity securities of the successor
entity, with respect to participation in the profits and distributions, and in
the assets, of the successor entity, (ii) the Investment Affiliates expressly
acknowledge such successor entity as the holder of the Affiliate Investment
Instruments, (iii) the Partnership Preferred Securities or any Successor
Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Partnership Preferred Securities, if so listed, are
then listed, (iv) such merger, consolidation, amalgamation or replacement does
not cause the Trust Preferred Securities (or, in the event that the Trust is
liquidated in connection with a Trust Special Event, the Partnership Preferred
Securities (including any Partnership Successor Securities)) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the powers,
preferences and other special rights of the holders of the Trust Preferred
Securities or Partnership Preferred Securities (including any Partnership
Successor Securities)) in any material respect (other than, in the case of the
Partnership Preferred Securities, with respect to any dilution of the holders'
interest in the new resulting entity), (vi) such successor entity has a purpose
substantially identical to that of the Partnership, (vii) prior to such merger,
consolidation, amalgamation or replacement, the Company has received an opinion
of nationally recognized independent counsel to the Partnership experienced in
such matters to the effect that (A) such successor entity will be treated as a
partnership for United States federal income tax purposes, (B) such merger,
consolidation, amalgamation or replacement would not cause the Trust to be
classified as an association taxable as a corporation for United States federal
income tax purposes, (C) following such merger, consolidation, amalgamation or
replacement, the Company and such successor entity will be in compliance with
the 1940 Act without registering thereunder as an investment company, and (D)
such merger, consolidation, amalgamation or replacement will not adversely
affect the limited liability of the holders of the Partnership Preferred
Securities and (viii) the Company guarantees the obligations of such successor
entity under the Partnership Successor Securities at least to the extent
provided by the Partnership Guarantee.
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BOOK-ENTRY AND SETTLEMENT
If the Partnership Preferred Securities are distributed to holders of Trust
Preferred Securities in connection with the involuntary or voluntary
dissolution, winding-up or liquidation of the Trust as a result of the
occurrence of a Trust Special Event, the Partnership Preferred Securities will
be issued in the form of one or more global certificates (each a 'Global
Partnership Security') registered in the name of DTC as the depository or its
nominee. For a description of DTC and the specific terms of the Depository
arrangements, see 'Description of the Trust Preferred Securities -- Book-Entry
Only Issuance -- The Depository Trust Company.' As of the date of this
Prospectus, the description therein of DTC's book-entry system and DTC's
practices as they relate to purchases, transfers, notices and payments with
respect to the Trust Preferred Securities apply in all material respects to any
Partnership Preferred Securities represented by one or more Global Partnership
Securities.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
The General Partner will act as registrar, transfer agent and paying agent
for the Partnership Preferred Securities for so long as the Partnership
Preferred Securities are held by the Trust or, if the Trust is liquidated in
connection with a Trust Special Event, for so long as the Partnership Preferred
Securities remain in book-entry only form. In the event the Partnership
Preferred Securities are distributed in connection with a Trust Special Event
and the book-entry system for the Partnership Preferred Securities is
discontinued, it is anticipated that The First National Bank of Chicago, N.A. or
one of its affiliates will act as registrar, transfer agent and paying agent for
the Partnership Preferred Securities.
Registration of transfers of Partnership Preferred Securities will be
effected without charge by or on behalf of the Partnership, but upon payment
(with the giving of such indemnity as the Partnership or the General Partner may
require) in respect of any tax or other governmental charges that may be imposed
in relation to it.
The Partnership will not be required to register or cause to be registered
the transfer of Partnership Preferred Securities after such Partnership
Preferred Securities have been called for redemption.
MISCELLANEOUS
The General Partner is authorized and directed to conduct its affairs and
to operate the Partnership in such a way that (i) the Partnership will not be
deemed to be an 'investment company' required to be registered under the 1940
Act or characterized as an association taxable as a corporation for United
States federal income tax purposes, (ii) the Affiliate Investment Instruments
that are debt instruments will be treated as indebtedness of the issuer of such
debt instruments for United States federal income tax purposes and (iii) the
Partnership will not be treated as an association or as a 'publicly traded
partnership' (within the meaning of Section 7704 of the Code) taxable as a
corporation. In this connection, the General Partner is authorized to take any
action, not inconsistent with applicable law, the certificate of limited
partnership of the Partnership or the Limited Partnership Agreement, that the
General Partner determines in its discretion to be necessary or desirable for
such purposes as long as such action does not adversely affect the interests of
the holders of the Partnership Preferred Securities.
DESCRIPTION OF THE PARTNERSHIP GUARANTEE
Set forth below is a summary of information concerning the Partnership
Guarantee that will be executed and delivered by the Company for the benefit of
the holders from time to time of Partnership Preferred Securities. The summary
does not purport to be complete and is subject in all respects to the provisions
of, and is qualified in its entirety by reference to, the Partnership Guarantee,
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The General Partner will hold the Partnership Guarantee
for the benefit of the holders of the Partnership Preferred Securities.
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GENERAL
Pursuant to the Partnership Guarantee, the Company will irrevocably agree,
on a subordinated basis to the extent set forth therein, to pay in full to the
holders of the Partnership Preferred Securities (without duplication of amounts
theretofore paid by the Partnership), as and when due, regardless of any
defense, right of set-off or counterclaim that the Partnership may have or
assert, the following payments (the 'Partnership Guarantee Payments'): (i) any
accrued and unpaid distributions that have theretofore been declared on the
Partnership Preferred Securities out of funds legally available therefor, (ii)
the redemption price with respect to any Partnership Preferred Securities called
for redemption by the Partnership out of funds legally available therefor, and
(iii) upon a liquidation of the Partnership, the lesser of (a) the aggregate of
the liquidation preference and all accrued and unpaid distributions on the
Partnership Preferred Securities to the date of payment and (b) the amount of
assets of the Partnership after satisfaction of all liabilities remaining
available for distribution to holders of Partnership Preferred Securities in
liquidation of the Partnership. The Company's obligation to make a Partnership
Guarantee Payment may be satisfied by direct payment of the required amounts by
the Company to the holders of Partnership Preferred Securities or by causing the
Partnership to pay such amounts to such holders.
The Partnership Guarantee will be a guarantee on a subordinated basis with
respect to the Partnership Preferred Securities from the time of issuance of
such Partnership Preferred Securities but will not apply to any payment of
distributions or Redemption Price, or to payments upon the dissolution,
winding-up or termination of the Trust, except to the extent the Partnership
shall have funds available therefor. If Investment Affiliates (including, where
applicable, the Company, as guarantor) of the Affiliate Investment Instruments
in which the Partnership invests fail to make any payment in respect of such
securities (or, if applicable, guarantees), the Partnership may not declare or
pay dividends on the Partnership Preferred Securities. In such event, holders of
the Partnership Preferred Securities would not be able to rely upon the
Partnership Guarantee for payment of such amounts. Instead, holders of the
Partnership Preferred Securities will have the remedies described herein under
'Description of the Partnership Preferred Securities -- Partnership Enforcement
Events,' including the right to direct the General Partner or the Special
Representative, as the case may be, to enforce the covenant restricting certain
payments by the Company and its majority owned subsidiaries. See ' -- Certain
Covenants of the Company' below.
The Guarantees, when taken together with the Company Debenture and the
Company's obligations to pay all fees and expenses of the Trust and the
Partnership, constitute a full and unconditional guarantee to the extent set
forth herein by the Company of the distribution, redemption and liquidation
payments payable to the holders of the Trust Preferred Securities. The
Guarantees do not apply, however, to current distributions by the Partnership
unless and until such distributions are declared by the Partnership out of funds
legally available for payment or to liquidating distributions unless there are
assets available for payment in the Partnership, each as more fully described
under 'Risk Factors -- Risk Factors Related to TOPrS -- Insufficient Income or
Assets Available to Partnership.'
CERTAIN COVENANTS OF THE COMPANY
The Company will covenant in the Partnership Guarantee that if (a) for any
distribution period, full distributions on a cumulative basis on any Partnership
Preferred Securities have not been paid or declared and set apart for payment,
(b) an Investment Event of Default by any Investment Affiliate in respect of any
Affiliate Investment Instrument has occurred and is continuing or (c) the
Company is in default of its obligations under the Trust Guarantee, the
Partnership Guarantee or any Investment Guarantee, then, during such period the
Company shall not, nor permit any majority owned subsidiary to (i) declare or
pay dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to any of its capital stock
or comparable equity interest (except for dividends or distributions in shares
of its capital stock, conversions or exchanges of common stock of one class into
common stock of another class and dividends, distributions with respect to the
Partnership or the Trust or dividends and distributions on the common stock of
wholly owned subsidiaries of the Company), (ii) make, or permit the making of,
any Affiliated Restricted Payments
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except for Permissible Affiliated Payments, and (iii) make any guarantee
payments with respect to the foregoing.
EVENTS OF DEFAULT; ENFORCEMENT OF PARTNERSHIP GUARANTEE
An event of default under the Partnership Guarantee will occur upon the
failure of the Company to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Partnership
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Special Representative
in respect of the Partnership Guarantee or to direct the exercise of any trust
or power conferred upon the Special Representative under the Partnership
Guarantee. If the Special Representative fails to enforce its rights under the
Partnership Guarantee, after a holder of Partnership Preferred Securities has
made a written request, such holder of Partnership Preferred Securities may
institute a legal proceeding directly against the Company to enforce the Special
Representative's rights under the Partnership Guarantee without first
instituting a legal proceeding against the Partnership, the Special
Representative or any other person or entity. Notwithstanding the foregoing, if
the Company has failed to make a guarantee payment, a holder of Partnership
Preferred Securities may directly institute a proceeding against the Company for
enforcement of the Partnership Guarantee for such payment.
STATUS OF THE PARTNERSHIP GUARANTEE; SUBORDINATION
The Partnership Guarantee will constitute an unsecured obligation of the
Company and will rank subordinate and junior to all other liabilities of the
Company and will rank pari passu with the most senior preferred stock issued
from time to time by the Company and with any guarantee now or hereafter entered
into by the Company in respect of any preferred stock of any affiliate of the
Company. The Limited Partnership Agreement provides that each holder of
Partnership Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Partnership Guarantee.
The Partnership Guarantee will constitute a guarantee of payment and not of
collection (that is, the guaranteed party may directly institute a legal
proceeding against the Company to enforce its rights under the Partnership
Guarantee without instituting a legal proceeding against any other person or
entity).
The Partnership Guarantee will be deposited with the General Partner to be
held for the benefit of the holders of the Partnership Preferred Securities. In
the event of the appointment of a Special Representative to, among other things,
enforce the Partnership Guarantee, the Special Representative may take
possession of the Partnership Guarantee for such purpose. If no Special
Representative has been appointed to enforce the Partnership Guarantee, the
General Partner has the right to enforce the Partnership Guarantee on behalf of
the holders of the Partnership Preferred Securities.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Partnership Preferred Securities (in which case no consent will be
required), the Partnership Guarantee may be amended only with the prior approval
of the holders of not less than a majority in liquidation preference of the
outstanding Partnership Preferred Securities. All guarantees and agreements
contained in the Partnership Guarantee shall bind the successors, assigns,
receivers, trustees and representatives of the Company and shall inure to the
benefit of the holders of the Partnership Preferred Securities then outstanding.
Except in connection with any permitted merger or consolidation of the Company
with or into another entity or any permitted sale, transfer or lease of the
Company's assets to another entity as described above under 'Description of the
Partnership Preferred Securities -- Merger, Consolidation or Amalgamation of the
Partnership,' the Company may not assign its rights or delegate its obligations
under the Partnership Guarantee without the prior approval of the holders of at
least a majority of the aggregate stated liquidation amount of the Partnership
Preferred Securities then outstanding.
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TERMINATION OF THE PARTNERSHIP GUARANTEE
The Partnership Guarantee will terminate and be of no further force and
effect as to the Partnership Preferred Securities upon (i) full payment of the
redemption price of all Partnership Preferred Securities or (ii) full payment of
the amounts payable in accordance with the Limited Partnership Agreement upon
liquidation of the Partnership. The Partnership Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of Partnership Preferred Securities must in accordance with the Partnership Act
restore payment of any sums paid under the Partnership Preferred Securities or
the Partnership Guarantee. The Partnership Act provides that a limited partner
of a limited partnership who wrongfully receives a distribution may be liable to
the limited partnership for the amount of such distribution.
GOVERNING LAW
The Partnership Guarantee will be governed by and construed in accordance
with the laws of the State of New York.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
In the opinion of Simpson Thacher & Bartlett, special tax counsel to the
Company, the Trust and the Partnership ('Tax Counsel'), the following summary
accurately describes the material United States federal income tax consequences
that may be relevant to the purchase, ownership and disposition of Trust
Preferred Securities. Unless otherwise stated, this summary deals only with
Trust Preferred Securities held as capital assets by United States Persons
(defined below) who purchase the Trust Preferred Securities upon original
issuance. As used herein, a 'United States Person' means a person that is a
citizen or resident of the United States, a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, or an estate or trust the income of which is
subject to United States federal income taxation regardless of its source. The
tax treatment of a holder may vary depending on its particular situation. This
summary does not address all the tax consequences that may be relevant to
holders who may be subject to special tax treatment, such as banks, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or currencies, tax-exempt investors, or foreign investors. This
summary does not include any description of any alternative minimum tax
consequences or the tax laws of any state or local government or of any foreign
government that may be applicable to the Trust Preferred Securities. This
summary is based on the Internal Revenue Code of 1986, as amended (the 'Code'),
the Treasury regulations promulgated thereunder and administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change, possibly on a retroactive basis.
The Trust Preferred Securities are not being marketed to persons that are
not United States Persons ('non-United States Persons') and, consequently, the
following discussion does not discuss the tax consequences that might be
relevant to non-United States Persons. Moreover, in order to protect the Trust
and the Partnership from potential adverse consequences, non-United States
Persons will be subject to withholding on distributions on the Trust Preferred
Securities held by such non-United States Persons at a rate of 30%. In
determining a holder's status, the United States entity otherwise required to
withhold taxes may rely on an IRS form W-8, an IRS form W-9, or a holder's
certification of its non-foreign status signed under penalty of perjury.
Non-United States Persons should consult their own tax advisors as to the
specific United States federal income tax consequences of the purchase,
ownership, and disposition of Trust Preferred Securities.
Tax Counsel has advised that there is no authority directly on point
dealing with securities such as the Trust Preferred Securities or transactions
of the type described herein and that the opinions of Tax Counsel are not
binding on the Internal Revenue Service ('IRS') or the courts, either of which
could take a contrary position. No rulings have been or will be sought from the
IRS. Accordingly, there can be no assurance that the IRS will not challenge the
opinions expressed herein or that a court would not sustain such a challenge.
Nevertheless, Tax Counsel has advised that it is of the view that, if
challenged, the opinions expressed herein would be sustained by a court with
jurisdiction in a properly presented case.
HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE TRUST
PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES
FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE POSSIBLE REDEMPTION OF THE
TRUST PREFERRED SECURITIES OR REDEMPTION OF THE PARTNERSHIP PREFERRED SECURITIES
UPON THE OCCURRENCE OF CERTAIN TAX EVENTS SEE 'DESCRIPTION OF THE TRUST
PREFERRED SECURITIES -- TRUST SPECIAL EVENT REDEMPTION OR DISTRIBUTION' AND
'DESCRIPTION OF THE PARTNERSHIP PREFERRED SECURITIES -- PARTNERSHIP SPECIAL
EVENT' RESPECTIVELY.
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CLASSIFICATION OF THE TRUST
Tax Counsel is of the opinion that, under current law, and based on certain
representations, facts and assumptions set forth in such opinion, the Trust will
be classified for United States federal income tax purposes as a grantor trust
and not as an association taxable as a corporation. Accordingly, for United
States federal income tax purposes, each holder of Trust Preferred Securities
will be considered the owner of an undivided interest in the Partnership
Preferred Securities held by the Trust, and each holder will be required to
include in its gross income its distributive share of income attributable to the
Partnership, which generally will be equal to such holder's allocable share of
amounts accrued on the Partnership Preferred Securities. No amount included in
income with respect to the Trust Preferred Securities will be eligible for the
corporate dividends-received deduction.
CLASSIFICATION OF THE PARTNERSHIP
Tax Counsel is of the opinion that, under current law, and based on certain
representations, facts and assumptions set forth in such opinion, the
Partnership will be classified for United States federal income tax purposes as
a partnership and not as an association or publicly traded partnership taxable
as a corporation.
Tax Counsel's opinion is based on certain factual assumptions relating to
the organization and operation of the Partnership and is conditioned upon
certain representations made by the General Partner and the Partnership as to
factual matters, such as the organization and the operation of the Partnership
and the type and frequency of investments made by the Partnership.
The General Partner has represented that it intends to operate the
Partnership in a manner such that it will continue to constitute a partnership
for all future taxable periods in which any Partnership Preferred Securities
remain outstanding. In particular, pursuant to the Limited Partnership
Agreement, the General Partner is prohibited from taking any action that would
cause the Partnership to constitute a 'publicly traded partnership' taxable as a
corporation under section 7704(a) of the Code. Accordingly, it is expected that
the Partnership will continue to qualify as a partnership, and therefore will
not constitute a publicly traded partnership taxable as a corporation, for all
taxable years in which the Partnership Preferred Securities remain outstanding.
If, however, the Partnership were to constitute a publicly traded partnership
taxable as a corporation with respect to a future taxable year, the
Partnership's net income would be subject to United States federal income tax at
the applicable corporate rates.
CLASSIFICATION OF THE DEBENTURES
The Partnership, the Company, the relevant Investment Affiliates and the
holders of the Trust Securities (by acceptance of a beneficial interest in a
Trust Security) will agree to treat the Debentures as indebtedness for all
United States tax purposes. In connection with the issuance of the Debentures,
Tax Counsel is of the opinion that, under current law, and based on certain
representations, facts and assumptions set forth in such opinion, the Debentures
will be classified as indebtedness for United States federal income tax
purposes.
INCOME AND DEDUCTIONS
A holder's distributive share of income attributable to the Partnership
generally will equal the amount of the cash distributions payable with respect
to the Trust Preferred Securities. Accordingly, if quarterly distributions on
the Trust Preferred Securities are paid currently, the amount of income
recognized by a holder during a taxable year generally will equal the cash
distributions received by the holder with respect to its Trust Preferred
Securities. Holders who are individuals, trusts or estates may be subject to
limitations on the deductibility of their pro rata share of the expenses
attributable to the Trust.
The nature and timing of the income that is allocated to holders of Trust
Preferred Securities, however, will depend on the United States federal income
tax characterization of the Debentures held by the Partnership during the period
in question. Because the Partnership will be an accrual basis
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taxpayer for United States federal income tax purposes, income will accrue on
the Trust Preferred Securities and will be allocated to holders of Trust
Preferred Securities on a daily accrual basis, generally at a rate that is
expected to be equal to (and that will not be greater than) the distribution
rate on the Trust Preferred Securities, regardless of the holders' method of
accounting. Actual cash distributions on the Trust Preferred Securities,
however, will not be separately reported as taxable income to the holders at the
time they are received.
If distributions on the Partnership Preferred Securities are not made
currently, the corresponding distributions on the Trust Preferred Securities
will not be made currently. Because the Partnership is an accrual basis taxpayer
it can be expected that during a period in which payment on the Debentures or
distributions on the Partnership Preferred Securities are deferred (for whatever
reason), holders will generally recognize income in advance of their receipt of
any cash distributions with respect to their Trust Preferred Securities. The
amount of income that will be allocated to holders of Trust Preferred Securities
during any such deferral period will equal their pro rata share of the amount
accruing on the Partnership Preferred Securities during such deferral period.
RECEIPT OF PARTNERSHIP PREFERRED SECURITIES UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption 'Description of
the Trust Preferred Securities -- Trust Special Event Redemption or
Distribution', Partnership Preferred Securities may be distributed to holders of
Trust Preferred Securities in exchange for their Trust Preferred Securities and
in liquidation of the Trust. Unless the liquidation of the Trust occurs as a
result of the Trust being subject to United States federal income tax with
respect to income accrued or received on the Partnership Preferred Securities,
such a distribution to holders would, for United States federal income tax
purposes, be treated as a nontaxable event to each holder, each holder would
receive an aggregate tax basis in the Partnership Preferred Securities equal to
such holder's aggregate tax basis in its Trust Preferred Securities, and a
holder's holding period in the Partnership Preferred Securities so received in
liquidation of the Trust would include the period during which the Trust
Preferred Securities were held by such holder. If, however, the liquidation of
the Trust were to occur because the Trust is subject to United States federal
income tax with respect to income accrued or received on the Partnership
Preferred Securities, the distribution of Partnership Preferred Securities to
holders by the Trust would be a taxable event to each holder, and a holder would
recognize gain or loss as if the holder had exchanged its Trust Preferred
Securities for the Partnership Preferred Securities it received upon the
liquidation of the Trust.
REDEMPTION OF TRUST PREFERRED SECURITIES FOR CASH
Under certain circumstances, as described under the caption 'Description of
the Trust Preferred Securities -- Optional Redemption', 'Description of the
Trust Preferred Securities -- Trust Special Event Redemption or Distribution'
and 'Description of the Partnership Preferred Securities -- Partnership Special
Event Redemption', the General Partner may cause the Partnership to redeem the
Partnership Preferred Securities for cash, in which event the Trust would use
the proceeds of such redemption to redeem the Trust Preferred Securities. Under
current law, such a redemption would constitute, for United States federal
income tax purposes, a taxable disposition, and a holder would recognize gain or
loss as if it sold the holder's proportionate interest in the redeemed
Partnership Preferred Securities for an amount of cash equal to the proceeds
received upon redemption. See ' -- Disposition of Trust Preferred Securities.'
DISPOSITION OF TRUST PREFERRED SECURITIES
A holder that sells Trust Preferred Securities will recognize gain or loss
equal to the difference between the amount realized on the sale of the Trust
Preferred Securities and the holder's adjusted tax basis in such Trust Preferred
Securities. Such gain or loss will be a capital gain or loss and will be a long-
term capital gain or loss if the Trust Preferred Securities have been held for
more than one year at the time of the sale. A holder will be required to include
accrued but unpaid interest on the Debentures through the date of disposition in
income as ordinary income, and to add such amount to the adjusted
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tax basis of its Trust Preferred Securities. Subject to certain limited
exceptions, capital losses cannot be applied to offset ordinary income for
United States federal income tax purposes.
A holder's tax basis in its Trust Preferred Securities generally will equal
(i) the amount paid by such holder for its Trust Preferred Securities, (ii)
increased by the amount includible in income by such holder, and (iii) reduced
by the amount of cash or other property distributed to such holder with respect
to its Trust Preferred Securities.
OTHER PARTNERSHIP PROVISIONS
Section 708. Under Section 708 of the Code, the Partnership will be deemed
to terminate for United States federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a deemed termination were to occur, the Partnership
would be considered to have distributed its assets to the partners who would
then be treated as having recontributed those assets to a new partnership. If
any such constructive termination occurs, the General Partner does not intend to
comply with certain technical requirements that might be applicable for various
reasons including the likely lack of relevant data. As a result, the Partnership
may be subject to certain tax penalties and may incur additional expenses, which
would be the obligation of the General Partner. Proposed Treasury regulations,
should they become effective, will mitigate some of the effects of a
constructive termination.
Section 701. The Department of Treasury has promulgated regulations under
Section 701 of the Code that permit it to disregard or recast a transaction if a
partnership is 'formed or availed of' with 'a principal purpose to reduce
substantially the present value of the partners' aggregate tax liability in a
manner inconsistent with the intent of [the partnership provisions of the
Code]'. The Partnership has been formed for, and will engage in, activities
typical for partnerships. Although there is no precedent that applies to the
transactions contemplated herein, Tax Counsel believes that the Partnership is
not of the type intended to fall within the scope of these regulations.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Income on the Trust Preferred Securities will be reported to holders on an
IRS Form 1099-MISC, which form should be mailed to holders of Trust Preferred
Securities by January 31 following each calendar year. Payments made on and
proceeds from the sale of Trust Preferred Securities may be subject to a
'back-up' withholding tax of 31% unless the holder complies with certain
identification requirements. Any withheld amount generally will be allowed as a
credit against the holder's United States federal income tax, provided the
required information is timely filed with the IRS.
PROPOSED LEGISLATION
On March 19, 1996, as part of President Clinton's Fiscal 1997 Budget
Proposal, the Treasury Department proposed legislation (the 'Proposed
Legislation') that would, among other things, deny the borrower an interest
deduction with respect to certain types of debt instruments that are payable in
stock of the issuer or a related party. The Proposed Legislation also would
treat as equity for United States federal income tax purposes instruments with a
maximum term of more than 20 years that are not shown as indebtedness on the
consolidated balance sheet of the issuer. On March 29, 1996, Senate Finance
Committee Chairman William V. Roth and House Ways and Means Committee Chairman
Bill Archer issued a joint statement (the 'Joint Statement') indicating their
intent that certain legislative proposal initiated by the Clinton
administration, including the Proposed Legislation, that may be adopted by
either of the tax-writing committees of Congress, would have an effective date
that is no earlier than the date of 'appropriate Congressional action'. In
addition, subsequent to the publication of the Joint Statement, Senator Daniel
Patrick Moynihan and Representatives Sam M. Gibbons and Charles B. Rangel wrote
letters to Treasury Department officials concurring with the view expressed in
the Joint Statement (the 'Democrat Letters'). If the principles contained in the
Joint Statement and the Democrat Letters were followed and the Proposed
Legislation were enacted, such legislation would not apply to the Debentures.
There can be no assurances, however, that legislation enacted after the date
hereof will not adversely affect the tax treatment of the Debentures, or whether
such tax treatment
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would cause a Partnership Tax Event or a Trust Tax Event that may result in the
redemption of the Partnership Preferred Securities and, consequently, the Trust
Preferred Securities.
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
'Purchase Agreement'), the Trust has agreed to sell to each of the Underwriters
named below, and each of the Underwriters, for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated, A.G. Edwards & Sons, Inc., Goldman, Sachs & Co.,
Lehman Brothers, PaineWebber Incorporated and Prudential Securities Incorporated
are acting as representatives (the 'Representatives'), has severally agreed to
purchase the number of Trust Preferred Securities set forth opposite its name
below. In the Purchase Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all the Trust
Preferred Securities offered hereby if any of the Trust Preferred Securities are
purchased. In the event of default by an Underwriter, the Purchase Agreement
provides that, in certain circumstances, the purchase commitments of the
non-defaulting Underwriters may be increased or the Purchase Agreement may be
terminated.
<TABLE>
<CAPTION>
NUMBER OF TRUST
UNDERWRITERS PREFERRED SECURITIES
--------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................
A. G. Edwards & Sons, Inc.................................................
Goldman, Sachs & Co.......................................................
Lehman Brothers...........................................................
PaineWebber Incorporated..................................................
Prudential Securities Incorporated........................................
--------------------
Total....................................................... 8,000,000
--------------------
--------------------
</TABLE>
The Underwriters propose to offer the Trust Preferred Securities, in part,
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and, in part, to certain securities dealers at
such price less a concession of $. per Trust Preferred Security. The
Underwriters may allow, and such dealers may re-allow, a concession not in
excess of $. per Trust Preferred Security to certain brokers and dealers. After
the Trust Preferred Securities are released for sale to the public, the offering
price and other selling terms may from time to time be varied by the
Representatives.
In view of the fact that the proceeds of the sale of the Trust Preferred
Securities will ultimately be used to purchase the investment instruments of the
Company and its subsidiaries, the Purchase Agreement provides that Company will
pay as compensation ('Underwriters' Compensation') to the Underwriters arranging
the investment therein of such proceeds, an amount in immediately available
funds of $ per Trust Preferred Security (or $ in the aggregate) for the
accounts of the several Underwriters; provided that, such compensation for sales
of 10,000 or more Trust Preferred Securities to any single purchaser will be $
per Trust Preferred Security. Therefore, to the extent of such sales, the actual
amount of Underwriters' Compensation will be less than the aggregate amount
specified in the preceding sentence.
During a period of 30 days from the date of the Prospectus, neither the
Trust nor the Company will, without the prior written consent of the
Underwriters, directly or indirectly, sell, offer to sell, grant any option for
sale of, or otherwise dispose of, any Trust Preferred Securities, any
Partnership Preferred Securities, any preferred stock of the Company or any
security convertible into or exchangeable into or exercisable for Trust
Preferred Securities or Partnership Preferred Securities or any preferred stock
of the Company.
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Application has been made to list the Trust Preferred Securities on the New
York Stock Exchange. Trading of the Trust Preferred Securities on the New York
Stock Exchange is expected to commence within a 30-day period after the initial
delivery of the Trust Preferred Securities. The Representatives have advised the
Trust that they intend to make a market in the Trust Preferred Securities prior
to the commencement of trading on the New York Stock Exchange. The
Representatives will have no obligation to make a market in the Trust Preferred
Securities, however, and may cease market making activities, if commenced, at
any time.
Prior to this offering there has been no public market for the Trust
Preferred Securities. In order to meet one of the requirements for listing the
Trust Preferred Securities on the New York Stock Exchange, the Underwriters will
undertake to sell lots of 100 or more Trust Preferred Securities to a minimum of
400 beneficial holders.
The Trust, the Company, and the Partnership have agreed to indemnify the
Underwriters against, or contribute to payments that the Underwriters may be
required to make in respect of, certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
The Underwriters have agreed to reimburse the Company for $ in expenses
incurred in connection with the issuance and sale of the Trust Preferred
Securities offered hereby.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, the Company and its subsidiaries in the
ordinary course of business.
LEGAL MATTERS
Certain legal matters in connection with this offering will be passed upon
for the Company by Robert J. Ingato, Senior Vice President, General Counsel and
Secretary of the Company. Certain matters of Delaware law relating to the
legality of the Trust Preferred Securities, the validity of the Trust Agreement,
the formation of the Trust and the Partnership and the legality under state law
of the Trust Preferred Securities and the Partnership Preferred Securities are
being passed upon by Richards, Layton & Finger, special Delaware counsel to the
Trust, the Partnership and the Company. The legality under state law of the
Trust Guarantee and the Partnership Guarantee will be passed upon on behalf of
the Trust, the Partnership and the Company by Simpson Thacher & Bartlett (a
partnership which includes professional corporations), New York, New York. The
validity of the Trust Preferred Securities, the Partnership Preferred Securities
and the Trust Guarantee, the Partnership Guarantee and the Investment Guarantees
will be passed upon on behalf of the Underwriters by Skadden, Arps, Slate,
Meagher & Flom, New York, New York, counsel to the Underwriters. Simpson Thacher
& Bartlett and Skadden, Arps, Slate, Meagher & Flom will rely upon the opinion
of Richards, Layton & Finger as to certain matters of Delaware law.
EXPERTS
The consolidated balance sheets as of December 31, 1995 and 1994 and the
consolidated statements of income, changes in shareowners' equity and cash flows
for each of the three years in the period ended December 31, 1995 of AT&T
Capital Corporation which are incorporated by reference in this Prospectus and
Registration Statement have been incorporated herein by reference in reliance on
the reports of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The balance sheet of each of the Trust and the Partnership, each dated as
of October 14, 1996 and included in this Prospectus have been so included in
reliance on the reports of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
71
<PAGE>
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERMS PAGE NO.
- ------------------------------------------------------------------------------------------------------- --------
<S> <C>
Affiliate.............................................................................................. 51
Affiliate Debentures................................................................................... 55
Affiliated Restricted Payments......................................................................... 51
AT&T................................................................................................... 7
AT&T Restructuring..................................................................................... 8
AT&T Capital........................................................................................... 1
AT&T Entities.......................................................................................... 8
Babcock & Brown........................................................................................ 7
Change in 1940 Act Law................................................................................. 42
Code................................................................................................... 34
Commission............................................................................................. 4
Common Stock........................................................................................... 7
Company................................................................................................ 1
Company Debenture...................................................................................... 55
Debentures............................................................................................. 55
Declaration............................................................................................ 36
Delaware Trustee....................................................................................... 36
DTC.................................................................................................... 46
Duff & Phelps.......................................................................................... 16
Eligible Institution................................................................................... 56
Eligible Debt Securities............................................................................... 55
Exchange Act........................................................................................... 4
Fitch.................................................................................................. 16
General Partner........................................................................................ 1
GRSH................................................................................................... 7
Guarantees............................................................................................. 2
Holdings............................................................................................... 7
Initial Partnership Proceeds........................................................................... 55
Intercompany Agreement................................................................................. 8
Investment Affiliates.................................................................................. 56
Investment Event of Default............................................................................ 55
Investment Guarantees.................................................................................. 2
IRS.................................................................................................... 66
License Agreement...................................................................................... 8
Limited Partnership Agreement.......................................................................... 36
Lucent................................................................................................. 8
Management Investors................................................................................... 7
Merger................................................................................................. 7
Merger Agreement....................................................................................... 7
Merger Sub............................................................................................. 7
Moody's................................................................................................ 16
NCR.................................................................................................... 8
New York Stock Exchange................................................................................ 1
1940 Act............................................................................................... 13
Nomura................................................................................................. 7
Non-United States Persons.............................................................................. 66
Operating Agreements................................................................................... 8
Partnership............................................................................................ 1
Partnership Act........................................................................................ 37
Partnership Enforcement Event.......................................................................... 54
Partnership Guarantee.................................................................................. 2
Partnership Guarantee Payments......................................................................... 62
</TABLE>
72
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERMS PAGE NO.
- ------------------------------------------------------------------------------------------------------- --------
<S> <C>
Partnership Investment Company Event................................................................... 58
Partnership Preferred Securities....................................................................... 1
Partnership Special Event.............................................................................. 23
Partnership Successor Securities....................................................................... 61
Partnership Tax Event.................................................................................. 58
Property Account....................................................................................... 36
Property Trustee....................................................................................... 36
Purchase Agreement..................................................................................... 70
Redemption Price....................................................................................... 3
Registration Statement................................................................................. 4
Regular Trustees....................................................................................... 36
Representatives........................................................................................ 70
S&P.................................................................................................... 16
Securities Act......................................................................................... 4
Special Representative................................................................................. 54
Tax Action............................................................................................. 42
Tax Counsel............................................................................................ 66
Trust.................................................................................................. 1
Trust Act.............................................................................................. 36
Trust Common Securities................................................................................ 1
Trust Dissolution Tax Opinion.......................................................................... 41
Trust Enforcement Event................................................................................ 40
Trust Guarantee........................................................................................ 2
Trust Guarantee Trustee................................................................................ 36
Trust Indenture Act.................................................................................... 36
Trust Investment Company Event......................................................................... 41
Trust Liquidation...................................................................................... 43
Trust Liquidation Distribution......................................................................... 10
Trust Preferred Securities............................................................................. 1
Trust Redemption Tax Opinion........................................................................... 41
Trust Securities....................................................................................... 1
Trust Special Event.................................................................................... 41
Trust Tax Event........................................................................................ 41
</TABLE>
73
<PAGE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
CAPITA PREFERRED FUNDING L.P.
Report of Independent Accountants................................................................. F-2
Balance Sheet of the Partnership.................................................................. F-3
Notes to Balance Sheet of the Partnership......................................................... F-3
CAPITA PREFERRED TRUST
Report of Independent Accountants................................................................. F-4
Balance Sheet of the Trust........................................................................ F-5
Notes to Balance Sheet of the Trust............................................................... F-5
</TABLE>
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the General Partner and Initial Limited Partner of
CAPITA PREFERRED FUNDING L.P.
We have audited the accompanying balance sheet of Capita Preferred Funding
L.P. (the 'Partnership') as of October 14, 1996. This balance sheet is the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Capita Preferred Funding L.P. at
October 14, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York
October 14, 1996
F-2
<PAGE>
<PAGE>
BALANCE SHEET OF
CAPITA PREFERRED FUNDING L.P.
OPENING BALANCE SHEET
OCTOBER 14, 1996
<TABLE>
<S> <C>
Assets -- cash............................................................................................ $100
----
----
Partnership securities
Limited partnership interest......................................................................... $ 85
General partnership interest......................................................................... 15
----
$100
----
----
</TABLE>
NOTES TO BALANCE SHEET OF THE PARTNERSHIP
------------------------
Capita Preferred Funding L.P. (the 'Partnership') is a limited partnership
that was formed under the Delaware Revised Uniform Limited Partnership Act on
August 29, 1996 for the exclusive purposes of purchasing certain eligible
securities of AT&T Capital Corporation (the 'Company') and wholly owned
subsidiaries of the Company (the 'Affiliate Investment Instruments') with the
proceeds from the sale of Partnership Preferred Securities (the 'Partnership
Preferred Securities') to Capita Preferred Trust (the 'Trust') and a capital
contribution from the Company in exchange for the general partnership interest
in the Partnership (collectively, the 'Partnership Proceeds').
The Partnership Proceeds will be used initially to purchase debt
instruments from the Company and certain domestic wholly owned subsidiaries of
the Company. The Partnership shall have a perpetual existence subject to certain
termination events. The Company serves as the sole general partner of the
Partnership. The Company, in its capacity as General Partner of the Partnership,
has agreed to pay all fees and expenses related to the organization and
operations of the Partnership (including any taxes, duties, assessments or
government charges of whatever nature (other than withholding taxes) imposed by
the United States or any other domestic taxing authority upon the Partnership)
and the offering of the Partnership Preferred Securities and be responsible for
all debts and other obligations of the Partnership (other than with respect to
the Partnership Preferred Securities). The General Partner has agreed to
indemnify certain officers and agents of the Partnership.
F-3
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustee of
CAPITA PREFERRED TRUST
We have audited the accompanying balance sheet of Capita Preferred Trust
(the 'Trust'), as of October 14, 1996. This balance sheet is the responsibility
of the Trust's management. Our responsibility is to express an opinion on this
balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Capita Preferred Trust at October
14, 1996, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York
October 14, 1996
F-4
<PAGE>
<PAGE>
BALANCE SHEET OF
CAPITA PREFERRED TRUST
OPENING BALANCE SHEET
OCTOBER 14, 1996
<TABLE>
<S> <C>
Assets....................................................................................................... $ 0
---
---
Trust securities............................................................................................. $ 0
---
---
</TABLE>
NOTES TO BALANCE SHEET OF THE TRUST
------------------------
Capita Preferred Trust (the 'Trust') is a statutory business trust formed
on August 29, 1996 under the laws of the State of Delaware for the exclusive
purposes of (i) issuing the Trust Originated Preferred Securities (the 'Trust
Preferred Securities') and the Trust Common Securities (together with the Trust
Preferred Securities, the 'Trust Securities') representing undivided beneficial
ownership interests in the assets of the Trust, (ii) purchasing Partnership
Preferred Securities (the 'Partnership Preferred Securities') representing the
limited partnership interests of Capita Preferred Funding L.P. (the
'Partnership') with the proceeds from the sale of the Trust Securities and (iii)
engaging in only those other activities necessary or incidental thereto. The
Trust has a perpetual existence, subject to certain termination events as
provided in the Declaration of Trust under which it was formed. Subsequent to
October 14, 1996, the Trust intends to issue and sell its Trust Preferred
Securities in a public offering. No Trust Preferred Securities have been
authorized or issued as of October 14, 1996.
The proceeds from the Trust's sale of the Trust Securities will be used to
purchase the Partnership Preferred Securities from the Partnership. AT&T Capital
Corporation (the 'Company') will be obligated to pay compensation to the
underwriters of the offering of the Trust Preferred Securities. The Company will
pay all fees and expenses related to the organization and operations of the
Trust (including any taxes, duties, assessments or governmental charges of
whatever nature (other than withholding taxes) imposed by the United States or
any other domestic taxing authority upon the Trust) and the offering of the
Trust Preferred Securities and be responsible for all debts and other
obligations of the Trust (other than the Trust Securities). The Company has also
agreed to indemnify the Trustees and certain other persons.
F-5
<PAGE>
<PAGE>
_____________________________________ _____________________________________
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE TRUST PREFERRED SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information....................................................................................................... 4
Incorporation of Certain Documents By Reference............................................................................. 5
Prospectus Summary.......................................................................................................... 6
Risk Factors................................................................................................................ 17
Use of Proceeds............................................................................................................. 26
Capitalization.............................................................................................................. 26
Ratio of Earnings to Fixed Charges of the Company........................................................................... 27
Selected Financial Data..................................................................................................... 28
Business of the Company..................................................................................................... 30
The Merger.................................................................................................................. 33
Relationship With AT&T Entities............................................................................................. 34
Capita Preferred Trust...................................................................................................... 36
Capita Preferred Funding L.P................................................................................................ 37
Description of the Trust Preferred Securities............................................................................... 38
Description of the Trust Guarantee.......................................................................................... 50
Description of the Partnership Preferred Securities......................................................................... 53
Description of the Partnership Guarantee.................................................................................... 62
Certain Federal Income Tax Considerations................................................................................... 66
Underwriting................................................................................................................ 70
Legal Matters............................................................................................................... 71
Experts..................................................................................................................... 71
Index of Defined Terms...................................................................................................... 72
Index to Financial Statements............................................................................................... F-1
</TABLE>
8,000,000
TRUST PREFERRED SECURITIES
CAPITA PREFERRED TRUST
% TRUST ORIGINATED
PREFERRED SECURITIES'SM' ('TOPRS'SM'')
FULLY AND UNCONDITIONALLY
GUARANTEED TO THE EXTENT SET
FORTH HEREIN BY
[LOGO]
---------------------------
PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
A. G. EDWARDS & SONS, INC.
GOLDMAN, SACHS & CO.
LEHMAN BROTHERS
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
, 1996
_____________________________________ _____________________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below are other expenses of issuance and distribution, all of
which will be paid by AT&T Capital:
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee..................................... $ 60,607
Printing and Distributing Registration Statement, Prospectus, and Miscellaneous
Material*.......................................................................
Accountants' Fee*.................................................................
Legal Fees and Expenses*..........................................................
Blue Sky Fees and Expenses*.......................................................
New York Stock Exchange Listing Fee*..............................................
Rating Agency Fee*................................................................
Miscellaneous Expenses*...........................................................
--------
Total................................................................... $
--------
--------
</TABLE>
- ------------
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware and the Company's
Restated Certificate of Incorporation and By-Laws provide for the
indemnification of directors and officers of the Company under certain
circumstances, and on a case by case basis, against expenses reasonably incurred
in connection with a civil or criminal action to which they were a party, or
threatened to be made a party, by reason of being a director or officer. The
Company's Restated Certificate of Incorporation and By-Laws provide for
indemnity of directors and officers to the fullest extent permitted by law.
The Declaration of Trust of Capita Preferred Trust (the 'Trust') provides
that to the fullest extent permitted by applicable law, the Sponsor shall
indemnify and hold harmless each of the Regular Trustees, any Affiliate of any
Regular Trustee, any officer, director, shareholder, member, partner, employee,
representative or agent of any Regular Trustee, or any officer, director,
shareholder, member, partner, employee, representative or agent of the Trust or
its Affiliates (each a 'Company Indemnified Person'), from and against any loss,
damage or claim incurred by such Company Indemnified Person by reason of any act
or omission performed or omitted by such Company Indemnified Person in good
faith on behalf of the Trust and in a manner such Company Indemnified Person
reasonably believed to be within the scope of authority conferred on such
Company Indemnified Person by the Declaration of Trust, except that no Company
Indemnified Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Company Indemnified Person by reason of gross
negligence (or, in the case of the Property Trustee, negligence) or willful
misconduct with respect to such acts or omissions. The Declaration of Trust also
provides that, to the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by a Company Indemnified Person in defending any
claim, demand, action, suit or proceeding shall, from time to time, be advanced
by the Company prior to the final disposition of such claim, demand, action,
suit or proceeding upon receipt by the Company of an undertaking by or on behalf
of the Company Indemnified Person to repay such amount if it shall be determined
that the Company Indemnified Person is not entitled to be indemnified as
authorized in the Declaration of Trust. The Declaration of Trust further
provides that no Company Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person (as
defined therein) or for any loss, damage or claim incurred by reason of any act
or omission performed or omitted by such Company Indemnified Person in good
faith on behalf of the Trust and in a manner such Company Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Company Indemnified Person by the Declaration of Trust or by law, except that a
Company Indemnified Person shall be liable for any such loss, damage or claim
incurred by
II-1
<PAGE>
<PAGE>
reason of such Company Indemnified Person's gross negligence or willful
misconduct with respect to acts or omissions.
The Limited Partnership Agreement of Capita Preferred Funding L.P. (the
'Partnership') provides that to the fullest extent permitted by applicable law,
the Company shall indemnify and hold harmless each of the General Partner, and
any Special Representative, any Affiliate of the General Partner or any Special
Representative, any officer, director, shareholder, member, partner, employee,
representative or agent of the General Partner or any Special Representative, or
any employee or agent of the Partnership or its Affiliates (each a 'Partnership
Indemnified Person'), from and against any loss, damage or claim incurred by
such Partnership Indemnified Person by reason of any act or omission performed
or omitted by such Partnership Indemnified Person in good faith on behalf of the
Partnership and in a manner such Partnership Indemnified Person reasonably
believed to be within the scope of authority conferred on such Partnership
Indemnified Person by the Limited Partnership Agreement, except that no
Partnership Indemnified Person shall be entitled to be indemnified in respect of
any loss, damage or claim incurred by such Partnership Indemnified Person by
reason of gross negligence or willful misconduct with respect to such acts or
omissions. The Limited Partnership Agreement also provides that, to the fullest
extent permitted by applicable law, expenses (including legal fees) incurred by
a Partnership Indemnified Person in defending any claim, demand, action, suit or
proceeding shall, from time to time, be advanced by the Company prior to the
final disposition of such claim, demand, action, suit or proceeding upon receipt
by the Company of an undertaking by or on behalf of the Partnership Indemnified
Person to repay such amount if it shall be determined that the Partnership
Indemnified Person is not entitled to be indemnified as authorized in the
Limited Partnership Agreement. The Limited Partnership Agreement further
provides that no Partnership Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Partnership or any Covered Person (as
defined therein) or for any loss, damage or claim incurred by reason of any act
or omission performed or omitted by such Partnership Indemnified Person in good
faith on behalf of the Partnership and in a manner such Partnership Indemnified
Person reasonably believed to be within the scope of the authority conferred on
such Partnership Indemnified Person by the Limited Partnership Agreement or by
law, except that a Partnership Indemnified Person shall be liable for any such
loss, damage or claim incurred by reason of such Partnership Indemnified
Person's gross negligence or willful misconduct with respect to acts or
omissions.
The directors and officers of the Company and the Regular Trustees of the
Trust are covered by insurance policies indemnifying them against certain
liabilities, including certain liabilities arising under the Act, which might be
incurred by them in such capacities and against which they cannot be indemnified
by the Company or the Trust. Any agents, dealers or underwriters who execute the
agreement filed as Exhibit 1 of this Registration Statement will agree to
indemnify the Company's directors and their officers and the Trustees who signed
the Registration Statement against certain liabilities that may arise under the
Securities Act with respect to information furnished to the Company or the Trust
by or on behalf of any such indemnifying party.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
1.1* -- Form of Purchase Agreement for the offering of the Preferred Securities being registered under this
Registration Statement.
4.1'D' -- Certificate of Trust dated August 29, 1996, of Capita Preferred Trust.
4.2* -- Form of Amended and Restated Declaration of Trust dated , 1996, of Capita Preferred
Trust.
4.3'D' -- Certificate of Limited Partnership, dated as of August 28, 1996, of Capita Preferred Funding L.P.
4.4 -- Amended and Restated Certificate of Limited Partnership of Capita Preferred Funding L.P. dated as of
October 2, 1996.
4.5* -- Form of Amended and Restated Limited Partnership Agreement dated , 1996 of Capita
Preferred Funding L.P.
</TABLE>
II-2
<PAGE>
<PAGE>
<TABLE>
<C> <S>
4.6* -- Form of Trust Preferred Securities Guarantee Agreement dated , 1996 between AT&T
Capital Corporation and The First National Bank of Chicago, N.A., as guarantee trustee.
4.7* -- Form of Partnership Preferred Securities Guarantee Agreement dated , 1996 between AT&T
Capital Corporation and The First National Bank of Chicago, N.A., as guarantee trustee.
5.1* -- Opinion of Simpson Thacher & Bartlett.
5.2* -- Opinion of Richards Layton & Finger.
8.1* -- Opinion of Simpson Thacher & Bartlett as to certain federal income tax matters.
12.1* -- Computation of Ratio of Earnings to Fixed Charges of AT&T Capital Corporation.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2* -- Consent of Simpson Thacher & Bartlett (to be contained in Exhibits No. 5.1 and 5.2).
23.3* -- Consent of Richards, Layton & Finger (to be contained in Exhibit 5.2).
24.1 -- Powers of Attorney (included on signature pages of Registration Statement).
25.1* -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as amended, of The First
National Bank of Chicago, N.A., under the Declaration of Trust (contained in Exhibit 4.2).
25.2* -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as amended, of The First
National Bank of Chicago, N.A., under the Trust Preferred Securities Guarantee Agreement (contained in
Exhibit 4.6).
</TABLE>
- ------------
'D' Previously filed.
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The undersigned registrants hereby undertake:
1. that for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrants pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective;
2. that for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
the time shall be deemed to be the initial bona fide offering thereof; and
3. that for purposes of determining any liability under the Securities
Act of 1933, each filing of the Company's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in this registration statement shall be deemed to
be a new registration statement relating to the securities offered herein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
------------------------
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of a
registrant pursuant to the foregoing provisions or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by a registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted against a
registrant by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
II-3
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 15th day of October, 1996.
AT&T CAPITAL CORPORATION
By: /s/ ROBERT J. INGATO
...................................
ROBERT J. INGATO
SENIOR VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Robert J. Ingato and Edward M. Dwyer, and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any registration statement
related thereto pursuant to Rule 462(b) of the Securities Act of 1933, and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed below by the
following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/S/ THOMAS C. WAJNERT Chairman of the Board of Directors and Chief October 15, 1996
......................................... Executive Officer
(THOMAS C. WAJNERT) (Principal Executive Officer)
/S/ EDWARD M. DWYER Senior Vice President and Chief October 15, 1996
......................................... Financial Officer (Principal
(EDWARD M. DWYER) Financial Officer)
/S/ RAMON OLIU Vice President, Controller (Principal October 15, 1996
......................................... Accounting Officer)
(RAMON OLIU)
/S/ HIROMI YAMAJI Director October 15, 1996
.........................................
(HIROMI YAMAJI)
/S/ JOHN APPLETON Director October 15, 1996
.........................................
(JOHN APPLETON)
/S/ GUY HANDS Director October 15, 1996
.........................................
(GUY HANDS)
/S/ JEFFERY NASH Director October 15, 1996
.........................................
(JEFFERY NASH)
/S/ DAVID BANKS Director October 15, 1996
.........................................
(DAVID BANKS)
</TABLE>
II-4
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 15th day of October, 1996.
CAPITA PREFERRED FUNDING L.P.
By: AT&T CAPITAL CORPORATION,
as General Partner
By: /s/ ROBERT J. INGATO
...................................
ROBERT J. INGATO
SENIOR VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Robert J. Ingato and Edward M. Dwyer, and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any registration statement
related thereto pursuant to Rule 462(b) of the Securities Act of 1933, and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed below by the
following persons in the capacities with respect to the General Partner of
Capita Preferred Funding L.P. and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/S/ THOMAS C. WAJNERT Director October 15, 1996
.........................................
(THOMAS C. WAJNERT)
/S/ HIROMI YAMAJI Director October 15, 1996
.........................................
(HIROMI YAMAJI)
/S/ JOHN APPLETON Director October 15, 1996
.........................................
(JOHN APPLETON)
/S/ GUY HANDS Director October 15, 1996
.........................................
(GUY HANDS)
/S/ JEFFERY NASH Director October 15, 1996
.........................................
(JEFFERY NASH)
/S/ DAVID BANKS Director October 15, 1996
.........................................
(DAVID BANKS)
</TABLE>
II-5
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, on the 15th day of October, 1996.
CAPITA PREFERRED TRUST
By: /s/ JEFFERY F. NASH
...................................
JEFFERY F. NASH
REGULAR TRUSTEE
II-6
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<C> <S>
1.1* -- Form of Purchase Agreement for the offering of the Preferred Securities being registered under this
Registration Statement.
4.1'D' -- Certificate of Trust dated August 29, 1996, of Capita Preferred Trust.
4.2* -- Form of Amended and Restated Declaration of Trust dated , 1996, of Capita Preferred
Trust.
4.3'D' -- Certificate of Limited Partnership, dated as of August 28, 1996, of Capita Preferred Funding L.P.
4.4 -- Amended and Restated Certificate of Limited Partnership of Capita Preferred Funding L.P. dated as of
October 2, 1996.
4.5* -- Form of Amended and Restated Limited Partnership Agreement dated , 1996 of Capita
Preferred Funding L.P.
4.6* -- Form of Trust Preferred Securities Guarantee Agreement dated , 1996 between AT&T
Capital Corporation and The First National Bank of Chicago, N.A., as guarantee trustee.
4.7* -- Form of Partnership Preferred Securities Guarantee Agreement dated , 1996 between AT&T
Capital Corporation and The First National Bank of Chicago, N.A., as guarantee trustee.
5.1* -- Opinion of Simpson Thacher & Bartlett.
5.2* -- Opinion of Richards Layton & Finger.
8.1* -- Opinion of Simpson Thacher & Bartlett as to certain federal income tax matters.
12.1* -- Computation of Ratio of Earnings to Fixed Charges of AT&T Capital Corporation.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2* -- Consent of Simpson Thacher & Bartlett (to be contained in Exhibits No. 5.1 and 5.2).
23.3* -- Consent of Richards, Layton & Finger (to be contained in Exhibit 5.2).
24.1 -- Powers of Attorney (included on signature pages of Registration Statement).
25.1* -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as amended, of The First
National Bank of Chicago, N.A., under the Declaration of Trust (contained in Exhibit 4.2).
25.2* -- Form T-1, Statement of Eligibility Under the Trust Indenture Act of 1939, as amended, of The First
National Bank of Chicago, N.A., under the Trust Preferred Securities Guarantee Agreement (contained in
Exhibit 4.6).
</TABLE>
- ------------
'D' Previously filed.
* To be filed by amendment.
STATEMENT OF DIFFERENCES
The dagger symbol shall be expressed as 'D'
The service mark shall be expressed as 'SM'
<PAGE>
<PAGE>
EXHIBIT 4.4
AMENDED AND RESTATED CERTIFICATE OF LIMITED PARTNERSHIP
OF
CAPITA PREFERRED FUNDING L.P.
THIS Amended and Restated Certificate of Limited Partnership of Capita
Preferred Funding L.P. (the 'Partnership'), dated as of October 2, 1996, has
been duly executed and is being filed by the undersigned in accordance with the
provisions of 6 Del. C. SS17-210, to amend and restate the original Certificate
of Limited Partnership of the Partnership, which was filed on August 29, 1996,
with the Secretary of State of the State of Delaware (the 'Certificate'), to
form a limited partnership under the Delaware Revised Uniform Limited
Partnership Act (6 Del. C. SS17-101, et seq.).
The Certificate is hereby amended and restated in its entirety to read as
follows:
1. Name. The name of the limited partnership formed and continued
hereby is Capita Preferred Funding L.P.
2. Registered Office. The address of the registered office of the
Partnership in the State of Delaware is: c/o The Prentice-Hall Corporation
System, Inc., 1013 Centre Road, Wilmington, New Castle County, Delaware,
19805.
3. Registered Agent. The name and address of the registered agent for
service of process on the Partnership in the State of Delaware are: The
Prentice-Hall Corporation System, Inc., 1013 Centre Road, Wilmington, New
Castle County, Delaware, 19805.
4. General Partner. The name and the mailing address of the sole
general partner of the Partnership are: AT&T Capital Corporation, 44
Whippany Road, Morristown, New Jersey 07962.
IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Certificate of Limited Partnership as of the date first-above written.
AT&T CAPITAL CORPORATION,
as sole general partner
By: /s/ ROBERT J. INGATO
...................................
NAME: ROBERT J. INGATO
TITLE: SR. VICE PRESIDENT AND
GENERAL COUNSEL
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to (i) the incorporation by reference in this registration
statement on Form S-3 (File No. 333-11243) of our reports dated January 25, 1996
each of which include an explanatory paragraph that describes a change in the
method of accounting for income taxes in 1993, on our audits of the consolidated
financial statements and financial statement schedule of AT&T Capital
Corporation and (ii) the use in such registration statement of our reports dated
October 14, 1996 on our audits of the balance sheets of each of Capita Preferred
Funding L.P. and Capita Preferred Trust, appearing in the prospectus which is a
part of such registration statement. We also consent to the reference to our
firm under the caption 'Experts'.
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York
October 15, 1996
<PAGE>
