<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-17847
PROSPECTUS SUPPLEMENT
- ----------------------------------
(TO PROSPECTUS DATED JANUARY 17, 1997)
$100,000,000
[ILLINOVA LOGO]
ILLINOVA CORPORATION
7 1/8% SENIOR NOTES DUE FEBRUARY 1, 2004
---------------------------
Interest on the 7 1/8% Senior Notes Due February 1, 2004 (the "Notes") is
payable semi-annually on February 1 and August 1 of each year, beginning August
1, 1997. The Notes will be general unsecured obligations of Illinova Corporation
(the "Company") and will rank pari passu with the Company's existing and future
unsecured and unsubordinated indebtedness. The Notes are not redeemable prior to
maturity and will not be subject to any sinking fund.
The Notes will be represented by one or more global securities registered
in the name of the nominee of The Depository Trust Company, as depository (the
"Depository"). Beneficial interests in the Notes will be shown on, and transfers
thereof will be effected only through, records maintained by the Depository and
its participants. Except as described herein, the Notes will not be issued in
definitive form. See "Description of the Notes -- Book-Entry Only System."
---------------------------
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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Per Note......................... 99.379% .625% 98.754%
- -------------------------------------------------------------------------------------------------------------
Total............................ $99,379,000 $625,000 $98,754,000
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from date of issuance.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933. See "Underwriting."
(3) Before deduction of expenses payable by the Company estimated at $345,000.
---------------------------
The Notes are being offered by the several Underwriters, subject to prior
sale, when, as and if issued by the Company, delivered to and accepted by the
Underwriters, subject to approval of certain legal matters by counsel for the
Underwriters and certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer, and to reject orders in whole or in part.
It is expected that delivery of the Notes will be made through the facilities of
the Depository on or about February 5, 1997 against payment therefor in
immediately available funds.
---------------------------
MERRILL LYNCH & CO. SMITH BARNEY INC.
---------------------------
The date of this Prospectus Supplement is January 31, 1997.
<PAGE> 2
THE COMPANY AND ITS SUBSIDIARIES
The Company is a holding company organized in Illinois in May 1994. It has
four principal operating subsidiaries: Illinois Power Company ("Illinois
Power"), organized in May 1923, is a combination electric and gas utility;
Illinova Generating Company, organized in October 1992, is an independent power
company which invests in energy supply projects and competes in the independent
power market worldwide; Illinova Power Marketing, Inc., organized in July 1994,
is in the business of brokering and marketing electric power and gas to various
customers; and Illinova Energy Partners, Inc., organized in May 1996, develops
and markets energy-related services to the unregulated energy market in the
United States. Illinois Power's financial position and results of operations are
currently the principal factors affecting the Company's consolidated financial
position and results of operation.
Illinois Power is engaged in the generation, transmission, distribution and
sale of electric energy and the distribution, transportation and sale of natural
gas in the State of Illinois. Its service area is a widely diversified
industrial and agricultural area comprising approximately 15,000 square miles in
northern, central and southern Illinois. Electric service is provided at retail
to 310 incorporated municipalities, adjacent suburban and rural areas and
numerous unincorporated municipalities having an estimated aggregate population
of 1,265,000. Gas service is provided to 257 incorporated municipalities,
adjacent suburban areas and numerous unincorporated municipalities having an
estimated aggregate population of 920,000. The larger cities served include
Decatur, East St. Louis (gas only), Champaign, Danville, Belleville, Granite
City, Bloomington (electric only), Galesburg, Urbana and Normal (electric only).
SUMMARY FINANCIAL INFORMATION OF THE COMPANY
(THOUSANDS, EXCEPT RATIOS AND PERCENTAGES)
The following information should be read in conjunction with the
information and financial statements of the Company, which are incorporated by
reference herein. See "Incorporation of Certain Documents by Reference" in the
accompanying Prospectus.
<TABLE>
<CAPTION>
12 MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------------------------------- SEPTEMBER 30,
1991(a) 1992(a) 1993(a) 1994 1995 1996
------- ------- ------- ---- ---- -------------
(UNAUDITED)(b)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Operating Revenues.......... $1,474,905 $1,479,449 $1,581,190 $1,589,465 $1,641,436 $1,656,303
Net Income (Loss)........... 109,244 122,088 (81,874) 151,786 151,601 173,930
Net Income (Loss) Applicable
to Common Stock........... 78,378 93,234 (81,874) 158,186(e) 148,096(e) 169,666(e)
Ratio of Earnings to Fixed
Charges(c)................ 1.70 1.87 0.66(d) 2.56 2.56 2.88
</TABLE>
S-2
<PAGE> 3
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
---------------------------------
(UNAUDITED)(b)
ACTUAL AS ADJUSTED(f)
----------- ------------------
<S> <C> <C> <C>
CAPITALIZATION
Long-Term Debt of Illinois Power (excluding amounts due
within one year).......................................... $1,649,408 $1,649,408 44.8%
Long-Term Debt of the Company (excluding amounts due within
one year)................................................. -- 100,000 2.7
Preferred Stock of Illinois Power (not subject to mandatory
redemption)............................................... 96,626 96,626 2.6
Company-obligated Mandatorily Redeemable Preferred
Securities of Illinois Power Capital, L.P. and of Illinois
Power Financing I......................................... 197,000 197,000 5.4
Common Stock Equity......................................... 1,636,296 1,636,296 44.5
---------- ---------- -----
Total Capitalization................................... $3,579,330 $3,679,330 100.0%
========== ========== =====
</TABLE>
- -------------------------
(a) The Company was formed on May 27, 1994, at which time it became the parent
of Illinois Power pursuant to a share-for-share conversion of Illinois Power
common stock with the Company's common stock. Financial information for the
years ended December 31, 1991, 1992 and 1993, represents that of Illinois
Power. Illinois Power is the primary business and subsidiary of the Company.
(b) In the opinion of the Company, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of the results for the
unaudited twelve-month period ended September 30, 1996, have been made.
(c) Earnings used in the calculation of the ratios of earnings to fixed charges
include the allowance for funds used during construction and the deferred
financing costs associated with Illinois Power's Clinton Power Station and
are before deduction of income taxes and fixed charges. Fixed charges
include interest on long-term debt, related amortization of debt discount,
premium, expense, other interest and that portion of rent expense which is
estimated to be representative of the interest component.
(d) The ratio of earnings to fixed charges of 0.66 for the year ended December
31, 1993 indicates that earnings were inadequate to cover fixed charges. The
dollar amount of the coverage deficiency for the year ended December 31,
1993 was approximately $37 million. Excluding the loss on disallowed plant
costs of $200 million, net of income taxes, recorded in the third quarter of
1993, the ratio of earnings to fixed charges would have been 2.11 for the
year ended December 31, 1993.
(e) Includes approximately $6.4 million gain represented by the excess of
carrying amount over consideration paid for redeemed preferred stock of
Illinois Power in 1994 and approximately $3.5 million loss represented by
consideration paid over carrying amount of redeemed preferred stock of
Illinois Power in 1995 and approximately $4.3 million loss represented by
consideration paid over carrying amount of redeemed preferred stock of
Illinois Power for the twelve months ended September 30, 1996.
(f) As adjusted to give effect to the issuance of the Notes.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes (estimated to be
approximately $98,409,000 million) will be added to the Company's general funds
and used for the repayment of indebtedness outstanding under the Company's $150
million short-term credit facility (the "Credit Facility"). Until so utilized,
it is expected that such net proceeds will be placed in interest bearing time
deposits or invested in short-term marketable securities. The balance of the net
proceeds, if any, will be used for other general corporate purposes, including
loans to or investments in the Company's operating subsidiaries. The principal
amount currently outstanding under the Credit Facility is $77 million, bears
interest at a rate of 5.99% per annum and matures on February 5, 1997.
Borrowings under the Credit Facility have been used primarily for Illinova
Generating Company's investments in energy supply projects in foreign countries.
The Credit Facility terminates on June 11, 1997.
S-3
<PAGE> 4
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying Prospectus as the "Senior Debt
Securities") supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Senior Debt Securities
set forth under the caption "Description of the Senior Debt Securities" in the
accompanying Prospectus, to which description reference is hereby made. Except
as otherwise defined herein, capitalized terms defined in the accompanying
Prospectus have the same meanings when used herein.
GENERAL
The summary contained under this caption of certain provisions of the
Indenture dated as of February 1, 1997 (the "Indenture") between the Company and
The First National Bank of Chicago, as trustee (the "Trustee"), does not purport
to be complete and is subject to and qualified by reference to the Indenture and
the Notes.
The Notes will be limited to $100,000,000 aggregate principal amount and
will mature on February 1, 2004. Interest at the annual rate set forth on the
cover page of this Prospectus Supplement is to accrue from February 5, 1997 and
is to be payable semiannually on February 1 and August 1, commencing August 1,
1997, to the Persons in whose names the Notes are registered at the close of
business on the preceding January 15 or July 15, respectively. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months. All
payments on the Notes will be made in United States dollars. The Notes may not
be redeemed prior to maturity and will not be subject to any sinking fund.
The Notes will be general unsecured obligations of the Company and will
rank pari passu with the Company's existing and future unsecured and
unsubordinated indebtedness. The Company is a holding company, conducting
substantially all of its business through its subsidiaries. The Notes will be
effectively subordinated to all obligations of the subsidiaries of the Company.
Consequently, the rights of the Company to receive assets of any subsidiary (and
thus the ability of holders of the Notes to benefit indirectly from such assets)
are subject to the prior claims of creditors of that subsidiary. See
"Description of Senior Debt Securities -- General" in the accompanying
Prospectus.
The discharge, defeasance and covenant defeasance provisions and the
covenant provisions described in the accompanying Prospectus under the caption
"Description of the Senior Debt Securities" will apply to the Notes.
BOOK-ENTRY ONLY SYSTEM
The Depository Trust Company ("DTC"), New York, New York, will act as
securities depository for the Notes. The Notes will be issued as
fully-registered securities registered in the name of Cede & Co. (DTC's
partnership nominee). One fully-registered Note certificate will be issued for
the Notes, in the aggregate principal amount of $100,000,000 and will be
deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Participants") deposit
with DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. "Direct
Participants" include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial
S-4
<PAGE> 5
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The Rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
Purchases of Notes under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of each Note ("Beneficial Owner") is
in turn to be recorded on the Direct and Indirect Participants' records.
Beneficial Owners will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Direct or Indirect Participant through which the Beneficial
Owner entered into the transaction. Transfers of ownership interests in the
Notes are to be accomplished by entries made on the books of Participants acting
on behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Notes, except in the event that use of
the book-entry system for the Notes is discontinued.
To facilitate subsequent transfers, all Notes deposited by Participants
with DTC are registered in the name of DTC's partnership nominee, Cede & Co. The
deposit of Notes with DTC and their registration in the name of Cede & Co.
effect no change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Notes; DTC's records reflect only the identity of the
Direct Participants to whose accounts such Notes are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to Notes.
Under its usual procedures, DTC mails an Omnibus Proxy to the Company as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Notes are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Principal and interest payments on the Notes will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on payable date. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, Paying Agent ("Agent") or the
Company, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal and interest to DTC is the
responsibility of the Company or Agent, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.
A Beneficial Owner shall give notice to elect to have its Notes purchased
or tendered, through its Participant, to Agent, and shall effect delivery of
such Notes by causing the Direct Participant to transfer the Participant's
interest in the Notes, on DTC's records, to Agent. The requirement for physical
delivery of Notes in connection with an optional tender or a mandatory purchase
will be deemed satisfied when the ownership rights in the Notes are transferred
by Direct Participants on DTC's records and followed by a book-entry credit of
tendered Notes to Agent's account.
DTC may discontinue providing its services as securities depository with
respect to the Notes at any time by giving reasonable notice to the Company or
Agent. Under such circumstances, in the event that a successor securities
depository is not obtained, Note certificates are required to be printed and
delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Note certificates will be printed and delivered.
S-5
<PAGE> 6
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement of the Notes will be made by the Underwriters in immediately
available funds. So long as the Notes are in the form of book-entry securities,
all payments of principal and interest will be made by the Company in
immediately available funds.
The Notes are expected to trade in the Depository's Same-Day Funds
Settlement System until maturity, and secondary market trading activity in the
Notes therefore will be required by the Depository to settle in immediately
available funds. No assurance can be given as to the effect, if any, of
settlement in immediately available funds on trading activity in the Notes.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among the Company and Merrill Lynch, Pierce,
Fenner & Smith Incorporated, acting on behalf of itself and Smith Barney Inc.
(the "Underwriters"), the Company has agreed to sell to each of the
Underwriters, and each of the Underwriters has severally agreed to purchase, the
respective principal amounts of Notes set forth opposite their respective names
below. Under certain circumstances, the commitments of a non-defaulting
Underwriter may be increased as set forth in the Underwriting Agreement.
<TABLE>
<CAPTION>
PRINCIPAL
UNDERWRITER AMOUNT OF NOTES
----------- ---------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $ 50,000,000
Smith Barney Inc. .......................................... 50,000,000
------------
Total.......................................... $100,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the Notes if any are
purchased.
The Underwriters have advised the Company that the Underwriters propose to
offer the Notes to the public initially at the public offering price set forth
on the cover page of this Prospectus Supplement, and to certain dealers at such
price less a concession of not in excess of .375% of the principal amount per
Note. The Underwriters may allow, and such dealers may reallow, a discount of
not in excess of .25% of such principal amount on sales to certain other
dealers. After the initial public offering, the public offering price and
concession and discount to dealers may be changed by the Underwriters.
Prior to the offering made hereby, there has been no public market for the
Notes. The Company does not intend to list the Notes on any securities exchange.
The Underwriters have advised the Company that the Underwriters currently intend
to make a market in the Notes; however, the Underwriters are not obligated to do
so, and any Underwriter may discontinue any such market making at any time
without notice. No assurance can be given as to the liquidity of the trading
market for the Notes.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended, or to contribute to payments that the Underwriters may be required to
make in respect of such liabilities.
S-6
<PAGE> 7
PROSPECTUS
ILLINOVA CORPORATION
SENIOR DEBT SECURITIES
-------------------------
[ILLINOVA LOGO]
-------------------------
Illinova Corporation (the "Company") may offer and issue from time to time,
in one or more series, unsecured debentures, notes or other evidences of
indebtedness (the "Senior Debt Securities") with an initial offering price not
to exceed $300,000,000 (or, if applicable, the equivalent in foreign denominated
currency or units based on or relating to currencies, including European
Currency Units). The Company will offer the Senior Debt Securities to the public
on terms determined by market conditions. The Prospectus Supplement sets forth
the specific designation, aggregate principal amount, purchase price, maturity,
interest rate (or manner of calculation thereof), time of payment of interest
(if any), listing (if any) on a securities exchange and any other specific terms
of the Senior Debt Securities and the name of and compensation to each dealer,
underwriter, or agent (if any) involved in the sale of each series of the Senior
Debt Securities. The managing underwriters with respect to each series sold to
or through underwriters will be named in the Prospectus Supplement.
The Senior Debt Securities will be general unsecured obligations of the
Company and will rank pari passu with the Company's existing and future
unsecured and unsubordinated indebtedness. As of September 30, 1996, the amount
of the Company's total unsecured and unsubordinated indebtedness with which the
Senior Debt Securities would have been pari passu was $57 million. The Senior
Debt Securities will be effectively subordinated to all obligations of the
subsidiaries of the Company. Consequently, the rights of the Company to receive
assets of any subsidiary (and thus the ability of holders of Senior Debt
Securities to benefit indirectly from such assets) are subject to the prior
claims of creditors of that subsidiary. As of September 30, 1996, $1,990 million
of the Company's total debt was indebtedness of subsidiaries, and such
subsidiaries may incur additional indebtedness in the future.
-------------------------
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 Senior Debt Securities may be offered through dealers, through
underwriters, or through agents designated from time to time, as set forth in
the Prospectus Supplement. Net proceeds to the Company will be the purchase
price in the case of a dealer, the public offering price less discount in the
case of an underwriter or the purchase price less commission in the case of an
agent, and in each case, less other expenses attributable to issuance and
distribution. See "Plan of Distribution" for possible indemnification
arrangements for dealers, underwriters and agents.
This Prospectus does not constitute an offer to sell or the solicitation of
an offer to buy any of the Senior Debt Securities other than the Senior Debt
Securities described in the accompanying Prospectus Supplement.
-------------------------
The date of this Prospectus is January 17, 1997.
<PAGE> 8
Senior Debt Securities of a series may be issuable as individual securities
in registered form without coupons or in bearer form with or without coupons
attached. Senior Debt Securities may be sold for United States dollars, foreign
denominated currency or currency units. Principal of and any interest on Senior
Debt Securities may likewise be payable in United States dollars, foreign
denominated currency or currency units, in each case, as the Company
specifically designates.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS, IF ANY, MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE
SENIOR DEBT SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
------------------------
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, information statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, information
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices at Suite 1400, Northwestern Atrium Center, 500
West Madison Street, Chicago, Illinois 60661 and at the 13th Floor, Seven World
Trade Center, New York, New York 10048, or obtained from the Commission's Web
site on the World Wide Web at http://www.sec.gov. Copies of such material may be
obtained from the public reference section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. Such reports, information
statements and other information concerning the Company may also be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005 and the Chicago Stock Exchange, 440 South LaSalle Street, Chicago,
Illinois 60605, on which exchanges the Common Stock of the Company is listed. In
addition, such reports, information statements and other information concerning
the Company may be inspected at the principal office of the Company, 500 South
27th Street, Decatur, Illinois 62525.
This Prospectus does not contain all the information set forth in the
Registration Statement on Form S-3 (together with all amendments and exhibits
thereto, the "Registration Statement"), which the Company has filed with the
Commission under the Securities Act of 1933, as amended (the "Securities Act").
Statements contained or incorporated by reference herein concerning the
provisions of documents are necessarily summaries of such documents, and each
statement is qualified in its entirety by reference to the Registration
Statement.
2
<PAGE> 9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under the
Exchange Act are incorporated herein by reference:
(1) the Company's Annual Report on Form 10-K for the year ended
December 31, 1995;
(2) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996; and
(3) the Company's Current Reports on Form 8-K, dated August 22, 1996
and September 13, 1996.
All documents subsequently 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 Senior Debt Securities offered
hereby shall be deemed to be incorporated by reference in this Prospectus and to
be a part hereof from the date of filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF
THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH
PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN
OR MAY BE INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO
SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE INTO THE
INFORMATION THAT THIS PROSPECTUS INCORPORATES. REQUESTS FOR SUCH COPIES SHOULD
BE DIRECTED TO THE SHAREHOLDER SERVICES DEPARTMENT, ILLINOVA CORPORATION AT 500
SOUTH 27TH STREET, DECATUR, ILLINOIS 62525, TELEPHONE NUMBER 1(800)800-8220 OR
AT ITS WEB SITE ON THE WORLD WIDE WEB AT HTTP://WWW.ILLINOVA.COM.
THE COMPANY AND ITS SUBSIDIARIES
The Company is a holding company organized in Illinois in May 1994. It has
four principal operating subsidiaries: Illinois Power Company ("Illinois
Power"), organized in May 1923, is a combination electric and gas utility;
Illinova Generating Company, organized in October 1992, is an independent power
company which invests in energy supply projects and competes in the independent
power market world-wide; Illinova Power Marketing, Inc., organized in July 1994,
is in the business of brokering and marketing electric power and gas to various
customers; and Illinova Energy Partners, Inc., organized in May 1996, develops
and markets energy-related services to the unregulated energy market in the
United States. Illinois Power's financial position and results of operations are
currently the principal factors affecting the Company's consolidated financial
position and results of operation.
Illinois Power is engaged in the generation, transmission, distribution and
sale of electric energy and the distribution, transportation and sale of natural
gas in the State of Illinois. Its service area is a widely diversified
industrial and agricultural area comprising approximately 15,000 square miles in
northern, central and southern Illinois. Electric service is provided at retail
to 310 incorporated municipalities, adjacent suburban and rural areas and
numerous unincorporated municipalities having an estimated aggregate population
of 1,265,000. Gas service is provided to 257 incorporated municipalities,
adjacent suburban areas and numerous unincorporated municipalities having an
estimated aggregate population of 920,000. The larger cities served include
Decatur, East St. Louis (gas only), Champaign, Danville, Belleville, Granite
City, Bloomington (electric only), Galesburg, Urbana and Normal (electric only).
The executive offices of the Company and Illinois Power are located at 500
South 27th Street, Decatur, Illinois 62525, and their telephone number is
1(217)424-6600.
3
<PAGE> 10
USE OF PROCEEDS
Unless otherwise provided in the Prospectus Supplement accompanying this
Prospectus, the net proceeds from the sale of the Senior Debt Securities will be
added to the Company's general funds and used for repayment of debt or other
general corporate purposes, including loans to or investments in the Company's
operating subsidiaries. Until so utilized, it is expected that such net proceeds
will be placed in interest bearing time deposits or invested in short-term
marketable securities. The specific use of the net proceeds of any offering of
Senior Debt Securities will be determined at the time of such offering and will
be described in the accompanying Prospectus Supplement.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges of
the Company for the periods indicated. This information is qualified in its
entirety by the information appearing elsewhere in this Prospectus and by the
information and financial statements incorporated in this Prospectus by
reference.
<TABLE>
<CAPTION>
12 MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30, 1996
- ----------------------------------------------------------- ------------------
1991 1992 1993 1994 1995
- ---- ---- ---- ---- ---- (UNAUDITED)
<S> <C> <C> <C> <C> <C>
1.70 1.87 0.66(a) 2.56 2.56 2.88
</TABLE>
- -------------------------
(a) The ratio of earnings to fixed charges of 0.66 for the year ended December
31, 1993 indicates that earnings were inadequate to cover fixed charges. The
dollar amount of the coverage deficiency for the year ended 1993 was
approximately $37 million. Excluding the loss on disallowed plant costs of
$200 million, net of income taxes, recorded in the third quarter of 1993,
the ratio of earnings to fixed charges would have been 2.11 for the year
ended 1993.
Earnings used in the calculation of the ratios of earnings to fixed charges
include the allowance for funds used during construction and the deferred
financing costs associated with Illinois Power's Clinton Power Station and are
before deduction of income taxes and fixed charges. Fixed charges include
interest on long-term debt, related amortization of debt discount, premium,
expense, other interest and that portion of rent expense which is estimated to
be representative of the interest component.
DESCRIPTION OF SENIOR DEBT SECURITIES
The Senior Debt Securities will be issued under an indenture (the
"Indenture"), between the Company, as issuer, and The First National Bank of
Chicago, as Trustee (the "Trustee"). The form of the Indenture is filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
terms of the Senior Debt Securities include those stated in the Indenture and
those made a part of the Indenture by reference to the Trust Indenture Act of
1939 as in effect on the date of the Indenture (the "Trust Indenture Act"). The
following summary of certain provisions of the Indenture and the Senior Debt
Securities does not purport to be complete and such summary is subject to the
detailed provisions of the Indenture to which reference is hereby made for a
full description of such provisions, including the definition of certain terms
used herein, and for other information regarding the Senior Debt Securities.
Wherever particular sections or defined terms of the Indenture are referred to,
such sections or defined terms are incorporated herein by reference as part of
the statement made, and the statement is qualified in its entirety by such
reference. The Senior Debt Securities offered by this Prospectus and the
accompanying Prospectus Supplement are referred to herein as the "Offered Debt
Securities."
The Senior Debt Securities may be issued from time to time in one or more
series. The following description of the Senior Debt Securities sets forth
certain general terms and provisions of the Senior Debt Securities of all
series. The particular terms of each series of Senior Debt Securities offered by
any Prospectus Supplement will be described in the Prospectus Supplement
relating to such series.
4
<PAGE> 11
GENERAL
The Indenture provides that Senior Debt Securities may be issued from time
to time in one or more series. The Indenture does not limit the amount of Senior
Debt Securities that may be issued by the Company, nor does the Indenture
restrict transactions between the Company and its affiliates, or dividends and
other distributions by the Company to its stockholders. Other than as set forth
under "Certain Covenants of the Company -- Limitation on Liens," the Indenture
does not contain any covenant or provision which affords the Person in whose
name the Senior Debt Securities are registered or, if not registered, the bearer
of the Senior Debt Securities (each, a "Holder") protection in the event of a
change of control of the Company or a highly leveraged transaction involving the
Company.
The Senior Debt Securities will be general unsecured obligations of the
Company and will rank pari passu with the Company's existing and future
unsecured and unsubordinated indebtedness. Accordingly, the ability of the
Company to meet its obligations under the Indenture and the Senior Debt
Securities will be dependent on the earnings and cash flows of its Subsidiaries
and the ability of its Subsidiaries to pay dividends or to advance funds to the
Company. As of September 30, 1996, the amount of the Company's total unsecured
and unsubordinated indebtedness with which the Senior Debt Securities would have
been pari passu was $57 million.
The Company is a holding company, conducting substantially all of its
business through its Subsidiaries, and the Indenture does not restrict the
incurrence of debt by such Subsidiaries. The Senior Debt Securities will be
effectively subordinated to all obligations of such Subsidiaries. Consequently,
the rights of the Company to receive assets of any Subsidiary (and thus the
ability of holders of Senior Debt Securities to benefit indirectly from such
assets) are subject to the prior claims of creditors of that Subsidiary. As of
September 30, 1996, $1,990 million of the Company's total debt was indebtedness
of Subsidiaries, and such Subsidiaries may incur additional indebtedness in the
future.
The Company's short-term credit agreement, which terminates on June 11,
1997, limits the amount of debt that the Company may incur at any time to the
product of three multiplied by the lesser of (i) the amount of dividends paid to
the Company during the four fiscal quarters then most recently ended and (ii)
the aggregate net income of subsidiaries of the Company during such period. At
September 30, 1996, the Company could have issued approximately $247 million of
debt (such as the Senior Debt Securities) without violating this agreement.
Reference is made to the Prospectus Supplement for the following terms of
and information relating to the Offered Debt Securities: (i) the specific
designation, aggregate principal amount, purchase price and denomination; (ii)
currency or units based on or relating to currencies in which such Offered Debt
Securities are denominated and/or in which principal, premium, if any, and/or
any interest will or may be payable; (iii) the date of maturity; (iv) interest
rate or rates (or method by which such rate will be determined), if any; (v) the
dates on which any such interest will be payable; (vi) the place or places where
the principal of and interest, if any, on the Offered Debt Securities will be
payable; (vii) whether the Offered Debt Securities will be issuable in
registered or bearer form or both and, if Offered Debt Securities in bearer form
are issuable, restrictions applicable to the exchange of one form for another
and to the offer, sale and delivery of Offered Debt Securities in bearer form;
(viii) any applicable United States federal income tax consequences, including
whether and under what circumstances the Company will pay additional amounts on
Offered Debt Securities held by any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof (each, a "Person") who
is not a United States Person (as defined in the Prospectus Supplement) in
respect of any tax, assessment or governmental charge withheld or deducted, and
if so, whether the Company will have the option to redeem such Offered Debt
Securities rather than pay such additional amounts; (ix) the obligation, if any,
of the Company to redeem, repurchase or repay such Offered Debt Securities
pursuant to any mandatory sinking fund or analogous provisions or at the option
of a Holder thereof and the price or prices at which, the period or periods
within which, and the terms and conditions upon which such Offered Debt
Securities may be redeemed, repurchased or repaid, in whole or in part, pursuant
to such obligation; and (x) any other specific terms of the Offered Debt
Securities, including any additional events of default or covenants provided for
with
5
<PAGE> 12
respect to such Offered Debt Securities, and any terms which may be required by
or advisable under United States laws or regulations.
Senior Debt Securities may be issued as original issue discount securities.
An "Original Issue Discount Security" is a Senior Debt Security that (i) is
issued at a price lower than the amount payable upon the stated maturity thereof
and (ii) provides that upon redemption or acceleration of the maturity thereof
an amount less than the amount payable upon the stated maturity thereof and
determined in accordance with the terms of such Senior Debt Security will become
due and payable. Special United States federal income tax considerations
applicable to Senior Debt Securities issued at an original issue discount,
including Original Issue Discount Securities, will be set forth in any
Prospectus Supplement relating thereto.
Senior Debt Securities may be presented for exchange, and registered Senior
Debt Securities may be presented for transfer in the manner, at the places and
subject to the restrictions set forth in the Senior Debt Securities and the
Prospectus Supplement. Such services will be provided without charge, other than
any tax or other governmental charge payable in connection therewith, but
subject to the limitations provided in the Indenture. Senior Debt Securities in
bearer form and the coupons, if any, appertaining thereto will be transferable
by delivery.
REGISTERED GLOBAL SECURITIES
The registered Senior Debt Securities of a series may be issued in the form
of one or more fully registered global securities (a "Registered Global
Security") that will be deposited with a depositary (the "Depositary"), or with
a nominee for a Depositary identified in the Prospectus Supplement relating to
such series. In such case, one or more Registered Global Securities will be
issued in a denomination or aggregate denominations equal to the portion of the
aggregate principal amount of outstanding registered Senior Debt Securities of
the series to be represented by such Registered Global Security or Senior Debt
Securities. Unless and until it is exchanged in whole or in part for Senior Debt
Securities in definitive registered form, a Registered Global Security may not
be transferred except as a whole by the Depositary for such Registered Global
Security to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to any
portion of a series of Senior Debt Securities to be represented by a Registered
Global Security will be described in the Prospectus Supplement relating to such
series. The Company anticipates that the following provisions will apply to all
depositary arrangements.
Upon the issuance of a Registered Global Security, the Depositary for such
Registered Global Security will credit, on its book-entry registration and
transfer system, the respective principal amounts of the Senior Debt Securities
represented by such Registered Global Security to the accounts of Persons that
have accounts with such Depositary ("participants"). The accounts to be credited
shall be designated by any underwriters or agents participating in the
distribution of such Senior Debt Securities. Ownership of beneficial interests
in a Registered Global Security will be limited to participants or Persons that
may hold interests through participants. Ownership of beneficial interests in
such Registered Global Security will be shown on, and the transfer of that
ownership will be effected only through, records maintained by the Depositary
for such Registered Global Security (with respect to interests of participants)
or by participants or Persons that hold through participants (with respect to
interests of Persons other than participants). So long as the Depositary for a
Registered Global Security, or its nominee, is the registered owner of such
Registered Global Security, such Depositary or such nominee, as the case may be,
will be considered the sole owner or Holder of the Senior Debt Securities
represented by such Registered Global Security for all purposes under the
Indenture. Except as set forth below, owners of beneficial interests in a
Registered Global Security will not be entitled to have the Senior Debt
Securities represented by such Registered Global Security registered in their
names, will not receive or be entitled to receive physical delivery of such
Senior Debt Securities in definitive form and will not be considered the owners
or Holders thereof under the Indenture.
6
<PAGE> 13
Principal, premium, if any, and interest payments on Senior Debt Securities
represented by a Registered Global Security registered in the name of a
Depositary or its nominee will be made to such Depositary or its nominee, as the
case may be, as the registered owner of such Registered Global Security. None of
the Company, the Trustee or any paying agent for such Senior Debt Securities
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in such
Registered Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Company expects that the Depositary for any Senior Debt Securities
represented by a Registered Global Security, upon receipt of any payment of
principal, premium or interest, will immediately credit participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of such Registered Global Security as shown on the
records of such Depositary. The Company also expects that payments by
participants to owners of beneficial interests in such Registered Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with the securities
held for the accounts of customers registered in "street names" and will be the
responsibility of such participants.
If the Depositary for any Senior Debt Securities represented by a
Registered Global Security is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed by the Company within
ninety days, the Company will issue such Senior Debt Securities in definitive
form in exchange for such Registered Global Security. In addition, the Company
may at any time and in its sole discretion determine not to have any of the
Senior Debt Securities of a series represented by one or more Registered Global
Securities and, in such event, will issue Senior Debt Securities of such series
in definitive form in exchange for all of the Registered Global Security or
Senior Debt Securities representing such Senior Debt Securities.
CERTAIN COVENANTS OF THE COMPANY
Limitation on Liens. The Indenture provides that, except as otherwise
specified with respect to a particular series of Senior Debt Securities, so long
as any Senior Debt Securities of any series are Outstanding, the Company will
not mortgage, hypothecate or grant a security interest in, or permit any
mortgage, pledge, security interest or other lien upon any, capital stock of any
Subsidiary (hereinafter defined) now or hereinafter owned by the Company to
secure any Indebtedness (hereinafter defined), without making effective
provisions whereby the Outstanding Senior Debt Securities shall (so long as such
other Indebtedness shall be so secured) be equally and ratably secured with any
and all such other Indebtedness and any other indebtedness similarly entitled to
be equally and ratably secured. This restriction does not apply to, nor prevent
the creation or existence of, (i) any mortgage, pledge, security interest, lien
or encumbrance upon any such capital stock created at the time of the
acquisition of such capital stock by the Company or within one year after such
time to secure all or a portion of the purchase price for such capital stock or
existing thereon at the time of the acquisition thereof by the Company (whether
or not the obligations secured thereby are assumed by the Company); or (ii) any
extension, renewal or refunding of any mortgage, pledge, security interest, lien
or encumbrance described in clause (i) above on capital stock of any Subsidiary
theretofore subject thereto (or substantially the same capital stock) or any
portion thereof.
For purposes of the restriction described in the preceding paragraph,
"Indebtedness" means (i) all indebtedness, whether or not represented by bonds,
debentures, notes or other securities, created or assumed by the Company for the
repayment of money borrowed; (ii) all indebtedness for money borrowed secured by
a lien upon property owned by the Company and upon which indebtedness for money
borrowed the Company customarily pays interest, although the Company has not
assumed or become liable for the payment of such indebtedness for money
borrowed; and (iii) all indebtedness for money borrowed of others guaranteed as
to payment of principal by the Company or in effect guaranteed by the Company
through a contingent agreement to purchase such indebtedness for money borrowed,
but excluding from this definition any other contingent obligation of the
Company in respect of indebtedness for money borrowed or other obligations
incurred by others. "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 of the Company's other Subsidiaries, or by
7
<PAGE> 14
the Company and one or more other Subsidiaries. For the purposes of this
definition, "voting stock" means stock that ordinarily has voting power for the
election of directors, whether at all times or only so long as no senior class
of stock has such voting power by reason of any contingency.
Notwithstanding the foregoing, except as otherwise specified with respect
to a particular series of Senior Debt Securities, the Company may, without
securing the Senior Debt Securities, pledge, mortgage, hypothecate or grant a
security interest in, or permit any mortgage, pledge, security interest or other
lien (in addition to liens expressly permitted as described in the second
preceding paragraph) upon, capital stock of any Subsidiary now or hereafter
owned by the Company to secure any Indebtedness (which would otherwise be
subject to the foregoing restriction) in an aggregate amount which, together
with all other such Indebtedness, does not exceed 5% of Consolidated
Capitalization. For this purpose, "Consolidated Capitalization" means the sum
obtained by adding (i) Consolidated Shareholders' Equity, (ii) Consolidated
Indebtedness (exclusive of any thereof which is due and payable within one year
of the date such sum is determined) and, without duplication, (iii) any
preference or preferred stock of the Company or any Consolidated Subsidiary
which is subject to mandatory redemption or sinking fund provisions.
The term "Consolidated Shareholders' Equity" (as used above) means the
total Assets of the Company and its Consolidated Subsidiaries less all
liabilities of the Company and its Consolidated Subsidiaries. As used in the
foregoing definition, "liabilities" means all obligations which would, in
accordance with generally accepted accounting principles in the United States,
be classified on a balance sheet as liabilities, including without limitation
(i) indebtedness secured by property of the Company or any of its Consolidated
Subsidiaries whether or not the Company or such Consolidated Subsidiary is
liable for the payment thereof unless, in the case that the Company or such
Consolidated Subsidiary is not so liable, such property has not been included
among the Assets of the Company of such Consolidated Subsidiary on such balance
sheet, (ii) deferred liabilities and (iii) indebtedness of the Company or any of
its Consolidated Subsidiaries that is expressly subordinated in right and
priority of payment to other liabilities of the Company or such Consolidated
Subsidiary. As used in this definition, "liabilities" includes preference or
preferred stock of the Company or any Consolidated Subsidiary only to the extent
of any such preference or preferred stock that is subject to mandatory
redemption or sinking fund provisions.
The term "Consolidated Subsidiary" (as used above) means at any date any
Subsidiary the financial statements of which under generally accepted accounting
principles would be consolidated with those of the Company in its consolidated
financial statements as of such date. The "Assets" of any Person means the whole
or any part of its business, property, assets, cash and receivables. The term
"Consolidated Indebtedness" means total indebtedness as shown on the
consolidated balance sheet of the Company and its Consolidated Subsidiaries.
As of September 30, 1996, the Consolidated Capitalization of the Company
was approximately $3.58 billion.
Consolidation, Merger, Conveyance of Assets. The Indenture provides that
the Company will not consolidate with or merge into any other corporation or
convey, transfer or lease its properties and assets substantially as an entirety
to any Person, unless the corporation formed by such consolidation or into which
the Company is merged or the Person which acquires such assets shall expressly
assume the Company's obligations under the Indenture and the Senior Debt
Securities issued thereunder and 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 happened and be
continuing.
EVENTS OF DEFAULT
Unless otherwise indicated in the Prospectus Supplement, an Event of
Default is defined under the Indenture with respect to Senior Debt Securities of
any series issued under the Indenture as: (i) default in payment of any
principal of the Senior Debt Securities of such series, either at maturity, upon
any redemption, by declaration or otherwise; (ii) default for 30 days in payment
of any interest on any Senior Debt Securities of such series; (iii) default for
90 days after written notice in the observance or performance of any covenant or
warranty in the Senior Debt Securities of such series or the Indenture (other
than a covenant a default in whose performance or whose breach is specifically
dealt with), (iv) certain events of bankruptcy, insolvency or
8
<PAGE> 15
reorganization of the Company; (v) the acceleration of the maturity of any
indebtedness for borrowed money of the Company or Illinois Power or the failure
to pay any portion of such indebtedness when due and payable after the
expiration of any applicable grace period (in each case, other than the Senior
Debt Securities of such series or indebtedness of the Company or Illinois Power
in respect of which the recourse of the holder of such indebtedness, whether
direct or indirect and whether contingent or otherwise, is effectively limited
to specified assets, and with respect to which neither the Company nor Illinois
Power provides any credit support) having an aggregate principal amount
outstanding in excess of $25,000,000, if such acceleration is not rescinded or
annulled, such failure to pay is not cured, or such indebtedness shall not have
been discharged, within 15 days after written notice thereof to the Company by
either the Trustee or the Holders of not less than 25 percent in principal
amount of Senior Debt Securities of such series; or (vi) any other Event of
Default provided in a supplemental indenture thereto with respect to Senior Debt
Securities of that series; provided, however, that, except as otherwise may be
established for a series of Senior Debt Securities, the occurrence of any of the
events described in the foregoing clauses (iii) or (vi) shall not constitute an
Event of Default if such occurrence is the result of changes in generally
accepted accounting principles as recognized by the American Institute of
Certified Public Accountants at the date as of which this Indenture is executed
and a certificate to such effect is delivered to the Trustee by the Company's
independent public accountants.
The Indenture provides that, (a) if an Event of Default described in
clauses (i), (ii) or (iii) above (if the Event of Default under clause (iii) is
with respect to less than all series of Senior Debt Securities then outstanding)
occurs, either the Trustee or the Holders of not less than 25 percent in
principal amount of Senior Debt Securities of each affected series (treated as
one class) issued under the Indenture and then outstanding may then declare the
entire principal (or, if the Senior Debt Securities of that series are Original
Issue Discount Securities, such portion of the principal amount as may be
specified in the terms of that series) of all Senior Debt Securities of each
such affected series and interest accrued thereon to be due and payable
immediately and (b) if an Event of Default due to a default described in clause
(iii) above which is applicable to all series of Senior Debt Securities then
outstanding or due to certain events of bankruptcy, insolvency and
reorganization of the Company, shall have occurred and be continuing, either the
Trustee or the Holders of not less than 25 percent in principal amount of all
Senior Debt Securities issued under the Indenture and then outstanding (treated
as one class) may declare the entire principal of all such Senior Debt
Securities and interest accrued thereon to be due and payable immediately, but
upon certain conditions such declarations may be annulled and past defaults may
be waived (except a continuing default in payment of principal of, premium, if
any, or interest on such Senior Debt Securities) by the Holders of a majority in
aggregate principal amount of the Senior Debt Securities of all such affected
series then outstanding.
The Indenture contains a provision entitling the Trustee, subject to the
duty of the Trustee during a default to act with the required standard of care,
to be indemnified by the Holders of Senior Debt Securities (treated as one
class) issued under the Indenture before proceeding to exercise any right or
power under the Indenture at the request of such Holders. Subject to such
provisions in the Indenture for the indemnification of the Trustee and certain
other limitations, the Holders of a majority in aggregate principal amount of
the outstanding Senior Debt Securities of each series affected (treated as one
class) issued under the Indenture may 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.
The Indenture provides that no Holder of Senior Debt Securities issued
under the Indenture may institute any action against the Company under the
Indenture (except actions for payment of overdue principal or interest) unless
such Holder previously shall have given to the Trustee written notice of default
and continuance thereof and unless the Holders of not less than 25 percent in
principal amount of the Senior Debt Securities of each affected series (treated
as one class) issued under the Indenture and then outstanding shall have
requested the Trustee to institute such action and shall have offered the
Trustee reasonable indemnity and the Trustee shall not have instituted such
action within 60 days of such request, and the Trustee shall not have received
direction inconsistent with such written request by the Holders of a majority in
principal amount of the Senior Debt Securities of each affected series (treated
as one class) issued under the Indenture and then outstanding.
9
<PAGE> 16
The Indenture contains a covenant that the Company will file annually with
the Trustee a certificate of no default or a certificate specifying any default
that exists.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Company can discharge or defease its obligations under the Indenture as
set forth below.
Under terms satisfactory to the Trustee, the Company may discharge certain
obligations to Holders of any series of Senior Debt Securities issued under the
Indenture which have not already been delivered to the Trustee for cancellation
and which have either become due and payable or are by their terms due and
payable within one year (or scheduled for redemption within one year) by
irrevocably depositing with the Trustee cash or, in the case of Senior Debt
Securities payable only in United States dollars, United States Government
Obligations (as defined in the Indenture) as trust funds in an amount certified
to be sufficient to pay at maturity (or upon redemption) the principal of and
interest on such Senior Debt Securities.
The Company may also, upon satisfaction of the condition listed below,
discharge certain obligations to Holders of any series of Senior Debt Securities
issued under the Indenture at any time ("defeasance"). Under terms satisfactory
to the Trustee, the Company may be released with respect to any outstanding
series of Senior Debt Securities issued under the Indenture from the obligations
imposed by the covenants described above limiting liens, sale and lease-back
transactions and consolidations, mergers and conveyances of assets in, and omit
to comply with such covenants without creating an Event of Default ("covenant
defeasance"). Defeasance or covenant defeasance may be effected only if, among
other things: (i) the Company irrevocably deposits with the Trustee cash or, in
the case of Senior Debt Securities payable only in United States dollars, United
States Government Obligations, as trust funds in an amount certified to be
sufficient to pay at maturity (or upon redemption) the principal of and interest
on all outstanding Senior Debt Securities of such series issued under the
Indenture; and (ii) the Company delivers to the Trustee an opinion of counsel to
the effect that the Holders of such series of Senior Debt Securities will not
recognize income, gain or loss for United States federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to United
States federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if defeasance or covenant defeasance had
not occurred (in the case of a defeasance, such opinion must be based on a
ruling of the Internal Revenue Service or a change in United States federal
income tax law occurring after the date of the Indenture, since such a result
would not occur under current tax law).
Under current United States federal income tax law, defeasance and
discharge likely would be treated as a taxable exchange of Senior Debt
Securities to be defeased for an interest in the defeasance trust. As a
consequence, in respect of a defeasance described in the second preceding
paragraph, a Holder would recognize gain or loss equal to the difference between
the Holder's cost or other tax basis for such Senior Debt Securities and the
value of the Holder's interest in the defeasance trust, and thereafter would be
required to include in income a share of the income, gain or loss of the
defeasance trust. Under current United States federal income tax law, covenant
defeasance would ordinarily not be treated as a taxable exchange of such Senior
Debt Securities.
MODIFICATION, WAIVER AND MEETINGS
The Indenture provides that the Company and the Trustee may enter into
supplemental indentures (which conform to the provisions of the Trust Indenture
Act) without the consent of the Holders to, among other things: (i) secure any
Senior Debt Securities; (ii) evidence the assumption by a successor Person of
the obligations of the Company; (iii) add further covenants for the protection
of the Holders; (iv) cure any ambiguity, correct any inconsistency or make any
other provisions in the Indenture, so long as such action will not adversely
affect the interests of the Holders; (v) establish the form or terms of Senior
Debt Securities of any series; and (vi) evidence the acceptance of appointment
by a successor trustee.
The Indenture also contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than the majority in
principal amount of Senior Debt Securities of each series issued under the
Indenture then outstanding and affected (voting as one class) to add any
provisions to, or change in any
10
<PAGE> 17
manner or eliminate any of the provisions of, the Indenture or modify in any
manner the rights of the Holders of the Senior Debt Securities of each series so
affected; provided that such changes conform to provisions of the Trust
Indenture Act and provided that the Company and the Trustee may not, without the
consent of all Holders of outstanding Senior Debt Securities affected thereby,
(i) extend the final maturity of the principal of any Senior Debt Securities, or
reduce the principal amount thereof or reduce the rate or extend the time of
payment of interest thereon, or reduce any amount payable on redemption thereof
or change the currency in which the principal thereof (including any amount in
respect of original issue discount) or interest thereon is payable, or reduce
the amount of any Original Issue Discount Security payable upon acceleration or
provable in bankruptcy or alter certain provisions of the Indenture relating to
Senior Debt Securities not denominated in United States dollars or for which
conversion to another currency is required to satisfy the judgment of any court,
or impair the right to institute suit for the enforcement of any payment on any
Senior Debt Securities when due or (ii) reduce the aforesaid percentage in
principal amount of Senior Debt Securities of any series issued under the
Indenture, the consent of the Holders of which is required for any such
modification.
The Holders of a majority in aggregate principal amount of the Senior Debt
Securities of each series may, on behalf of the Holders of all Senior Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
The Holders of a majority in aggregate principal amount of the Senior Debt
Securities of each series may, on behalf of all Holders of Senior Debt
Securities of that series, waive any past default under the Indenture with
respect to any Securities of that series, except a default (i) in the payment of
principal of, or any premium or interest on, any Senior Debt Security of such
series or (ii) in respect of a covenant or provision of the Indenture that
cannot be modified or amended without the consent of the Holder of each Senior
Debt Security of such series affected.
The Indenture provides that in determining whether the Holders of the
requisite principal amount of the Senior Debt Securities have given any request,
demand, authorization, direction, notice, consent or waiver thereunder or are
present at a meeting of the Holders of Senior Debt Securities for quorum
purposes, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal that
would be due and payable as of the date of such determination upon acceleration
of the Maturity thereof, and (ii) the principal amount of a Senior Debt Security
denominated in a foreign currency or currencies shall be the United States
dollar equivalent, determined on the date of original issuance of such Senior
Debt Security, of the principal amount of such Senior Debt Security or, in the
case of an Original Issue Discount Security, the United States dollar
equivalent, determined on the date of original issuance of such Senior Debt
Security, of the amount determined as provided in clause (i) above.
The Indenture contains provisions for convening meetings of the Holders of
Senior Debt Securities of a series. A meeting may be called at any time by the
Trustee and also, upon request, by the Company or the Holders of at least 10% in
principal amount of the Outstanding Senior Debt Securities of such series, in
any such case upon notice given in accordance with "Notices" below. Except for
any consent that must be given by the Holder of each Outstanding Senior Debt
Security affected thereby, as described above, any resolution presented at a
meeting or adjourned meeting at which a quorum is present may be adopted by the
affirmative vote of the Holders of a majority in principal amount of the
Outstanding Senior Debt Securities of that series; provided, however, that
except for any consent that must be given by the Holder of each Outstanding
Senior Debt Security affected thereby, as described above, any resolution with
respect to any consent or waiver that may be given by the Holders of a specified
percentage, which is greater than a majority in principal amount of the
Outstanding Senior Debt Securities of a series, may be adopted at a meeting or
an adjourned meeting duly convened and at which a quorum is present only by the
affirmative vote of the Holders of such specified percentage in principal amount
of the Outstanding Senior Debt Securities of that series; and provided, further,
that, except for any consent that must be given by the Holder of each
Outstanding Senior Debt Security affected thereby, as described above, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
Holders of a specified percentage, which is less than a majority, in principal
amount of the Outstanding Senior Debt Securities of a series that may be adopted
at a meeting or adjourned meeting duly reconvened and at which a quorum is
present by the affirmative vote of the Holders of such specified percentage in
principal amount of the Outstanding Senior Debt Securities of that series. Any
resolution passed or decision taken at any meeting
11
<PAGE> 18
of Holders of Senior Debt Securities of any series duly held in accordance with
the Indenture will be binding on all Holders of Senior Debt Securities of that
series and the related coupons. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be Persons holding or
representing a majority in principal amount of the Outstanding Senior Debt
Securities of a series; provided, however, that if any action is to be taken at
such meeting with respect to a consent or waiver that may be given by the
Holders of a specified percentage, which is greater than a majority in aggregate
principal amount of the Outstanding Senior Debt Securities of a series, the
Persons holding or representing such specified percentage in principal amount of
the Outstanding Senior Debt Securities of such series will constitute a quorum.
CONCERNING THE TRUSTEE
The Trustee is one of a number of banks with which the Company and its
affiliates maintain ordinary banking relationships and with which the Company
and its affiliates maintain credit facilities. An affiliate of the Trustee has
also underwritten securities offerings for affiliates of the Company and may
underwrite future offerings for the Company and its affiliates.
The Indenture and the provisions of the Trust Indenture Act incorporated by
reference therein contain certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest, it must eliminate such conflict or resign.
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES
Except as may otherwise be provided in the Prospectus Supplement applicable
thereto, in compliance with United States federal income tax laws and
regulations, Bearer Debt Securities (including Bearer Debt Securities in global
form) will not be offered, sold, resold or delivered, directly or indirectly, in
the United States or its possessions or to United States persons (as defined
below), except as permitted by United States Treasury Regulations Section
1.163-5(c)(2)(i)(D). Any underwriters, agents and dealers participating in the
offerings of Bearer Debt Securities, directly or indirectly, must agree that (i)
they will not, in connection with the original issuance of any Bearer Debt
Securities or during the restricted period, as defined in United States Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(7) (the "restricted period"), offer,
sell, resell or deliver, directly or indirectly, any Bearer Debt Securities in
the United States or its possessions or to United States persons (other than as
permitted by the applicable Treasury Regulations described above). In addition,
any such underwriters, agents and dealers must have procedures reasonably
designed to ensure that its employees or agents who are directly engaged in
selling Bearer Debt Securities are aware of the above restrictions on the
offering, sale, resale or delivery of Bearer Debt Securities. Moreover, Bearer
Debt Securities (other than temporary global Senior Debt Securities and Bearer
Debt Securities that satisfy the requirements of United States Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(3)(iii)) and any coupons appertaining
thereto will not be delivered in definitive form, nor will any interest be paid
on any Bearer Debt Securities, unless the Company has received a signed
certificate in writing (or an electronic certificate described in United States
Treasury Regulations Section 1.163-5(c)(2)(i)(D)(3)(ii)) stating that on such
date such Bearer Debt Security (i) is owned by a person that is not a United
States person, (ii) is owned by a United States person that (a) is a foreign
branch of a United States financial institution (as defined in United States
Treasury Regulations Section 1.165-12(c)(1)(v)) (a "financial institution")
purchasing for its own account or for resale, or (b) is acquiring such Bearer
Debt Security through a foreign branch of a United States financial institution
and who holds the Bearer Debt Security through such financial institution
through such date (and in either case (a) or (b), each such United States
financial institution agrees, on its own behalf or through its agent, that the
Company may be advised that it will comply with the requirements of Section
165(j)(3)(A), (B) or (C) of the United States Internal Revenue Code, and the
regulations thereunder) or (iii) is owned by a United States or foreign
financial institution for the purposes of resale during the restricted period
and such financial institution certifies that it has not acquired the Bearer
Debt Security for purposes of resale directly or indirectly to a United States
person or to a person within the United States or its possessions.
12
<PAGE> 19
Bearer Debt Securities (other than temporary global Senior Debt Securities)
and any coupons appertaining thereto will bear a legend substantially to the
following effect: "Any United States person who holds this obligation will be
subject to limitations under the United States federal income tax laws,
including the limitations provided in Sections 165(j) and 1287(a) of the United
States Internal Revenue Code." The sections referred to in such legend provide
that, with certain exceptions, a United States person will not be permitted to
deduct any loss, and will not be eligible for capital gain treatment with
respect to any gain, realized on the sale, exchange or redemption of such Bearer
Security or coupon.
As used herein, "United States person" means any person who is, for United
States federal income tax purposes, a citizen, national or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of the United States or any political subdivision thereof,
or an estate or trust the income of which is subject to United States federal
income taxation regardless of its source.
PLAN OF DISTRIBUTION
GENERAL
The Company may sell the Offered Debt Securities in the following ways: (i)
through agents, (ii) through underwriters, (iii) through dealers and (iv)
directly to purchasers.
Offers to purchase the Offered Debt Securities may be solicited by agents
designated by the Company from time to time. Any such agent, who may be deemed
to be an underwriter as that term is defined in the Securities Act, involved in
the offer or sale of the Offered Debt Securities in respect of which this
Prospectus is delivered will be named, and any commissions payable by the
Company to such agent set forth, in the Prospectus Supplement. Unless otherwise
indicated in the Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
If any underwriters are utilized in the sale, the Company will enter into
an underwriting agreement with such underwriters at the time of sale to them and
the names of the underwriters and the terms of the transaction will be set forth
in the Prospectus Supplement, which will be used by the underwriters to make
resales to the public of the Offered Debt Securities in respect of which this
Prospectus is delivered.
If a dealer is utilized in the sale of the Offered Debt Securities in
respect of which this Prospectus is delivered, the Company will sell such
Offered Debt Securities to the dealer, as principal. The dealer may then resell
such Offered Debt Securities to the public at varying prices to be determined by
such dealer at the time of resale.
Agents, dealers and underwriters may be entitled under agreements entered
into with the Company to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which such agents, dealers or underwriters may be
required to make in respect thereof. Agents, dealers and underwriters may be
customers of, engage in transactions with, or perform services for the Company
in the ordinary course of business.
The Offered Debt Securities may also be offered and sold, if so indicated
in the Prospectus Supplement, in connection with a remarketing upon their
purchase, in accordance with a redemption or repayment pursuant to their terms,
or otherwise, by one or more firms ("remarketing firms"), acting as principals
for their own accounts or as agents for the Company. Any remarketing firm will
be identified and the terms of its agreement, if any, with the Company and its
compensation will be described in the Prospectus Supplement. Remarketing firms
may be deemed to be underwriters in connection with the Offered Debt Securities
remarketed thereby. Remarketing firms may be entitled under agreements which may
be entered into with the Company to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act, and
may be customers of, engage in transactions with or perform services for the
Company in the ordinary course of business.
If so indicated in the Prospectus Supplement, the Company will authorize
agents and dealers or underwriters to solicit offers by certain purchasers to
purchase the Offered Debt Securities from the Company
13
<PAGE> 20
at the public offering price set forth in the Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on a specified
date in the future. Such contracts will be subject to only those conditions set
forth in the Prospectus Supplement, and the Prospectus Supplement will set forth
the commission payable for solicitation of such offers.
The Senior Debt Securities, when first issued, will have no established
trading market. Any underwriters or agents to or through whom Senior Debt
Securities are sold by the Company for public offering and sale may make a
market in such Senior Debt Securities, but such underwriters or agents will not
be obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of the trading market for
any Senior Debt Securities.
DELAYED DELIVERY ARRANGEMENTS
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters or other persons acting as the Company's agents to solicit offers
by certain institutions to purchase Senior Debt Securities from the Company
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
contracts will be subject to the approval of the Company. The obligations of any
purchaser under any such contract will be subject to the condition that the
purchase of the Senior Debt Securities shall not at the time of delivery be
prohibited under the laws of the jurisdiction to which such purchaser is
subject. The underwriters and such agents will not have any responsibility in
respect of the validity or performance of such contracts.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Company's Annual Report on Form 10-K for the year ended December 31, 1995
have been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
LEGAL MATTERS
Certain legal matters in connection with the Senior Debt Securities will be
passed upon for the Company by Schiff Hardin & Waite, Chicago, Illinois. Certain
legal matters in connection with the Senior Debt Securities may be passed upon
for any underwriters, dealers or agents by Winthrop, Stimson, Putnam & Roberts,
New York, New York.
14
<PAGE> 21
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE
HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN
OFFER OR A SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company and its Subsidiaries............ S-2
Summary Financial Information of the
Company................................... S-2
Use of Proceeds............................. S-3
Description of the Notes.................... S-4
Underwriting................................ S-6
PROSPECTUS
Available Information....................... 2
Incorporation of Certain Documents by
Reference................................. 3
The Company and its Subsidiaries............ 3
Use of Proceeds............................. 4
Ratio of Earnings to Fixed Charges.......... 4
Description of Senior Debt Securities....... 4
Plan of Distribution........................ 13
Experts..................................... 14
Legal Matters............................... 14
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$100,000,000
ILLINOVA CORPORATION
7 1/8% SENIOR NOTES
DUE FEBRUARY 1, 2004
[ILLINOVA LOGO]
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
MERRILL LYNCH & CO.
SMITH BARNEY INC.
JANUARY 31, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
