<PAGE>
Filed Pursuant to Rule 424(b)(2)
Relating to Registration Number 333-34181
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 10, 1997
[FSA LOGO]
$130,000,000
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
7.375% SENIOR QUARTERLY INCOME DEBT SECURITIES
DUE 2097 (SENIOR QUIDS)
-------------------------
The 7.375% Senior Quarterly Income Debt Securities due 2097 (the "Debt
Securities") are being offered hereby by Financial Security Assurance Holdings
Ltd. (the "Company"). The Debt Securities will bear interest at the rate of
7.375% per annum, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing December 31, 1997. The
Debt Securities will mature on September 30, 2097. The Debt Securities may not
be redeemed by the Company prior to September 18, 2002 and are not subject to
any sinking fund.
The Debt Securities will be issued only in fully registered form and will
be represented by one global security registered in the name of a nominee of The
Depository Trust Company, as Depositary (the "Depositary"). Beneficial interests
in the global security representing the Debt Securities will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depositary and its participants. Except as described herein, Debt Securities in
certificated form will not be issued in exchange for the global security. The
Debt Securities will trade in the Depositary's Same-Day Funds Settlement System
until maturity, and secondary market trading activity for the Debt Securities
will therefore settle in immediately available funds. All payments of principal
and interest will be made by the Company in immediately available funds. See
"Description of Debt Securities".
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
SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
Initial Public Underwriting Proceeds to
Offering Price (1) Discount (2) Company (1)(3)
------------------ ----------- --------------
Per Debt Security.... 100% 3.15% 96.85%
Total $130,000,000 $4,095,000 $125,905,000
- ---------------
(1) Plus accrued interest, if any, from September 18, 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting."
(3) Before deducting expenses estimated at $226,000 payable by the Company.
-------------------------
The Debt 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 the Debt Securities will be ready for delivery in New York, New York on or
about September 18, 1997, against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO.
MORGAN STANLEY DEAN WITTER
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
---------------------------
The date of this Prospectus Supplement is September 15, 1997.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEBT SECURITIES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
DEBT SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
S-2
<PAGE>
THE COMPANY
Financial Security Assurance Holdings Ltd. (the "Company"), through its
wholly owned subsidiary, Financial Security Assurance Inc. ("FSA"), is
primarily engaged in the business of providing financial guaranty insurance
on asset-backed securities and municipal bonds. FSA was the first insurance
company organized to insure asset-backed obligations and has been a leading
insurer of asset-backed obligations (based on number of transactions insured)
since its inception in 1985. FSA expanded the focus of its business in 1990
to include financial guaranty insurance of municipal obligations. For the
six months ended June 30, 1997, FSA had gross premiums written of $132.1
million, of which 49% related to insurance of asset-backed obligations and
51% related to insurance of municipal obligations. At June 30, 1997, FSA had
net insurance in force of $102.5 billion, of which 69% represented insurance
of municipal obligations and 31% represented insurance of asset-backed
obligations.
Financial guaranty insurance written by FSA typically guarantees
scheduled payments on an issuer's obligations. In the case of a payment
default on an insured obligation, FSA is generally required to pay the
principal, interest or other amounts due in accordance with the obligations'
original payment schedule or, at its option, to pay such amounts on an
accelerated basis. FSA's underwriting policy is to insure asset-backed and
municipal obligations that would otherwise be investment grade without the
benefit of FSA's insurance. The asset-backed obligations insured by FSA are
generally issued in structured transactions backed by pools of assets such as
residential mortgage loans, consumer or trade receivables, securities or
other assets having an ascertainable cash flow or market value. The
municipal obligations insured by FSA consist primarily of general obligation
bonds supported by the issuers' taxing power and special revenue bonds and
other special obligations of state and local governments supported by the
issuers' ability to impose and collect fees and charges for public services
or specific projects.
The Company's business objective is to remain a leading insurer of
asset-backed obligations and to become a more prominent insurer of municipal
obligations. The Company's acquisition of Capital Guaranty Corporation
("Capital Guaranty") in December 1995 increased the Company's presence in the
insured municipal bond sector. The Company believes that the demand for its
financial guaranty insurance will grow over the long term in response to
anticipated growth in insured asset-backed and municipal obligations. The
Company expects continued growth in the insurance of asset-backed
obligations, due in part to the continued expansion of asset securitization
outside of the residential mortgage sector. In the long term, the Company
also expects continued growth in the insurance of municipal obligations, due
in part to increased issuance of municipal bonds to finance repairs and
improvements to the nation's infrastructure and increased municipal bond
purchases by individuals who generally purchase insured obligations. In
addition, the percentage of new domestic municipal bond volume which is
insured has increased each year since 1986, to 46% for the year ending 1996
according to published sources. The Company maintains offices in New York
City, San Francisco, Dallas, London, Paris and Sydney, and expects soon to
open a Singapore office. In addition to its domestic business, the Company
pursues international opportunities and currently operates in the European
and Pacific Rim markets. The Company was the first financial guaranty
insurance company to insure obligations in international markets.
The Company expects to continue to emphasize a diversified insured
portfolio characterized by insurance of both asset-backed and municipal
obligations, with a broad geographic distribution and a variety of revenue
sources and transaction structures.
The claims-paying ability of FSA is rated "Aaa" by Moody's Investors
Service, Inc. and "AAA" by Standard & Poor's Ratings Services ("S&P"), Fitch
Investors Service, L.P., Nippon Investors Services and S&P (Australia) Pty. Ltd.
FSA is licensed to engage in the financial guaranty insurance business in
all 50 states, the District of Columbia and Puerto Rico.
The principal executive offices of the Company are located at 350 Park
Avenue, New York, New York 10022. The telephone number at that location is (212)
826-0100.
S-3
<PAGE>
USE OF PROCEEDS
The proceeds to the Company from the sale of the Debt Securities, net of
underwriting discounts and expenses, are estimated to be approximately $125.7
million. The net proceeds from the sale of the Debt Securities will be used as
follows: (a) approximately $30 million will be used to repay outstanding 7.05%
Notes due 2003 of Capital Guaranty, (b) up to approximately $28 million may be
used to purchase shares of its common stock pursuant to forward agreements with
certain financial institutions, (c) approximately $50 million will be
contributed to the capital of and/or lent to FSA and (d) approximately $17.7
million ($45.7 million if the Company does not purchase shares pursuant to the
forward agreements) will be retained by the Company for general corporate
purposes.
CAPITALIZATION
The following table sets forth the total capitalization of the Company at
June 30, 1997, and such capitalization as adjusted to give effect to the
issuance and sale of $130 million aggregate principal amount of Debt Securities
(in each case without giving effect to the payment of expenses).
June 30, 1997
----------------------------------------
Actual As Adjusted (1)
----------------------------------------
(Unaudited)
(Dollars in Thousands)
Long-term debt $ 30,000 $ 130,000
Shareholders' equity:
Preferred Stock 700 700
Common Stock 694,973 694,973
Retained earnings 182,429 182,429
Unrealized gain on investments 12,732 12,732
Deferred Equity compensation 14,302 14,302
Less treasury stock at cost (63,937) (91,937)
--------- ---------
Total shareholders' equity 841,199 813,199
--------- ---------
Total capitalization $ 871,199 $ 943,199
========= =========
- ------------
(1) Adjusted to give effect to the issuance and sale of and use of proceeds
from the Debt Securities, including the use of $28 million for the purchase
of shares pursuant to the forward agreements.
S-4
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND STATISTICAL DATA
The selected consolidated financial data in the table below for each of the
five years in the period ended December 31, 1996 have been derived from audited
consolidated financial statements of the Company previously filed with the
Commission. The selected consolidated financial data at June 30, 1996 and 1997,
and for the six months ended June 30, 1996 and 1997, are unaudited but in the
opinion of management include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation. The results of
operations for the periods ended June 30, 1996 and 1997 are not necessarily
indicative of the operating results for the full year. The following
information should be read in conjunction with the consolidated financial
statements and related notes of the Company included, or incorporated by
reference, in the Company's periodic reports filed under the Exchange Act that
are incorporated by reference herein. See "Incorporation of Certain Documents by
Reference" in the accompanying Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------------- ------------------
1992(1) 1993(2) 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Gross premiums written....... $ 131,131 $ 127,409 $ 106,449 $110,742 $176,965 $ 97,341 $132,106
Net premiums written......... 78,397 65,006 77,757 77,576 121,000 64,865 94,679
Net Premiums earned.......... 63,857 63,377 65,754 69,347 90,448 42,484 52,335
Net realized gains
(losses).................. 29,153 18,292 (3,773) 5,120 3,189 1,512 1,333
Net investment income........ 47,024 47,948 46,592 48,965 65,064 31,668 33,482
Total revenues............... 142,506 127,654 109,350 127,273 158,998 75,769 90,407
Losses and loss adjustment
expenses................... 54,623 84,054 3,024 21,6584 6,874 3,155 4,441
Amortization and write-
off of goodwill............ 3,718 81,598 -- -- -- -- --
Policy acquisition and other
expenses................... 31,323 40,459 28,036 30,573 42,353 21,169 23,642
Income (loss) before income
taxes ..................... 52,842 (163,866) 78,290 75,042 109,771 51,445 62,324
Net income (loss)............ 43,457 (124,707) 60,375 55,038 80,760 38,292 45,483
Earnings (loss) per common
share..................... 1.90 (5.44) 2.32 2.13 2.64 1.23 1.52
Cash dividends per common
share...................... 0.26 -- 0.16 0.32 0.35 0.16 0.19
SELECTED FINANCIAL STATISTICS
GAAP BASIS(3)
Loss ratio................... 85.5% 132.6% 4.6% 31.2%(4) 7.6% 7.4% 8.5%
Expense ratio................ 47.3 62.1 40.5 42.2 42.8 45.4 41.5
Combined ratio............... 132.8 194.7 45.1 73.4 50.4 52.8 50.0
SAP BASIS(3)%
Loss ratio................... 67.7% 0.7% 28.1% 16.7% 10.6% 0.4% 8.1%
Expense ratio................ 47.5 52.2 59.1 45.5 33.7 26.8 23.0
Combined ratio .............. 115.2 52.9 87.2 62.2 44.3 27.2 31.1
BALANCE SHEET
Total investments............ $727,455 $786,723(5) $747,176 $1,110,742 $1,154,416 $1,139,439 $1,266,035
Prepaid reinsurance
premiums................... 98,225 127,849 121,668 133,548 151,224 144,881 169,112
Total assets................. 1,042,362 1,030,587 1,074,316 1,490,262 1,537,742 1,516,296 1,694,604
Deferred premium
revenue................... 297,073 328,165 334,569 463,897 511,196 496,061 570,363
Total liabilities............ 433,166 488,615 528,880 712,315 736,482 756,296 853,405
Shareholders' equity......... 609,196 541,972 545,436 777,947 801,260 760,000 841,199
Book value per common
share..................... 26.64 20.95 20.92 24.67 26.71 25.10 28.18
SELECTED FINANCIAL STATISTICS3
Gross insurance in force..... $52,592,000 $61,290,000 $65,824,000 $99,034,000 $125,432,000 $109,877,000 $139,706,000
Net insurance in force ...... 37,334,000 41,667,000 45,825,000 75,360,000 93,704,000 85,271,000 102,530,000
Qualified statutory capital.. 461,443 454,048 465,787 644,653 675,944 661,732 711,154
Policyholders' leverage ratio 81:1 92:1 98:1 117:1 139:1 129:1 144:1
</TABLE>
S-5
<PAGE>
- -----------------------------
1. Results for full year 1992 were adversely affected by $54.6 million of
additional reserves, consisting of case basis reserves for three
commercial mortgage transactions insured by FSA and the establishment
of a non-specific general reserve (the "General Reserve") for
unidentified losses covering FSA's entire insured portfolio.
2. Results for the year ended December 31, 1993 were adversely affected
by $63.7 million in net incurred losses for three commercial mortgage
transactions insured by FSA, $63.0 million of which losses were
directly paid by a U S WEST, Inc. Letter of Credit. The payment under
the U S WEST, Inc. Letter of Credit was accounted for under GAAP as a
contribution of capital (net of related tax effect) and the related
losses were reflected as an expense in the Company's income statement,
while for SAP income statement purposes the drawings under the U S
WEST, Inc. Letter of Credit were netted against such losses. Results
were also adversely affected by an increase in FSA's General Reserve
of $20.3 million, a write-off of $78.8 million of goodwill, a
restructuring charge of $85.4 million resulting from the premium
payment by FSA to Commercial Reinsurance Company under its reinsurance
agreement with FSA and non-recurring charges of approximately $10.0
million. Gross and net premiums written were reduced due to the
cession of $17.9 million of unearned premiums from FSA to Commercial
Reinsurance Company under such reinsurance agreement.
3. These ratios and statistics relate solely to FSA. The GAAP loss ratio
is losses and loss adjustment expenses incurred (inclusive of
additions to the General Reserve) divided by net premiums earned. The
SAP loss ratio is losses and loss adjustment expenses incurred
(exclusive of additions to the General Reserve) divided by net
premiums earned. The statutory loss ratio for the period ended June
30, 1997 reflects the increase in case basis reserves of $3.2 million
which was recorded for statutory financial statement purposes in July
1997. The GAAP expenses ratio is underwriting and operating expenses
divided by net premiums earned. The SAP expense ratio is underwriting
and operating expenses divided by net premiums written. The combined
ratio on both a GAAP and SAP basis is the sum of the applicable loss
and expense ratios.
4. 1995 losses and loss adjustment expenses and loss ratio include $15.4
million increase to General Reserve related to the merger with Capital
Guaranty Corporation. Excluding this increase, the loss ratio would
have been 9.0%.
5. Total investments at December 31, 1993 included $54.1 million of
unrealized gains and $24.3 million of funds withheld from the premium
ceded by FSA to Commercial Reinsurance Company, pending deposit of
such funds in a trust account satisfying the requirements of
applicable insurance law.
S-6
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the Company for the periods indicated. Earnings represent consolidated earnings
before income taxes and fixed charges. Fixed charges consist of interest and
one-third of rental expense deemed representative of the interest factor for
such rental expense. The ratio for 1993 is considered not meaningful because of
the significant loss incurred by the Company in that year. The Company had no
capitalized interest for the periods presented.
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------------- -----------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
Ratio of earnings
to fixed charges.......... 31.1 N/M 51.2 70.0 35.2 32.7 39.5
DESCRIPTION OF DEBT SECURITIES
The Debt Securities offered hereby will represent direct unsecured
obligations of the Company and will be issued as a separate series of debt
securities under the Indenture, dated as of September 15, 1997 (the "Senior
Indenture"), between the Company and First Union National Bank, as Trustee (the
"Trustee"). The statements herein relating to the Debt Securities and the Senior
Indenture are summaries of, and subject to, the detailed provisions of the
Senior Indenture, including the definitions therein of certain terms. A copy of
the Senior Indenture is filed as an exhibit to the Registration Statement of
which the accompanying Prospectus is a part. The following summaries of certain
provisions of the Senior Indenture and of the Debt Securities (referred to in
the accompanying Prospectus as the "Debt Securities") supplement, and to the
extent inconsistent therewith replace, the summaries of certain provisions of
the Debt Securities set forth in the accompanying Prospectus, to which reference
is hereby made, and do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of the Senior
Indenture, including the definitions therein of certain terms.
The Debt Securities offered hereby will be limited to $130,000,000
aggregate principal amount and will mature on September 30, 2097. Each Debt
Security will bear interest at the rate of 7.375% per annum from September 18,
1997 or from the most recent interest payment date to which interest has been
paid or provided for, payable quarterly on March 31, June 30, September 30 and
December 31 of each year, commencing December 31, 1997, to the person in whose
name such Debt Security is registered at the close of business on March 15,
June 15, September 15 or December 15, as the case may be, next preceding such
interest payment date. The Debt Securities will not be redeemable prior to
September 18, 2002, and thereafter will be redeemable at the option of the
Company, in whole at any time or in part from time to time, without premium or
penalty. The Debt Securities will be subject to defeasance and covenant
defeasance as provided in Article Thirteen of the Senior Indenture.
BOOK-ENTRY PROCEDURES
Except as set forth below, Debt Securities will be available for purchase
in book-entry form only in denominations of $25 and integral multiples thereof.
Market makers expect to trade the Debt Securities in round lots of 100 units
(representing $2,500 aggregate principal amount). Upon issuance, all Debt
Securities will be represented by one fully registered global security (the
"Registered Global Security"). The Registered Global Security will be deposited
with, or on behalf of, the Depositary, and registered in the name of the
Depositary or a nominee thereof. The Registered Global Security may be
transferred, in whole but not in part, by the Depositary to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of
S-7
<PAGE>
such Depositary or by such Depositary or any such nominee to a successor
Depositary selected or approved by the Company or to a nominee of such successor
Depositary.
The Depositary has advised the Company as follows: the Depositary is a
limited-purpose trust company organized under the Banking Law of the State of
New York, 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. The Depositary was created to hold securities of its participants and to
facilitate the clearance and settlement of transactions among its participants
in such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depositary's participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations, and certain other organizations, some of whom (and/or their
representatives) own the Depositary. Access to the depositary book-entry system
is also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly.
Ownership of beneficial interest in the Debt Securities will be limited to
persons that have accounts with the Depositary ("Agent Members") or persons that
may hold interests through Agent Members. The Depositary has advised the Company
that upon the issuance of the Registered Global Security representing the Debt
Securities, the Depositary will credit, on its book-entry registration and
transfer system, the Agent Members' accounts with the respective principal
amounts of the Debt Securities beneficially owned by such Agent Members.
Ownership of beneficial interest in such Registered Global Security will be
shown on, and the transfer of such ownership interests will be effected only
through, records maintained by the Depositary (with respect to interests of
Agent Members) and on the records of Agent Members (with respect to interests of
persons holding through Agent Members). The laws of some states may require that
certain purchases of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to own,
transfer or pledge beneficial interests in the Registered Global Security.
So long as the Depositary, or its nominee, is the registered owner of the
Registered Global Security, the Depositary or its nominee, as the case may be,
will be considered the sole owner or Holder of the Debt Securities represented
by such Registered Global Security for all purposes under the Senior Indenture.
Except as provided below, owners of beneficial interests in the Registered
Global Security will not be entitled to have the Debt Securities represented by
such Registered Global Security registered in their names, will not receive or
be entitled to receive physical delivery of the Debt Securities in definitive
form and will not be considered the owners or Holders thereof under the Senior
Indenture. Accordingly, each Person owning a beneficial interest in the
Registered Global Security must rely on the procedures of the Depositary and, if
such Person is not an Agent Member, on the procedures of the Agent Member
through which such Person owns its interest, to exercise any rights of a Holder
under the Senior Indenture. The Company understands that under existing industry
practices, in the event that the Company requests any action of Holders or that
an owner of a beneficial interest in the Registered Global Security desires to
give or take any action which a Holder is entitled to give or take under the
Senior Indenture, the Depositary would authorize the Agent Members holding the
relevant beneficial interests to give or take such action, and such Agent
Members would authorize beneficial owners owning through such Agent Members to
give or take such action or would otherwise act upon the instructions of
beneficial owners holding through them.
Payment of principal of, and interest on, Debt Securities registered in the
name of the Depositary or its nominee will be made by wire transfer of
immediately available funds on the date such payment is due to the Depositary or
its nominee, as the case may be, as the Holder of the Registered Global Security
representing such Debt Securities. None of the Company, the Trustee or any other
agent of the Company or agent of the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests or for supervising or reviewing any records
relating to such beneficial ownership interests. The Company expects that the
Depositary, upon receipt of any payment of principal or interest in respect of
the Registered Global Security, will credit the accounts of the Agent Members
with payment in amounts proportionate to their respective beneficial interests
in such Registered Global Security as shown on the records of the Depositary.
The Company also expects that payments by Agent Members to owners of
S-8
<PAGE>
beneficial interests in the Registered Global Security will be governed by
standing customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of such Agent Members.
If (x) the Depositary notifies the Company that it is at any time unwilling
or unable to continue as Depositary or the Depositary ceases to be a clearing
agent registered under the Exchange Act and a successor Depositary is not
appointed by the Company within 90 days after the Company receives such notice,
or becomes aware of such condition, as the case may be, or (y) the Company
executes and delivers to the Trustee an Officers' Certificate to the effect that
the Registered Global Security shall be transferable and exchangeable, the
Registered Global Security will be transferable or exchangeable for Debt
Securities in definitive form of an equal aggregate principal amount without
coupons and in denominations of $25 and integral multiples thereof. Such
definitive Debt Securities shall be registered in such name or names as the
Depositary shall instruct the Trustee. It is expected that such instructions may
be based upon directions received by the Depositary from Agent Members with
respect to ownership of beneficial interests in the Registered Global Security.
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), each of the underwriters named below (the
"Underwriters") has severally agreed to purchase from the Company the aggregate
principal amount of Debt Securities set forth opposite its name below.
PRINCIPAL AMOUNT OF
UNDERWRITER DEBT SECURITIES
----------- -------------------
Goldman, Sachs & Co..................................... $ 22,000,000
Morgan Stanley & Co. Incorporated....................... $ 21,750,000
PaineWebber Incorporated................................ $ 21,750,000
Prudential Securities Incorporated...................... $ 21,750,000
Smith Barney Inc........................................ $ 21,750,000
BT Alex. Brown Incorporated............................. $ 1,500,000
A.G. Edwards & Sons, Inc................................ $ 1,500,000
EVEREN Securities, Inc.................................. $ 1,500,000
Oppenheimer & Co., Inc.................................. $ 1,500,000
J.C. Bradford & Co...................................... $ 750,000
Cowen & Company......................................... $ 750,000
Dain Bosworth Incorporated.............................. $ 750,000
Fahnestock & Co. Inc.................................... $ 750,000
Interstate/Johnson Lane Corporation..................... $ 750,000
Janney Montgomery Scott Inc............................. $ 750,000
Kennedy, Cabot & Co..................................... $ 750,000
Legg Mason Wood Walker, Incorporated.................... $ 750,000
McDonald & Company Securities, Inc...................... $ 750,000
McGinn, Smith & Co., Inc................................ $ 750,000
Morgan Keegan & Company, Inc............................ $ 750,000
The Ohio Company........................................ $ 750,000
Olde Discount Corporation............................... $ 750,000
Piper Jaffray Inc....................................... $ 750,000
Rauscher Pierce Refsnes, Inc............................ $ 750,000
Raymond James & Associates, Inc......................... $ 750,000
The Robinson-Humphrey Company, Inc...................... $ 750,000
Tucker Anthony Incorporated............................. $ 750,000
U.S. Clearing Corp...................................... $ 750,000
Wheat First Butcher Singer.............................. $ 750,000
------------
Total............................................... $130,000,000
============
S-9
<PAGE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Debt Securities, if
any are taken pursuant to the Underwriting Agreement, all such Debt Securities
must be purchased.
The Company has been advised that the Underwriters propose initially to
offer the Debt Securities to the public at the public offering price set forth
on the cover page of this Prospectus Supplement, and to certain dealers at such
price less a selling concession not in excess of 2.00% of the principal amount.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of 1.60% of the principal amount to certain other dealers. After the
initial public offering, the public offering price and such concessions may be
changed.
There is currently no public market for the Debt Securities. The Company
has been advised by the Underwriters that, following completion of the initial
offering of the Debt Securities, they presently intend to make a market in the
Debt Securities although they are under no obligation to do so and may
discontinue any market-making activities at any time without notice.
Application will be made to list the Debt Securities on the New York Stock
Exchange.
In connection with the offering, the Underwriters may purchase and sell the
Debt Securities in the open market. These transactions may include
over-allotment and stabilizing transactions and purchases to cover syndicate
short positions created in connection with the offering. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Debt Securities; and syndicate
short positions involve the sale by the Underwriters of a greater number of Debt
Securities than they are required to purchase from the Company in the offering.
The Underwriters also may impose a penalty bid, whereby selling concessions
allowed to syndicate members or other broker-dealers in respect of the
securities sold in the offering for their account may be reclaimed by the
syndicate if such Debt Securities are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Debt Securities, which may be higher
than the price that might otherwise prevail on the open market; and these
activities, if commenced, may be discontinued at any time. These transactions
may be effected on the New York Stock Exchange, in the over-the-counter market
or otherwise.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
The Underwriters, and certain of their affiliates, have from time to time
provided investment banking, financial advisory and other services to the
Company and its affiliates in the ordinary course of business.
LEGAL OPINIONS
The validity of the Debt Securities offered hereby will be passed upon for
the Company by Bruce E. Stern, Esq., General Counsel of the Company, and for the
Underwriters by Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York
10019.
EXPERTS
The consolidated financial statements and the related consolidated
financial statement schedule of the Company appearing or incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, have been audited by Coopers & Lybrand L.L.P., independent
accountants, as set forth in their reports thereon dated January 24, 1997,
incorporated by reference or included therein and incorporated herein by
reference. Such consolidated financial statements and financial statement
schedule are incorporated herein by reference in reliance upon such reports
given on the authority of such firm as experts in accounting and auditing.
S-10
<PAGE>
PROSPECTUS
- ----------
US $250,000,000
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
DEBT SECURITIES
COMMON STOCK
Financial Security Assurance Holdings Ltd., a New York corporation
(the "Company"), may offer from time to time (a) its unsecured debt securities,
in one or more series, which may be either senior debt securities (the "Senior
Debt Securities") or subordinated debt securities (the "Subordinated Debt
Securities" and, together with the Senior Debt Securities, the "Debt
Securities"); and (b) shares of its Common Stock, par value $.01 per share (the
"Common Stock"). The Debt Securities and Common Stock (collectively, the
"Securities") will be offered in amounts, at prices and on terms to be
determined at the time any such Securities are to be offered. The Securities
will have an aggregate initial offering price of up to $250,000,000 or the
equivalent thereof in U.S. dollars if any Securities are denominated in a
foreign currency or in currency units.
Specific terms of the particular Debt Securities in respect of which
this Prospectus is being delivered will be set forth in an accompanying
Prospectus Supplement (the "Prospectus Supplement"), which will describe,
without limitation and where applicable, the following: (a) in the case of the
Debt Securities, the specific designation, aggregate principal amount,
denominations, maturity, premium, if any, interest rate (which may be fixed or
variable) or method of calculation of interest and premium, if any, place or
places where principal, premium, if any, and interest will be payable, any terms
of redemption, any sinking fund provisions, terms for any conversion or exchange
into other Securities, initial public offering or purchase price, methods of
distribution and other special terms, and (b) in the case of Common Stock, the
number of shares offered, initial public offering or purchase price, methods of
distribution and other special terms.
The Prospectus Supplement will also contain information, as
applicable, about certain United States Federal income tax considerations
relating to the Securities.
The Securities may be sold to or through underwriters, through dealers
or agents or directly to purchasers. See "Plan of Distribution". The names of
any underwriters, dealers or agents involved in the sale of Securities in
respect of which this Prospectus is being delivered and any applicable fee,
commission or discount arrangements with them will be set forth in the
Prospectus Supplement.
This Prospectus may not be used to consummate sales of Securities
unless accompanied by a Prospectus Supplement.
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 September 10, 1997
<PAGE>
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. The 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.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA, NOR HAS THE
COMMISSIONER RULED UPON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT.
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus and the applicable Prospectus
Supplement, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or any agent,
underwriter or dealer. This Prospectus and the Prospectus Supplement do not
constitute an offer to sell or a solicitation of an offer to buy any securities
to which they relate in any jurisdiction in which it is unlawful to make such an
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
AVAILABLE INFORMATION
The Company 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 and
proxy and information statements and other information concerning the Company
may be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549
and at the following regional offices of the Commission: Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661, 14th Floor, and Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
at prescribed rates, or may be viewed by visiting the Commission's web site at
http://www.sec.gov. Reports, proxy statements and other information concerning
the Company may also be inspected at the offices of the New York Stock Exchange,
Inc. at 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act")
with respect to the securities offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain portions of
which have been omitted as permitted by the rules and regulations of the
Commission. In addition, certain documents filed by the Company with the
Commission have been incorporated by reference in this Prospectus. See
"Incorporation of Certain Documents by Reference." Statements contained herein
concerning the provisions of any document do not purport to be complete, and in
each instance are qualified in all respects by reference to the copy of such
document filed as an exhibit to the Registration Statement or otherwise filed
with the Commission.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
(2) The Company's Quarterly Report on Form 10-Q for each of the first
two calendar quarters of 1997.
(3) The description of the Common Stock of the Company contained in
the Company's Registration Statement on Form 8-A declared effective by the
Commission on May 6, 1994, and any amendment or report filed for the
purpose of updating such description.
Any documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the Securities offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference into the foregoing documents). Any such request should
be directed to: Bruce E. Stern, Esq., Financial Security Assurance Holdings
Ltd., 350 Park Avenue, New York, New York 10022 (telephone: (212) 826-0100).
THE COMPANY
Financial Security Assurance Holdings Ltd. (the "Company"), through
its wholly owned subsidiary, Financial Security Assurance Inc. ("FSA"), is
primarily engaged in the business of providing financial guaranty insurance on
asset-backed securities and municipal bonds. FSA was the first insurance
company organized to insure asset-backed obligations and has been a leading
insurer of asset-backed obligations (based on number of transactions insured)
since its inception in 1985. FSA expanded the focus of its business in 1990 to
include financial guaranty insurance of municipal obligations. For the six
months ended June 30, 1997, FSA had gross premiums written of $132.1 million,
of which 49% related to insurance of asset-backed obligations and 51% related to
insurance of municipal obligations. At June 30, 1997, FSA had net insurance in
force of $102.5 billion, of which 69% represented insurance of municipal
obligations and 31% represented insurance of asset-backed obligations.
Financial guaranty insurance written by FSA typically guarantees
scheduled payments on an issuer's obligations. In the case of a payment default
on an insured obligation, FSA
3
<PAGE>
is generally required to pay the principal, interest or other amounts due in
accordance with the obligations' original payment schedule or, at its option, to
pay such amounts on an accelerated basis. FSA's underwriting policy is to
insure asset-backed and municipal obligations that would otherwise be investment
grade without the benefit of FSA's insurance. The asset-backed obligations
insured by FSA are generally issued in structured transactions backed by pools
of assets such as residential mortgage loans, consumer or trade receivables,
securities or other assets having an ascertainable cash flow or market value.
The municipal obligations insured by FSA consist primarily of general obligation
bonds supported by the issuers' taxing power and special revenue bonds and other
special obligations of state and local governments supported by the issuers'
ability to impose and collect fees and charges for public services or specific
projects.
The Company's business objective is to remain a leading insurer of
asset-backed obligations and to become a more prominent insurer of municipal
obligations. The Company's acquisition of Capital Guaranty Corporation
("Capital Guaranty") in December 1995 increased the Company's presence in the
insured municipal bond sector. The Company believes that the demand for its
financial guaranty insurance will grow over the long term in response to
anticipated growth in insured asset-backed and municipal obligations. The
Company expects continued growth in the insurance of asset-backed obligations,
due in part to the continued expansion of asset securitization outside of the
residential mortgage sector. In the long term, the Company also expects
continued growth in the insurance of municipal obligations, due in part to
increased issuance of municipal bonds to finance repairs and improvements to the
nation's infrastructure and increased municipal bond purchases by individuals
who generally purchase insured obligations. In addition the percentage of new
domestic municipal bond volume which is insured has increased each year since
1986, to 46% for the year ending 1996 according to published sources. The
company maintains offices in New York City, San Francisco, Dallas, London,
Paris, Madrid and Sydney, and expects soon to open an office in Singapore. In
addition to its domestic business, the Company pursues international
opportunities and currently operates in the European and Pacific Rim markets.
The Company was the first financial guaranty insurance company to insure
obligations in international markets.
The Company expects to continue to emphasize a diversified insured
portfolio characterized by insurance of both asset-backed and municipal
obligations, with a broad geographic distribution and a variety of revenue
sources and transaction structures.
The claims-paying ability of FSA is rated "Aaa" by Moody's Investors
Service, Inc. and "AAA" by Standard & Poor's Ratings Services ("S&P"), Fitch
Investors Service, L.P., Nippon Investors Services and S&P (Australia) Pty. Ltd.
FSA is licensed to engage in the financial guaranty insurance business
in all 50 states, the District of Columbia and Puerto Rico.
The principal executive offices of the Company are located at 350 Park
Avenue, New York, New York 10022. The telephone number at that location is (212)
826-0100.
USE OF PROCEEDS
Unless otherwise stated in the applicable Prospectus Supplement, the
net proceeds to the Company from the sale of the Securities will be used for
general corporate purposes of the Company.
4
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges
for the Company for the periods indicated. Earnings represent consolidated
income before income taxes and fixed charges. Fixed charges consist of interest
and one-third of rental expense which is deemed representative of the interest
factor for such rental expense. The ratio for 1993 is considered not meaningful
because of the significant loss incurred by the Company in that year. The
Company had no capitalized interest for the periods presented.
Six Months
Ended
Years Ended December 31, June 30,
------------------------ --------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ---- ----
Ratio of earnings to
fixed charges 31.1 N/M 51.2 70.0 35.2 32.7 39.5
DESCRIPTION OF DEBT SECURITIES
The Senior Debt Securities offered hereby are to be issued in one or
more series under a Senior Indenture, as supplemented from time to time (as so
supplemented, the "Senior Indenture"), between the Company and a trustee to be
named in the applicable Prospectus Supplement (the "Senior Indenture Trustee").
The Subordinated Debt Securities offered hereby are to be issued in one or more
series under a Subordinated Indenture, as supplemented from time to time (as so
supplemented, the "Subordinated Indenture" and, together with the Senior
Indenture, the "Indentures"), between the Company and a trustee to be named in
the applicable Prospectus Supplement (the "Subordinated Indenture Trustee" and,
together with the Senior Indenture Trustee, the "Trustees"). Copies of the
Senior Indenture and the form of the Subordinated Indenture have been filed as
exhibits to the Registration Statement of which this Prospectus forms a part.
The statements herein relating to the Debt Securities and the
following summaries of certain provisions of the Indentures do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indentures (as they may be amended or supplemented
from time to time) and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Whenever particular sections or defined terms of the Indentures
(as they may be amended or supplemented from time to time) are referred to
herein or in a Prospectus Supplement, such sections or defined terms are
incorporated herein or therein by reference.
GENERAL
The Debt Securities will be direct and unsecured obligations of the
Company. The Senior Debt Securities will rank equally and ratably with all other
unsecured and unsubordinated obligations of the Company. The Subordinated Debt
Securities will be subordinate and junior in right of payment to the extent and
in the manner set forth in the Subordinated Indenture to all Senior Debt (as
defined below) of the Company. See "-Subordination under the Subordinated
Indenture". As a non-operating holding company, most of the assets of the
Company are owned by the Company's subsidiaries, and the Company relies
primarily on dividends or other payments from such subsidiaries to meet its
obligations for payment of principal and interest on its outstanding debt
obligations. Accordingly, the Debt Securities will be effectively subordinated
to all existing and future liabilities of the Company's subsidiaries. In
addition, the payment of dividends or other amounts by the Company's
5
<PAGE>
insurance company subsidiary, Financial Security Assurance Inc., is limited
under the applicable insurance laws and regulations of the State of New York.
The Indentures do not limit the aggregate amount of Debt Securities that may be
issued thereunder. Except as otherwise provided in the applicable Prospectus
Supplement, the Indentures, as they apply to any series of Debt Securities, do
not limit the incurrence or issuance of other secured or unsecured debt of the
Company, whether under either of the Indentures or any other indenture that the
Company may enter into in the future or otherwise.
The Debt Securities will be issuable in one or more series pursuant to
an indenture supplemental to the Senior Indenture or the Subordinated Indenture,
as the case may be, or in accordance with a resolution of the Company's Board of
Directors or a committee thereof.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the Debt Securities (to the extent such terms
are applicable to such Debt Securities): (1) the title of the Debt Securities;
(2) any limit upon the aggregate principal amount of the Debt Securities; (3)
the date or dates on which the principal of the Debt Securities is payable; (4)
the rate or rates, if any, at which the Debt Securities shall bear interest, the
interest payment dates on which any such interest shall be payable, the right,
if any, of the Company to defer or extend an interest payment date, or the
method by which any of the foregoing shall be determined; (5) the place or
places where, subject to the terms of the Indenture, the principal of and
premium, if any, and interest on the Debt Securities will be payable; (6) any
period or periods within or date or dates on which, the price or prices at which
and the terms and conditions upon which Debt Securities may be redeemed, in
whole or in part, at the option of the Company pursuant to any sinking fund or
otherwise; (7) the obligation, if any, of the Company to redeem, purchase or
repay the Debt Securities pursuant to any sinking fund, amortization or
analogous provisions or at the option of a Holder thereof and the period or
periods within which, the price or prices at which, the currency or currencies
(including currency unit or units) in which and the other terms and conditions
upon which the Debt Securities shall be redeemed, repaid or purchased, in whole
or in part, pursuant to such obligation; (8) the denominations in which any Debt
Securities shall be issuable if other than denominations of $1,000 and any
integral multiple thereof; (9) if other than in U.S. Dollars, the currency or
currencies (including currency unit or units) in which the principal of (and
premium, if any) and interest, if any, on the Debt Securities shall be payable,
or in which the Debt Securities shall be denominated; (10) any additions,
modifications or deletions, in the Events of Default or covenants of the Company
specified in the Indenture with respect to the Debt Securities; (11) if other
than the principal amount thereof, the portion of the principal amount of Debt
Securities that shall be payable upon declaration of acceleration of the
maturity thereof; (12) any index or indices used to determine the amount of
payments of principal of and premium, if any, on the Debt Securities and the
manner in which such amounts will be determined; (13) the issuance of a
temporary Global Security representing all of the Debt Securities of such series
and exchange of such temporary Global Security for definitive Debt Securities of
such series; (14) whether the Debt Securities of the series shall be issued in
whole or in part in the form of one or more Global Securities and, in such case,
the Depositary for such Global Securities, and the circumstances under which any
such Registered Global Security may be registered for transfer or exchange, or
authenticated and delivered, in the name of a Person other than such Depositary
or its nominee, if other than as set forth in the Indentures; (15) the
appointment of any paying agent, transfer agent or registrars; (16) the terms
and conditions of any obligation or right of the Company to convert or exchange
the Subordinated Debt Securities into other Securities or at the option of a
Holder thereof; (17) the relative degree, if any, to which the Debt Securities
of any series shall be senior to or subordinated to other series of Debt
Securities in right of payment, whether such other series of Debt Securities are
outstanding or not; and (18) any other terms of the Debt Securities not
inconsistent with the provisions of the Indentures. (Section 2.03).
6
<PAGE>
Debt Securities may be sold at a substantial discount below their
stated principal amount, bearing no interest or interest at a rate which at the
time of issuance is below market rates. Certain federal income tax consequences
and special considerations applicable to any such Debt Securities will be
described in the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is payable in one
or more foreign currencies or currency units or if any Debt Securities are
denominated in one or more foreign currencies or currency units or if the
principal of, premium, if any, or interest, if any, on any Debt Securities is
payable in one or more foreign currencies or currency units, the restrictions,
elections, certain federal income tax considerations, specific terms and other
information with respect to such issue of Debt Securities and such foreign
currency or currency units will be set forth in the applicable Prospectus
Supplement.
If any index is used to determine the amount of payments of principal
of, premium, if any, or interest on any series of Debt Securities, special
federal income tax, accounting and other considerations applicable thereto will
be described in the applicable Prospectus Supplement.
DENOMINATIONS, REGISTRATION, PAYMENT AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement,
the Debt Securities will be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. Debt Securities of
any series will be exchangeable for other Debt Securities of the same issue and
series, of any authorized denominations, of a like aggregate principal amount.
Debt Securities may be presented for exchange as provided above, and
may be presented for registration of transfer (with the form of transfer
endorsed thereon, or a satisfactory written instrument of transfer, duly
executed), at the office of the registrar or at the office of any transfer agent
designated by the Company for such purpose with respect to any series of Debt
Securities and referred to in an applicable Prospectus Supplement, without
service charge and upon payment of any taxes and other governmental charges as
described in the Indenture. The Company will appoint the Trustees as registrars
under the Indentures. If the applicable Prospectus Supplement refers to any
transfer agents or paying agents (in addition to the registrar) initially
designated by the Company with respect to any series of Debt Securities, the
Company may at any time rescind the designation of any such transfer agent or
paying agent or approve a change in the location through which any such transfer
agent or paying agent acts. The Company may at any time designate additional
transfer agents or paying agents with respect to any series of Debt Securities.
Neither the Company nor the Trustees shall be required to exchange or
register a transfer of (a) any Debt Securities of any series for a period of 15
days preceding the first mailing of notice of redemption for such series to be
redeemed, or (b) any Debt Securities selected, called or being called for
redemption except, in the case of any Debt Security to be redeemed in part, the
portion thereof not so to be redeemed.
Unless otherwise indicated in an applicable Prospectus Supplement,
payment of principal of (and premium, if any) and any interest on Debt
Securities will be made at the office of the Trustee for such Debt Securities in
the City of New York or at the office of such paying agent or paying agents as
the Company may designate from time to time in an applicable Prospectus
Supplement, except that at the option of the Company payment of any interest may
be made by check mailed to the address of the person entitled thereto as such
address shall appear in the register. Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any interest on Debt Securities
will be
7
<PAGE>
made to the person in whose name such Debt Security is registered at the close
of business on any record date for such interest, except in the case of
defaulted interest.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in
the form of one or more Global Debt Securities that will be deposited with, or
on behalf of, a depositary (the "Depositary") identified in the Prospectus
Supplement relating to such series. Global Debt Securities may be issued only in
fully registered form and in either temporary or permanent form. Unless and
until it is exchanged in whole or in part for the individual Debt Securities
represented thereby, a Global Debt Security may not be transferred except as a
whole by the Depositary for such Global Debt Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by the Depositary or any nominee to a successor
Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a
series of Debt Securities will be described in the Prospectus Supplement
relating to such series. The Company anticipates that the following provisions
will generally apply to depositary arrangements.
Upon the issuance of a Global Debt Security, and the deposit of such
Global Debt Security with or on behalf of the Depositary, the Depositary for
such Global Debt Security or its nominee will credit on its book-entry
registration and transfer system, the respective principal amounts of the
individual Debt Securities represented by such Global Debt Security to the
accounts of persons that have accounts with such Depositary ("Participants").
Such accounts shall be designated by the dealers, underwriters or agents with
respect to such Debt Securities or by the Company if such Debt Securities are
offered and sold directly by the Company. Ownership of beneficial interests in a
Global Debt Security will be limited to Participants or persons that may hold
interests through Participants. Ownership of beneficial interests in such Global
Debt Security will be shown on, and the transfer of that ownership will be
effected only through, records maintained by the applicable Depositary or its
nominee (with respect to interests of Participants) and the records of
Participants (with respect to interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a Global Debt Security.
So long as the Depositary for a Global Debt Security, or its nominee,
is the registered owner of such Global Debt Security, such Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Debt Securities represented by such Global Debt Security for all purposes under
the Indenture governing such Debt Securities. Except as provided below, owners
of beneficial interests in a Global Debt Security will not be entitled to have
any of the individual Debt Securities of the series represented by such Global
Debt Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities of such series in
definitive form and will not be considered the owners or holders thereof under
the Indenture governing such Debt Securities.
Payments of principal of (and premium, if any) and interest on
individual Debt Securities represented by a Global Debt Security registered in
the name of a Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner of the Global Debt Security
representing such Debt Securities. None of the Company, the Trustee for such
Debt Securities, any paying agent, or the Securities registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of
8
<PAGE>
beneficial ownership interest of the Global Debt Security for such Debt
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that the Depositary for a series of Debt
Securities or its nominee, upon receipt of any payment of principal, premium or
interest in respect of a permanent Global Debt Security representing any of such
Debt Securities, immediately will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interest in the principal
amount of such Global Debt Security for such Debt Securities as shown on the
records of such Depositary or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global Debt
Security held through such Participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in `street name'.
Such payments will be the responsibility of such Participants.
Unless otherwise specified in the applicable Prospectus Supplement, if
a Depositary for a series of Debt Securities is at any time unwilling, unable or
ineligible to continue as depositary and a successor depositary is not appointed
by the Company within 90 days, the Company will issue individual Debt Securities
of such series in exchange for the Global Debt Security representing such series
of Debt Securities. In addition, the Company may at any time and in its sole
discretion, subject to any limitations described in the Prospectus Supplement
relating to such Debt Securities, determine not to have any Debt Securities of
such series represented by one or more Global Debt Securities and, in such
event, will issue individual Debt Securities of such series in exchange for the
Global Debt Security or Securities representing such series of Debt Securities.
Further, if the Company so specifies with respect to the Debt Securities of a
series, an owner of a beneficial interest in a Global Debt Security representing
Debt Securities of such series may, on terms acceptable to the Company, the
Trustee and the Depositary for such Global Debt Security, receive individual
Debt Securities of such series in exchange for such beneficial interests,
subject to any limitations described in the Prospectus Supplement relating to
such Debt Securities. In any such instance, an owner of a beneficial interest in
a Global Debt Security will be entitled to physical delivery of individual Debt
Securities of the series represented by such Global Debt Security equal in
principal amount to such beneficial interest and to have such Debt Securities
registered in its name. Individual Debt Securities of such series so issued will
be issued in denominations, unless otherwise specified by the Company, of $1,000
and integral multiples thereof.
CERTAIN COVENANTS OF THE COMPANY
LIMITATIONS ON LIENS. Under the Senior Indenture, so long as Senior
Debt Securities are outstanding, the Company will not, and will not permit any
Subsidiary to, directly or indirectly, create, issue, assume, incur or guarantee
any indebtedness for borrowed money which is secured by a Mortgage of any nature
on any of the present or future capital stock of any Restricted Subsidiary
unless the Senior Debt Securities then outstanding shall be secured equally and
ratably with, or prior to, such other secured debt so long as it is outstanding.
(Section 3.06)
LIMITATIONS ON DISPOSITION OF STOCK OF RESTRICTED SUBSIDIARIES. Under
the Senior and Subordinated Indentures, so long as Debt Securities are
outstanding, the Company will not, and will not permit any Subsidiary to, sell,
transfer or otherwise dispose of any shares of capital stock of any Restricted
Subsidiary except for (i) a sale, transfer or other disposition of any capital
stock of any Restricted Subsidiary to a wholly owned Subsidiary of the Company
or such Subsidiary; (ii) a sale, transfer or other disposition of the entire
capital stock of any Restricted Subsidiary for at least fair value (as
determined by the Board of Directors of the Company acting in good faith); or
(iii) a sale, transfer or other disposition of the capital stock of any
Restricted Subsidiary for at least fair value (as
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<PAGE>
determined by the Board of Directors of the Company acting in good faith) if,
after giving effect thereto, the Company and its Subsidiaries would own more
than 80% of the issued and outstanding Voting Stock of such Restricted
Subsidiary. (Section 3.07)
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Under the Senior and Subordinated Indentures, so long as Debt
Securities are outstanding, the Company will not consolidate with or merge into
any other corporation or convey, transfer or lease its properties or assets as
an entirety or substantially as an entirety to any person, unless (i) the
successor or purchaser is a corporation organized and existing under the laws of
the United States of America, any State thereof or the District of Columbia;
(ii) such successor or purchaser shall expressly assume, by supplemental
indenture satisfactory in form to the related Trustee, the due and punctual
payment of the principal of, premium, if any, and interest on all the Debt
Securities and the performance and observance of every covenant and condition of
the Company under the related Indenture; and (iii) immediately after giving
effect to such transaction, no Event of Default, and no event which, after
notice or lapse of time or both, would become an Event of Default, shall have
occurred and be continuing under the related Indenture. (Section 9.01)
CERTAIN DEFINITIONS
The covenants and other provisions relating to the Debt Securities are
to be read in conjunction with the definitions contained in the Senior and
Subordinated Indentures, certain of which are substantially to the following
effect:
"Debt Securities" means all unsecured debt securities, notes or other
evidences of indebtedness issued in one or more series that the Company may
issue from time to time in accordance with the terms of the related Indentures.
"Mortgage" means any mortgage, pledge, lien, security interest or
other encumbrance.
"Restricted Subsidiary" means Financial Security Assurance Inc. and
any successor to all or substantially all of its business, provided that such
successor is a Subsidiary.
"Subsidiary" means a corporation more than 50% of the outstanding
Voting Stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other
Subsidiaries.
"Voting Stock" means, with respect to any Subsidiary, stock of any
class or classes (or equivalent interests), if the holders of the stock of such
class or classes (or equivalent interests) are ordinarily, in the absence of
contingencies, entitled to vote for the election of the directors (or persons
performing similar functions) of such corporation, even though the right so to
vote has been suspended by the happening of such a contingency.
EVENTS OF DEFAULT
Any one of the following events will constitute an Event of Default
with regard to any series of Debt Securities under each of the Indentures: (i)
default continued for 30 days in payment of any installment of interest on any
of the Debt Securities when due; (ii) default in payment of all or any part of
the principal of the Debt Securities when due and payable either at maturity,
upon any redemption, by declaration or otherwise; (iii) default continued for 60
days after notice of such default
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in performance of any covenant or warranty of the Indenture by the Company in
respect of the Debt Securities; (iv) certain events of default with respect to
indebtedness of the Company (other than the Debt Securities or non-recourse
obligations of the Company) in an aggregate principal amount in excess of
$10,000,000 which default shall consist of the failure to make any payment at
maturity or shall have resulted in the acceleration of the maturity of such
indebtedness; (v) certain events of bankruptcy, insolvency, or reorganization of
the Company or any Restricted Subsidiary; or (vi) any other Event of Default
provided in the supplemental indenture or resolution of the Board of Directors
under which such series of Debt Securities is issued or in the form of Debt
Security for such series. (Section 5.01) The Company is required to file with
the Trustee annually a written statement as to the fulfillment of certain of its
obligations under the Indenture. (Section 3.05)
Each Indenture provides that the Trustee may withhold notice to the
holders of Debt Securities of any default (except in payment of principal of or
premium, if any, or interest on the Debt Securities) if the Trustee considers it
in the interest of the holders of the Debt Securities to do so. (Section 5.11)
Each Indenture provides that (a) if an Event of Default described in
clause (i) or (ii) above shall have occurred and be continuing with regard to
the Debt Securities of any series, either the Trustee or the holders of 25% in
aggregate principal amount of the Debt Securities of that series then
outstanding (each such series acting as a separate class) may declare the
principal (or, if Debt Securities of such series are original issue discount
Debt Securities, such portion of the principal amount as may be specified in the
terms of that series) of all Debt Securities of such series and interest accrued
thereon, if any, to be due and payable immediately and (b) if an Event of
Default described in clause (iii), (iv) or (v) above shall have occurred and be
continuing, either the Trustee or the holders of 25% in aggregate principal
amount of all Debt Securities (or in the case of an Event of Default described
in clause (iii) above, all series affected by such Event of Default) then
outstanding (voting as a single class) may declare the principal (or, if Debt
Securities of such series are original issue discount Debt Securities, such
portion of the principal amount as may be specified in the terms of that series)
of all Debt Securities (in the case of clause (iii) above, limited to all series
affected) then outstanding and interest accrued thereon, if any, to be due and
payable immediately. Upon certain conditions, such declaration by the holders of
Debt Securities of any series may be annulled and past defaults which have been
cured may be waived by (a) with respect to clauses (i) or (ii) the holders of a
majority in aggregate principal amount of Debt Securities of such series (each
such series voting as a separate class) then outstanding and (b) with respect to
clauses (iii), (iv) or (v) above, the holders of a majority in aggregate
principal amount of the Debt Securities of all series (in the case of clause
(iii) above, limited to all series affected by such default) then outstanding
(voting as a single class). (Section 5.01) Prior to a declaration of
acceleration of maturity of the Debt Securities of any series, the holders of a
majority in aggregate principal amount of the Debt Securities of each series
voting separately or all series voting as a single class, depending on the
nature of the Event of Default, may waive any Event of Default, and its
consequences, except a default in the payment of the principal of or premium, if
any, or interest on any of the Debt Securities of such series or in respect of a
covenant or provision of the Indenture which cannot be modified or amended
without the consent of the holder of each Debt Security of such series affected.
(Section 5.10)
Subject to the provisions of each Indenture relating to the duties of
the Trustee, the Trustee shall be under no obligation to exercise any of its
rights or powers under the relative Indenture at the request, order or direction
of any of the holders of Debt Securities, unless such holders shall have offered
the Trustee reasonable indemnity. (Section 6.02) Subject to such provision for
indemnification, the holders of a majority in aggregate principal amount of the
Debt Securities shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee. (Section 5.09)
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<PAGE>
DEFEASANCE AND COVENANT DEFEASANCE
Except as may otherwise be provided in the applicable Prospectus
Supplement with respect to the Debt Securities of any series, each Indenture
provides that, subject to certain conditions, the Company may elect either (i)
to be discharged from any and all obligations with respect to the Debt
Securities (except for the obligations to register the transfer or exchange of
the Debt Securities, to replace temporary or mutilated, defaced, destroyed, lost
or stolen Debt Securities, to maintain an office or agency for the payment of
principal and interest in respect of the Debt Securities, to appoint a paying
agent and, if the Company elects to act as the paying agent, to hold moneys for
such payment in trust) ("Defeasance") or (ii) to be released from its
obligations with respect to the Debt Securities under Sections 3.06 and 3.07 of
the Indenture (being the sections of the Indenture captioned "Limitations on
Liens" and "Limitations on Disposition of Stock of Restricted Subsidiaries" SEE
"Certain Covenants of the Company") ("Covenant Defeasance"), upon the deposit
with the Trustee (or another qualifying trustee) irrevocably in trust for such
purpose, of money and/or United States government obligations in an amount
which, in the opinion of a nationally recognized firm of independent public
accountants delivered to such trustee, would be sufficient to pay the principal
of and premium, if any, and interest on the Debt Securities on the scheduled due
dates therefor. (Sections 13.01 through 13.04)
Each Indenture provides that, to effect Defeasance or Covenant
Defeasance, the Company must deliver to the Trustee an opinion of counsel to the
effect that Defeasance or Covenant Defeasance, as the case may be, will not
cause the holders of the Debt Securities to recognize income, gain or loss for
federal income tax purposes. In addition, in the case of Defeasance, such
opinion of counsel must state that a private letter ruling or a revenue ruling
to the same effect has been issued by the United States Internal Revenue Service
or state that since the date of the Indenture there has been a change in the
applicable federal income tax law or the interpretation thereof to the same
effect. (Section 13.04)
With respect to the Subordinated Indenture, in order to be
discharged as described above, no default in the payment of principal of (or
premium, if any) or interest on any Senior Debt shall have occurred and be
continuing or no Event of Default with respect to the Senior Debt shall have
occurred and be continuing and shall have resulted in such Senior Debt
becoming or being declared due and payable prior to the date it would have
become due and payable.
MODIFICATION AND WAIVER
Each Indenture provides that the Company may enter into a supplemental
indenture or indentures for the purpose of adding to, changing or eliminating
any of the provisions of such Indenture or of any supplemental indentures or of
modifying the rights of the holders of Debt Securities issued thereunder if
approved in writing signed by the holders of not less than a majority in
aggregate principal amount of all outstanding Debt Securities affected thereby
voting as one class; provided that the consent of each holder of Debt Securities
affected thereby is required for any modification or alteration which (i)
extends the final maturity of any Debt Securities, or reduces the principal
amount thereof, or reduces the rate or extends the time of payment of interest
thereon, or reduces any amount payable on redemption thereof or impairs or
affects the right of any holder of Debt Securities to institute suit for the
payment thereof, (ii) reduces the percentage in aggregate principal amount, the
consent of the holders of which is required for any such supplemental indenture
or (iii) modifies any provision with respect to the subordination of Debt
Securities of any series in a manner adverse to the holders thereof. (Section
8.02) The holders of at least a majority in aggregate principal amount of the
outstanding Debt Securities of all series (including the Debt Securities) voting
as one class may waive compliance by the Company with certain covenants
contained in each Indenture. (Section 3.08)
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SUBORDINATION UNDER THE SUBORDINATED INDENTURE
In the Subordinated Indenture, the Company has covenanted and agreed
that any Subordinated Debt Securities issued thereunder will be subordinate and
junior in right of payment to all Senior Debt to the extent provided in the
Subordinated Indenture. Upon any payment or distribution of assets to creditors
upon any liquidation, dissolution, winding up, reorganization, assignment for
the benefit of creditors, marshaling of assets or any bankruptcy, insolvency,
debt restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the holders of the Senior Debt will first
be entitled to receive payment in full of principal of (and premium, if any) and
interest, if any, on such Senior Debt before the holders of Subordinated Debt
Securities will be entitled to receive or retain any payment in respect of the
principal of (and premium, if any) or interest, if any, on the Subordinated Debt
Securities. (Section 14.01 and 14.02)
In the event of the acceleration of the maturity of any Subordinated
Debt Securities, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the holders of
Subordinated Debt Securities will be entitled to receive any payment upon the
principal of (or premium, if any) or interest, if any, or the Subordinated Debt
Securities. (Section 14.03)
No payments on account of principal (or premium, if any) or interest,
if any, in respect of the Subordinated Debt Securities may be made if there
shall have occurred and be continuing a default in any payment with respect to
Senior Debt, or an event of default with respect to any Senior Debt resulting in
the acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default. (Section 14.04)
The Subordinated Indenture defines "Senior Debt" as the principal of
(and premium, if any) and interest, if any (including interest accruing on or
after the filing of any petition in bankruptcy or for reorganization relating to
the Company whether or not such claim for post-petition interest is allowed in
such proceeding), on Debt, whether incurred on or prior to the date of the
Subordinated Indenture or thereafter incurred, unless, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding, it
is provided that such obligations are not superior in right of payment to the
Subordinated Debt Securities or to other Debt which is pari passu with, or
subordinated to, the Subordinated Debt Securities; provided, however, that
Senior Debt shall not be deemed to include (i) any Debt of the Company which
when incurred and without respect to any election under Section 1111(b) of the
Bankruptcy code was without recourse to the Company, (ii) any Debt of the
Company to any of its subsidiaries, (iii) Debt to any employee of the Company,
(iv) any liability for taxes, (v) indebtedness or monetary obligations to trade
taxes and (v) indebtedness or monetary obligations to trade creditors or assumed
by the Company or any of its subsidiaries in the ordinary course of business in
connection with the obtaining of materials or services. As used in the
proceeding sentence the term "Debt" means with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed; (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations incurred in connection with the acquisition
of property, assets or businesses; (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person; (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business); (v) every capital lease obligation of such Person;
and (vi) every obligation of the type referred to in clauses (i) through (v) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has guaranteed or is responsible or liable, directly or
indirectly, as obligor or otherwise.
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The Subordinated Indenture places no limitation on the amount of
additional Senior Debt that may be incurred by the Company. The Company may from
time to time incur additional indebtedness constituting Senior Debt.
The Subordinated Indenture provides that the foregoing subordination
provisions, insofar as they relate to any particular issue of Subordinated Debt
Securities, may be changed prior to such issuance. Any such change would be
described in the Prospectus Supplement relating to such Subordinated Debt
Securities.
CONVERSION OR EXCHANGE
The Subordinated Debt Securities of any series may be convertible or
exchangeable into Common Stock or other Securities. The specific terms and
conditions on which Subordinated Debt Securities of any series may be so
converted or exchanged will be set forth in the applicable Prospectus
Supplement. Such terms may include the conversion or exchange price, provisions
for conversion or exchange, either mandatory, at the option of the holder, or at
the option of the Company, and provisions under which the number of shares of
Common Stock or other Securities to be received by the holders of Subordinated
Debt Securities would be calculated as of a time and in the manner stated in the
applicable Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
The Company's Certificate of Incorporation authorizes the issuance of
50,000,000 shares of Common Stock, par value $.01 per share. At July 31st,
1997, there were outstanding 31,016,527 shares of Common Stock of the Company
(includes 1,127,883 shares of Common Stock owned by a trust on behalf of the
Company and excludes 1,259,774 shares of Common Stock actually held in
treasury).
The following description of the common stock of the Company is
subject to the detailed provisions of the Company's Certificate of Incorporation
and by-laws as currently in effect (the "Bylaws"). This description does not
purport to be complete or to give full effect to the terms of the provisions of
statutory or common law and is subject to, and qualified in its entirety by
reference to, the Certificate of Incorporation and the Bylaws, each of which has
been filed as an exhibit to or will be incorporated by reference in the
Registration Statement of which this Prospectus is a part.
The amount of dividends payable in the future will be reviewed
periodically by the Board of Directors in light of the Company's earnings,
financial condition and capital and other cash requirements. It is the policy
of the Board of Directors that FSA Holding retain an adequate portion of its
earnings to support the growth of its business. There is no requirement or
assurance that dividends will be paid.
Most of the operations of the Company are conducted through FSA.
FSA's ability to declare and pay dividends to Capital Guaranty which in turn
declares and pays dividends to the Company, is dependent on 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 related
regulations of New York and other states.
The Company will ordinarily be required to withhold United States
federal income taxes in the amount of 30% of any dividends paid to non-United
States shareholders not otherwise
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subject to United States federal income taxation, unless a tax treaty between
the United States and the country of the shareholder's residence provides for
withholding at a reduced rate.
The Common Stock is traded on the New York Stock Exchange under the
symbol FSA. The transfer agent for the Common Stock is The Bank of New York.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for
public offering and sale by them or may sell Securities to investors directly or
through agents or dealers. Any such underwriter, agent or dealer involved in the
offer and sale of the Securities will be named in an applicable Prospectus
Supplement.
Offers and sales of Securities hereunder may be effected at a fixed
price or prices, which may be changed, or from time to time at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Company also may, from time to time,
authorize underwriters acting as its agents to offer and sell the Securities
upon the terms and conditions set forth in any Prospectus Supplement. If
Securities are sold by means of an underwritten offering, the Company will
execute an underwriting agreement with an underwriter or underwriters at the
time an agreement for such sale is reached, and the names of the specific
managing underwriter or underwriters, as well as any other underwriters, the
respective amounts underwritten and the terms of the transaction, including
commissions, discounts and any other compensation of the underwriters and
dealers, if any, will be set forth in the applicable Prospectus Supplement which
will be used by the underwriters to make resales of the Securities in respect of
which this Prospectus is being delivered to the public. If any underwriter or
underwriters are utilized in the sale of the Securities, unless otherwise set
forth in the applicable Prospectus Supplement, the underwriting agreement will
provide that the obligations of the underwriters are subject to certain
conditions precedent and that the underwriters with respect to a sale of
Securities will be obligated to purchase all such Securities if any are
purchased.
In connection with the sale of Securities, underwriters may be deemed
to have received compensation from the Company in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of
Securities for whom they may act as agent. Underwriters may sell Securities to
or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters and/or commissions
(which may be changed from time to time) from the purchasers for whom they may
act as agent.
Any underwriting compensation paid by the Company to underwriters or
agents in connection with the offering of Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in an applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Securities 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 resale of the Securities may
be deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements with the
Company to indemnification against and contribution toward certain civil
liabilities, including liabilities, under the Securities Act, and to
reimbursement by the Company for certain expenses.
If a dealer is utilized in the sale of the Securities in respect of
which this Prospectus is delivered, the Company will sell such Securities to
such dealer, as principal. The dealer may then
15
<PAGE>
resell such Securities to the public at varying prices to be determined by such
dealer at the time of resale. The name of the dealer and the terms of the
transaction will be set forth in the Prospectus Supplement relating thereto.
Offers to purchase Securities may be solicited directly by the Company
and the sale thereof may be made by the Company directly to institutional
investors or others, who may be deemed to be underwriters within the meaning of
the Securities Act with respect to any resale thereof. The terms of any such
transaction will be set forth in the Prospectus Supplement relating thereto.
The Securities may or may not be listed on a national securities
exchange or a foreign securities exchange. Certain series of the Securities will
be a new issue and will not have an established trading market. No assurances
can be given that there will be a market for any of the Securities.
Agents, underwriters and dealers may be customers of, engage in
transactions with or perform services for, the Company and its subsidiaries in
the ordinary course of business.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Securities
being offered hereby will be passed upon for the Company by Bruce E. Stern,
Esq., General Counsel of the Company, and for any underwriters or agents by
counsel to be named in the Prospectus Supplement.
EXPERTS
The consolidated financial statements and the related financial
statement schedule of the Company appearing or incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996, have
been audited by Coopers & Lybrand L.L.P., independent accountants, as set forth
in their reports thereon dated January 24, 1997 incorporated by reference or
included therein and incorporated herein by reference. Such consolidated
financial statements and financial statement schedule are incorporated herein by
reference in reliance upon such reports given on the authority of such firm as
experts in accounting and auditing.
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No person has been authorized to give any information
or to make any representations other than those contained
in this Prospectus Supplement or the Prospectus, and, if
given or made, such information or representations must $130,000,000
not be relied upon as having been authorized. This
Prospectus Supplement and the Prospectus do not
constitute an offer to sell or the solicitation of an
offer to buy any securities other than the securities FINANCIAL SECURITY
desired in this Prospectus Supplement or an offer to sell ASSURANCE HOLDINGS LTD.
or the solicitation of an offer to buy such securities in
any circumstances in which such offer or solicitation is
unlawful. Neither the delivery of this Prospectus 7.375% SENIOR QUARTERLY INCOME
Supplement or the Prospectus nor any sale made hereunder DEBT SECURITIES
or thereunder shall, under any circumstances, create any DUE 2097 (SENIOR QUIDS)
implication that there has been no change in the affairs
of the Company since the date hereof or that the ==========
information contained herein or therein is correct as of [FSA LOGO]
any time subsequent to its date. ==========
--------------- GOLDMAN, SACHS & CO.
TABLE OF CONTENTS MORGAN STANLEY DEAN WITTER
PROSPECTUS SUPPLEMENT PAINE WEBBER INCORPORATED
The Company............................................S-3 PRUDENTIAL SECURITIES INCORPORATED
Use of Proceeds........................................S-4
Capitalization.........................................S-4 SMITH BARNEY INC.
Selected Consolidated Financial and REPRESENTATIVES OF THE UNDERWRITERS
Statistical Data....................................S-5
Ratio of Earnings to Fixed Changes.....................S-7
Description of Debt Securities.........................S-7
Underwriting...........................................S-9
Legal Opinions........................................S-10
Experts...............................................S-10
PROSPECTUS
Available Information....................................2
Incorporation of Certain Documents
by Reference..........................................3
The Company..............................................3
Use of Proceeds..........................................4
Ratio of Earnings to Fixed Charges.......................5
Description of Debt Securities...........................5
Description of Common Stock.............................14
Plan of Distribution....................................15
Legal Opinions..........................................16
Experts.................................................16
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