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Filed Pursuant to
Rule 424(b)(3)
Registration
No. 033-80769
PROSPECTUS
[LOGO]
1,750,000 SHARES
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
COMMON STOCK
($.01 PAR VALUE)
This prospectus relates to the offer and resale of 1,750,000 shares of common
stock, par value $.01 per share (the "Common Stock"), of Financial Security
Assurance Holdings Ltd., a New York corporation ("FSA Holdings" and, together
with its consolidated subsidiaries, the "Company"). Of such 1,750,000 shares of
Common Stock, 943,396 are owned by National Westminster Bank Plc, together with
its subsidiaries ("NatWest") and 806,604 are owned by Canadian Imperial Bank of
Commerce, together with its subsidiaries ("CIBC" and, together with NatWest, the
"Selling Shareholders"). To the extent required, the terms of the offering of
such shares of Common Stock, the method of distribution of such shares of Common
Stock and any applicable discounts, concessions or commissions will be set forth
in a supplement to this Prospectus. To the extent either Selling Shareholder may
be deemed an underwriter under the Securities Act of 1933, as amended (the
"Securities Act"), it may be subject to certain statutory liabilities under the
Securities Act, including without limitation Sections 11 and 12 of the
Securities Act. See "Plan of Distribution."
Except as described herein under "Recent Developments" FSA Holdings will not
receive any of the proceeds from the sale of such shares of Common Stock by the
Selling Shareholders.
The Registration Statement of which this Prospectus forms a part also includes a
Prospectus relating to the delivery by Salomon Inc ("Salomon") pursuant to the
7 5/8% Exchangeable Notes due May 15, 1999 (the "DECS") of Salomon of shares of
Common Stock which Salomon may receive from U S WEST, Inc. ("U S WEST") pursuant
to the terms of certain exchangeable notes of U S WEST and a Prospectus relating
to shares of Common Stock which may be offered and sold by Salomon Brothers Inc
in connection with market-making activities in the DECS.
The Common Stock is listed for trading on the New York Stock Exchange, Inc. (the
"NYSE") under the symbol "FSA". On May 17, 1996, the last reported sale price of
the Common Stock on the NYSE Composite Tape was $27 5/8 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May 17, 1996.
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AVAILABLE INFORMATION
FSA Holdings is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by FSA Holdings 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 Commission's regional offices at Room 3190, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of such material may be
obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. In addition, material filed by FSA Holdings can be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
FSA Holdings has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules filed as a part thereof, as permitted by the rules and regulations of
the Commission. For further information with respect to FSA Holdings and the
Common Stock, reference is hereby made to such Registration Statement, including
the exhibits and schedules filed as a part thereof. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
herein are not necessarily complete and where such contract or other document is
an exhibit to the Registration Statement, each such statement is qualified in
all respects by the provisions of such exhibit, to which reference is hereby
made for a full statement of the provisions thereof. The Registration Statement,
including the exhibits and schedules filed as a part thereof, may be inspected
without charge at the public reference facilities maintained by the Commission
as set forth in the preceding paragraph. Copies of these documents may be
obtained at prescribed rates from the Public Reference Section of the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission (File No.
1-12644) are hereby incorporated by reference in this Prospectus:
1. FSA Holdings' Annual Report on Form 10-K for the year ended December 31,
1995;
2. FSA Holdings' Quarterly Report on Form 10-Q for the three months ended
March 31, 1996;
3. FSA Holdings' Current Report on Form 8-K dated April 26, 1996;
4. The description of the Common Stock set forth in FSA Holdings'
Registration Statement on Form 8-A, declared effective on May 6, 1994, and any
amendment or report filed for the purpose of updating such description;
5. Annual Report on Form 10-K for the year ended December 31, 1994 of
Capital Guaranty Corporation ("Capital Guaranty"), a wholly owned subsidiary of
FSA Holdings;
6. Capital Guaranty's Quarterly Report on Form 10-Q for the three months
ended March 31, 1995;
7. Capital Guaranty's Quarterly Report on Form 10-Q for the three months
ended June 30, 1995; and
8. Capital Guaranty's Quarterly Report on Form 10-Q for the three months
ended September 30, 1995.
All documents filed by FSA Holdings 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 this offering shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing such
documents.
Any statement contained in a document 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 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.
FSA Holdings hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above other than exhibits to such documents. Requests for such copies should be
directed to the Secretary of FSA Holdings, Financial Security Assurance Holdings
Ltd., 350 Park Avenue, New York, New York 10022, telephone number (212)
826-0100.
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FSA Holdings' principal executive offices are located at 350 Park Avenue,
New York, New York 10022, telephone number (212) 826-0100.
"DECS" is a service mark of Salomon Brothers Inc.
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THE COMPANY
FSA Holdings, through its indirect wholly owned subsidary, Financial
Security Assurance Inc. ("FSA"), is primarily engaged in the business of
providing financial guaranty insurance on asset-backed securities and municipal
bonds.
RISK FACTORS
ADEQUACY OF LOSS RESERVES
Like other financial guaranty insurers, FSA does not consider traditional
actuarial approaches used in the property/casualty insurance industry to be
applicable to the determination of its loss reserves because of the absence of a
sufficient number of losses in its financial guaranty insurance activities and
in the financial guaranty industry generally to establish a meaningful
statistical base. In the municipal area, a relatively small percentage of the
total amount of municipal obligations insured by the financial guaranty
insurance industry has experienced defaults in payment in recent years. There
can be no assurance, however, that these low default rates will be indicative of
future rates of default in insured municipal obligations. The statistical base
in the asset-backed area is even more limited than in the municipal area. In
addition, actual loss rates in the asset-backed area may over time prove to be
higher than in the municipal area. Although FSA currently maintains reserves in
an amount believed by its management to be sufficient to pay its estimated
ultimate liability for losses and loss adjustment expenses with respect to
obligations it has insured, there can be no assurance that losses in FSA's
insured portfolio will not exceed the loss reserves. Losses from future
defaults, depending on their magnitude, could have a material adverse effect on
the results of operations and financial condition of FSA Holdings.
CLAIMS-PAYING ABILITY RATINGS
As is customary in the financial guaranty insurance industry, the rating
agencies perform periodic assessments of the credits insured by a financial
guaranty insurer to confirm that such insurer continues to meet the requirements
of the rating agencies for a triple-A rating of the insurer's claims-paying
ability. Although FSA Holdings intends to continue to comply with the criteria
of the rating agencies, no assurance can be given that one or more of the rating
agencies will not reduce or withdraw its triple-A rating of the claims-paying
ability of FSA in the future. FSA's ability to compete with other triple-A rated
financial guarantors, and its results of operations and financial condition,
would be materially adversely affected by a reduction in its ratings.
MARKET AND OTHER FACTORS
The demand for financial guaranty insurance depends upon many factors, some
of which are beyond the control of FSA.
While all the major financial guaranty insurers have triple-A claims-paying
ability ratings from major rating agencies, the marketplace may from time to
time distinguish between financial guarantors on the basis of various factors,
including size, insured portfolio concentration and financial performance. These
distinctions may result in differentials in trading levels for securities
insured by particular financial guarantors which, in turn, may provide a
competitive advantage to those financial guarantors with better trading levels.
Conversely, various investors may lack additional capacity to purchase
securities insured by certain financial guarantors, which may provide a
competitive advantage to guarantors with fewer insured obligations outstanding.
Prevailing interest rate levels affect demand for financial guaranty
insurance to the extent that lower interest rates are accompanied by narrower
spreads between insured and uninsured obligations. The purchase of insurance
during periods of relatively narrower interest rate spreads will generally
provide lower cost savings to the issuer than during periods of relatively wider
spreads. These lower cost savings generally are accompanied by a corresponding
decrease in demand for financial guaranty insurance. However, relatively low
interest rate levels may encourage the issuance of new or the refunding of
existing debt securities by companies and municipalities, which may increase the
demand for financial guaranty insurance.
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Credit quality concerns among investors, especially during times of weak
economic conditions, typically result in an increase in demand for financial
guaranty insurance. During such times, investors generally prefer to purchase
higher rated investments, including those that achieve higher ratings through
financial guaranty insurance.
The perceived financial strength of financial guaranty insurers also affects
demand for financial guaranty insurance. Should a major financial guaranty
insurer, or the industry generally, have its claims-paying ability rating
lowered, or suffer for some other reason a deterioration in investor confidence,
demand for financial guaranty insurance would be adversely affected.
In addition, the financial guaranty insurance industry has historically been
and will continue to be subject to the direct and indirect effects of
governmental regulation, including changes in tax laws affecting insurance on
asset-backed and municipal obligations. No assurance can be given that future
legislative or regulatory changes will not adversely affect FSA's business.
COMPETITION AND INDUSTRY CONCENTRATION
FSA faces competition from both other providers of third party credit
enhancement and alternatives to third party credit enhancement. The majority of
asset-backed and municipal obligations are sold without third party credit
enhancement. Accordingly, each transaction proposed to be insured by FSA must
generally compete against an alternative execution which does not employ third
party credit enhancement. FSA also faces competition from other monoline primary
financial guaranty insurers, primarily AMBAC Indemnity Corporation, Capital
Markets Assurance Corporation, Connie Lee Insurance Company, Financial Guaranty
Insurance Company and MBIA Insurance Corp. Traditional credit enhancers such as
bank letter of credit providers and mortgage pool insurers also provide
significant competition to FSA as providers of credit enhancement for
asset-backed obligations. While actions by securities rating agencies in recent
years have significantly reduced the number of triple-A rated banks that can
offer a product directly competitive with FSA's triple-A guaranty, and recently
implemented risk-based capital guidelines applicable to banks have generally
increased costs associated with letters of credit that compete directly with
financial guaranty insurance, bank letter of credit providers and other credit
enhancement, such as cash collateral accounts, provided by banks, continue to
provide significant competition to FSA.
SUBSTANTIAL VOTING CONTROL
At March 1, 1996, voting control of FSA Holdings was held 41.9% by U S WEST
Capital Corporation ("USWCC"), 19.1% by Fund American Enterprises Holdings, Inc.
("Fund American") and 5.8% by the Tokio Marine and Fire Insurance Company, Ltd.
("Tokio Marine") (together, the "Substantial Shareholders"). Each of the
Substantial Shareholders has the ability to exercise significant influence over
the policies and corporate actions of FSA Holdings. Consummation of the
transactions described under "Recent Developments" will significantly reduce the
number of shares of Common Stock owned by USWCC and will increase the number of
shares owned by Fund American. See "Recent Developments." Shareholders of FSA
Holdings do not have cumulative voting rights with respect to the election of
directors and, accordingly, any shareholder or group of shareholders holding
shares representing in excess of 50% of the voting shares outstanding of FSA
Holdings would by itself have the power to elect the entire board of directors
of FSA Holdings.
HOLDING COMPANY STRUCTURE
The operations of FSA Holdings are conducted through FSA. Accordingly, FSA
Holdings' financial condition and results of operations are dependent upon FSA,
whose ability to declare and pay dividends to FSA Holdings is dependent upon
FSA's financial condition, results of operations, cash requirements and other
related factors and is also subject to restrictions contained in the insurance
laws and regulations of New York and other states.
SHARES ELIGIBLE FOR FUTURE SALE
At March 1, 1996, the three largest shareholders of FSA Holdings, USWCC,
Fund American and Tokio Marine, together owned approximately 64.7% of the Common
Stock outstanding. U S WEST has the right to cause the delivery of 8,725,000
shares of Common Stock owned by USWCC (plus 1,071,303 shares solely
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to cover over-allotments) to Salomon pursuant to the terms of the U S WEST DECS.
All of the shares of Common Stock owned by USWCC, Fund American and Tokio Marine
will continue to be tradeable in the open market subject to the volume
limitations, manner of sale and notice requirements of Rule 144 under the
Securities Act or, without such requirements or limitations through the exercise
of registration rights available under agreements with FSA Holdings.
Consummation of the transactions described under "Recent Developments" will
significantly reduce the number of shares of Common Stock owned by USWCC and
will increase the number of shares owned by Fund American. See "Recent
Developments."
Sales of substantial amounts of Common Stock in the public or private
market, or the perception that such sales could occur, could adversely affect
prevailing market prices of the Common Stock.
IMPACT OF THE DECS ON THE MARKET FOR THE COMMON STOCK
It is not possible to predict accurately how or whether any market that
develops for the DECS will influence the market for the Common Stock. For
example, the price of the Common Stock could become more volatile and could be
depressed by investors' anticipation of the potential distribution into the
market of substantial additional amounts of Common Stock upon the maturity of
the DECS, by possible sales of Common Stock by investors who view the DECS as a
more attractive means of equity participation in FSA Holdings and by hedging or
arbitrage trading activity that may develop involving the DECS and the Common
Stock.
RECENT DEVELOPMENTS
On April 29, 1996, USWCC and FSA Holdings announced plans to enter into a
series of transactions (the "Sale Transactions") pursuant to which USWCC will
sell up to 3,750,000 shares of the Common Stock it currently owns. Pursuant to
the Sale Transactions, (i) FSA Holdings will repurchase 1,000,000 shares of
Common Stock from USWCC at a price of $26.50 per share, (ii) Fund American will
purchase 1,000,000 shares of Common Stock from USWCC at a price of $26.50 per
share and (iii) NatWest will purchase 943,396 shares of Common Stock from USWCC
(the "NatWest Shares"), and CIBC will purchase 806,604 shares of Common Stock
from USWCC (the "CIBC Shares" and, together with the NatWest shares, the
"Forward Shares"), at a price of $26.50 per share and each will concurrently
enter into a five-year forward agreement (the "Forward Agreements") with FSA
Holdings with respect to such shares pursuant to which FSA Holdings will have an
option to purchase such shares at a price of $26.50 per share plus carrying
costs as described below.
Pursuant to the Forward Agreements, FSA Holdings will have the option either
(i) to purchase the Forward Shares from the Selling Shareholders for a price of
$26.50 per share plus Carrying Costs (as defined below) or (ii) to direct the
Selling Shareholders to sell the Forward Shares. If FSA Holdings directs the
Selling Shareholders to sell the Forward Shares, if the market value of the
Forward Shares exceeds the sum of $26.50 per share plus Carrying Costs, FSA
Holdings will receive such excess and if the market value of the Forward Shares
is less than the sum of $26.50 per share plus Carrying Costs, FSA Holdings will
be required to pay such shortfall to the Selling Shareholders in cash or shares
of Common Stock. "Carrying Costs" will equal a specified margin over LIBOR (plus
any LIBOR breakage fees) less any dividends paid by FSA Holdings on the Forward
Shares (and interest thereon). Under the Forward Agreement, the obligation of
FSA Holdings with respect to 1,000,000 of the Forward Shares will be for the
account of FSA Holdings and the obligation of FSA Holdings with respect to
750,000 of the Forward Shares will be for the account of FSA Holdings'
management.
On May 10, 1996, FSA Holdings repurchased 450,000 shares of Common Stock
from USWCC. Consummation of the other Sale Transactions is expected by the end
of May 1996, subject to the satisfaction of customary closing conditions.
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UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL INFORMATION
STATEMENT OF OPERATIONS
In December 1995, FSA Holdings acquired Capital Guaranty in a merger
transaction in which Capital Guaranty became a direct wholly owned subsidiary of
FSA Holdings (the "Merger"). The following pro forma consolidated condensed
statement of operations reflects the Merger of Capital Guaranty with a
subsidiary of FSA Holdings. The pro forma consolidated condensed statement of
operations is unaudited and combines the operations of FSA Holdings and Capital
Guaranty for the year ended December 31, 1995. The pro forma consolidated
condensed statements of operations assume the Merger occurred at January 1,
1995.
The historical financial information of FSA Holdings for the year ended
December 31, 1995 has been derived from the FSA Holdings financial statements
which are incorporated herein by reference. The historical financial information
of Capital Guaranty for the year ended December 31, 1995 has been derived from
the Capital Guaranty financial statements which are incorporated herein by
reference and has been adjusted for fourth quarter 1995 activity. The pro forma
consolidated condensed financial statement of operations should be read in
conjunction with the historical financial statements of FSA Holdings and Capital
Guaranty incorporated herein by reference. See "Available Information" and
"Incorporation of Certain Documents By Reference."
The unaudited pro forma consolidated condensed financial statement of
operations has been included as required by the Commission and is provided for
comparative purposes only. As further discussed in the accompanying notes, the
pro forma financial statement of operations does not purport to be indicative of
the financial operating results that would have been achieved had the Merger
been consummated as of the date indicated and should not be construed as
representative of future financial operating results.
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PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------
HISTORICAL PRO FORMA
----------------------- ADJUSTMENTS
FSA CAPITAL INCREASE NOTE
HOLDINGS GUARANTY * (DECREASE) REFERENCE PRO FORMA
---------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES
Premiums Earned................................. $ 69,347 $ 12,213 $ $ 81,560
Net Investment Income (Loss).................... 48,965 19,136 (3,724) (a) 64,376
Net Realized Gains.............................. 5,120 2,208 7,328
Other Income.................................... 3,841 45 3,886
---------- ----------- ------------ -----------
TOTAL REVENUES.............................. 127,273 33,601 (3,724) 157,150
---------- ----------- ------------ -----------
EXPENSES
Losses and Loss Adjustment Expenses Related to
the Merger..................................... 15,400 (15,400) (b)
Losses and Loss Adjustment Expenses............. 6,258 850 (c) 7,108
Policy Acquisition Costs........................ 16,888 3,495 (371) (d) 20,012
Interest Expense................................ 2,115 2,115
Other Operating Expenses........................ 13,685 4,666 (3,347) (e) 15,004
---------- ----------- ------------ -----------
TOTAL EXPENSES.............................. 52,231 10,276 (18,268) 44,239
---------- ----------- ------------ -----------
INCOME BEFORE INCOME TAXES...................... 75,042 23,325 14,544 112,911
Provision for Income Taxes...................... 20,004 7,212 5,090 (f) 32,306
---------- ----------- ------------ -----------
NET INCOME (LOSS)........................... $ 55,038 $ 16,113 $ 9,454 $ 80,605
---------- ----------- ------------ -----------
---------- ----------- ------------ -----------
Weighted Average Common Shares Outstanding...... 25,797 31,849
Earnings Per Common Share....................... $ 2.13 $ 2.53
</TABLE>
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* The Capital Guaranty December 31, 1995 financial information was derived by
beginning with September 30, 1995 information incorporated herein by reference
and adjusting it for fourth quarter 1995 activity. As such, from September 30,
1995 through December 31, 1995, Capital Guaranty's premiums earned were
increased by $3,488, net investment income was increased by $4,939, net
realized gains were increased by $1,666, other income was increased by $10,
policy acquisition costs were increased by $856, interest expense was
increased by $529, other operating expenses were increased by $1,281 and
provision for income taxes was increased by $3,472.
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NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
The pro forma consolidated condensed statement of operations reflects the
Merger of Capital Guaranty with a subsidiary of FSA Holdings and assumes all
shares of Capital Guaranty Common Stock, $.10 par value ("Capital Guaranty
Common Stock"), were converted, pursuant to the Merger, into shares of FSA
Holdings Common Stock at a per share stock consideration of 0.6716 of a share of
FSA Holdings Common Stock (determined based on an average FSA Holdings Common
Stock price of $25.775), per share cash consideration of $5.69 and a total cash
consideration (the "Total Cash Consideration") of approximately $51.3 million.
With the exception of Item (c) described below, the pro forma consolidated
condensed statement of operations does not include adjustments to conform the
accounting policies of Capital Guaranty to those followed by FSA Holdings. The
nature and extent of additional adjustments, if any, will be based upon further
study and analysis and would not be expected to affect significantly the pro
forma financial results.
The following describes the pro forma adjustments reflected in the
accompanying pro forma consolidated condensed statement of operations:
(a) To reflect the reduction of investment income due to the payment of
$51.3 million to shareholders of Capital Guaranty and transaction costs of
the Merger.
(b) To eliminate the one-time charge FSA recognized in its December 31,
1995 statement of operations which provided a general loss provision on the
insured portfolio it had assumed in the Merger in a manner consistent with
FSA's general reserve methodology.
(c) To record the increase to FSA's general loss reserve for new
business underwritten by Capital Guaranty Insurance Company consistent with
FSA's general reserve methodology.
Based on FSA Holdings' detailed plans, certain costs and expenses of the
combined companies will be less than the historical expenses due to the
consolidation of certain operations and elimination of duplicative facilities.
The expense reductions are primarily related to the elimination of duplicative
facilities, equipment, personnel and functions.
The pro forma pre-tax expense reductions, based on FSA Holdings' detailed
plans, are estimated to total $6.3 million, of which $3.0 million is a reduction
of policy acquisition costs, for the year ended December 31, 1995. Adjustments
(d), (e) and (f) reflect these estimated cost savings.
(d) To adjust amortization policy acquisition costs for the reduction in
expenses.
(e) To reduce expenses due to elimination of duplicative facilities,
personnel and functions net of the effect of costs deferred or amortized.
(f) To record accrued taxes on all adjustments.
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SELLING SHAREHOLDERS
NatWest is engaged in a wide range of banking, financial and related
activities in the United Kingdom and throughout the world. This Prospectus
relates to the offer and resale by NatWest of the NatWest Shares. Upon
consummation of the Sale Transactions, NatWest will own the NatWest Shares and
will not own any other shares of Common Stock. Upon consummation of this
offering, NatWest will not own any shares of Common Stock, assuming all of the
NatWest Shares are sold by NatWest. NatWest does not hold, and during the past
three years has not held, any position or office with FSA Holdings or any of its
predecessors or affiliates and NatWest does not have, and during the past three
years has not had, any material relationship with FSA Holdings or any of its
predecessors or affiliates.
CIBC is a diversified Canadian financial services company operating on a
global basis. This Prospectus relates to the offer and resale by CIBC of the
CIBC Shares. Upon consummation of the Sale Transactions, CIBC will own the CIBC
Shares and will not own any other shares of Common Stock. Upon consummation of
this offering, CIBC will not own any shares of Common Stock, assuming all of the
CIBC Shares are sold by CIBC. CIBC does not hold, and during the past three
years has not held, any position or office with FSA Holdings or any of its
predecessors or affiliates and CIBC does not have, and during the past three
years has not had, any material relationship with FSA Holdings or any of its
predecessors or affiliates.
PLAN OF DISTRIBUTION
As contemplated by the Forward Agreements, shares of Common Stock may be
offered and sold from time to time in brokerage transactions on the NYSE at
market prices prevailing at the time of sale, or by such other means as may be
agreed by FSA Holdings. The supplement to this Prospectus (each such supplement,
a "Prospectus Supplement") with respect to the shares of Common Stock offered
thereby describes, if and to the extent required, the terms of the offering of
such shares of Common Stock and the method of distribution of the shares of
Common Stock offered thereby and identifies any firms acting as underwriters,
dealers or agents in connection therewith.
In connection with the sale of shares of Common Stock, underwriters,
dealers, brokers or agents may be deemed to have received compensation from a
Selling Shareholder in the form of underwriting discounts, concessions or
commissions and may also receive commissions from purchasers of shares of Common
Stock for whom they may act as agent. Underwriters may sell shares of Common
Stock to or through dealers, and such dealers may receive compensation in the
form of discounts, concessions or commissions from the underwriters or
commissions from the purchasers for whom they may act as agent. Certain of the
underwriters, dealers or agents who participate in the distribution of shares of
Common Stock may engage in other transactions with, and perform other services
for, the Selling Shareholders or FSA Holdings in the ordinary course of
business.
Any underwriting compensation paid by a Selling Shareholder to underwriters
or agents in connection with the offering of shares of Common Stock, and any
discounts, concessions or commissions allowed by underwriters to dealers, are
set forth in the Prospectus Supplement. Underwriters, dealers, brokers and
agents participating in the offer and sale of shares of Common Stock may be
deemed to be underwriters under the Securities Act, and any discounts and
commissions received by them and any profit realized by them on the resale of
shares of Common Stock may be deemed to be underwriting compensation under the
Securities Act. To the extent either Selling Shareholder may be deemed an
underwriter under the Securities Act, it may be subject to certain statutory
liabilities under the Securities Act, including without limitation Sections 11
and 12 of the Securities Act. The Selling Shareholders may be entitled under
agreements with FSA Holdings to indemnification against and contributions toward
certain liabilities, including liabilities under the Securities Act.
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EXPERTS
The consolidated financial statements of FSA Holdings and its subsidiaries
as of December 31, 1995 and 1994 and for each of the three years in the period
ended December 31, 1995, incorporated by reference in FSA Holdings' Annual
Report (Form 10-K), have been audited by Coopers & Lybrand L.L.P., independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of Capital Guaranty and its
subsidiaries as of December 31, 1994 and 1993, and for each of the three years
in the period ended December 31, 1994, incorporated by reference in Capital
Guaranty's Annual Report (Form 10-K), have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Common Stock being offered hereby will be passed upon
for FSA Holdings by Bruce E. Stern, Esq., General Counsel of FSA Holdings.
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NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY FSA HOLDINGS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE FACTS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 3
The Company.................................... 4
Risk Factors................................... 4
Recent Developments............................ 6
Unaudited Pro Forma Consolidated Condensed
Financial Information......................... 7
Selling Shareholders........................... 10
Plan of Distribution........................... 10
Experts........................................ 11
Legal Matters.................................. 11
</TABLE>
1,750,000 SHARES
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
COMMON STOCK
($.01 PAR VALUE)
[LOGO]
PROSPECTUS
DATED MAY 17, 1996
