<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. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated May 10, 1996
PROSPECTUS SUPPLEMENT
(To Prospectus dated January 24, 1996)
20,000,000 PREFERRED SECURITIES
TCI COMMUNICATIONS FINANCING II
% TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
TCI COMMUNICATIONS, INC.
------------
The % Trust Preferred Securities (the "Preferred Securities") offered
hereby evidence preferred undivided beneficial interests in the assets of TCI
Communications Financing II, a statutory business trust formed under the laws
of the State of Delaware (the "Trust"). TCI Communications, Inc., a Delaware
corporation (the "Company"), will directly or indirectly own all the common
securities (the "Common Securities" and, together with the Preferred
Securities, the "Trust Securities")
(continued on next page)
------------
See "Risk Factors" commencing on page S-6 of this Prospectus Supplement for
certain information relevant to an investment in the Preferred Securities,
including the period and circumstances during and under which payments of
distributions on the Preferred Securities may be deferred and the related
United States Federal Income Tax Consequences of such deferral.
------------
The Preferred Securities have been approved for listing, subject to official
notice of issuance, on the New York Stock Exchange, Inc. (the "New York Stock
Exchange"). Trading of the Preferred Securities on the New York Stock Exchange
is expected to commence within a 30-day period after the initial delivery of
the Preferred Securities. See "Underwriting."
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Initial Public Underwriting Proceeds to
Offering Price (1) Commission (2) Trust (3)(4)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Preferred Security.......... $25.00 (3) $25.00
- --------------------------------------------------------------------------------
Total........................... $500,000,000 (3) $500,000,000
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Plus accrued distributions, if any, from May , 1996.
(2) The Company and the Trust have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be invested in Subordinated Debt Securities, the Company
has agreed to pay to the Underwriters, as compensation for their arranging
the investment therein of such proceeds, $ per Preferred Security (or
$ in the aggregate); provided, that such compensation for sales of
10,000 or more Preferred Securities to a single purchaser will be $ per
Preferred Security. Therefore, to the extent of such sales, the actual
amount of Underwriters' compensation will be less than the aggregate amount
specified in the preceding sentence. See "Underwriting."
(4) Expenses of the offering which are payable by the Company are estimated to
be $100,000.
------------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Preferred Securities will be made only in book-
entry form through the facilities of The Depository Trust Company on or about
May , 1996.
------------
LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
A.G. EDWARDS & SONS, INC.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
Incorporated
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
May , 1996.
<PAGE>
(continued from previous page)
representing common undivided beneficial interests in the assets of the Trust.
The Trust exists for the exclusive purposes of issuing the Trust Securities
and investing the proceeds thereof in an equivalent principal amount of %
Subordinated Deferrable Interest Notes due May 31, 2045 (the "Subordinated
Debt Securities") of the Company. The Subordinated Debt Securities will be
unsecured obligations of the Company and will be subordinate and junior in
right of payment to certain other indebtedness of the Company, as described
herein. Upon an event of default under the Declaration (as defined herein),
the holders of the Preferred Securities will have a preference over the holder
of the Common Securities with respect to payments in respect of distributions
and payments upon liquidation, redemption and otherwise.
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of % of the liquidation amount of $25 per
Preferred Security, accruing from May , 1996 and payable quarterly in arrears
on March 31, June 30, September 30 and December 31 of each year, commencing
June 30, 1996 ("distributions"). The distribution payable on June 30, 1996,
which will be calculated at the above rate and based on a period that is
shorter than a full quarter, will be in the amount of $ per Preferred
Security. The distribution rate and the distribution and other payment dates
for the Preferred Securities will correspond to the interest rate and interest
and other payment dates on the Subordinated Debt Securities, which will be the
sole assets of the Trust. As a result, if principal or interest is not paid on
the Subordinated Debt Securities, no amounts will be paid on the Preferred
Securities. The payment of distributions out of moneys held by the Trust, and
payments on liquidation of the Trust or the redemption of Preferred
Securities, as set forth below, are guaranteed by the Company (the "Preferred
Securities Guarantee") if and to the extent the Trust has funds available
therefor. The Company's obligations under the Preferred Securities Guarantee,
taken together with its other obligations described herein, constitute a full
and unconditional guarantee by the Company of payments due on the Preferred
Securities. See "Effect of Obligations Under the Subordinated Debt Securities
and the Preferred Securities Guarantee" and "Description of the Preferred
Securities Guarantee." The obligations of the Company under the Preferred
Securities Guarantee are subordinate and junior in right of payment to all
other liabilities of the Company and will rank pari passu with the most senior
preferred stock issued by the Company from time to time and with any guarantee
that may be entered into by the Company in respect of any preferred stock of
any subsidiary or affiliate of the Company. If the Company does not make
principal or interest payments on the Subordinated Debt Securities, the Trust
will not have sufficient funds to redeem or make distributions on the
Preferred Securities, in which event the Preferred Securities Guarantee will
not apply to such redemptions or distributions until the Trust has sufficient
funds available therefor. The obligations of the Company under the
Subordinated Debt Securities are subordinate and junior in right of payment to
all present and future Senior Indebtedness (as defined herein) of the Company.
The Senior Indebtedness of the Company aggregated approximately $8,333 million
at December 31, 1995. In addition, because the Company is primarily a holding
company, its obligations under the Preferred Securities Guarantee and the
Subordinated Debt Securities will be effectively subordinated to all existing
and future liabilities of its subsidiaries. At December 31, 1995, the
subsidiaries of the Company had total debt (excluding debt owed to the
Company) of approximately $4,303 million.
The Company has the right to defer payments of interest on the Subordinated
Debt Securities by extending the interest payment period on the Subordinated
Debt Securities, at any time, for up to 20 consecutive quarters (each an
"Extension Period"). If interest payments are so deferred, distributions on
the Preferred Securities will also be deferred. Despite such deferral, during
an Extension Period distributions will continue to accrue with interest
thereon (to the extent permitted by applicable law) at an annual rate of %
per annum, compounded quarterly, and holders of Preferred Securities will be
required to include deferred interest income in their gross income for United
States federal income tax purposes in advance of receipt of the cash interest
payments attributable to such deferred income. There could be multiple
Extension Periods of varying lengths throughout the term of the Subordinated
Debt Securities. See "Description of the Subordinated Debt Securities--Option
to Extend Interest Payment Period," "Risk Factors--Option to Extend Interest
Payment Period" and "Certain Federal Income Tax Consequences--Original Issue
Discount, Premium and Market Discount." In the event of any such deferral, the
holders of the Preferred Securities do not have the right to appoint a special
representative or trustee or otherwise act to protect their interests.
S-2
<PAGE>
The Subordinated Debt Securities are redeemable by the Company (in whole or
in part) from time to time, on or after May 31, 2001, or at any time in
certain circumstances upon the occurrence of a Tax Event (as defined herein).
If the Company redeems Subordinated Debt Securities, the Trust must redeem
Trust Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Subordinated Debt Securities so redeemed at $25 per
Trust Security plus accrued and unpaid distributions thereon (the "Redemption
Price") to the date fixed for redemption. See "Description of the Preferred
Securities--Mandatory Redemption." The Preferred Securities will be redeemed
upon maturity of the Subordinated Debt Securities. The Subordinated Debt
Securities mature on May 31, 2045. In addition, upon the occurrence of a
Special Event (as defined herein) arising from a change in law or a change in
legal interpretation, unless the Subordinated Debt Securities are redeemed in
the limited circumstances described below, the Trust shall be terminated with
the result that the Subordinated Debt Securities will be distributed to the
holders of the Preferred Securities, on a pro rata basis, in lieu of any cash
distribution. In the case of the occurrence of a Special Event that is a Tax
Event, the Company will have the right in certain circumstances to redeem the
Subordinated Debt Securities, which would result in the redemption by the
Trust of the Trust Securities in the same amount on a pro rata basis. If the
Subordinated Debt Securities are distributed to the holders of the Preferred
Securities, the Company will use its best efforts to have the Subordinated
Debt Securities listed on the New York Stock Exchange or on such other
exchange as the Preferred Securities are then listed. See "Description of the
Preferred Securities--Special Event Redemption or Distribution" and
"Description of the Subordinated Debt Securities."
In the event of the voluntary or involuntary dissolution, winding-up or
termination of the Trust, the holders of the Preferred Securities will be
entitled to receive, for each Preferred Security, a liquidation amount of $25
plus accrued and unpaid distributions thereon (including interest, if any,
thereon) to the date of payment, unless in connection with such dissolution,
winding-up or termination the Subordinated Debt Securities are distributed to
the holders of the Preferred Securities. See "Description of the Preferred
Securities--Liquidation Distribution Upon Termination."
The Company is a subsidiary of Tele-Communications, Inc. ("TCI"). See "The
Company." The Company will be the sole obligor under the Subordinated Debt
Securities and the Preferred Securities Guarantee and with respect to the
other obligations of the Company described herein, and TCI has no obligation
or liability, contingent or otherwise, to pay any amounts due pursuant to the
Subordinated Debt Securities, the Preferred Securities Guarantee or the
Preferred Securities.
----------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
S-3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus Supplement and in
the accompanying Prospectus. Reference is made to "Definitions" on page S-44
for the location in this Prospectus Supplement of the definitions of certain
capitalized terms used herein.
PREFERRED SECURITIES OFFERED
20,000,000 % Trust Preferred Securities evidencing preferred undivided
beneficial interests in the assets of the Trust are offered hereby. Holders of
the Preferred Securities are entitled to receive cumulative cash distributions
at an annual rate of % of the liquidation amount of $25 per Preferred
Security, accruing from May , 1996 and payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year, commencing on June 30,
1996. The distribution payable on June 30, 1996, which will be calculated at
the above rate and based on a period that is shorter than a full quarter, will
be in the amount of $ per Preferred Security. The distribution rate and the
distribution and other payment dates for the Preferred Securities will
correspond to the interest rate and interest and other payment dates on the
Subordinated Debt Securities, which will be the sole assets of the Trust. As a
result, if principal or interest is not paid on the Subordinated Debt
Securities, no amounts will be paid on the Preferred Securities. See
"Description of the Preferred Securities."
SUBORDINATED DEBT SECURITIES
The Trust will invest the proceeds from the issuance of the Preferred
Securities and Common Securities in an equivalent amount of % Subordinated
Deferrable Interest Notes due May 31, 2045 of the Company. The Subordinated
Debt Securities will be subordinate and junior in right of payment to all
Senior Indebtedness of the Company. See "Description of the Subordinated Debt
Securities--Subordination."
PREFERRED SECURITIES GUARANTEE
Payment of distributions out of moneys held by the Trust, and payments on
liquidation of the Trust or the redemption of Preferred Securities, are
guaranteed by the Company if and to the extent the Trust has funds available
therefor. If the Company does not make principal or interest payments on the
Subordinated Debt Securities, the Trust will not have sufficient funds to
redeem or make distributions on the Preferred Securities, in which event the
Preferred Securities Guarantee will not apply to such redemptions or
distributions until the Trust has sufficient funds available therefor. The
Company's obligations under the Preferred Securities Guarantee, taken together
with its other obligations described herein, constitute a full and
unconditional guarantee by the Company of payments due on the Preferred
Securities. See "Effect of Obligations Under the Subordinated Debt Securities
and the Preferred Securities Guarantee" and "Description of the Preferred
Securities Guarantee." The obligations of the Company under the Preferred
Securities Guarantee are subordinate and junior in right of payment to all
other liabilities of the Company and will rank pari passu with the most senior
preferred stock issued by the Company from time to time and with any guarantee
that may be entered into by the Company in respect of any preferred stock of
any subsidiary or affiliate of the Company. See "Risk Factors--Ranking of
Preferred Securities Guarantee and Subordinated Debt Securities" and "--Rights
under the Preferred Securities Guarantee" and "Description of the Preferred
Securities Guarantee."
INTEREST DEFERRAL
The Company has the right to defer payments of interest on the Subordinated
Debt Securities by extending the interest payment period on the Subordinated
Debt Securities, at any time and from time to time, for up to 20 consecutive
quarters. If interest payments on the Subordinated Debt Securities are so
deferred, distributions on
S-4
<PAGE>
the Preferred Securities will also be deferred. During any deferral,
distributions will continue to accrue with interest thereon compounded
quarterly (to the extent permitted by law) as described herein. There could be
multiple Extension Periods of varying lengths throughout the term of the
Subordinated Debt Securities. During an Extension Period, holders of Preferred
Securities will be required to include deferred interest income in their gross
income in advance of receipt of the cash interest payments attributable
thereto. See "Description of the Preferred Securities--Voting Rights,"
"Description of the Subordinated Debt Securities--Option to Extend Interest
Payment Period" and "Certain Federal Income Tax Consequences--Original Issue
Discount, Premium and Market Discount."
MANDATORY REDEMPTION OF PREFERRED SECURITIES
Unless previously redeemed pursuant to the optional or special redemption
provisions described below, each of the outstanding Preferred Securities will
be redeemed by the Trust, in cash, on May 31, 2045, which is the maturity date
of the Subordinated Debt Securities, at the Redemption Price, which is equal to
(a) $25 per Preferred Security plus (b) accrued and unpaid distributions
thereon to the date of redemption. See "Description of the Preferred
Securities--Mandatory Redemption."
OPTIONAL AND SPECIAL REDEMPTION
The Subordinated Debt Securities are redeemable by the Company in whole or in
part, from time to time, on or after May 31, 2001, or at any time in certain
circumstances upon the occurrence of a Tax Event, in each case at a price equal
to (a) 100% of the principal amount of Subordinated Debt Securities to be
redeemed plus (b) accrued and unpaid interest thereon to the date of
redemption. If the Company redeems Subordinated Debt Securities, the Trust must
redeem Trust Securities, including the Preferred Securities, having an
aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Debt Securities so redeemed at the Redemption Price. See
"Description of the Preferred Securities--Mandatory Redemption" and "--Special
Event Redemption or Distribution."
VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and will not
be entitled to vote to appoint, remove or replace, or to increase or decrease
the number of, Company Trustees (as defined herein), which voting rights are
vested exclusively in the holder of the Common Securities. See "Description of
the Preferred Securities--Voting Rights."
USE OF PROCEEDS
The Trust will invest the proceeds from the sale of the Preferred Securities
offered hereby in the Subordinated Debt Securities, the proceeds of which will
be used by the Company to repay indebtedness outstanding under three credit
facilities. See "Use of Proceeds."
LISTING
The Preferred Securities have been approved for listing, subject to official
notice of issuance, on the New York Stock Exchange under the symbol "TFI PrA."
Trading of the Preferred Securities on the NYSE is expected to commence within
a 30-day period after the initial delivery of the Preferred Securities. See
"Underwriting."
S-5
<PAGE>
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained in other sections of this Prospectus Supplement and in
the accompanying Prospectus and should particularly consider the following
matters.
RANKING OF OBLIGATIONS UNDER PREFERRED SECURITIES GUARANTEE AND SUBORDINATED
DEBT SECURITIES
The Company's obligations under the Preferred Securities Guarantee are
subordinate and junior in right of payment to all liabilities of the Company
and pari passu with the most senior preferred stock issued by the Company from
time to time and with any guarantee that may be entered into by the Company in
respect of any preferred stock of any subsidiary or affiliate of the Company.
The obligations of the Company under the Subordinated Debt Securities are
subordinate and junior in right of payment to all present and future Senior
Indebtedness (as defined herein) of the Company. No payment of principal of
(including redemption payments), premium, if any, or interest on the
Subordinated Debt Securities may be made if (a) any Senior Indebtedness of the
Company is not paid when due and any applicable grace period with respect to
such default has ended with such default not being cured or waived or ceasing
to exist, or (b) the maturity of any Senior Indebtedness has been accelerated
because of a default. At December 31, 1995, Senior Indebtedness of the Company
aggregated approximately $8,333 million. In addition, because the Company is
primarily a holding company, its obligations under the Preferred Securities
Guarantee and the Subordinated Debt Securities will be effectively
subordinated to all existing and future liabilities of its subsidiaries. At
December 31, 1995, the subsidiaries of the Company had total debt (excluding
debt owed to the Company) of approximately $4,303 million. See "Holding
Company Structure" below. There are no terms in the Preferred Securities, the
Subordinated Debt Securities or the Preferred Securities Guarantee that limit
the Company's ability to incur additional indebtedness, including indebtedness
that ranks senior to the Subordinated Debt Securities or the Preferred
Securities Guarantee. See "Description of the Preferred Securities Guarantee"
and "Description of the Subordinated Debt Securities--Subordination." Although
the Company is a subsidiary of TCI, TCI will have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Subordinated Debt
Securities, the Preferred Securities Guarantee or the Preferred Securities.
RIGHTS UNDER THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee guarantees to the holders of the
Preferred Securities the payment of (i) any accrued and unpaid distributions
which are required to be paid on the Preferred Securities, to the extent the
Trust shall have funds available therefor, (ii) the Redemption Price, which
includes all accrued and unpaid distributions to the date of the redemption,
to the extent the Trust has funds available therefor, with respect to any
Preferred Securities called for redemption by the Trust and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Subordinated Debt
Securities to the holders of Preferred Securities), the lesser of (a) the
aggregate of the liquidation amount and all accrued and unpaid distributions
on the Preferred Securities to the date of payment thereof, to the extent the
Trust has funds available therefor, and (b) the amount of assets of the Trust
remaining available for distribution to holders of Preferred Securities in
liquidation of the Trust. Holders of the Preferred Securities have the right
to proceed directly against the Company to enforce the Company's obligations
to make payments under the Preferred Securities Guarantee, without first
instituting a legal proceeding against the Trust, the Preferred Guarantee
Trustee (as defined herein) or any other person or entity. If the Company were
to default in its obligation to pay amounts payable on the Subordinated Debt
Securities, the Trust would lack available funds for the payment of
distributions or amounts payable on redemption of the Preferred Securities or
otherwise, and in such event holders of the Preferred Securities would not be
able to rely upon the Preferred Securities Guarantee for payment of such
amounts. Instead, holders of the Preferred Securities would rely on the
enforcement by the Property Trustee (as defined herein) of its rights as
registered holder of the Subordinated Debt Securities against the Company,
pursuant to the terms of the Subordinated Debt Securities. See "Description of
the Preferred Securities Guarantee--Status of the Preferred Securities
Guarantee" and "Description of the Subordinated Debt Securities--
Subordination." The Declaration (as defined herein) provides that each holder
of Preferred Securities by acceptance thereof agrees to the provisions of the
Preferred Securities Guarantee and the Indenture (as defined herein).
S-6
<PAGE>
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF PREFERRED SECURITIES
If a Declaration Event of Default (as defined herein) occurs and is
continuing, then the holders of Preferred Securities would rely on the
enforcement by the Property Trustee of its rights as the holder of the
Subordinated Debt Securities against the Company. In addition, the holders of
a majority in aggregate liquidation amount of the Preferred Securities will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee or to direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration, including the right to direct the Property Trustee to exercise
the remedies available to it as a holder of the Subordinated Debt Securities.
If a Declaration Event of Default occurs that results from the failure of the
Company to pay principal of or interest on the Subordinated Debt Securities
when due, during the continuance of such an event of default a holder of
Preferred Securities may institute a legal proceeding directly against the
Company to obtain payment of such principal or interest on Subordinated Debt
Securities having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities owned of record by such holder. The holders of
Preferred Securities will not be able to exercise directly against the Company
any other remedy available to the Property Trustee unless the Property Trustee
first fails to do so. See "Description of the Preferred Securities--Voting
Rights."
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company has the right under the Indenture to defer payments of interest
on the Subordinated Debt Securities by extending the interest payment period
at any time, and from time to time, on the Subordinated Debt Securities. As a
consequence of such an extension, quarterly distributions on the Preferred
Securities would be deferred (but despite such deferral would continue to
accrue with interest thereon compounded quarterly) by the Trust during any
such extended interest payment period. Such right to extend the interest
payment period for the Subordinated Debt Securities is limited to a period not
exceeding 20 consecutive quarters for any such extension. In the event that
the Company exercises this right to defer payments of interest, then (a) the
Company shall not declare or pay any dividend on, make any distributions with
respect to, or redeem, purchase or make a liquidation payment with respect to,
any of its capital stock, (b) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company which rank pari passu with or junior to
the Subordinated Debt Securities and (c) the Company shall not make any
guarantee payments (other than pursuant to the Preferred Securities Guarantee)
with respect to the foregoing; provided, however, that the foregoing
restrictions do not apply to any dividend, redemption, interest, principal or
guarantee payments by the Company where the payment is made by way of (i)
securities (including capital stock) that rank junior to the securities on
which such dividend, redemption, interest, principal or guarantee payment is
being made or (ii) securities (including capital stock) of TCI. Prior to the
termination of any such Extension Period, the Company may further defer
payments of interest by further extending the interest payment period,
provided that such Extension Period, together with all such previous and
further extensions thereof, may not exceed 20 consecutive quarters or extend
beyond the maturity of the Subordinated Debt Securities. Upon the termination
of any Extension Period and the payment of all amounts then due, the Company
may select a new Extension Period, as if no Extension Period had previously
been declared, subject to the above requirements. See "Description of the
Preferred Securities--Distributions" and "--Voting Rights" and "Description of
the Subordinated Notes--Option to Extend Interest Payment Period."
Should the Company exercise its right to defer payments of interest by
extending the interest payment period, each holder of Preferred Securities
will continue to accrue income (as original issue discount) for United States
federal income tax purposes in respect of the deferred interest allocable to
its Preferred Securities, which will be allocated, but not distributed, to
holders of record of Preferred Securities. As a result, holders of Preferred
Securities will recognize income for United States federal income tax purposes
in advance of the receipt of cash and will not receive cash from the Trust
related to such income if such holder disposes of its Preferred Securities
prior to the record date for the date on which distributions of such amounts
are made. The Company has no current intention of exercising its right to
defer payments of interest by extending the interest payment period on the
Subordinated Debt Securities. However, should the Company determine to
exercise such right in the future, the market price of the Preferred
Securities is likely to be affected. A holder that disposes of its Preferred
Securities during an Extension Period, therefore, might not receive the same
return on its investment as a holder that continues to hold its Preferred
Securities. In addition, as a result of the existence of the Company's right
to
S-7
<PAGE>
defer interest payments, the market price of the Preferred Securities (which
represent a preferred undivided beneficial interest in the Subordinated Debt
Securities) may be more volatile than other securities on which original issue
discount accrues that are not subject to such right. See "Certain Federal
Income Tax Consequences--Original Issue Discount, Premium and Market
Discount."
SPECIAL EVENT DISTRIBUTION
Upon the occurrence of a Special Event, the Trust will be terminated, except
in the limited circumstances described below, with the result that the
Subordinated Debt Securities would be distributed to the holders of the Trust
Securities in connection with the liquidation of the Trust. In the case of a
Special Event that is a Tax Event, in certain circumstances the Company shall
have the right to redeem the Subordinated Debt Securities, in whole or in
part, in which event the Trust will redeem the Trust Securities on a pro rata
basis to the same extent as the Subordinated Debt Securities are redeemed. See
"Description of the Preferred Securities--Special Event Redemption or
Distribution" and "Certain Federal Income Tax Consequences."
Under current United States federal income tax law, a distribution of the
Subordinated Debt Securities upon the termination of the Trust would not be a
taxable event to holders of the Preferred Securities. Upon occurrence of a Tax
Event, however, a termination of the Trust in which holders of the Preferred
Securities receive cash would be a taxable event to such holders. See "Certain
Federal Income Tax Consequences--Receipt of Subordinated Debt Securities or
Cash upon Liquidation of the Trust."
There can be no assurance as to the market prices for the Preferred
Securities, or the Subordinated Debt Securities that may be distributed in
exchange for Preferred Securities if a termination of the Trust were to occur.
Accordingly, the Preferred Securities that an investor may purchase, or the
Subordinated Debt Securities that the investor may receive on dissolution and
liquidation of the Trust, may trade at a discount to the price that the
investor paid to purchase the Preferred Securities offered hereby. Because
holders of Preferred Securities may receive Subordinated Debt Securities upon
the occurrence of a Special Event, prospective purchasers of Preferred
Securities are also making an investment decision with regard to the
Subordinated Debt Securities and should carefully review all the information
regarding the Subordinated Debt Securities and the Company contained herein.
See "Description of the Preferred Securities--Special Event Redemption or
Distribution" and "Description of the Subordinated Debt Securities."
PROPOSED TAX LAW CHANGES
On December 7, 1995, the U.S. Treasury Department proposed a series of tax
law changes that would, among other things, prevent companies from deducting
interest on debt instruments with a maturity of more than 40 years and on
instruments with a maximum term of more than 20 years which are not shown as
indebtedness on the consolidated balance sheet of the issuer. Either of these
proposals, if enacted, would prevent the Company from deducting interest paid
on the Subordinated Debt Securities. The Company cannot predict whether the
proposed tax law changes will become law. However, the Chairmen of the House
Ways and Means and Senate Finance Committees issued a joint statement on March
29, 1996 stating that the effective date of these proposals, if enacted, would
be no earlier than the date of appropriate Congressional action. If
legislation is enacted limiting, in whole or in part, the deductibility by the
Company of interest on the Subordinated Debt Securities for United States
federal income tax purposes, such enactment would be a Tax Event. Under
certain circumstances following a Tax Event, the Company may cause the
Subordinated Debt Securities to be redeemed, in which event the Trust would
redeem the Trust Securities. The December 7, 1995 proposed tax law changes
would not alter the United States federal income tax consequences of the
purchase, ownership and disposition of the Preferred Securities. See "Certain
Federal Income Tax Consequences."
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights, primarily
in connection with directing the activities of the Property Trustee as the
holder of the Subordinated Debt Securities. Such holders will not be entitled
to vote to appoint, remove or replace, or to increase or decrease the number
of, Company Trustees, which
S-8
<PAGE>
voting rights are vested exclusively in the Company as the holder of the
Common Securities. See "Description of the Preferred Securities--Voting
Rights."
TRADING PRICE OF PREFERRED SECURITIES
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the underlying
Subordinated Debt Securities. A holder who disposes of his Preferred
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest on the Subordinated Debt
Securities through the date of disposition in income as ordinary income (i.e.,
OID (as defined herein)), and to add such amount to his adjusted tax basis in
his pro rata share of the underlying Subordinated Debt Securities deemed
disposed of. To the extent the selling price is less than the holder's
adjusted tax basis (which will include, in the form of OID, all accrued but
unpaid interest), a holder will recognize a capital loss. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for United States federal income tax purposes. See "Certain Federal Income Tax
Consequences--Original Issue Discount, Premium and Market Discount" and "--
Sale of Preferred Securities."
LOSSES
The Company incurred a net loss of $120 million for the year ended December
31, 1995 and a net loss of $5 million for the year ended December 31, 1993.
The Company had net earnings of $94 million for the year ended December 31,
1994. Notwithstanding the losses it has incurred, the Company has been able
to, and expects to continue to be able to, satisfy its debt service and other
obligations as and when they become due. The Company's operating cash flow
(operating income before depreciation, amortization and other non-cash credits
or charges) ($2,043 million, $1,801 million and $1,858 million for the years
ended December 31, 1995, 1994 and 1993, respectively) has historically been
sufficient to cover its interest expense ($962 million, $777 million and $731
million for the years ended December 31, 1995, 1994 and 1993, respectively).
The Company's interest coverage ratios for the years ended December 31, 1995,
1994 and 1993 were 212%, 232% and 254%, respectively. Operating cash flow is a
measure of value and borrowing capacity within the cable television industry
and is not intended to be a substitute for cash flows provided by operating
activities, a measure of performance prepared in accordance with generally
accepted accounting principles, and should not be relied upon as such.
Operating cash flow, as defined, does not take into consideration substantial
costs of doing business, such as interest expense, and should not be
considered in isolation to other measures of performance.
Another measure of liquidity is net cash provided by operating activities as
reflected in the Company's consolidated statements of cash flows. Net cash
provided by operating activities ($1,263 million, $1,142 million and $1,251
million for the years ended December 31, 1995, 1994 and 1993, respectively)
reflects net cash from the operations of the Company available for the
Company's liquidity needs after taking into consideration the aforementioned
substantial costs of doing business not reflected in operating cash flow.
Amounts expended by the Company for its investing activities exceed net cash
provided by operating activities.
HOLDING COMPANY STRUCTURE
The Trust's ability to make distributions and other payments on the
Preferred Securities is solely dependent upon the Company's making interest
and other payments on the Subordinated Debt Securities. The Company is a
holding company and its assets consist almost entirely of investments in its
subsidiaries. A substantial portion of the Company's consolidated liabilities
have been incurred by its subsidiaries. Therefore, the Company's rights and
the rights of its creditors, including holders of Subordinated Debt
Securities, to participate in the distribution of assets of any subsidiary
upon the latter's liquidation or reorganization will be subject to prior
claims of the subsidiary's creditors, including trade creditors, except to the
extent that the Company may itself be a creditor with recognized claims
against the subsidiary (in which case the claims of the Company would still be
subject to the prior claims of any secured creditor of such subsidiary and of
any holder of indebtedness of such subsidiary that is senior to that held by
the Company). Accordingly, the holders of Subordinated Debt Securities may be
effectively subordinated to such claims. At December 31, 1995, the
subsidiaries of the Company had total debt (excluding debt owed to the
Company) of approximately $4,303 million.
S-9
<PAGE>
The Company's ability to service its indebtedness, including the
Subordinated Debt Securities, and to perform under the Preferred Securities
Guarantee, is dependent upon the earnings of the Company's subsidiaries and
the distribution or other payment of such earnings to the Company in the form
of dividends, loans or advances, payment or reimbursement for management fees
and expenses, and repayment of loans and advances from the Company. The
subsidiaries are separate and distinct legal entities and have no obligation,
contingent or otherwise, to pay any amounts due pursuant to the Subordinated
Debt Securities or the Preferred Securities Guarantee or to make any funds
available therefor, whether by dividends, loans or other payments. The payment
of dividends or the making of loans and advances to the Company by its
subsidiaries may be subject to statutory or regulatory restrictions, are
contingent upon the earnings of those subsidiaries and are subject to various
business considerations. Further, certain of the Company's subsidiaries are
subject to loan agreements that prohibit or limit the transfer of funds by
such subsidiaries to the Company in the form of loans, advances or dividends
and require that such subsidiaries' indebtedness to the Company be subordinate
to the indebtedness under such loan agreements. The amount of net assets of
subsidiaries subject to such restrictions exceeds the Company's consolidated
net assets.
CREDIT RATING ON SENIOR DEBT
In late April, 1996, the Company was notified by Moody's Investors Service,
Inc. and Duff & Phelps Credit Rating Co. that those rating agencies had
downgraded by one level their respective ratings of the Company's senior debt
to the first level below investment grade. Standard & Poor's Securities, Inc.
("Standard & Poor's") and Fitch Investors Service, L.P. reaffirmed their
respective ratings for the Company's senior debt at the last level of
investment grade. In connection with its reaffirmation, Standard & Poor's
changed its outlook on the Company from stable to negative. These actions are
expected to marginally increase the Company's cost of borrowings under certain
bank credit facilities, and may adversely affect the Company's access to the
public debt market and its overall cost of future borrowings.
S-10
<PAGE>
THE COMPANY
The Company or its predecessor companies have been principally engaged in
the acquisition, development and operation of cable television systems since
the early 1950's. The Company believes that, measured by the number of basic
subscribers served by the Company and its subsidiaries and affiliates at
December 31, 1995, it is the largest provider of basic cable television
services in the United States.
On August 4, 1994, the Company (then named "Tele-Communications, Inc.") and
Liberty Media Corporation ("Liberty") each merged with separate wholly owned
subsidiaries of TCI/Liberty Holding Company, a new holding company formed by
the Company and Liberty for the purpose of combining the businesses of the
Company and Liberty. Immediately prior to the mergers, the Company had held a
significant economic interest in Liberty through its ownership of Liberty
common stock and several series of preferred stock of Liberty, and had
accounted for its investment in Liberty under the equity method. In connection
with the mergers, TCI/Liberty Holding Company changed its name to "Tele-
Communications, Inc." (referred to herein as "TCI") and the Company's name was
changed to its current name, "TCI Communications, Inc." As a result of the
foregoing, the Company and Liberty are both subsidiaries of TCI. Unless the
context indicates otherwise, as used herein the term "Company" means (i) on
and after August 4, 1994, TCI Communications, Inc. and its consolidated
subsidiaries and (ii) before August 4, 1994, Tele-Communications, Inc. and its
consolidated subsidiaries.
During the fourth quarter of 1994, TCI was reorganized (the
"Reorganization") based on four lines of business: Domestic Cable and
Communications; Programming; International Cable and Programming; and
Technology/Venture Capital. The assets and business operations of the Company
constitute TCI's Domestic Cable and Communications group. In connection with
the Reorganization, certain of the assets of the Company were transferred to
the other operating groups, the most significant of which included the
transfer of the Company's investment in (i) Turner Broadcasting System, Inc.
and Discovery Communications, Inc. to the Programming group (which consists
primarily of the programming assets of Liberty) and (ii) TeleWest
Communications, plc to the International Cable and Programming group.
The Company is a Delaware corporation incorporated in 1968 with executive
offices at Terrace Tower II, 5619 DTC Parkway, Englewood, Colorado 80111-3000;
telephone (303) 267-5500.
THE TRUST
The Trust is a statutory business trust formed under Delaware law pursuant
to the filing of a certificate of trust with the Delaware Secretary of State
on November 21, 1995. The Trust's business is defined in a Declaration of
Trust, dated as of November 21, 1995, executed by the Company, as sponsor (the
"Sponsor"), and the Company Trustees as of that date. The Declaration of Trust
will be amended and restated in its entirety (as so amended and restated, the
"Declaration") substantially in the form filed as an exhibit to the
Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus form a part. The Declaration has been qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the Preferred Securities, the purchasers
thereof will own all of the Preferred Securities. See "Description of the
Preferred Securities--Book-Entry Issuance Only--The Depository Trust Company."
The Company will directly or indirectly acquire all of the Common Securities
in an aggregate liquidation amount equal to 3% of the total capital of the
Trust. The Trust exists for the exclusive purposes of (i) issuing the Trust
Securities, representing undivided beneficial interests in the assets of the
Trust, (ii) investing the gross proceeds of the Trust Securities in the
Subordinated Debt Securities and (iii) engaging in only those other activities
necessary or incidental thereto. The Trust has a term of approximately 55
years, but may terminate earlier as provided in the Declaration.
The Trust's business and affairs will be conducted by the trustees (the
"Company Trustees") appointed by the Company, as holder of the Common
Securities. The duties and obligations of the Company Trustees shall be
S-11
<PAGE>
governed by the Declaration. Pursuant to the Declaration, the number of
Company Trustees will initially be five. Three of the Company Trustees (the
"Regular Trustees") will be persons who are employees or officers of, or
affiliated with, the Company. A fourth trustee will be a financial institution
unaffiliated with the Company that will serve as property trustee (the
"Property Trustee") under the Declaration and as indenture trustee for
purposes of the Trust Indenture Act. The Bank of New York will act as the
Property Trustee until removed or replaced by the holder of the Common
Securities. The Bank of New York will also act as indenture trustee under the
Preferred Securities Guarantee (the "Preferred Guarantee Trustee"). See
"Description of the Preferred Securities Guarantee." The fifth trustee will be
a financial institution or an affiliate thereof which maintains a principal
place of business or residence in the State of Delaware (the "Delaware
Trustee"). The Bank of New York (Delaware) will act as the Delaware Trustee.
The Property Trustee will hold title to the Subordinated Debt Securities for
the benefit of the Trust and holders of the Trust Securities and will have the
power to exercise all rights, powers and privileges under the Indenture (as
defined herein) as the holder of the Subordinated Debt Securities. In
addition, the Property Trustee will maintain exclusive control of a segregated
non-interest bearing bank account (the "Property Account") to hold all
payments made in respect of the Subordinated Debt Securities for the benefit
of the Trust and holders of the Trust Securities. The Property Trustee will
make payments of distributions and payments on liquidation, redemption and
otherwise to the holders of the Trust Securities out of funds from the
Property Account. The Preferred Guarantee Trustee will hold the Preferred
Securities Guarantee for the benefit of the holders of the Preferred
Securities. The Company, as the holder of all the Common Securities, will have
the right to appoint, remove or replace any Company Trustee and to increase or
decrease the number of Company Trustees, provided that the number of Company
Trustees shall be at least three, a majority of which shall be Regular
Trustees. The Company will pay all fees, expenses, debts and obligations
(other than the Trust Securities) related to the Trust and the offering of the
Trust Securities. The Company has agreed that the Property Trustee and any
person to whom such fees, expenses, debts and obligations are owed will have
the right to enforce the Company's obligations in respect of such fees,
expenses, debts and obligations directly against the Company without first
proceeding against the Trust. See "Description of the Preferred Securities--
Expenses and Taxes."
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are as set forth in the
Declaration, the Delaware Business Trust Act, as amended (the "Trust Act"),
and the Trust Indenture Act. See "Description of the Preferred Securities."
The principal place of business of the Trust shall be c/o TCI
Communications, Inc., Terrace Tower II, 5619 DTC Parkway, Englewood, Colorado
80111-3000; telephone (303) 267-5500.
S-12
<PAGE>
SELECTED FINANCIAL DATA OF THE COMPANY
The following table sets forth selected historical financial data for the
Company for each of the five fiscal years in the period ended December 31,
1995. The selected financial data are derived from the audited consolidated
financial statements of the Company. The following information is qualified in
its entirety by, and should be read in conjunction with, the consolidated
financial statements and notes thereto of the Company incorporated by
reference herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(IN MILLIONS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
DATA:
Revenue................ $ 5,118 $ 4,318 $ 4,153 $ 3,574 $ 3,214
Operating income....... 803 818 916 864 674
Earnings (loss) from:
Continuing operations.. (120) 94 (5) 8 (77)
Discontinued
operations............ -- -- -- (15) (19)
--------- --------- --------- --------- ---------
(120) 94 (5) (7) (96)
Dividend requirement on
redeemable preferred
stocks................ -- -- (2) (15) --
--------- --------- --------- --------- ---------
Net earnings (loss)
attributable to common
stockholders.......... $ (120) $ 94 $ (7) $ (22) $ (96)
========= ========= ========= ========= =========
OTHER DATA:
Ratio of earnings to
combined fixed charges
and preferred stock
dividends(1).......... -- 1.21x 1.22x 1.02x --
Operating income before
depreciation,
amortization and non-
cash operating
expenses(2)........... $ 2,043 $ 1,801 $ 1,858 $ 1,637 $ 1,430
Consolidated basic
cable subscribers..... 12.4 11.1 10.3 9.9 8.9
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SUMMARY BALANCE SHEET
DATA:
Property and equipment,
net................... 6,605 $ 5,579 $ 4,935 $ 4,562 $ 4,081
Franchise costs, net... 11,563 9,297 9,197 9,300 8,104
Net assets of
discontinued
operations............ -- -- -- -- 242
Total assets........... 19,981 15,880 16,527 16,315 15,169
Debt................... 12,635 10,712 9,900 10,285 9,455
Stockholders' equity... 1,729 683 2,116 1,728 1,571
Shares outstanding (net
of treasury
shares)(3):
Class A Common Stock... 1 1 403 382 370
Class B Common Stock... -- -- 47 48 49
</TABLE>
- --------
(1) The ratio of earnings to combined fixed charges and preferred stock
dividends of the Company was 1.02, 1.22, and 1.21 for the years ended
December 31, 1992, 1993 and 1994, respectively. The ratio of earnings to
combined fixed charges and preferred stock dividends of the Company was
less than 1.00 for the years ended December 31, 1991 and 1995; thus,
earnings available for combined fixed charges and preferred stock
dividends were inadequate to cover combined fixed charges and preferred
stock dividends for such periods. The amounts of the coverage deficiencies
were $177 million and $142 million for the years ended December 31, 1991
and 1995, respectively. For the ratio calculations, earnings available for
combined fixed charges and preferred stock dividends consists of earnings
(losses) before income taxes plus combined fixed charges and preferred
stock dividends (minus capitalized interest), distributions from and
(earnings) loss of less than 50%-owned affiliates with debt not guaranteed
by the Company (net of earnings not distributed of less than 50%-owned
affiliates), and minority interest in earnings (losses) of consolidated
subsidiaries (including an amount representing the pretax earnings which
would be required to cover preferred stock dividend requirements of
consolidated subsidiaries). Combined fixed charges and preferred stock
dividends consist of (i) interest (including capitalized interest) on
debt, including interest of less than 50%-owned affiliates with debt
guaranteed by the Company and excluding interest to 50%-owned affiliates,
(ii) the
(footnotes continued on following page)
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<PAGE>
(footnotes continued from preceding page)
Company's proportionate share of interest of 50%-owned affiliates, (iii)
that portion of rental expense the Company believes to be representative of
interest (one-third of rental expense), (iv) amortization of debt expense,
(v) that portion of minority interests in earnings of consolidated
subsidiaries that represent the amount of pretax earnings that would be
required to cover preferred stock dividend requirements excluding similarly
adjusted preferred stock dividend requirements of consolidated subsidiaries
to 50%-owned affiliates and (vi) the amount representing the pretax
earnings which would be required to cover preferred stock dividend
requirements of 50%-owned affiliates, other than amounts payable to the
Company. The Company has guaranteed the debt of certain less than 50%-owned
affiliates and certain other entities in which it has an interest. Combined
fixed charges and preferred stock dividends of $506,000, $2,517,000,
$13,833,000, $5,346,000 and $5,358,000 relating to such guarantees for the
years ended December 31, 1991, 1992, 1993, 1994 and 1995, respectively,
have not been included in combined fixed charges and preferred stock
dividends.
(2) Operating income before depreciation, amortization and non-cash operating
expenses should not be considered as an alternative to net income or to
cash flows provided by operating activities or to any other measure of
performance or liquidity as an indicator of an entity's operating
performance.
(3) On August 4, 1994, each 500.3735 shares of Class A Common Stock and
500.3735 shares of Class B Common Stock issued and outstanding on that
date were reclassified and changed into one share of Class A Common Stock
and one share of Class B Common Stock, respectively.
S-14
<PAGE>
CAPITALIZATION OF THE COMPANY
The following table sets forth the unaudited consolidated capitalization of
the Company at December 31, 1995, and as adjusted to reflect (i) the issuance
on January 29, 1996 of preferred securities with an aggregate liquidation
amount of $500 million by TCI Communications Financing I ("Trust I"), a
Delaware business trust sponsored by the Company, and (ii) the offering of the
Preferred Securities by the Trust and the application of the estimated net
proceeds received by the Company in connection therewith to repay outstanding
indebtedness as set forth under "Use of Proceeds." The following should be
read in conjunction with the Company's consolidated financial statements and
the notes thereto incorporated by reference herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------
AS AS
REPORTED ADJUSTED
-------- --------
(IN MILLIONS)
<S> <C> <C>
Total Debt................................................... $12,635 $11,635
------- -------
Minority interests in equity of consolidated subsidiaries.... 206 206
------- -------
Company-obligated mandatorily redeemable preferred securities
of subsidiary trusts holding solely subordinated debt
securities of the Company(1)................................ -- 1,000
------- -------
Stockholders' equity:
Class A Common Stock....................................... 1 1
Class B Common Stock....................................... -- --
Additional paid-in capital................................. 3,122 3,122
Unrealized holding gains for available-for-sale
securities................................................ 7 7
Accumulated deficit........................................ (370) (370)
Investment in Tele-Communications, Inc. ................... (1,145) (1,145)
Due to Tele-Communications, Inc............................ 114 114
------- -------
Total stockholders' equity................................ 1,729 1,729
------- -------
Total capitalization..................................... $14,570 $14,570
======= =======
</TABLE>
- --------
(1) As described in this Prospectus Supplement, the sole asset of the Trust
will be the % Subordinated Deferrable Interest Notes due May 31, 2045 of
the Company with a principal amount of $515.5 million. Upon redemption of
such debt, the Preferred Securities will be mandatorily redeemable. The
sole asset of Trust I is $515.5 million principal amount of 8.72%
Subordinated Deferrable Interest Notes of the Company due January 31,
2045. Upon redemption of such debt, the preferred securities of Trust I
will be mandatorily redeemable.
ACCOUNTING TREATMENT
The financial statements of the Trust will be consolidated with the
Company's financial statements, with the Preferred Securities shown on the
Company's consolidated financial statements as Company-obligated mandatorily
redeemable preferred securities of subsidiary trusts holding solely
subordinated debt securities of the Company. The sole asset of the Trust will
be the % Subordinated Deferrable Interest Notes due May 31, 2045 in the
principal amount of $515.5 million.
USE OF PROCEEDS
The proceeds of the sale of the Preferred Securities will be invested by the
Trust in the Subordinated Debt Securities of the Company. The Company will use
the net proceeds from the sale of such Subordinated Debt Securities (estimated
to be approximately $ ) to repay the following outstanding indebtedness:
(i) approximately $100 million under a bank credit facility, which at May 9,
1996 had a weighted average interest rate of 6.4375% per annum; (ii)
approximately $275 million under a second bank credit facility, on which
interest is being paid at a bank's prime rate (8.5% per annum as of May 9,
1996); and (iii) approximately $125 million under a third bank credit
facility, on which interest is being paid at the rate of 6.25% per annum.
Amounts repaid under certain of the foregoing bank credit facilities may
subsequently be reborrowed. Any remaining net proceeds from the sale of the
Subordinated Debt Securities will be used by the Company for general corporate
purposes.
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<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration has been qualified as an indenture under the
Trust Indenture Act. The Property Trustee will act as the indenture trustee
for purposes of compliance with the provisions of the Trust Indenture Act. The
terms of the Preferred Securities will include those stated in the Declaration
and those made part of the Declaration by the Trust Indenture Act. The
following summary of the principal terms and provisions of the Preferred
Securities does not purport to be complete and is subject to, and qualified in
its entirety by reference to, the Declaration (a copy of which is filed as an
exhibit to the Registration Statement, of which this Prospectus Supplement and
the accompanying Prospectus are a part), the Trust Act and the Trust Indenture
Act.
GENERAL
The Declaration authorizes the Regular Trustees, on behalf of the Trust, to
issue the Preferred Securities, which represent preferred undivided beneficial
interests in the assets of the Trust, and the Common Securities, which
represent common undivided beneficial interests in the assets of the Trust.
All of the Common Securities will be owned directly or indirectly by the
Company. The Common Securities rank pari passu, and payments will be made
thereon on a pro rata basis with the Preferred Securities, except that upon
the occurrence and during the continuation of a Declaration Event of Default,
the rights of the holders of the Common Securities to receive payment of
periodic distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights to payment of the holders of the Preferred
Securities. The Declaration does not permit the issuance by the Trust of any
securities other than the Trust Securities or the incurrence of any
indebtedness by the Trust. Pursuant to the Declaration, the Property Trustee
will own and hold the Subordinated Debt Securities for the benefit of the
Trust and the holders of the Trust Securities. The payment of distributions
out of money held by the Trust, and payments upon redemption of the Preferred
Securities or liquidation of the Trust, are guaranteed by the Company to the
extent described under "Description of the Preferred Securities Guarantee."
The Preferred Guarantee Trustee will hold the Preferred Securities Guarantee
for the benefit of the holders of the Preferred Securities. The Preferred
Securities Guarantee does not cover payment of distributions on the Preferred
Securities when the Trust does not have sufficient available funds in the
Property Account to make such distributions.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of % of the stated liquidation amount of $25 per Preferred Security
(equivalent to $ per Preferred Security). Distributions in arrears for more
than one quarter will bear interest at the rate of % per annum compounded
quarterly (to the extent permitted by applicable law). The term
"distributions" as used herein includes any such interest payable unless
otherwise stated.
Distributions on the Preferred Securities will be cumulative, will accrue
from May , 1996, and will be payable quarterly in arrears on March 31, June
30, September 30 and December 31 of each year to the holders of record on the
applicable record date, commencing June 30, 1996, when, as and if available
for payment by the Property Trustee, except as otherwise described below. The
amount of distributions payable for any full quarterly period will be computed
on the basis of a 360-day year of twelve 30-day months, and for any period
shorter than a full quarter, on the basis of the actual number of days elapsed
in such a 90-day quarter. The initial distribution, payable on June 30, 1996,
will be based on a period shorter than a full quarter (May to June 30, 1996)
and will be in the amount of $ per Preferred Security.
The Company has the right under the Indenture to defer payments of interest
on the Subordinated Debt Securities by extending the interest payment period
from time to time on the Subordinated Debt Securities which, if exercised,
would defer quarterly distributions on the Preferred Securities (though such
distributions would continue to accrue interest since interest would continue
to accrue on the Subordinated Debt Securities) during any such extended
interest payment period. In the event that the Company exercises this right,
then (a) the Company shall not declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase or make a liquidation
payment with respect to, any of its capital stock, (b) the Company shall not
make any
S-16
<PAGE>
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem any debt securities issued by the Company which rank pari passu with or
junior to the Subordinated Debt Securities, and (c) the Company shall not make
any guarantee payments (other than pursuant to the Preferred Securities
Guarantee) with respect to the foregoing; provided, however, that the
foregoing restrictions do not apply to any dividend, redemption, liquidation,
interest, principal or guarantee payments by the Company where the payment is
made by way of (i) securities (including capital stock) that rank junior to
the securities on which such dividend, redemption, interest, principal or
guarantee payment is being made or (ii) securities (including capital stock)
of TCI. Prior to the termination of any such Extension Period, the Company may
further extend the interest payment period, provided that such Extension
Period, together with all such previous and further extensions thereof, may
not exceed 20 consecutive quarters or extend beyond the maturity of the
Subordinated Debt Securities. Upon the termination of any Extension Period and
the payment of all amounts then due, the Company may select a new Extension
Period as if no Extension Period had previously been declared, subject to the
above requirements. See "--Voting Rights" below and "Description of the
Subordinated Debt Securities--Interest" and "--Option to Extend Interest
Payment Period." If distributions are deferred, the deferred distributions and
accrued interest thereon shall be paid to holders of record of the Preferred
Securities, if funds are available therefor, as they appear on the books and
records of the Trust on the record date next following the termination of such
Extension Period.
Distributions on the Preferred Securities must be paid on the dates payable
to the extent that the Trust has funds available for the payment of such
distributions in the Property Account. The Trust's funds available for
distribution to the holders of the Preferred Securities will be limited to
payments received under the Subordinated Debt Securities. See "Description of
the Subordinated Debt Securities." The payment of distributions out of moneys
held by the Trust is guaranteed by the Company to the extent set forth under
"Description of the Preferred Securities Guarantee."
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of the Trust on the relevant
record dates, which, as long as the Preferred Securities remain in book-entry
only form, will be one Business Day (as defined herein) prior to the relevant
payment dates, which payment dates correspond to the interest payment dates on
the Subordinated Debt Securities. Such distributions will be paid through the
Property Trustee, who will hold amounts received in respect of the
Subordinated Debt Securities in the Property Account for the benefit of the
Trust and the holders of the Trust Securities. Subject to any applicable laws
and regulations and the provisions of the Declaration, each such payment will
be made as described under "--Book-Entry Only Issuance--The Depository Trust
Company" below. In the event the Preferred Securities shall not continue to
remain in book-entry only form, the Regular Trustees shall have the right to
select relevant record dates which shall be at least one Business Day, but
less than 60 Business Days, prior to the relevant payment dates. In the event
that any date on which distributions are to be made on the Preferred
Securities is not a Business Day, then payment of the distributions payable on
such date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay) except
that if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. A "Business Day" shall
mean any day other than a Saturday, Sunday or other day on which banking
institutions in New York, New York are authorized or required by law to close.
MANDATORY REDEMPTION
The Subordinated Debt Securities will mature on May 31, 2045 and may be
redeemed, in whole or in part, at any time on or after May 31, 2001, or at any
time in certain circumstances upon the occurrence of a Tax Event. Upon the
repayment of the Subordinated Debt Securities, whether at maturity or upon
acceleration, redemption or otherwise, the proceeds from such repayment or
payment shall simultaneously be applied to redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Debt Securities so repaid or redeemed at the Redemption Price;
provided, that except in the case of payments upon maturity, holders of Trust
Securities shall be given not less than 30 nor more than 60 days
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notice of such redemption. See "Description of the Subordinated Debt
Securities." In the event that fewer than all of the outstanding Preferred
Securities are to be redeemed, the Preferred Securities will be redeemed pro
rata as described under "--Book-Entry Only Issuance--The Depository Trust
Company" below.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
A "Tax Event" means that the Regular Trustees shall have received an opinion
from independent tax counsel experienced in such matters (a "Dissolution Tax
Opinion") to the effect that, on or after the date of this Prospectus
Supplement, as a result of (a) any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein or (b) any amendment to, or change in, an interpretation or
application of such laws or regulations by any legislative body, court,
governmental agency or regulatory authority, in each case which amendment or
change is enacted, promulgated, issued or announced or which interpretation is
issued or announced or which action is taken, on or after the date of this
Prospectus Supplement, there is more than an insubstantial risk that (i) the
Trust would be subject to United States federal income tax with respect to
interest accrued or received on the Subordinated Debt Securities, (ii)
interest payable to the Trust on the Subordinated Debt Securities would not be
deductible in whole or in part by the Company for United States federal income
tax purposes or (iii) the Trust would be subject to more than a de minimis
amount of other taxes, duties or other governmental charges, which change or
amendment becomes effective on or after the date of this Prospectus
Supplement.
An "Investment Company Event" means that the Regular Trustees shall have
received an opinion from independent counsel experienced in practice under the
1940 Act (as hereinafter defined) to the effect that, as a result of the
occurrence of a change in law or regulation or a written change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act
Law"), there is more than an insubstantial risk that the Trust is or will be
considered an "investment company" which is required to be registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), which Change
in 1940 Act Law becomes effective on or after the date of this Prospectus
Supplement.
If, at any time, a Tax Event or an Investment Company Event (each, as
defined above, a "Special Event") shall occur and be continuing, the Trust
shall, except in the circumstances described below, be terminated and
dissolved with the result that Subordinated Debt Securities, with an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the distribution rate of, and accrued and unpaid
interest equal to accrued and unpaid distributions on, the Trust Securities,
would be distributed to the holders of the Trust Securities, in liquidation of
such holders' interests in the Trust on a pro rata basis, within 90 days
following the occurrence of such Special Event; provided, however, that in the
case of the occurrence of a Tax Event, as a condition of such termination,
dissolution and distribution, the Regular Trustees shall have received an
opinion from independent tax counsel experienced in such matters (a "No
Recognition Opinion"), which opinion may rely on published revenue rulings of
the Internal Revenue Service, to the effect that neither the Trust nor the
holders of the Trust Securities will recognize any gain or loss for United
States federal income tax purposes as a result of such termination and
dissolution of the Trust and the distribution of the Subordinated Debt
Securities; and, provided, further, that, if there is available to the Trust
the opportunity to eliminate, within such 90-day period, the Special Event by
taking some ministerial action, such as filing a form or making an election,
or pursuing some other similar reasonable measure, which has no adverse effect
on the Trust, the Company or the holders of the Trust Securities, the Trust
will pursue such measure in lieu of termination and dissolution. Furthermore,
if in the case of the occurrence of a Tax Event (i) the Company has received
an opinion (a "Redemption Tax Opinion") from independent tax counsel
experienced in such matters that, as a result of a Tax Event, there is more
than an insubstantial risk that the Company would be precluded from deducting
the interest on the Subordinated Debt Securities for United States federal
income tax purposes even after the Subordinated Debt Securities were
distributed to the holders of Trust Securities in liquidation of such holders'
interests in the Trust as described above or (ii) the Regular Trustees shall
have been informed by such tax counsel
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that a No Recognition Opinion cannot be delivered, the Company shall have the
right, upon not less than 30 nor more than 60 days' notice, to redeem the
Subordinated Debt Securities in whole or in part for cash within 90 days
following the occurrence of such Tax Event, and, following such redemption,
Trust Securities with an aggregate liquidation amount equal to the aggregate
principal amount of the Subordinated Debt Securities so redeemed shall be
redeemed by the Trust at the Redemption Price on a pro rata basis; provided,
however, that, if there is available to the Company or the Trust the
opportunity to eliminate, within such 90-day period, the Tax Event by taking
some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure which has no adverse effect on
the Trust, the Company or the holders of the Trust Securities, the Company or
the Trust will pursue such measure in lieu of redemption.
If Subordinated Debt Securities are distributed to the holders of the
Preferred Securities, the Company will use its best efforts to have the
Subordinated Debt Securities listed on the New York Stock Exchange or on such
other exchange as the Preferred Securities are then listed.
After the date for any distribution of Subordinated Debt Securities upon
termination of the Trust, (i) the Preferred Securities and Preferred
Securities Guarantee will no longer be deemed to be outstanding, (ii) the
depositary or its nominee, as the record holder of the Preferred Securities,
will receive a registered global certificate or certificates representing the
Subordinated Debt Securities to be delivered upon such distribution and (iii)
any certificates representing Preferred Securities and the Preferred
Securities Guarantee not held by the depositary or its nominee will be deemed
to represent Subordinated Debt Securities having an aggregate principal amount
equal to the aggregate stated liquidation amount of, with an interest rate
identical to the distribution rate of, and accrued and unpaid interest equal
to accrued and unpaid distributions on, such Preferred Securities, until such
certificates are presented to the Company or its agent for transfer or
reissuance.
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debt Securities that may be distributed in
exchange for the Preferred Securities if a termination and liquidation of the
Trust were to occur. Accordingly, the Preferred Securities that an investor
may purchase, whether pursuant to the offer hereby or in the secondary market,
or the Subordinated Debt Securities that the investor may receive on
termination and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities offered hereby.
On December 7, 1995, the U.S. Treasury Department proposed a series of tax
law changes that would, among other things, prevent companies from deducting
interest on debt instruments with a maturity of more than 40 years and on
instruments with a maximum term of more than 20 years which are not shown as
indebtedness on the consolidated balance sheet of the issuer. Either of these
proposals, if enacted, would prevent the Company from deducting interest paid
on the Subordinated Debt Securities. The Company cannot predict whether the
proposed tax law changes will become law. However, the Chairmen of the House
Ways and Means and Senate Finance Committees issued a joint statement on March
29, 1996 stating that the effective date of these proposals, if enacted, would
be no earlier than the date of appropriate Congressional action. If
legislation is enacted limiting, in whole or in part, the deductibility by the
Company of interest on the Subordinated Debt Securities for United States
federal income tax purposes, such enactment would be a Tax Event and the
Subordinated Debt Securities would be subject to redemption as described
above. Were the Subordinated Debt Securities redeemed in connection with such
a Tax Event, the Trust would be required to redeem the Trust Securities. The
December 7, 1995 proposed tax law changes would not alter the United States
federal income tax consequences of the purchase, ownership and disposition of
the Preferred Securities. See "Certain Federal Income Tax Consequences."
REDEMPTION PROCEDURES
The Trust may not redeem fewer than all of the outstanding Preferred
Securities unless all accrued and unpaid distributions have been paid on all
Trust Securities for all quarterly distribution periods terminating on or
prior to the date of redemption.
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If the Trust gives a notice of redemption in respect of Preferred Securities
(which notice will be irrevocable), then, by 12:00 noon, New York City time,
on the redemption date, provided that the Company has paid to the Property
Trustee a sufficient amount of cash in connection with the related redemption
or maturity of the Subordinated Debt Securities, the Trust will irrevocably
deposit with the depositary funds sufficient to pay the applicable Redemption
Price and will give the depositary irrevocable instructions and authority to
pay the Redemption Price to the holders of the Preferred Securities. See "--
Book-Entry Only Issuance--The Depository Trust Company." If notice of
redemption shall have been given and funds deposited as required, then
immediately prior to the close of business on the date of such deposit,
distributions will cease to accrue and all rights of holders of such Preferred
Securities so called for redemption will cease, except the right of the
holders of such Preferred Securities to receive the Redemption Price, but
without interest on such Redemption Price. In the event that any date fixed
for redemption of Preferred Securities is not a Business Day, then payment of
the Redemption Price payable on such date will be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day falls in the
next calendar year, such payment will be made on the immediately preceding
Business Day. In the event that payment of the Redemption Price in respect of
Preferred Securities is improperly withheld or refused and not paid either by
the Trust or by the Company pursuant to the Preferred Securities Guarantee,
distributions on such Preferred Securities will continue to accrue, from the
original redemption date to the actual date of payment, in which case the
actual payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price.
In the event that fewer than all of the outstanding Preferred Securities are
to be redeemed, the Preferred Securities will be redeemed pro rata as
described under "--Book-Entry Only Issuance--The Depository Trust Company"
below.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), the Company or its
affiliates may, at any time and from time to time, purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON TERMINATION
In the event of any voluntary or involuntary termination, dissolution or
winding-up of the Trust, the holders of the Preferred Securities at that time
will be entitled to receive out of the assets of the Trust, after satisfaction
of liabilities to creditors, distributions in an amount equal to the aggregate
of the stated liquidation amount of $25 per Preferred Security plus accrued
and unpaid distributions thereon to the date of payment (the "Liquidation
Distribution"), unless, in connection with such termination, dissolution or
winding-up Subordinated Debt Securities in an aggregate principal amount equal
to the aggregate stated liquidation amount of, with an interest rate identical
to the distribution rate of, and accrued and unpaid interest equal to accrued
and unpaid distributions on, the Preferred Securities, have been distributed
on a pro rata basis to the holders of Preferred Securities in exchange for
such Preferred Securities.
If, upon any such termination, dissolution or winding-up the Liquidation
Distribution can be paid only in part because the Trust has insufficient
assets available to pay in full the aggregate Liquidation Distribution, then
the amounts payable directly by the Trust on the Preferred Securities shall be
paid on a pro rata basis. The holders of the Common Securities will be
entitled to receive distributions upon any such dissolution pro rata with the
holders of the Preferred Securities, except that if a Declaration Event of
Default has occurred and is continuing, the Preferred Securities shall have a
preference over the Common Securities with regard to such distributions.
Pursuant to the Declaration, the Trust shall terminate (i) on May 31, 2051,
the expiration of the term of the Trust, (ii) upon the bankruptcy of the
Company or the holder of the Common Securities, (iii) upon the filing of a
certificate of dissolution or its equivalent with respect to the Company or
the holder of the Common Securities, the filing of a certificate of
cancellation with respect to the Trust, or the revocation of the charter of
the Company or the holder of the Common Securities and the expiration of 90
days after the date of revocation without a reinstatement thereof, (iv) upon
the distribution of the Subordinated Debt Securities following the occurrence
of
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a Special Event, (v) upon the entry of a decree of a judicial dissolution of
the Company or the holder of the Common Securities or the Trust or (vi) upon
the redemption of all of the Trust Securities.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture (an "Indenture Event of Default")
(see "Description of the Subordinated Debt Securities--Indenture Events of
Default") constitutes an event of default under the Declaration with respect
to the Trust Securities (a "Declaration Event of Default"); provided, that
pursuant to the Declaration, the holder of the Common Securities will be
deemed to have waived any Declaration Event of Default with respect to the
Common Securities or its consequences until all Declaration Events of Default
with respect to the Preferred Securities have been cured, waived or otherwise
eliminated. Until such Declaration Events of Default with respect to the
Preferred Securities have been so cured, waived or otherwise eliminated, the
Property Trustee will be deemed to be acting solely on behalf of the holders
of the Preferred Securities and only the holders of the Preferred Securities
will have the right to direct the Property Trustee with respect to certain
matters under the Declaration, and therefore the Indenture.
Upon the occurrence of a Declaration Event of Default, the Property Trustee,
as the sole holder of the Subordinated Debt Securities, will have the right
under the Indenture to declare the principal of, and interest on, the
Subordinated Debt Securities to be immediately due and payable.
If a Declaration Event of Default occurs that results from the failure of
the Company to pay principal of or interest on the Subordinated Debt
Securities when due, during the continuance of such an event of default a
holder of Preferred Securities may institute a legal proceeding directly
against the Company to obtain payment of such principal or interest on
Subordinated Debt Securities having a principal amount equal to the aggregate
liquidation amount of the Preferred Securities owned of record by such holder.
The holders of Preferred Securities will not be able to exercise directly
against the Company any other remedy available to the Property Trustee unless
the Property Trustee first fails to do so. See "--Voting Rights."
VOTING RIGHTS
Except as provided below and except as provided under the Trust Act, the
Trust Indenture Act and under "Description of the Preferred Securities
Guarantee--Amendments and Assignment" below, and except as otherwise required
by law and the Declaration, the holders of the Preferred Securities will have
no voting rights. In the event that the Company elects to defer payments of
interest on the Subordinated Debt Securities as described above under "--
Distributions," the holders of the Preferred Securities do not have the right
to appoint a special representative or trustee or otherwise act to protect
their interests.
Subject to the requirement of the Property Trustee obtaining a tax opinion
as set forth in the last sentence of this paragraph, the holders of a majority
in aggregate liquidation amount of the Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or to direct the exercise of any trust or
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee, as the holder of the Subordinated Debt
Securities, to (i) direct the time, method and place of conducting any
proceeding for any remedy available to the Debt Trustee (as hereinafter
defined) under the Indenture with respect to the Subordinated Debt Securities,
(ii) waive any past Indenture Event of Default which is waivable under the
Indenture, (iii) exercise any right to rescind or annul a declaration that the
principal of all the Subordinated Debt Securities shall be due and payable, or
(iv) consent to any amendment, modification or termination of the Indenture or
the Subordinated Debt Securities, where such consent shall be required,
provided that where a consent under the Indenture would require the consent of
the holders of greater than a majority in principal amount of Subordinated
Debt Securities affected thereby (a "Super-Majority"), only the holders of at
least the proportion in liquidation amount of the Preferred Securities which
the relevant Super-Majority represents of the aggregate principal amount of
the Subordinated Debt Securities may direct the Property Trustee to give such
consent. If the Property Trustee fails to enforce its rights under the
Declaration (including, without limitation, its rights, powers and privileges
as the holder of the
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Subordinated Debt Securities under the Indenture), a holder of Preferred
Securities may institute a legal proceeding directly against any person to
enforce the Property Trustee's rights under the Declaration without first
instituting any legal proceeding against the Property Trustee or any other
person or entity. Following and during the continuance of a Declaration Event
of Default that results from the failure of the Company to pay principal of or
interest on the Subordinated Debt Securities when due, a holder may also
proceed directly against the Company, without first waiting to determine if
the Property Trustee has enforced its rights under the Declaration, to obtain
payment of such principal or interest on Subordinated Debt Securities having a
principal amount equal to the aggregate liquidation amount of the Preferred
Securities owned of record by such holder. The Property Trustee shall notify
all holders of the Preferred Securities of any notice of default received from
the Debt Trustee with respect to the Subordinated Debt Securities. Such notice
shall state that such Indenture Event of Default also constitutes a
Declaration Event of Default. The Property Trustee shall not take any action
described in clauses (i), (ii), (iii) or (iv) above unless the Property
Trustee has obtained an opinion of independent tax counsel to the effect that,
as a result of such action, the Trust will not be classified as other than a
grantor trust for United States federal income tax purposes and each holder of
Trust Securities will be treated as owning an undivided beneficial interest in
the Subordinated Debt Securities.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Debt Securities, is required under the Indenture with respect to
any amendment, modification or termination of the Indenture, the Property
Trustee shall request the direction of the holders of the Trust Securities
with respect to such amendment, modification or termination. The Property
Trustee shall vote with respect to such amendment, modification or termination
as directed by a majority in liquidation amount of the Preferred Securities
and, if no Declaration Event of Default has occurred and is continuing, a
majority in liquidation amount of the Common Securities, voting together as a
single class, provided that where a consent under the Indenture would require
the consent of a Super-Majority, the Property Trustee may only give such
consent at the direction of the holders of at least the proportion in
liquidation amount of the Preferred Securities and Common Securities,
respectively, which the relevant Super-Majority represents of the aggregate
principal amount of the Subordinated Debt Securities outstanding. The Property
Trustee shall not take any such action in accordance with the directions of
the holders of the Trust Securities unless the Property Trustee has obtained
an opinion of independent tax counsel to the effect that, as a result of such
action, the Trust will not be classified as other than a grantor trust for
United States federal income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be
taken, to be mailed to each holder of record of Preferred Securities. Each
such notice will include a statement setting forth (i) the date of such
meeting or the date by which such action is to be taken, (ii) a description of
any resolution proposed for adoption at such meeting on which such holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents. No vote or consent
of the holders of Preferred Securities will be required for the Trust to
redeem and cancel Preferred Securities or distribute Subordinated Debt
Securities in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by the Company or any entity directly
or indirectly controlling or controlled by, or under direct or indirect common
control with, the Company, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if they were not
outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "--Book-Entry Only Issuance--The
Depository Trust Company."
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Holders of the Preferred Securities will have no rights to appoint or remove
the Company Trustees, who may be appointed, removed or replaced solely by the
Company, as the direct or indirect holder of all the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be amended or modified if approved and executed by a
majority of the Regular Trustees, provided that if any proposed amendment
provides for, or the Regular Trustees otherwise propose to effect, (i) any
action that would adversely affect the powers, preferences or special rights
of the Trust Securities, whether by way of amendment to the Declaration or
otherwise or (ii) the dissolution, winding-up or termination of the Trust
other than pursuant to the terms of the Declaration, then the holders of the
Trust Securities as a single class will be entitled to vote on such amendment
or proposal and such amendment or proposal shall not be effective except with
the approval of at least 66 2/3% in liquidation amount of the Trust Securities
affected thereby, provided that a reduction of the principal amount or the
distribution rate, or a change in the payment dates or maturity of the
Preferred Securities, shall not be permitted without the consent of each
holder of Preferred Securities. In the event any amendment or proposal
referred to in clause (i) above would adversely affect only the Preferred
Securities or the Common Securities, then only the affected class will be
entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of 66 2/3% in liquidation
amount of such class of Trust Securities.
Notwithstanding the foregoing, no amendment or modification may be made to
the Declaration if such amendment or modification would (i) cause the Trust to
be classified for purposes of United States federal income taxation as other
than a grantor trust, (ii) reduce or otherwise adversely affect the powers of
the Property Trustee or (iii) cause the Trust to be deemed to be an
"investment company" which is required to be registered under the 1940 Act.
EXPENSES AND TAXES
In the Declaration, the Company has agreed to pay for all debts and other
obligations (other than with respect to the Trust Securities) and all costs
and expenses of the Trust (including costs and expenses relating to the
organization of the Trust, the fees and expenses of the Company Trustees and
the costs and expenses relating to the operation of the Trust) and to pay any
and all taxes and all costs and expenses with respect thereto (other than
United States withholding taxes) to which the Trust might become subject. The
foregoing obligations of the Trust under the Declaration are for the benefit
of, and shall be enforceable by, the Property Trustee and any person to whom
any such debts, obligations, costs, expenses and taxes are owed (a "Creditor")
whether or not such Creditor has received notice thereof. The Property Trustee
and any such Creditor may enforce such obligations of the Trust directly
against the Company, and the Company has irrevocably waived any right or
remedy to require that the Property Trustee or any such Creditor take any
action against the Trust or any other person before proceeding against the
Company. The Company has also agreed in the Declaration to execute such
additional agreements as may be necessary or desirable to give full effect to
the foregoing agreement of the Company.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described below. The Trust may, with the consent of a majority of the Regular
Trustees and without the consent of the holders of the Trust Securities,
consolidate, amalgamate, merge with or into, or be replaced by a trust
organized as such under the laws of any State; provided, that (i) such
successor entity either (x) expressly assumes all of the obligations of the
Trust with respect to the Trust Securities or (y) substitutes for the Trust
Securities other securities having substantially the same terms as the Trust
Securities (the "Successor Securities") so long as the Successor Securities
rank the same as the Trust Securities rank in priority with respect to
distributions and payments upon termination, liquidation, redemption, maturity
and otherwise, (ii) the Company expressly
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acknowledges a trustee of such successor entity which possesses the same
powers and duties as the Property Trustee as the holder of the Subordinated
Debt Securities, (iii) the Preferred Securities or any Successor Securities
are listed, or any Successor Securities will be listed upon notification of
issuance, on any national securities exchange or other organization on which
the Preferred Securities are then listed, (iv) such merger, consolidation,
amalgamation or replacement does not cause the Preferred Securities (including
any Successor Securities) to be downgraded by any nationally recognized
statistical rating organization, (v) such merger, consolidation, amalgamation
or replacement does not adversely affect the rights, preferences and
privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect (other than with respect to any dilution
of the holders' interest in the new entity), (vi) such successor entity has a
purpose identical to that of the Trust, (vii) prior to such merger,
consolidation, amalgamation or replacement, the Company has received an
opinion from independent counsel to the Trust experienced in such matters to
the effect that (A) such merger, consolidation, amalgamation or replacement
does not adversely affect the rights, preferences and privileges of the
holders of the Trust Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the holders'
interest in the new entity), and (B) following such merger, consolidation,
amalgamation or replacement, neither the Trust nor such successor entity will
be required to register as an investment company under the 1940 Act and (viii)
the Company guarantees the obligations of such successor entity under the
Successor Securities at least to the extent provided by the Preferred
Securities Guarantee. Notwithstanding the foregoing, the Trust shall not,
except with the consent of holders of 100% in liquidation amount of the Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or the successor entity to be classified for
United States federal income tax purposes as other than a grantor trust and
any holder of Trust Securities not to be treated as owning an undivided
beneficial interest in the Subordinated Debt Securities.
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as
fully registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully registered global Preferred Securities
certificates will be issued, representing in the aggregate the total number of
Preferred Securities, and will be deposited with DTC.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in a global Preferred Security.
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, as amended (the "Exchange Act"). DTC holds securities
that its participants ("Participants") deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic computerized
book-entry changes in Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations ("Direct Participants"). DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, 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 relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser
of Preferred Securities ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect
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Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred
Securities. Transfers of ownership interests in the Preferred Securities 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 Preferred Securities, except in the
event that use of the book-entry system for the Preferred Securities is
discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited
by Participants with DTC are registered in the name of DTC's nominee, Cede &
Co. The deposit of Preferred Securities 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 Preferred Securities. DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Preferred Securities 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.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce pro rata the amount
of the interest of each Direct Participant in the Preferred Securities to be
redeemed; provided, that if, as a result of such pro rata redemption, Direct
Participants would hold fractional interests in the Preferred Securities, DTC
will adjust the amount of the interest of each Direct Participant to be
redeemed to avoid such fractional interests.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required neither DTC nor Cede & Co. will itself
consent or vote with respect to Preferred Securities. Under its usual
procedures, DTC would mail an Omnibus Proxy to the Trust as soon as possible
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
Distribution payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by participants to Beneficial Owners will be governed
by standing instructions and customary practices, as in the case with
securities held for the account of customers in bearer form or registered in
"street name," and will be the responsibility of such Participant and not of
DTC, the Trust, any trustee or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
distributions to DTC is the responsibility of the Trust, disbursement of such
payments to Direct Participants is the responsibility of DTC, and disbursement
of such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
Except as provided herein, a Beneficial Owner in a global Preferred Security
will not be entitled to receive physical delivery of Preferred Securities.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Preferred Securities.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Trust. Under such circumstances, in the event that a successor securities
depositary is not obtained, Preferred Securities certificates are required to
be printed and delivered. Additionally, the Regular Trustees (after
consultation with the Company) may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depositary) with respect to
the Preferred Securities. In that event, certificates for the Preferred
Securities will be printed and delivered.
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The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company and the Trust believe to be
reliable, but the Company and the Trust take no responsibility for the
accuracy thereof.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities and after the curing of all such defaults that may have
occurred, undertakes to perform only such duties as are specifically set forth
in the Declaration and, after default, shall exercise the same degree of care
as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provisions, the Property Trustee is under no
obligation to exercise any of the powers vested in it by the Declaration at
the request of any holder of Preferred Securities, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred thereby; but the foregoing shall not relieve the Property
Trustee, upon the occurrence of a Declaration Event of Default, from
exercising the rights and powers vested in it by the Declaration. The Property
Trustee also serves as the Debt Trustee under the Indenture and as the
Preferred Guarantee Trustee under the Preferred Securities Guarantee.
REGISTRAR AND TRANSFER AGENT
In the event that the Preferred Securities do not remain in book-entry only
form, the Property Trustee will act as paying agent and may designate an
additional or substitute paying agent at any time. Registration of transfers
of Preferred Securities will be effected without charge by or on behalf of the
Trust, but upon payment (with the giving of such indemnity as the Regular
Trustees may require) in respect of any tax or other government charges which
may be imposed in relation to it. The Trust will not be required to register
or cause to be registered the transfer of Preferred Securities after such
Preferred Securities have been called for redemption.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Regular Trustees are authorized and directed to operate the Trust in
such a way so that the Trust will not be deemed to be an "investment company"
required to be registered under the 1940 Act or characterized for United
States federal income tax purposes as other than a grantor trust. The Company
is authorized and directed to conduct its affairs so that the Subordinated
Debt Securities will be treated as indebtedness of the Company for United
States federal income tax purposes. In this connection, the Regular Trustees
and the Company are authorized to take any action, not inconsistent with
applicable law, the Declaration or the Restated Certificate of Incorporation
of the Company, that each of the Regular Trustees and the Company determines
in their discretion to be necessary or desirable for such purposes, as long as
such action does not materially and adversely affect the interests of the
holders of the Preferred Securities.
Holders of the Preferred Securities will have no preemptive rights.
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DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
Set forth below is a summary of information concerning the Preferred
Securities Guarantee that will be executed and delivered by the Company for
the benefit of the holders from time to time of the Preferred Securities. The
Preferred Securities Guarantee has been qualified as an indenture under the
Trust Indenture Act. The Bank of New York will act as the Preferred Guarantee
Trustee. The terms of the Preferred Securities Guarantee will be those set
forth therein and those made part thereof by the Trust Indenture Act. The
following summary does not purport to be complete and is subject in all
respects to the provisions of, and is qualified in its entirety by reference
to, the Preferred Securities Guarantee (which is filed as an exhibit to the
Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus form a part) and the Trust Indenture Act. The
Preferred Securities will be held by the Preferred Guarantee Trustee for the
benefit of the holders of the Preferred Securities.
GENERAL
Pursuant to the Preferred Securities Guarantee, the Company will irrevocably
and unconditionally agree, to the extent set forth therein, to pay in full to
the holders of the Preferred Securities the Guarantee Payments (as defined
herein) (without duplication of amounts theretofore paid by the Trust), to the
extent not paid by the Trust, regardless of any defense, right of set-off or
counterclaim that the Trust may have or assert. The following payments or
distributions with respect to the Preferred Securities to the extent not paid
or made by the Trust (the "Guarantee Payments") will be subject to the
Preferred Securities Guarantee (without duplication): (i) any accrued and
unpaid distributions that are required to be paid on the Preferred Securities,
to the extent the Trust has funds available therefor, (ii) the Redemption
Price, which includes all accrued and unpaid distributions to the date of the
redemption, to the extent the Trust has funds available therefor, with respect
to any Preferred Securities called for redemption by the Trust and (iii) upon
a voluntary or involuntary termination, dissolution or winding-up of the Trust
(other than in connection with the distribution of Subordinated Debt
Securities to the holders of Preferred Securities in exchange for Preferred
Securities), the lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Preferred Securities to the date of
payment, to the extent the Trust has funds available therefor, and (b) the
amount of assets of the Trust remaining available for distribution to holders
of Preferred Securities in liquidation of the Trust. The Company's obligation
to make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Company to the holders of Preferred Securities or by causing
the Trust to pay such amounts to such holders.
The Preferred Securities Guarantee will be a full and unconditional
guarantee of the Guarantee Payments with respect to the Preferred Securities
from the time of issuance of the Preferred Securities, but will not apply to
the payment of distributions and other payments on the Preferred Securities
when the Property Trustee does not have sufficient funds in the Property
Account to make such distributions or other payments. If the Company does not
make interest payments on the Subordinated Debt Securities held by the
Property Trustee, the Trust will not make distributions on the Preferred
Securities issued by the Trust and will not have funds available therefor. See
"Risk Factors--Rights under the Preferred Securities Guarantee" and
"Description of the Subordinated Debt Securities--Certain Covenants."
The Company has also agreed separately to guarantee the obligations of the
Trust with respect to the Common Securities (the "Common Securities
Guarantee") to the same extent as the Preferred Securities Guarantee, except
that upon the occurrence and during the continuation of an Indenture Event of
Default, holders of Preferred Securities shall have priority over holders of
Common Securities with respect to distributions and payments on liquidation,
redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In the Preferred Securities Guarantee, the Company will covenant that, so
long as the Preferred Securities remain outstanding, if there shall have
occurred and is continuing any event that would constitute an event of default
under the Preferred Securities Guarantee or the Declaration, then (a) the
Company shall not declare or
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pay any dividend on, or make any distribution with respect to, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
capital stock, (b) the Company shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by the Company which rank pari passu with or junior to the
Subordinated Debt Securities and (c) the Company shall not make any guarantee
payments (other than pursuant to the Preferred Securities Guarantee) with
respect to the foregoing. However, the foregoing restriction will not apply to
any dividend, redemption, liquidation, interest, principal or guarantee
payments by the Company where the payment is made by way of (i) securities
(including capital stock) that rank junior to the securities on which such
dividend, redemption, interest, principal or guarantee payment is being made
or (ii) securities (including capital stock) of TCI.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of Preferred Securities (in which case no vote will be
required), the Preferred Securities Guarantee may be amended only with the
prior approval of the holders of not less than 66 2/3% in liquidation amount
of the outstanding Preferred Securities. The manner of obtaining any such
approval of holders of the Preferred Securities is set forth under
"Description of the Preferred Securities--Voting Rights." All guarantees and
agreements contained in the Preferred Securities Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Company
and shall inure to the benefit of the Preferred Guarantee Trustee and the
holders of the Preferred Securities then outstanding.
TERMINATION OF THE PREFERRED SECURITIES GUARANTEE
The Preferred Securities Guarantee will terminate and be of no further force
and effect as to the Preferred Securities upon full payment of the Redemption
Price of all Preferred Securities, or upon distribution of the Subordinated
Debt Securities to the holders of the Preferred Securities, and will terminate
completely upon full payment of the amounts payable upon liquidation of the
Trust. The Preferred Securities Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Preferred
Securities must repay to the Trust or the Company, or their successors, any
sums paid to them under such Preferred Securities or the Preferred Securities
Guarantee.
EVENTS OF DEFAULT
An event of default under the Preferred Securities Guarantee will occur upon
the failure of the Company to perform any of its payment or other obligations
thereunder.
The holders of a majority in liquidation amount of the Preferred Securities
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Preferred Guarantee Trustee in
respect of the Preferred Securities Guarantee or to direct the exercise of any
trust or power conferred upon the Preferred Guarantee Trustee under the
Preferred Securities Guarantee. If the Preferred Guarantee Trustee fails to
enforce the Preferred Securities Guarantee, any holder of Preferred Securities
may institute a legal proceeding directly against the Company to enforce the
Preferred Guarantee Trustee's rights under the Preferred Securities Guarantee,
without first instituting a legal proceeding against the Trust, the Preferred
Guarantee Trustee or any other person or entity. In addition, any record
holder of Preferred Securities shall have the right, which is absolute and
unconditional, to proceed directly against the Company to obtain Guarantee
Payments, without first waiting to determine if the Preferred Guarantee
Trustee has enforced the Preferred Security Guarantee or instituting a legal
proceeding against the Trust, the Preferred Guarantee Trustee or any other
person or entity.
STATUS OF THE PREFERRED SECURITIES GUARANTEE
The Company's obligations under the Preferred Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of the Company
and will rank (i) subordinate and junior in right of payment to all other
liabilities of the Company, including the Subordinated Debt Securities, except
those liabilities of the
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Company made pari passu or subordinate by their terms, (ii) pari passu with
the most senior preferred stock issued from time to time by the Company and
with any guarantee now or hereafter entered into by the Company in respect of
any preferred stock of any subsidiary or affiliate of the Company and (iii)
senior to the Company's common stock. The terms of the Preferred Securities
provide that each holder of Preferred Securities by acceptance thereof agrees
to the subordination provisions and other terms of the Preferred Securities
Guarantee.
The Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without instituting a legal proceeding against any other person or
entity). The Preferred Securities Guarantee will be deposited with the
Preferred Guarantee Trustee to be held for the benefit of the holders of the
Preferred Securities. Except as otherwise noted herein, the Preferred
Guarantee Trustee has the right to enforce the Preferred Securities Guarantee
on behalf of the holders of the Preferred Securities. The Preferred Securities
Guarantee will not be discharged except by payment of the Guarantee Payments
in full (without duplication of amounts theretofore paid by the Trust).
The Company's obligations under the Preferred Securities Guarantee, taken
together with its obligations under the Declaration, the Subordinated Debt
Securities and the Indenture, in the aggregate provide a full and
unconditional guarantee by the Company of payments due on the Preferred
Securities.
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE
The Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to the Preferred Securities Guarantee and after the curing of all such
defaults that may have occurred, undertakes to perform only such duties as are
specifically set forth in the Preferred Securities Guarantee and, after
default, shall exercise the same degree of care as a prudent individual would
exercise in the conduct of his or her own affairs. Subject to such provisions,
the Preferred Guarantee Trustee is under no obligation to exercise any of the
powers vested in it by the Preferred Securities Guarantee at the request of
any holder of Preferred Securities, unless offered reasonable indemnity
against the costs, expenses and liabilities which might be incurred thereby;
but the foregoing shall not relieve the Preferred Guarantee Trustee, upon the
occurrence of an event of default under the Preferred Securities Guarantee,
from exercising the rights and powers vested in it by the Preferred Securities
Guarantee. The Preferred Guarantee Trustee also serves as Property Trustee
under the Declaration and as Debt Trustee under the Indenture.
GOVERNING LAW
The Preferred Securities Guarantee will be governed by, and construed in
accordance with, the internal laws of the State of New York.
DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
Set forth below is a description of the terms of the Subordinated Debt
Securities. The following description does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the Indenture,
dated as of January 29, 1996, as supplemented by a Second Supplemental
Indenture (as so supplemented, the "Indenture"), between the Company and The
Bank of New York, as Trustee (the "Debt Trustee"), the form of which is filed
as an exhibit to the Registration Statement of which this Prospectus
Supplement and the accompanying Prospectus form a part. The terms of the
Subordinated Debt Securities will include those stated in the Indenture and
those made a part of the Indenture by reference to the Trust Indenture Act.
Certain capitalized terms used herein are defined in the Indenture.
Under certain circumstances involving the termination of the Trust following
the occurrence of a Special Event, Subordinated Debt Securities may be
distributed to the holders of Trust Securities in liquidation of the Trust.
See "Description of the Preferred Securities--Special Event Redemption or
Distribution."
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If the Subordinated Debt Securities are distributed to the holders of the
Trust Securities, the Company will use its best efforts to have the
Subordinated Debt Securities listed on the New York Stock Exchange or on such
other exchange as the Preferred Securities are then listed.
GENERAL
The Subordinated Debt Securities will be issued as unsecured subordinated
debt securities under the Indenture. The Subordinated Debt Securities will be
limited in aggregate principal amount to approximately $515.5 million, such
amount being the sum of the aggregate stated liquidation amount of the
Preferred Securities and the capital contributed by the Company in exchange
for the Common Securities.
The Subordinated Debt Securities are not subject to any sinking fund
provision. The entire principal amount of the Subordinated Debt Securities
will mature and become due and payable, together with any accrued and unpaid
interest thereon, including Additional Interest (as defined herein), if any,
on May 31, 2045.
If Subordinated Debt Securities are distributed to holders of the Preferred
Securities in liquidation of such holders' interests in the Trust, such
Subordinated Debt Securities will initially be issued as a Global Security (as
defined below). As described herein, under certain limited circumstances,
Subordinated Debt Securities may be issued in certificated form in exchange
for a Global Security. See "--Book-Entry and Settlement" below. In the event
Subordinated Debt Securities are issued in certificated form, such
Subordinated Debt Securities will be in denominations of $25 and integral
multiples thereof and may be transferred or exchanged at the offices described
below. Payments on Subordinated Debt Securities issued as a Global Security
will be made to the depositary for the Subordinated Debt Securities. In the
event Subordinated Debt Securities are issued in certificated form, principal
and interest will be payable, the transfer of the Subordinated Debt Securities
will be registrable and Subordinated Debt Securities will be exchangeable for
Subordinated Debt Securities of other denominations of a like aggregate
principal amount at the corporate trust office of the Debt Trustee in New
York, New York; provided, that payment of interest may be made at the option
of the Company by check mailed to the address of the persons entitled thereto.
The Indenture does not contain provisions that afford holders of the
Subordinated Debt Securities protection in the event of a highly leveraged
transaction involving the Company or a decline in the credit quality of the
Company resulting from a change of control transaction.
SUBORDINATION
The Indenture provides that the Subordinated Debt Securities are
subordinated and junior in right of payment to all Senior Indebtedness of the
Company, whether now existing or hereafter incurred. No payment of principal
of (including redemption payments, if any), premium, if any, or interest on,
the Subordinated Debt Securities may be made if (a) any Senior Indebtedness of
the Company is not paid when due and any applicable grace period with respect
to such default has ended with such default not being cured or waived or
ceasing to exist, or (b) the maturity of any Senior Indebtedness has been
accelerated because of a default. Upon any distribution of assets of the
Company to creditors upon any dissolution, winding-up, liquidation or
reorganization, whether voluntary or involuntary, or in bankruptcy,
insolvency, receivership or other proceedings, all principal of, premium, if
any, and interest due or to become due on, all Senior Indebtedness must be
paid in full before the holders of the Subordinated Debt Securities are
entitled to receive or retain any payment. The rights of the holders of the
Subordinated Debt Securities will be subrogated to the rights of the holders
of Senior Indebtedness to receive payments or distributions applicable to such
Senior Indebtedness until all amounts owing on the Subordinated Debt
Securities are paid in full.
The term "Senior Indebtedness" means (i) any payment in respect of (a)
indebtedness of the Company for money borrowed (including indebtedness for
money borrowed owed to TCI or to subsidiaries or affiliates of the Company or
TCI) and (b) indebtedness evidenced by securities, debentures, bonds, notes or
other similar instruments issued by the Company, including all indebtedness
currently outstanding under indentures with
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various trustees, (ii) all capital lease obligations of the Company; (iii) all
obligations of the Company issued or assumed as the deferred purchase price of
property, all conditional sale obligations of the Company and all obligations
of the Company under any title retention agreement (but excluding trade
accounts payable arising in the ordinary course of business); (iv) all
obligations of the Company for the reimbursement on any letter of credit,
banker's acceptance, security purchase facility or similar credit transaction;
(v) all obligations of the type referred to in clauses (i) through (iv) above
of other persons for the payment of which the Company is responsible or liable
as obligor, guarantor or otherwise; and (vi) all obligations of the type
referred to in clauses (i) through (v) above of other persons secured by any
lien on any property or asset of the Company (whether or not such obligation
is assumed by the Company), except for any such indebtedness that is by its
terms subordinated to or pari passu with the Subordinated Debt Securities, as
the case may be. Such Senior Indebtedness shall continue to be Senior
Indebtedness and be entitled to the benefits of the subordination provisions
irrespective of any amendment, modification or waiver of any term of such
Senior Indebtedness.
The Indenture does not limit the aggregate amount of Senior Indebtedness
which may be issued by the Company. As of December 31, 1995, Senior
Indebtedness of the Company aggregated approximately $8,333 million.
CERTAIN COVENANTS
If (i) there shall have occurred and be continuing any event that would
constitute an Indenture Event of Default or (ii) the Company shall be in
default with respect to its payment of any obligations under the Preferred
Securities Guarantee or the Common Securities Guarantee, and such default
shall be continuing then (a) the Company shall not declare or pay any dividend
on, make any distributions with respect to, or redeem, purchase or make a
liquidation payment with respect to, any of its capital stock, (b) the Company
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities issued by the Company which
rank pari passu with or junior to the Subordinated Debt Securities and (c) the
Company shall not make any guarantee payments (other than pursuant to the
Preferred Securities Guarantee) with respect to the foregoing.
If the Company shall have given notice of its election of an Extension
Period as provided in the Indenture and such period, or any extension thereof,
shall be continuing, then (a) the Company shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase or
make a liquidation payment with respect to, any of its capital stock, (b) the
Company shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities issued by the Company
which rank pari passu with or junior to the Subordinated Debt Securities and
(c) the Company shall not make any guarantee payments (other than pursuant to
the Preferred Securities Guarantee) with respect to the foregoing.
Notwithstanding the foregoing restrictions, the Company will be permitted,
in any event, to make dividend, redemption, liquidation and guarantee payments
on capital stock, and interest, principal, redemption and guarantee payments
on debt securities issued by the Company ranking pari passu with or junior to
Subordinated Debt Securities, where the payment is made by way of (i)
securities (including capital stock) that rank junior to the securities on
which such payment is being made or (ii) securities (including capital stock)
of TCI.
For so long as the Trust Securities remain outstanding, the Company will
covenant (i) to directly or indirectly maintain 100% direct or indirect
ownership of the Common Securities of the Trust; provided, however, that any
permitted successor of the Company under the Indenture may succeed to the
Company's ownership of such Common Securities, (ii) not to cause, as sponsor
of the Trust, or to permit, as holder of the Common Securities, the
termination, dissolution or winding-up of the Trust, except in connection with
a distribution of the Subordinated Debt Securities as provided in the
Declaration and in connection with certain mergers, consolidations or
amalgamations, (iii) to use its reasonable efforts to cause the Trust (a) to
remain a statutory business trust, except in connection with the distribution
of Subordinated Debt Securities to the holders of Trust Securities in
liquidation of the Trust, the redemption of all of the Trust Securities of the
Trust, or certain mergers, consolidations or amalgamations, each as permitted
by the Declaration, and (b) to otherwise continue to be
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classified as a grantor trust for United States federal income purposes and
(iv) to use reasonable efforts to cause each holder of Trust Securities to be
treated as owning an undivided beneficial interest in the Subordinated Debt
Securities.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Subordinated Debt Securities,
in whole or in part, from time to time, on or after May 31, 2001, or at any
time in certain circumstances upon the occurrence of a Tax Event as described
under "Description of the Preferred Securities--Special Event Redemption or
Distribution," upon not less than 30 nor more than 60 days' notice, at a
redemption price equal to 100% of the principal amount to be redeemed plus any
accrued and unpaid interest, including Additional Interest, if any, to the
redemption date. If a partial redemption of the Preferred Securities resulting
from a partial redemption of the Subordinated Debt Securities would result in
the delisting of the Preferred Securities, the Company may only redeem the
Subordinated Debt Securities in whole.
INTEREST
Each Subordinated Debt Security shall bear interest at the rate of % per
annum from May , 1996, payable quarterly in arrears on March 31, June 30,
September 30, December 31 of each year (each, an "Interest Payment Date"),
commencing June 30, 1996, to the person in whose name such Subordinated Debt
Security is registered, subject to certain exceptions, at the close of
business on the Business Day next preceding such Interest Payment Date. In the
event the Subordinated Debt Securities are distributed to holders of the
Preferred Securities in liquidation of such holders' interests in the Trust
and such Subordinated Debt Securities shall not thereafter continue to remain
in book-entry only form, the Company shall have the right to select record
dates which shall be not less than fifteen days prior to each Interest Payment
Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period will be computed on the basis
of the actual number of days elapsed in such 90-day quarter. In the event that
any date on which interest is payable on the Subordinated Debt Securities is
not a Business Day, then payment of the interest payable on such date will be
made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day is in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
The Company shall have the right at any time, and from time to time, during
the term of the Subordinated Debt Securities to defer payments of interest by
extending the interest payment period for a period not exceeding 20
consecutive quarters, at the end of which Extension Period the Company shall
pay all interest then accrued and unpaid (including any Additional Interest),
together with interest thereon at the rate specified for the Subordinated Debt
Securities to the extent permitted by applicable law; provided, that, during
any such Extension Period, (a) the Company shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase or
make a liquidation payment with respect to, any of its capital stock, (b) the
Company shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities issued by the Company
which rank pari passu with or junior to the Subordinated Debt Securities and
(c) the Company shall not make any guarantee payments (other than pursuant to
the Preferred Securities Guarantee) with respect to the foregoing; provided,
however, the foregoing restriction will not apply to any dividend, redemption,
liquidation, interest, principal or guarantee payments by the Company where
the payment is made by way of (i) securities (including capital stock) that
rank junior to the securities on which such dividend, redemption, interest,
principal or guarantee payment is being made or (ii) securities (including
capital stock) of TCI. Prior to the termination of any such Extension Period,
the Company may further defer payments of interest by extending the interest
payment period, provided that such Extension Period together with all such
previous and further extensions thereof may not exceed 20 consecutive quarters
or extend beyond the maturity of the
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Subordinated Debt Securities. Upon the termination of any Extension Period and
the payment of all amounts then due, the Company may select a new Extension
Period, as if no Extension Period had previously been declared, subject to the
above requirements. No interest during an Extension Period, except at the end
thereof, shall be due and payable. The Company has no present intention of
exercising its right to defer payments of interest by extending the interest
payment period on the Subordinated Debt Securities. If the Property Trustee
shall be the sole holder of the Subordinated Debt Securities, the Company
shall give the Regular Trustees and the Property Trustee notice of its
selection of an Extension Period one Business Day prior to the earlier of (i)
the next succeeding date on which distributions on the Preferred Securities
are payable or (ii) the date the Trust is required to give notice to the New
York Stock Exchange or other applicable self-regulatory organization or to
holders of the Preferred Securities of the record date or the date such
distribution is payable, but in any event not less than one Business Day prior
to such record date. The Regular Trustees shall give notice of the Company's
selection of such Extension Period to the holders of the Preferred Securities.
If the Property Trustee shall not be the sole holder of the Subordinated Debt
Securities, the Company shall give the holders of the Subordinated Debt
Securities notice of its selection of such Extension Period ten Business Days
prior to the earlier of (i) the relevant Interest Payment Date or (ii) the
date the Company is required to give notice to the New York Stock Exchange or
other applicable self-regulatory organization or to holders of the
Subordinated Debt Securities of the record or payment date of such related
interest payment, but in any event at least two Business Days before such
record date.
ADDITIONAL INTEREST
If at any time the Trust shall be required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in
any such case, the Company will pay as additional interest ("Additional
Interest") such additional amounts as shall be required so that the net
amounts received and retained by the Trust after paying any such taxes,
duties, assessments or other governmental charges will be equal to the amounts
the Trust would have received had no such taxes, duties, assessments or other
governmental charges been imposed.
INDENTURE EVENTS OF DEFAULT
In case any Indenture Event of Default shall occur and be continuing, the
Property Trustee, as the holder of the Subordinated Debt Securities, will have
the right to declare the principal of and the interest on the Subordinated
Debt Securities (including Additional Interest, if any) and any other amounts
payable under the Indenture to be forthwith due and payable and to enforce its
other rights as a creditor with respect to the Subordinated Debt Securities.
The Indenture provides that any one or more of the following described
events, which has occurred and is continuing, constitutes an "Event of
Default" with respect to the Subordinated Debt Securities:
(a) failure for 30 days to pay interest on the Subordinated Debt
Securities, including any Additional Interest in respect thereof, when due;
provided, however, that a valid extension of the interest payment period by
the Company shall not constitute a default in the payment of interest for
this purpose; or
(b) failure to pay principal or premium, if any, on the Subordinated Debt
Securities when due whether at maturity, upon earlier redemption or
otherwise; or
(c) failure to observe or perform any other covenant (other than those
specifically relating to another series of subordinated debt securities)
contained in the Indenture for 90 days after written notice to the Company
from the Debt Trustee or the holders of at least 25% in principal amount of
the outstanding Subordinated Debt Securities; or
(d) certain events of bankruptcy, insolvency or reorganization of the
Company; or
(e) the voluntary or involuntary termination, dissolution or winding-up
of the Trust, except in connection with the distribution of Subordinated
Debt Securities to the holders of Preferred Securities in liquidation of
the Trust, the redemption of all outstanding Trust Securities of the Trust
and certain mergers, consolidations or amalgamations permitted by the
Declaration.
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The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debt Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debt
Trustee. The Debt Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Subordinated Debt Securities may declare
the principal due and payable immediately on default, but the holders of a
majority in aggregate outstanding principal amount may annul such declaration
and waive the default if the default has been cured and a sum sufficient to
pay all matured installments of interest and principal due otherwise than by
acceleration and any applicable premium has been deposited with the Debt
Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Subordinated Debt Securities affected thereby may, on behalf of the holders of
all the Subordinated Debt Securities, waive any past default, except (i) a
default in the payment of principal, premium, if any, or interest, including
Additional Interest (unless such default has been cured and a sum sufficient
to pay all matured installments of interest and principal due otherwise than
by acceleration and any applicable premium has been deposited with the Debt
Trustee), or (ii) a default in the covenant of the Company not to declare or
pay dividends on, or make distributions with respect to, or redeem, purchase
or acquire any of its capital stock during an Extension Period. An Indenture
Event of Default also constitutes a Declaration Event of Default. The holders
of Preferred Securities in certain circumstances have the right to direct the
Property Trustee to exercise its rights as the holder of the Subordinated Debt
Securities. See "Description of the Preferred Securities--Declaration Events
of Default" and "--Voting Rights."
In addition, if an Indenture Event of Default results from the failure of
the Company to pay principal of or interest on the Subordinated Debt
Securities when due, during the continuance of such an event of default a
holder of Preferred Securities may immediately institute a legal proceeding
directly against the Company to obtain payment of such principal or interest
on Subordinated Debt Securities having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities owned of record by
such holder.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
voluntary or involuntary termination, dissolution or winding-up of the Trust
as a result of the occurrence of a Special Event, the Subordinated Debt
Securities will be issued in the form of one or more global certificates
(each, a "Global Security") registered in the name of the depositary or its
nominee. Except under the limited circumstances described below, Subordinated
Debt Securities represented by the Global Security will not be exchangeable
for, and will not otherwise be issuable as, Subordinated Debt Securities in
definitive form. The Global Securities described above may not be transferred
except by the depositary to a nominee of the depositary or by a nominee of the
depositary to the depositary or another nominee of the depositary or to a
successor depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below, owners of beneficial interests in such a Global
Security will not be entitled to receive physical delivery of Subordinated
Debt Securities in definitive form and will not be considered the Holders (as
defined in the Indenture) thereof for any purpose under the Indenture, and no
Global Security representing Subordinated Debt Securities shall be
exchangeable, except for another Global Security of like denomination and
tenor to be registered in the name of the depositary or its nominee or to a
successor depositary or its nominee. Accordingly, each beneficial owner must
rely on the procedures of the depositary and, if such person is not a
Participant, on the procedures of the Participant through which such person
owns its interest, to exercise any rights of a Holder under the Indenture.
If Subordinated Debt Securities are distributed to holders of Preferred
Securities in liquidation of such holders' interests in the Trust, DTC will
act as securities depositary for the Subordinated Debt Securities. For a
description of DTC and the specific terms of the depository arrangements, see
"Description of the Preferred Securities--Book-Entry Only Issuance--The
Depository Trust Company." The description therein of DTC's book-entry system
and DTC's practices as they relate to purchases, transfers, notices and
payments with respect
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to the Preferred Securities apply in all material respects to any debt
obligations represented by one or more Global Securities held by DTC. The
Company may appoint a successor to DTC or any successor depositary in the
event DTC or such successor depositary is unable or unwilling to continue as
depositary.
None of the Company, the Trust, the Debt Trustee, any paying agent and any
other agent of the Company or the Debt Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a Global Security for such
Subordinated Debt Securities or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
A Global Security shall be exchangeable for Subordinated Debt Securities
registered in the names of persons other than the depositary or its nominee
only if (i) the depositary notifies the Company that it is unwilling or unable
to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, or if at any time the depositary ceases
to be registered or in good standing under the Exchange Act (or other
applicable statute or regulation) at a time when the depositary is required to
be so registered to act as such depositary and no successor depositary shall
have been appointed by the Company within 90 days after the Company receives
such notice or becomes aware of such condition, (ii) the Company in its sole
discretion determines that such Global Security shall be so exchangeable or
(iii) there shall have occurred an Indenture Event of Default with respect to
such Subordinated Debt Securities. Any Global Security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for Subordinated Debt
Securities registered in such names as the depositary shall direct. It is
expected that such instructions will be based upon directions received by the
depositary from its Participants with respect to ownership of beneficial
interests in such Global Security.
In the event the Subordinated Debt Securities are not represented by one or
more Global Securities, certificates evidencing Subordinated Debt Securities
may be presented for registration of transfer (with the form of transfer
endorsed thereon duly executed) or exchange, at the office of the Debt
Registrar (as defined in the Indenture) or at the office of any transfer agent
designated by the Company for such purpose with respect to the Subordinated
Debt Securities, without service charge and upon payment of any taxes and
other governmental charges as described in the Indenture. Such transfer or
exchange will be effected upon the Debt Register (as defined in the Indenture)
or such transfer agent, as the case may be, being satisfied with the documents
of title and identity of the person making the request. The Company has
appointed the Debt Trustee as Debt Registrar with respect to the Subordinated
Debt Securities. The Company may at any time rescind the designation of any
such transfer agent or approve a change in the location through which any such
transfer agent acts, except that the Company will be required to maintain a
transfer agent at the place of payment. The Company may at any time designate
additional transfer agents with respect to the Subordinated Debt Securities.
In the event of any redemption in part, the Company shall not be required to
(i) issue, exchange or register the transfer of Subordinated Debt Securities
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of less than all of the Subordinated
Debt Securities and ending at the close of business on the date of such
mailing or (ii) register the transfer of or exchange any Subordinated Debt
Securities so selected for redemption, in whole or in part, except the
unredeemed portion of any Subordinated Debt Securities being redeemed in part.
PAYMENT AND PAYING AGENTS
Payment of principal of and premium, if any, on the Subordinated Debt
Securities will be made only against surrender to the Paying Agent (as defined
in the Indenture) of the Subordinated Debt Securities. Principal of and
premium, if any, and interest on Subordinated Debt Securities will be payable,
subject to any applicable laws and regulations, at the office of such Paying
Agent or Paying Agents as the Company may designate from time to time, 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 Debt Register with respect to the Subordinated Debt Securities.
Payment of interest on the Subordinated Debt Securities on any Interest
Payment Date will be made to the person in whose name the Subordinated Debt
Security (or predecessor security) is registered at the close of business on
the Regular Record Date for such interest payment.
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The Company will initially act as Paying Agent with respect to the
Subordinated Debt Securities except that, if the Subordinated Debt Securities
are distributed to the holders of the Preferred Securities in liquidation of
such holders' interests in the Trust, the Debt Trustee will act as the Paying
Agent. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agents or approve a change in the office
through which any Paying Agent acts, except that the Company will be required
to maintain a Paying Agent at the place of payment.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of, premium, if any, or interest, if any, on the Subordinated Debt
Securities which remain unclaimed at the end of two years after such
principal, premium or interest shall have become due and payable will be
repaid to the Company, and the holder of such Subordinated Debt Securities
will thereafter look only to the Company for payment thereof.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Debt
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Subordinated Debt Securities, to modify the Indenture
or any supplemental indenture affecting that series or the rights of the
holders of the Subordinated Debt Securities; provided that no such
modification may, without the consent of the holder of each outstanding
Subordinated Debt Security affected thereby, (i) extend the fixed maturity of
the Subordinated Debt Securities, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, or reduce
any premium payable upon the redemption thereof, without the consent of the
holder of the Subordinated Debt Securities so affected or (ii) reduce the
percentage of Subordinated Debt Securities the holders of which are required
to consent to any such supplemental indenture, without the consent of the
holders of each Subordinated Debt Security then outstanding and affected
thereby.
In addition, the Company and the Debt Trustee may execute, without the
consent of holders of the Subordinated Debt Securities, any supplemental
indenture for certain other usual purposes including the creation of any new
series of subordinated debt securities.
SUCCESSOR CORPORATION
The Company may not consolidate with or merge into, or transfer its
properties and assets substantially as an entirety to, another corporation
unless (i) the successor corporation, which shall be a corporation organized
under the laws of the United States or a State thereof, assumes by
supplemental indenture all the obligations of the Company under the
Subordinated Debt Securities and the Indenture, and (ii) after giving effect
to such transaction, no Indenture Event of Default shall have occurred and be
continuing. The Indenture does not otherwise contain any covenant which
restricts the ability of the Company to merge or consolidate with or into any
other corporation, sell or convey all or substantially all of its assets to
any person, firm or corporation or otherwise engage in restructuring
transactions.
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, the Company will be discharged from any
and all obligations in respect of the Subordinated Debt Securities (except in
each case for certain obligations with respect to denominations and provisions
for payment of the Subordinated Debt Securities and obligations to register
the transfer or exchange of Subordinated Debt Securities, replace stolen, lost
or mutilated Subordinated Debt Securities, maintain paying agencies and hold
moneys for payment in trust) if the Company (i) deposits with the Debt
Trustee, in trust, moneys or governmental obligations in an amount sufficient
to pay all the principal of, and interest on, the Subordinated Debt Securities
on the dates such payments are due in accordance with the terms of such
Subordinated Debt Securities and (ii) delivers to the Debt Trustee an opinion
of counsel to the effect that, based upon the Company's receipt from, or the
publication by, the Internal Revenue Service of a ruling or a change in law,
the holders of the Subordinated Debt Securities will not recognize income,
gain or loss for United States federal income tax purposes as a result of the
deposit, defeasance and discharge and will be subject to
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United States federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit, defeasance or
discharge had not occurred.
GOVERNING LAW
The Indenture and the Subordinated Debt Securities will be governed by, and
construed in accordance with, the internal laws of the State of New York.
INFORMATION CONCERNING THE DEBT TRUSTEE
The Debt Trustee, prior to default, undertakes to perform only such duties
as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Debt Trustee
is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Subordinated Debt Securities, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby; but the foregoing shall not
relieve the Debt Trustee, upon the occurrence of an Indenture Event of
Default, from exercising the rights and powers vested in it by the Indenture.
The Debt Trustee is not required to expand or risk its own funds or otherwise
incur personal financial liability in the performance of its duties if the
Debt Trustee reasonably believes that repayment or adequate indemnity is not
reasonably assured to it. The Debt Trustee also serves as Property Trustee
under the Declaration and as the Preferred Guarantee Trustee under the
Preferred Securities Guarantee.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly owned
subsidiary of the Company; provided, that in the event of any such assignment,
the Company will remain liable for all of the obligations of such subsidiary.
Subject to the foregoing, the Indenture will be binding upon and inure to the
benefit of the parties thereto and their respective successors and assigns.
The Indenture provides that it may not otherwise be assigned by the parties
thereto.
The Indenture will provide that the Company will pay all costs, expenses,
debts and obligations of the Trust other than with respect to the Trust
Securities.
EFFECT OF OBLIGATIONS UNDER THE SUBORDINATED DEBT SECURITIES AND THE PREFERRED
SECURITIES GUARANTEE
As set forth in the Declaration, the exclusive purposes of the Trust are to
(i) issue the Trust Securities, (ii) invest the proceeds thereof in the
Subordinated Debt Securities and (iii) engage in only those other activities
necessary or incidental thereto.
As long as payments of interest and other payments are made when due on the
Subordinated Debt Securities, such payments will be sufficient to cover
distributions and payments due on the Trust Securities primarily because (i)
the aggregate principal amount of the Subordinated Debt Securities will be
equal to the sum of the aggregate stated liquidation amount of the Trust
Securities; (ii) the interest rate and interest and other payment dates on the
Subordinated Debt Securities will match the distribution rate and distribution
and other payment dates for the Preferred Securities; (iii) the Company shall
pay for all costs, expenses, debts and obligations of the Trust (other than
with respect to the Trust Securities); and (iv) the Declaration provides that
the Company Trustees shall not cause or permit the Trust to, among other
things, engage in any activity that is not consistent with the purposes of the
Trust.
Payments of distributions (to the extent funds therefor are available) and
other payments due on the Preferred Securities (to the extent funds therefor
are available) are guaranteed by the Company as and to the extent set forth
under "Description of the Preferred Securities Guarantee." If the Company does
not make
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interest payments on the Subordinated Debt Securities purchased by the Trust,
it is expected that the Trust will not have sufficient funds to pay
distributions on the Preferred Securities. The Preferred Securities Guarantee
does not apply to any payment of distributions unless and until the Trust has
sufficient funds for the payment of such distributions.
If the Company fails to make interest or other payments on the Subordinated
Debt Securities when due (taking into account any Extension Period), the
Declaration provides a mechanism whereby the holders of the Preferred
Securities, using the procedures described in "Description of the Preferred
Securities--Voting Rights," may direct the Property Trustee to enforce its
rights under the Subordinated Debt Securities, including proceeding directly
against the Company to enforce the Subordinated Debt Securities. If the
Property Trustee fails to enforce its rights under the Indenture or the
Subordinated Debt Securities, a holder of Preferred Securities may institute a
legal proceeding directly against the Company to enforce the Property
Trustee's rights under the Indenture and the Subordinated Debt Securities
without first instituting any legal proceeding against the Property Trustee or
any other person or entity, including the Trust. In addition, during the
continuance of a Declaration Event of Default that results from the failure of
the Company to pay principal of or interest on the Subordinated Debt
Securities when due, a holder may proceed directly against the Company,
without first waiting to determine if the Property Trustee has enforced its
rights under the Declaration, to obtain payment of such principal or interest
on Subordinated Debt Securities having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities owned of record by
such holder.
If the Company fails to make payments under the Preferred Securities
Guarantee, the Preferred Securities Guarantee provides a mechanism whereby the
holders of the Preferred Securities may direct the Preferred Guarantee Trustee
to enforce its rights thereunder. If the Preferred Guarantee Trustee fails to
enforce the Preferred Securities Guarantee, any holder of Preferred Securities
may institute a legal proceeding directly against the Company to enforce the
Preferred Guarantee Trustee's rights under the Preferred Securities Guarantee,
without first instituting a legal proceeding against the Trust, the Preferred
Guarantee Trustee or any other person or entity. In addition, any record
holder of Preferred Securities shall have the right, which is absolute and
unconditional, to proceed directly against the Company to obtain Guarantee
Payments, without first waiting to determine if the Preferred Guarantee
Trustee has enforced the Preferred Security Guarantee or instituting a legal
proceeding against the Trust, the Preferred Guarantee Trustee or any other
person or entity.
The Company's obligations under the Preferred Securities Guarantee, the
Declaration, the Subordinated Debt Securities and the Indenture, in the
aggregate, provide a full and unconditional guarantee by the Company of
payments due on the Preferred Securities.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain of the principal United States federal
income tax consequences of the purchase, ownership and disposition of the
Preferred Securities to a holder that is a citizen or resident of the United
States, a corporation, partnership or other entity created or organized under
the laws of the United States or any state thereof or the District of Columbia
or an estate or trust the income of which is subject to United States federal
income taxation regardless of source (a "Holder"). This summary does not
address the United States federal income tax consequences to persons other
than Holders.
This summary is based on the United States federal income tax laws,
regulations and rulings and decisions now in effect, all of which are subject
to change, possibly on a retroactive basis. This summary does not address the
tax consequences applicable to investors that may be subject to special tax
rules such as banks, thrifts, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or
currencies, tax-exempt investors or persons that will hold the Preferred
Securities as a position in a "straddle," as part of a "synthetic security" or
"hedge," as part of a "conversion transaction" or other integrated investment
or as other than a capital asset. This summary also does not address the tax
consequences to persons that have a functional currency other than the U.S.
dollar or the tax consequences to shareholders, partners or
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beneficiaries of a Holder. Further, it does not include any description of any
alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to a Holder.
CLASSIFICATION OF TCI COMMUNICATIONS FINANCING II
Baker & Botts, L.L.P., counsel to the Company and special counsel to the
Trust, is of the opinion that, under current law and assuming full compliance
with the terms of the Indenture and the Declaration (and certain
other documents), the Trust will be classified as a "grantor trust" for
federal income tax purposes and will not be classified as an association
taxable as a corporation or a partnership. Each Holder will be treated as
owning an undivided beneficial interest in the Subordinated Debt Securities.
Accordingly, each Holder will be required to include in its gross income the
original issue discount ("OID") accrued with respect to its allocable share of
Subordinated Debt Securities. Investors should be aware that the opinion of
Baker & Botts, L.L.P. does not address any other issue and is not binding on
the Internal Revenue Service or the courts.
ORIGINAL ISSUE DISCOUNT, PREMIUM AND MARKET DISCOUNT
Because of the option that the Company has, under the terms of the
Subordinated Debt Securities, to defer payments of interest by extending
interest payment periods for up to 20 consecutive quarters, the Subordinated
Debt Securities will be treated as issued with OID in an amount equal to all
of the stated interest payments on the Subordinated Debt Securities. Holders
must include the OID attributable to the Subordinated Debt Securities in
income on an economic accrual basis before the receipt of cash attributable to
the interest, regardless of their method of tax accounting. The amount of OID
that accrues in any month will approximately equal the amount of the interest
that accrues in that month at the stated interest rate. In the event that the
interest payment period is extended, Holders will continue to accrue OID
approximately equal to the amount of the interest payment due at the end of
the extended interest payment period on an economic accrual basis over the
length of the extended interest period. Corporate Holders will not be entitled
to a dividends-received deduction with respect to any income earned with
respect to the Preferred Securities.
To the extent a Holder acquires its Preferred Securities at a price that is
greater or less than the adjusted issue price of such Holder's share of the
Subordinated Debt Securities (which generally should approximate par plus
accrued but unpaid interest), the Holder will be deemed to have acquired its
interest in the Preferred Securities with acquisition premium or with market
discount, as the case may be. A Holder acquiring Preferred Securities at a
premium will be permitted to reduce the amount of OID required to be included
in income to reflect the acquisition premium. A Holder acquiring Preferred
Securities at a market discount will also include the amount of such discount
in income in accordance with the market discount rules described below.
A Holder acquiring Preferred Securities at a market discount generally will
be required to recognize ordinary income to the extent of accrued market
discount upon the retirement of the underlying Subordinated Debt Securities
or, to the extent of any gain, upon the disposition of the Preferred
Securities. Such market discount would accrue ratably, or, at the election of
the Holder, under a constant yield method over the remaining term of the
Subordinated Debt Securities. A Holder will also be required to defer the
deduction of a portion of the interest paid or accrued on indebtedness
incurred to purchase or carry Preferred Securities acquired with market
discount. In lieu of the foregoing, a Holder may elect to include market
discount in income currently as it accrues on all market discount instruments
acquired by such Holder in the taxable year of the election or thereafter, in
which case the interest deferral rule will not apply. A Holder may elect, in
lieu of applying the market discount or premium rules described above, to
account for all income under the Preferred Securities as if it were OID.
RECEIPT OF SUBORDINATED DEBT SECURITIES OR CASH UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption "Description of
the Preferred Securities--Special Event Redemption or Distribution,"
Subordinated Debt Securities may be distributed to Holders in
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exchange for the Preferred Securities and in liquidation of the Trust. Such a
distribution would be treated as a non-taxable event to each Holder and each
Holder would receive an aggregate tax basis in the Subordinated Debt
Securities equal to such Holder's aggregate tax basis in the Preferred
Securities. A Holder's holding period in the Subordinated Debt Securities so
received in liquidation of the Trust would include the period for which the
Preferred Securities were held by such Holder.
Upon occurrence of a Tax Event, a termination of the Trust in which Holders
receive cash would be a taxable event to such Holders.
SALE OF PREFERRED SECURITIES
A Holder that sells Preferred Securities will recognize gain or loss equal
to the difference between its adjusted tax basis in the Preferred Securities
and the amount realized on the sale. A Holder's adjusted tax basis in the
Preferred Securities generally will be its initial purchase price increased by
OID previously includible in such Holder's gross income to the date of
disposition (and the accrual of market discount, if any) and decreased by
payments received on the Preferred Securities. Subject to the market discount
rules described above, any such gain or loss generally will be capital gain or
loss.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the
underlying Subordinated Debt Securities. A Holder disposing of its Preferred
Securities between record dates for payments of distributions thereon will be
required to include accrued but unpaid interest through the date of
disposition in income as ordinary income (i.e., OID), and to add such amount
to its adjusted tax basis in its Preferred Securities. To the extent the
selling price is less than the Holder's adjusted tax basis (which will
include, in the form of OID, all accrued but unpaid interest), a Holder will
recognize a capital loss. Subject to certain limited exceptions, capital
losses cannot be applied to offset ordinary income for United States federal
income tax purposes.
FOREIGN INVESTORS
Subject to the discussion of backup withholding below, interest (including
OID) with respect to the Preferred Securities paid to a nonresident alien
individual, foreign corporation, foreign partnership or foreign estate or
trust will be exempt from U.S. withholding tax, provided that the Holder
complies with applicable certification requirements (and does not actually or
constructively own ten percent or more of the voting stock of the Company and
is not a controlled foreign corporation related to the Company or its
affiliates).
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the Preferred
Securities will be reported to Holders on Form 1099, which forms should be
mailed to Holders of Preferred Securities by January 31 following each
calendar year.
The Trust will be obligated to report annually to Cede & Co., as Holder of
record of the Preferred Securities, the OID with respect to the Preferred
Securities that accrued during that year. The Trust currently intends to
report such information on Form 1099 prior to January 31 following each
calendar year even though the Trust is not legally required to report to
record Holders until April 15 following each calendar year. The Underwriters
(as defined herein) have indicated to the Trust that, to the extent that they
hold Preferred Securities as nominees for beneficial holders, they currently
expect to report to such beneficial holders on Forms 1099 by January 31
following each calendar year. Under current law, Holders of Preferred
Securities who hold as nominees for beneficial Holders will not have any
obligation to report information regarding the beneficial holders to the
Trust. The Trust, moreover, will not have any obligation to report to
beneficial Holders who are not also record holders. Thus, beneficial holders
of Preferred Securities who hold their Preferred Securities through the
Underwriters or otherwise in "street name" will receive Forms 1099 reflecting
the income on their Preferred Securities from such nominee Holders rather than
the Trust.
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BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Preferred Securities
may be subject to a "backup" withholding tax of 31% unless the Holder complies
with certain identification requirements. Any withheld amounts will be allowed
as a credit against the Holder's federal income tax, provided that required
information is provided to the Internal Revenue Service.
PROPOSED TAX LAW CHANGES
On December 7, 1995, the U.S. Treasury Department proposed a series of tax
law changes that would, among other things, prevent companies from deducting
interest on debt instruments with a maturity of more than 40 years and on
instruments with a maximum term of more than 20 years which are not shown as
indebtedness on the consolidated balance sheet of the issuer. Either of these
proposals, if enacted, would prevent the Company from deducting interest paid
on the Subordinated Debt Securities. The Company cannot predict whether the
proposed tax law changes will become law. However, the Chairmen of the House
Ways and Means and Senate Finance Committees issued a joint statement on March
29, 1996 stating that the effective date of these proposals, if enacted, would
be no earlier than the date of appropriate Congressional action. If
legislation is enacted limiting, in whole or in part, the deductibility by the
Company of interest on the Subordinated Debt Securities for United States
federal income tax purposes, such enactment would be a Tax Event. Under
certain circumstances following a Tax Event, the Company may cause the
Subordinated Debt Securities to be redeemed, in which event the Trust would
redeem the Trust Securities. See "Description of the Preferred Securities--
Special Event Redemption or Distribution." The December 7, 1995 proposed tax
law changes would not alter the United States federal income tax consequences
of the purchase, ownership and disposition of the Preferred Securities.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF
THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
S-41
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Trust has agreed to sell to each of the
underwriters named below (the "Underwriters"), and each of the Underwriters,
for whom Lehman Brothers Inc., Bear, Stearns & Co. Inc., A.G. Edwards & Sons,
Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, PaineWebber Incorporated, Prudential Securities Incorporated and
Smith Barney Inc. are acting as representatives (the "Representatives"), has
severally agreed to purchase, the number of Preferred Securities set forth
opposite its name below. In the Purchase Agreement, the several Underwriters
have agreed, subject to the terms and conditions set forth therein, to
purchase all of the Preferred Securities offered hereby if any of the
Preferred Securities are purchased. In the event of default by an Underwriter,
the Purchase Agreement provides that, in certain circumstances, the purchase
commitments of the nondefaulting Underwriters may be increased or the Purchase
Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
Lehman Brothers Inc. ..................................
Bear, Stearns & Co. Inc. ..............................
A.G. Edwards & Sons, Inc. .............................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................
Morgan Stanley & Co. Incorporated......................
PaineWebber Incorporated...............................
Prudential Securities Incorporated.....................
Smith Barney Inc. .....................................
----------
Total............................................. 20,000,000
==========
</TABLE>
The Underwriters propose initially to offer the Preferred Securities to the
public at the initial public offering price set forth on the cover page of
this Prospectus, and to certain dealers at such price less a concession not in
excess of $ per Preferred Security, provided that such concession for sales
of 10,000 or more Preferred Securities to a single purchaser will not be in
excess of $ per Preferred Security. The Underwriters may allow, and such
dealers may reallow, a discount not in excess of $ per Preferred Security
to certain other dealers. After the initial public offering, the public
offering price, concession and discount may be changed.
In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Subordinated Debt Securities of the
Company, the Purchase Agreement provides that the Company will pay as
compensation ("Underwriters' Compensation") to the Underwriters for the
Underwriters arranging the investment therein of such proceeds, an amount in
New York Clearing House funds of $ per Preferred
S-42
<PAGE>
Security (or $ in the aggregate), provided that such compensation
for sales of 10,000 or more Preferred Securities to any single purchaser will
be $ per Preferred Security. Therefore, to the extent of such sales, the
actual amount of Underwriters' Compensation will be less than the aggregate
amount specified in the preceding sentence.
During a period of 30 days from the date of this Prospectus Supplement,
neither the Trust nor the Company will, without the prior written consent of
the Representatives, directly or indirectly, sell, offer to sell, contract to
sell, grant any option for the sale of, or otherwise dispose of, any Preferred
Securities, any security convertible into, or exchangeable or exercisable for,
Preferred Securities or the Subordinated Debt Securities or any debt
securities substantially similar to the Subordinated Debt Securities or any
equity securities substantially similar to the Preferred Securities (except
for the Subordinated Debt Securities and the Preferred Securities offered
hereby and subject to certain exceptions specified in the Purchase Agreement).
The Preferred Securities have been approved for listing, subject to official
notice of issuance, on the New York Stock Exchange. Trading of the Preferred
Securities on the New York Stock Exchange is expected to commence within a 30
day period after the initial delivery of the Preferred Securities. The
Representatives have advised the Trust that the Underwriters intend to make a
market in the Preferred Securities prior to the commencement of trading on the
New York Stock Exchange. The Underwriters will have no obligation to make a
market in the Preferred Securities, however, and may cease market making
activities, if commenced, at any time.
Prior to this offering there has been no public market for the Preferred
Securities. In order to meet one of the requirements for listing the Preferred
Securities on the New York Stock Exchange, the Underwriters will undertake to
sell lots of 100 or more Preferred Securities to a minimum of 400 beneficial
holders.
The Company and the Trust have agreed to indemnify the Underwriters against,
or to contribute to payments that the Underwriters may be required to make in
respect of, certain liabilities, including liabilities under the Securities
Act of 1933, as amended.
Certain of the Underwriters engage in transactions with, and from time to
time have performed services for, the Company in the ordinary course of
business.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Trust by Richards, Layton &
Finger, special Delaware counsel to the Trust. The validity of the
Subordinated Debt Securities, the Preferred Securities Guarantee and certain
matters relating thereto will be passed upon on behalf of the Company by Baker
& Botts, LLP, New York, New York. Certain United States federal income
taxation matters will be passed upon for the Company and the Trust by Baker &
Botts, LLP. Jerome H. Kern, a partner of Baker & Botts, LLP, is a director of
Tele-Communications, Inc. and certain partners of Baker & Botts LLP hold
options to purchase shares of Tele-Communications, Inc.'s Series A TCI Group
Common Stock and options to purchase or restricted shares of Series A Liberty
Media Group Common Stock. Certain legal matters will be passed upon on behalf
of the Underwriters by Brown & Wood, New York, New York.
EXPERTS
The consolidated balance sheets of TCI Communications, Inc. and subsidiaries
as of December 31, 1995 and 1994, and the related consolidated statements of
operations, stockholder's(s') equity, and cash flows for each of the years in
the three-year period ended December 31, 1995, and all related financial
statement schedules, which appear in the December 31, 1995 Annual Report on
Form 10-K of TCI Communications, Inc., have been incorporated by reference
herein, in reliance upon the reports, dated March 18, 1996, of KPMG Peat
Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
S-43
<PAGE>
DEFINITIONS
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Additional Interest........................................................ S-33
Beneficial Owner........................................................... S-24
Business Day............................................................... S-17
Change in 1940 Act Law..................................................... S-18
Common Securities.......................................................... S-1
Common Securities Guarantee................................................ S-27
Company.................................................................... S-1
Company Trustees........................................................... S-11
Creditor................................................................... S-23
DTC........................................................................ S-24
Debt Trustee............................................................... S-29
Declaration................................................................ S-11
Declaration Event of Default............................................... S-21
Delaware Trustee........................................................... S-12
Direct Participants........................................................ S-24
Dissolution Tax Opinion.................................................... S-18
Distributions.............................................................. S-2
Event of Default........................................................... S-33
Exchange Act............................................................... S-24
Extension Period........................................................... S-2
Global Security............................................................ S-34
Guarantee Payments......................................................... S-27
Holder..................................................................... S-38
Indenture.................................................................. S-29
Indenture Event of Default................................................. S-21
Indirect Participants...................................................... S-24
Interest Payment Date...................................................... S-32
Investment Company Event................................................... S-18
Liberty.................................................................... S-11
Liquidation Distribution................................................... S-20
New York Stock Exchange.................................................... S-1
1940 Act................................................................... S-18
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
No Recognition Opinion..................................................... S-18
OID........................................................................ S-39
Participants............................................................... S-24
Preferred Guarantee Trustee................................................ S-12
Preferred Securities....................................................... S-1
Preferred Securities Guarantee............................................. S-2
Property Account........................................................... S-12
Property Trustee........................................................... S-12
Purchase Agreement......................................................... S-42
Redemption Price........................................................... S-3
Redemption Tax Opinion..................................................... S-18
Regular Trustees........................................................... S-12
Reorganization............................................................. S-11
Representatives............................................................ S-42
Senior Indebtedness........................................................ S-30
Special Event.............................................................. S-18
Sponsor.................................................................... S-11
Standard & Poor's.......................................................... S-10
Successor Securities....................................................... S-23
Subordinated Debt Securities............................................... S-2
Super-Majority............................................................. S-21
TCI........................................................................ S-3
Tax Event.................................................................. S-18
Tele-Communications, Inc................................................... S-11
Trust...................................................................... S-1
Trust Act.................................................................. S-12
Trust Indenture Act........................................................ S-11
Trust I.................................................................... S-15
Trust Securities........................................................... S-1
Underwriters............................................................... S-42
Underwriter's Compensation................................................. S-42
</TABLE>
S-44
<PAGE>
PROSPECTUS
$1,000,000,000
TCI COMMUNICATIONS, INC.
SUBORDINATED DEBT SECURITIES
-----------------
TCI COMMUNICATIONS FINANCING I
TCI COMMUNICATIONS FINANCING II
TCI COMMUNICATIONS FINANCING III
TCI COMMUNICATIONS FINANCING IV
PREFERRED SECURITIES
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
TCI COMMUNICATIONS, INC.
-----------------
TCI Communications, Inc., a Delaware corporation (the "Company"), may from
time to time offer its subordinated debt securities (the "Subordinated Debt
Securities") in one or more series and in amounts, at prices and on terms to
be determined at the time of the offering. The Subordinated Debt Securities
when issued will be unsecured obligations of the Company. The Company's
obligations under the Subordinated Debt Securities will be subordinate and
junior in right of payment to certain other indebtedness of the Company, as
may be described in an accompanying Prospectus Supplement (the "Prospectus
Supplement").
TCI Communications Financing I, TCI Communications Financing II, TCI
Communications Financing III and TCI Communications Financing IV (each, a
"TCIC Trust"), each a statutory business trust formed under the laws of
Delaware, may from time to time offer preferred securities evidencing
undivided beneficial interests in the assets of the respective TCIC Trust
("Preferred Securities"). The payment of periodic cash distributions
("distributions") with respect to Preferred Securities of each of the TCIC
Trusts, out of moneys held by each of the TCIC Trusts, and payments on
liquidation, redemption or otherwise with respect to such Preferred Securities
will be guaranteed by the Company to the extent described herein (each, a
"Preferred Securities Guarantee"). The Company's obligations under the
Preferred Securities Guarantees will be subordinate and junior in right of
payment to all other liabilities of the Company and pari passu (equally and
ratably) with the most senior preferred stock issued by the Company and with
any guarantee that may be entered into by the Company in respect of any
preferred stock of any subsidiary or affiliate of the Company. Subordinated
Debt Securities may be issued and sold from time to time in one or more series
by the Company to a TCIC Trust in connection with the investment of the
proceeds from the offering of Preferred Securities and Common Securities (as
defined herein) of such TCIC Trust. The Subordinated Debt Securities
subsequently may be distributed pro rata to holders of Preferred Securities
and Common Securities in connection with the termination of such TCIC Trust
upon the occurrence of certain events as may be described in the Prospectus
Supplement.
Specific terms of the particular Subordinated Debt Securities of any series,
the Preferred Securities of any TCIC Trust and the related Preferred
Securities Guarantee in respect of which this Prospectus is being delivered
(the "Offered Securities") will be set forth in an accompanying Prospectus
Supplement with respect to such series of Subordinated Debt Securities or such
Preferred Securities, which will describe, without limitation and where
applicable, the following: (i) in the case of Subordinated Debt Securities,
the specific designation, aggregate principal amount, denomination, maturity,
premium, if any, interest rate (or the method of determining such rate), dates
on which premium, if any, and interest, if any, will be payable, any
redemption provisions, any sinking fund provisions, the initial public
offering price, the subordination terms, any listing on a securities exchange
and any other terms and (ii) in the case of Preferred Securities, the specific
designation, number of Preferred Securities, distribution rate (or the method
of determining such rate), dates on which distributions will be payable,
liquidation amount, voting rights, any redemption provisions, terms for any
conversion into or exchange for other securities, the initial public offering
price, any listing on a securities exchange and any other rights, preferences,
privileges, limitations and restrictions.
The Offered Securities may be offered in amounts, at prices and on terms to
be determined at the time of offering; provided, however, that the aggregate
initial public offering price of all Offered Securities shall not exceed
$1,000,000,000. The Prospectus Supplement relating to any series of Offered
Securities will contain information concerning certain United States federal
income tax considerations applicable to such Offered 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. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS
MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS ACCOMPANIED
BY A PROSPECTUS SUPPLEMENT.
The date of this Prospectus is January 24, 1996
<PAGE>
The Offered Securities will be sold directly or through agents, underwriters
or dealers as designated from time to time, or through a combination of such
methods. If agents or any underwriters or dealers are involved in the sale of
the Offered Securities in respect of which this Prospectus is being delivered,
the names of such agents, underwriters or dealers and any applicable
commissions or discounts will be set forth in or may be calculated from the
Prospectus Supplement related to such Offered Securities.
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED BY THE
COMPANY OR ANY OF THE TCIC TRUSTS TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR ANY OF THE TCIC
TRUSTS SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
The TCIC Trusts and the Company have filed with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), a combined
registration statement on Form S-3 (herein, together with all amendments and
exhibits, referred to as the "Registration Statement") relating to the
Subordinated Debt Securities, the Preferred Securities and the Preferred
Securities Guarantees. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement.
Statements or extracts presented in this Prospectus from financial statements,
contracts, agreements or other documents included as exhibits to the
Registration Statement are not necessarily complete. With respect to each such
financial statement, contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is hereby made to such exhibit for a
more complete description of the matter involved.
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 and other information with the Securities and
Exchange Commission (the "Commission"). Such reports and other information
concerning the Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's Regional Offices at Seven
World Trade Center, 13th Floor, New York, New York 10048, and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Room of the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed
rates.
No separate financial statements of the TCIC Trusts have been included
herein. The Company does not believe that such financial statements would be
material to holders of the Preferred Securities because the TCIC Trusts are
newly-formed special purpose entities, have no operating history, have no
independent operations and are not engaged in, and do not propose to engage
in, any activity other than the issuance of the Trust Securities (as defined
herein) and holding as trust assets the Subordinated Debt Securities of the
Company. The TCIC Trusts are not currently subject to the informational
reporting requirements of the Exchange Act. The TCIC Trusts will become
subject to such requirements upon the effectiveness of the Registration
Statement of which this Prospectus forms a part, and will seek and expect to
receive exemptions therefrom.
2
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
The Company hereby incorporates in this Prospectus by reference the
following documents filed by the Company with the Commission (Commission File
No. 0-5550): (i) its Annual Report on Form 10-K for the year ended December
31, 1994, as amended by Form 10-K/A (Amendment 1), (ii) its Quarterly Reports
on Form 10-Q for the quarters ended March 31, 1995, June 30, 1995 and
September 30, 1995, as amended by Form 10-Q/A (Amendment No. 1); (iii) its
Current Reports on Form 8-K dated January 23, 1995, February 3, 1995, as
amended by Form 8-K/A (Amendment No. 1), April 6, 1995, April 20, 1995, as
amended by Form 8-K/A (Amendment No. 1), May 4, 1995, as amended by Form 8-K/A
(Amendment No. 1), July 26, 1995, August 1, 1995, September 13, 1995, December
18, 1995 and December 21, 1995 and (iv) the financial statements and notes
thereto of TeleCable Corporation as of December 31, 1993 and 1992 and for each
of the years in the two-year period ended December 31, 1993, included in the
Company's Current Report on Form 8-K dated August 26, 1994. All documents
filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the securities offered hereby shall be deemed
to be incorporated herein by reference and to be a part hereof from the
respective dates of the filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a Prospectus
is delivered, on the written or oral request of any such person, a copy of any
or all of the documents incorporated by reference herein, other than certain
exhibits to such documents. Such requests should be addressed to Stephen M.
Brett, Esq., Senior Vice President, TCI Communications, Inc., Terrace Tower
II, 5619 DTC Parkway, Englewood, Colorado 80111-3000; telephone (303) 267-
5500.
3
<PAGE>
THE COMPANY
The Company is principally engaged in the construction, acquisition,
ownership and operation of cable television systems. The Company is the
largest provider of cable television services in the United States, based on
the number of basic subscribers served by the Company and its subsidiaries and
affiliates at September 30, 1995.
The Company is a subsidiary of Tele-Communications, Inc. ("TCI") which, in
addition to the operations of the Company, is engaged in the provision of
satellite-delivered programming services to various distribution media,
principally cable television systems. In addition, TCI has interests in cable
and telecommunications operations and television programming in certain
international markets and has investments in companies and joint ventures
involved in developing and providing programming for new television and
telecommunications technologies. TCI will have no obligation or liability,
contingent or otherwise, under the Subordinated Debt Securities, the Preferred
Securities Guarantees or the Preferred Securities.
The Company is a Delaware corporation incorporated in 1968. Its executive
offices are located at Terrace Tower II, 5619 DTC Parkway, Englewood, Colorado
80111-3000; telephone (303) 267-5500.
THE TCI COMMUNICATIONS FINANCING TRUSTS
Each of TCI Communications Financing I, TCI Communications Financing II, TCI
Communications Financing III and TCI Communications Financing IV is a
statutory business trust formed under Delaware law pursuant to (i) a separate
declaration of trust, dated as of November 21, 1995, executed by the Company,
as sponsor for such trust (the "Sponsor"), and the TCIC Trustees (as defined
herein) as of that date of such trust and (ii) the filing of a separate
certificate of trust with the Delaware Secretary of State on November 21,
1995. The declaration of trust of each TCIC Trust will be amended and restated
in its entirety (as so amended and restated, the "Declaration") substantially
in the form filed as an exhibit to the Registration Statement of which this
Prospectus forms a part. Each TCIC Trust exists for the exclusive purposes of
(i) issuing the Preferred Securities and Common Securities representing
undivided beneficial interests in the assets of such Trust (the "Common
Securities" and, together with the Preferred Securities, the "Trust
Securities"), (ii) investing the gross proceeds of the Trust Securities in a
series of Subordinated Debt Securities and (iii) engaging in only those other
activities necessary or incidental thereto. All of the Common Securities will
be directly or indirectly owned by the Company. The Common Securities will
rank pari passu, and payments will be made thereon pro rata, with the
Preferred Securities except that upon an event of default under the
Declaration, the rights of the holders of the Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and
otherwise will be subordinated to the rights of the holders of the Preferred
Securities. The Company will, directly or indirectly, acquire Common
Securities in an aggregate liquidation amount equal to 3% of the total capital
of each TCIC Trust. Each TCIC Trust has a term of approximately 55 years, but
may earlier terminate as provided in the applicable Declaration. Each TCIC
Trust's business and affairs will be conducted by the trustees (the "TCIC
Trustees") appointed by the Company, as the direct or indirect holder of all
the Common Securities. The holder of the Common Securities will be entitled to
appoint, remove or replace any of, or increase or reduce the number of, the
TCIC Trustees of a TCIC Trust. The duties and obligations of such TCIC
Trustees shall be governed by the Declaration of such TCIC Trust. A majority
of the TCIC Trustees (the "Regular Trustees") of each TCIC Trust will be
persons who are employees or officers of or affiliated with the Company. One
TCIC Trustee of each TCIC Trust will be a financial institution which will be
unaffiliated with the Company and which shall act as property trustee and as
indenture trustee for purposes of the Trust Indenture Act of 1939 (the "Trust
Indenture Act"), pursuant to the terms set forth in a Prospectus Supplement
(the "Property Trustee"). In addition, unless the Property Trustee maintains a
principal place of business in the State of Delaware, and otherwise meets the
requirements of applicable law, another TCIC Trustee of each TCIC Trust will
have its principal place of business or reside in the State of Delaware (the
"Delaware Trustee"). The Company will pay all fees, expenses, debts and
obligations (other than the Trust Securities) related to the TCIC Trusts and
the offering of Trust Securities. The office of the Delaware Trustee for each
TCIC Trust in the State of Delaware is 400 White Clay Center, Route 273,
Newark, Delaware 19711. The principal place of business of each TCIC Trust
shall be c/o TCI Communications, Inc., 5619 DTC Parkway, Englewood, Colorado
80111 (telephone number (303) 267-5500).
4
<PAGE>
ACCOUNTING TREATMENT
The financial statements of each TCIC Trust will be consolidated with the
Company's financial statements, with the Preferred Securities of each TCIC
Trust shown on the Company's consolidated financial statements as Company-
obligated mandatorily redeemable preferred securities of subsidiary trusts.
The Company's financial statements will include a footnote that discloses,
among other things, that the sole asset of each TCIC Trust included therein
consists of Subordinated Debt Securities of the Company, and will specify the
principal amount, interest rate and maturity date of such Subordinated Debt
Securities.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of earnings to combined fixed
charges and preferred stock dividends from continuing operations of the
Company for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- ------------------
1990 1991 1992 1993 1994 1994 1995
---- ---- ----- ----- ----- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to combined
fixed charges and preferred
stock dividends (1)......... -- -- 1.02x 1.22x 1.21x 1.23x --
</TABLE>
- --------
(1) The ratio of earnings to combined fixed charges and preferred stock
dividends of the Company was 1.02, 1.22 and 1.21 for the years ended
December 31, 1992, 1993 and 1994, respectively, and 1.23 for the nine
months ended September 30, 1994. The ratio of earnings to combined fixed
charges and preferred stock dividends of the Company was less than 1.00
for the years ended December 31, 1990 and 1991, and for the nine months
ended September 30, 1995; thus, earnings available for combined fixed
charges and preferred stock dividends were inadequate to cover combined
fixed charges and preferred stock dividends for such periods. The amounts
of the coverage deficiencies were $399 million and $177 million for the
years ended December 31, 1990 and 1991, respectively, and $63 million for
the nine months ended September 30, 1995. For the ratio calculations,
earnings available for combined fixed charges and preferred stock
dividends consists of earnings (losses) before income taxes plus combined
fixed charges and preferred stock dividends (minus capitalized interest),
distributions from and (earnings) loss of less than 50%-owned affiliates
with debt not guaranteed by the Company (net of earnings not distributed
of less than 50%-owned affiliates), and minority interest in earnings
(losses) of consolidated subsidiaries (including an amount representing
the pretax earnings which would be required to cover preferred stock
dividend requirements of consolidated subsidiaries). Combined fixed
charges and preferred stock dividends consist of (i) interest (including
capitalized interest) on debt, including interest of less than 50%-owned
affiliates with debt guaranteed by the Company and excluding interest to
50%-owned affiliates, (ii) the Company's proportionate share of interest
of 50%-owned affiliates, (iii) that portion of rental expense the Company
believes to be representative of interest (one-third of rental expense),
(iv) amortization of debt expense, (v) that portion of minority interests
in earnings of consolidated subsidiaries that represent the amount of
pretax earnings that would be required to cover preferred stock dividend
requirements excluding similarly adjusted preferred stock dividend
requirements of consolidated subsidiaries to 50%-owned affiliates and (vi)
the amount representing the pretax earnings which would be required to
cover preferred stock dividend requirements of 50%-owned affiliates, other
than amounts payable to the Company. The Company has guaranteed the debt
of certain less than 50%-owned affiliates and certain other entities in
which it has an interest. Combined fixed charges and preferred stock
dividends of $710,000, $506,000, $2,517,000, $13,833,000 and $5,346,000
relating to such guarantees for the years ended December 31, 1990, 1991,
1992, 1993 and 1994, respectively, and combined fixed charges and
preferred stock dividends of $7,403,000 and $3,053,000 relating to such
guarantees for the nine months ended September 30, 1994 and 1995,
respectively, have not been included in combined fixed charges and
preferred stock dividends.
USE OF PROCEEDS
Each TCIC Trust will invest all proceeds received from the sale of its Trust
Securities in Subordinated Debt Securities.
The Company will use the net proceeds from the sale of the Subordinated Debt
Securities for general corporate purposes, including to redeem, repurchase or
otherwise repay outstanding indebtedness, or for such other purposes as may be
specified in an accompanying Prospectus Supplement.
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DESCRIPTION OF THE PREFERRED SECURITIES
Each TCIC Trust may issue only one series of Preferred Securities having
terms described in the Prospectus Supplement relating thereto. The Declaration
of each TCIC Trust authorizes the Regular Trustees of such TCIC Trust to issue
on behalf of such TCIC Trust one series of Preferred Securities. Each
Declaration will be qualified as an indenture under the Trust Indenture Act.
The Preferred Securities will have such terms, including distributions,
redemption, voting, liquidation rights and such other preferred, deferred or
other special rights or such restrictions as shall be set forth in each
Declaration or made part of each Declaration by the Trust Indenture Act.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a TCIC Trust for specific terms, including (i) the distinctive
designation of such Preferred Securities; (ii) the number of Preferred
Securities issued by such TCIC Trust; (iii) the annual distribution rate (or
method of determining such rate) for Preferred Securities issued by such TCIC
Trust and the date or dates upon which such distributions shall be payable;
provided, however, that distributions on such Preferred Securities shall be
payable on a quarterly basis to holders of such Preferred Securities as of a
record date in each quarter during which such Preferred Securities are
outstanding; (iv) whether distributions on Preferred Securities issued by such
TCIC Trust shall be cumulative, and, in the case of Preferred Securities
having such cumulative distribution rights, the date or dates or method of
determining the date or dates from which distributions on Preferred Securities
issued by such TCIC Trust shall be cumulative; (v) the amount or amounts which
shall be paid out of the assets of such TCIC Trust to purchase or redeem
Preferred Securities issued by such TCIC Trust and the price or prices at
which, the period or periods within which, and the terms and conditions upon
which, Preferred Securities issued by such TCIC Trust shall be purchased or
redeemed, in whole or in part, pursuant to such obligation; (vi) the voting
rights, if any, of Preferred Securities issued by such TCIC Trust in addition
to those required by law, including any requirement for the approval by the
holders of Preferred Securities, or of Preferred Securities issued by one or
more TCIC Trusts, or of both, as a condition to specified action or amendments
to the Declaration of such TCIC Trust; and (vii) any other relevant rights,
preferences, privileges, limitations or restrictions of Preferred Securities
issued by such TCIC Trust not inconsistent with the Declaration of such TCIC
Trust or with applicable law. All Preferred Securities offered hereby will be
guaranteed by the Company to the extent set forth below under "Description of
the Preferred Securities Guarantees." Any applicable United States federal
income tax considerations applicable to any offering of Preferred Securities
will be described in the Prospectus Supplement relating thereto.
In connection with the issuance of Preferred Securities, each TCIC Trust
will issue one series of Common Securities. The Declaration of each TCIC Trust
authorizes the Regular Trustees of such trust to issue on behalf of such TCIC
Trust one series of Common Securities having such terms including
distributions, redemption, voting, liquidation rights or such restrictions as
shall be set forth therein. The terms of the Common Securities issued by a
TCIC Trust will be substantially identical to the terms of the Preferred
Securities issued by such Trust and the Common Securities will rank pari
passu, and payments will be made thereon pro rata, with the Preferred
Securities except that, upon an event of default under the Declaration, the
rights of the holders of the Common Securities to payment in respect of
distributions and payments upon liquidation, redemption and otherwise will be
subordinated to the rights of the holders of the Preferred Securities. All of
the Common Securities of a TCIC Trust will be directly or indirectly owned by
the Company.
PROPOSED TAX LAW CHANGES
Each TCIC Trust may invest the proceeds from the issuance of its Preferred
Securities and Common Securities in a series of Subordinated Debt Securities.
On December 7, 1995, the U.S. Treasury Department proposed a series of tax law
changes that would, among other things, prevent companies from deducting
interest on debt instruments with a maturity of more than 40 years and on
instruments with a maximum term of more than 20 years which are not shown as
indebtedness on the consolidated balance sheet of the issuer. If the Company
were to issue to a TCIC Trust a series of Subordinated Debt Securities that
had a maximum term of more than 20 years and which the Company did not show as
indebtedness on its consolidated balance sheet (see "Accounting Treatment"),
or if such Subordinated Debt Securities were issued with a maturity of more
than 40 years (or were otherwise within the scope of these proposals), then
the Treasury Department's proposals, if enacted, would prevent the Company
from deducting interest paid on such Subordinated Debt Securities. On
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December 19, 1995, the Treasury Department announced that, based on input it
had received to date, it would recommend to Congress that transitional relief
from the proposed changes be granted for financial instruments that are issued
pursuant to a registration statement that was filed with the Securities and
Exchange Commission on or before December 7, 1995. In the case of a "shelf"
registration statement (which registers securities for an offering to be made
on a continuous or delayed basis in the future), financial instruments would
be eligible for transitional relief if the issuer had filed a prospectus
supplement (including a preliminary prospectus supplement) to the registration
statement on or before December 7, 1995. Financial instruments would be
eligible for this transitional relief only to the extent of the aggregate
amount of such instruments described in the registration statement (or
prospectus supplement or preliminary prospectus supplement) as of December 7,
1995. To the extent a preliminary prospectus supplement included in such a
registration statement did not state a maximum amount to be issued, the amount
to be offered may be established by other contemporaneous written evidence. Of
the $1,000,000,000 in Offered Securities registered under the Registration
Statement of which this Prospectus forms a part, $500,000,000 will be issued
pursuant to a Prospectus Supplement that is eligible for this transitional
relief. The Company cannot predict whether the proposed tax law changes will
become law, but will describe the effect of any proposed or enacted tax law
changes arising after the date of this Prospectus in the Prospectus Supplement
relating to any securities offered thereby. The December 7, 1995 proposed tax
law changes would not alter the United States federal income tax consequences
of the purchase, ownership and disposition of Preferred Securities or
Subordinated Debt Securities.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees which will be executed and delivered by the Company for
the benefit of the holders from time to time of Preferred Securities. Each
Preferred Securities Guarantee will be qualified as an indenture under the
Trust Indenture Act. The Bank of New York will act as indenture trustee under
each Preferred Securities Guarantee (the "Preferred Guarantee Trustee"). The
terms of each Preferred Securities Guarantee will be those set forth in such
Preferred Securities Guarantee and those made part of such Preferred
Securities Guarantee by the Trust Indenture Act. The following summary does
not purport to be complete and is subject in all respects to the provisions
of, and is qualified in its entirety by reference to, the form of Preferred
Securities Guarantee, which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and the Trust Indenture Act.
Each Preferred Securities Guarantee will be held by the Preferred Guarantee
Trustee for the benefit of the holders of the Preferred Securities of the
applicable TCIC Trust.
GENERAL
Pursuant to each Preferred Securities Guarantee, the Company will
irrevocably and unconditionally agree, to the extent set forth therein, to pay
in full, to the holders of the Preferred Securities issued by a TCIC Trust,
the Guarantee Payments (as defined herein) (except to the extent paid by such
TCIC Trust), as and when due, regardless of any defense, right to set-off or
counterclaim which such TCIC Trust may have or assert. The following payments
with respect to Preferred Securities issued by a TCIC Trust, to the extent not
paid by such TCIC Trust (the "Guarantee Payments"), will be subject to the
Preferred Securities Guarantee thereon (without duplication): (i) any accrued
and unpaid distributions which are required to be paid on such Preferred
Securities, to the extent such TCIC Trust shall have funds available therefor,
(ii) the redemption price, including all accrued and unpaid distributions to
the redemption date (the "Redemption Price"), to the extent such TCIC Trust
has funds available therefor, with respect to any Preferred Securities called
for redemption by such TCIC Trust and (iii) upon a voluntary or involuntary
termination, dissolution or winding-up of such TCIC Trust (other than in
connection with the distribution of Subordinated Debt Securities to the
holders of Preferred Securities in exchange for their Preferred Securities),
the lesser of (a) the aggregate of the liquidation amount and all accrued and
unpaid distributions on such Preferred Securities to the date of payment and
(b) the amount of assets of such TCIC Trust remaining available for
distribution to holders of such Preferred Securities in liquidation of such
TCIC Trust. The Company's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Company to the
holders of Preferred Securities or by causing the applicable TCIC Trust to pay
such amounts to such holders.
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Each Preferred Securities Guarantee will be a full and unconditional
guarantee with respect to the Preferred Securities issued by the applicable
TCIC Trust from the time of issuance of such Preferred Securities, but will
not apply to any payment of distributions when the TCIC Trust does not have
sufficient funds available to make such payment or distributions. If the
Company does not make interest payments on the Subordinated Debt Securities
purchased by a TCIC Trust, such TCIC Trust will not pay distributions on the
Preferred Securities issued by such TCIC Trust and will not have funds
available therefor. See "Description of the Subordinated Debt Securities--
Certain Covenants."
The Company has also agreed separately to guarantee the obligations of the
TCIC Trusts with respect to the Common Securities (the "Common Securities
Guarantees") to the same extent as the Preferred Securities Guarantee, except
that upon the occurrence and during the continuation of an event of default
under the Indenture (as hereinafter defined), holders of Preferred Securities
shall have priority over holders of Common Securities with respect to
distributions and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In each Preferred Securities Guarantee, the Company will covenant that, so
long as any Preferred Securities issued by the applicable TCIC Trust remain
outstanding, if there shall have occurred any event that would constitute an
event of default under such Preferred Securities Guarantee or the Declaration
of such TCIC Trust, then (a) the Company shall not declare or pay any dividend
on, make any distributions with respect to, or redeem, purchase or make a
liquidation payment with respect to, any of its capital stock, (b) the Company
shall not make any payment of interest, principal or premium, if any, on or
repay, repurchase or redeem any debt securities issued by the Company which
rank pari passu with or junior to such Subordinated Debt Securities and (c)
the Company shall not make any guarantee payments (other than pursuant to the
Preferred Security Guarantees) with respect to the foregoing. However, each
Preferred Security Guarantee will except from the foregoing covenant any
dividend, redemption, liquidation, interest, principal or guarantee payment by
the Company where the payment is made by way of (i) securities (including
capital stock) that rank junior to the securities on which such dividend,
redemption, liquidation, interest, principal or guarantee payment is being
made or (ii) securities (including capital stock) of TCI.
MODIFICATION OF THE PREFERRED SECURITIES GUARANTEES; ASSIGNMENT
Except with respect to any changes which do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required),
each Preferred Securities Guarantee may be amended only with the prior
approval of the holders of not less than 66 2/3% in liquidation amount of the
outstanding Preferred Securities issued by the applicable TCIC Trust. The
manner of obtaining any such approval of holders of such Preferred Securities
will be as set forth in an accompanying Prospectus Supplement. All guarantees
and agreements contained in a Preferred Securities Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Company
and shall inure to the benefit of the holders of the Preferred Securities then
outstanding of the applicable TCIC Trust.
TERMINATION
Each Preferred Securities Guarantee will terminate as to the Preferred
Securities issued by the applicable TCIC Trust upon full payment of the
Redemption Price of all Preferred Securities of such TCIC Trust, upon
distribution of the Subordinated Debt Securities held by such TCIC Trust to
the holders of the Preferred Securities of such TCIC Trust in liquidation of
such holders' interest in such Preferred Securities or upon full payment of
the amounts payable in accordance with the Declaration of such TCIC Trust upon
liquidation of such TCIC Trust. Each Preferred Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Preferred Securities issued by the applicable TCIC Trust
must restore payment of any sums paid under such Preferred Securities or such
Preferred Securities Guarantee.
EVENTS OF DEFAULT
An event of default under a Preferred Securities Guarantee will occur upon
the failure of the Company to perform any of its payment or other obligations
thereunder.
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The holders of a majority in liquidation amount of the Preferred Securities
relating to such Preferred Securities Guarantee have the right to direct the
time, method and place of conducting any proceeding for any remedy available
to the Preferred Guarantee Trustee in respect of the such Preferred Securities
Guarantee or to direct the exercise of any trust or power conferred upon the
Preferred Guarantee Trustee under such Preferred Securities Guarantee. If the
Preferred Guarantee Trustee fails to enforce such Preferred Securities
Guarantee, any holder of Preferred Securities relating to such Preferred
Securities Guarantee may institute a legal proceeding directly against the
Company to enforce the Preferred Guarantee Trustee's rights under such
Preferred Securities Guarantee, without first instituting a legal proceeding
against the relevant TCIC Trust, the Preferred Guarantee Trustee or any other
person or entity. In addition, any record holder of Preferred Securities
relating to such Preferred Securities Guarantee shall have the right, which is
absolute and unconditional, to proceed directly against the Company to obtain
Guarantee Payments thereunder, without first waiting to determine if the
Preferred Guarantee Trustee has enforced such Preferred Security Guarantee or
instituting a legal proceeding against the TCIC Trust which issued such
Preferred Securities, the Preferred Guarantee Trustee or any other person or
entity.
STATUS OF THE PREFERRED SECURITIES GUARANTEES
The Preferred Securities Guarantees will constitute unsecured obligations of
the Company and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Company, (ii) pari passu with the most senior
preferred or preference stock now or hereafter issued by the Company and with
any guarantee now or hereafter entered into by the Company in respect of any
preferred or preference stock of any subsidiary or affiliate of the Company
and (iii) senior to the Company's common stock. The terms of the Preferred
Securities provide that each holder of Preferred Securities issued by such
TCIC Trust by acceptance thereof agrees to the subordination provisions and
other terms of the Preferred Securities Guarantee relating thereto.
The Preferred Securities Guarantees will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without instituting a legal proceeding against any other person or
entity).
The Company's obligations under the Declaration for each TCIC Trust, the
Preferred Securities Guarantee with respect to the Preferred Securities issued
by such Trust, the Subordinated Debt Securities purchased by such TCIC Trust
and the Indenture, in the aggregate, will provide a full and unconditional
guarantee by the Company of payments due on the Preferred Securities issued by
such TCIC Trust.
INFORMATION CONCERNING THE PREFERRED GUARANTEE TRUSTEE
The Preferred Guarantee Trustee, prior to the occurrence of a default with
respect to a Preferred Securities Guarantee, undertakes to perform only such
duties as are specifically set forth in such Preferred Securities Guarantee
and, after default, shall exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject to
such provisions, the Preferred Guaranteed Trustee is under no obligation to
exercise any of the powers vested in it by the Preferred Securities Guarantee
at the request of any holder of Preferred Securities, unless offered
reasonable indemnity against the costs, expenses and liabilities which might
be incurred thereby.
The Company and certain of its affiliates maintain deposit accounts and
banking relationships with the Preferred Guarantee Trustee. The Preferred
Guarantee Trustee serves as trustee under other indentures pursuant to which
unsecured debt securities of the Company are outstanding.
GOVERNING LAW
The Preferred Securities Guarantees will be governed by and construed in
accordance with the internal laws of the State of New York.
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DESCRIPTION OF THE SUBORDINATED DEBT SECURITIES
Subordinated Debt Securities may be issued from time to time in one or more
series under an Indenture, to be dated as of January 29, 1996 (the
"Indenture"), among the Company and The Bank of New York, as Trustee (the
"Debt Trustee"). The terms of the Subordinated Debt Securities will include
those stated in the Indenture and in a Supplemental Indenture (as defined
below) and those made part of the Indenture by reference to the Trust
Indenture Act. The following summary does not purport to be complete and is
subject in all respects to the provisions of, and is qualified in its entirety
by reference to, the Indenture, which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part, and the Trust
Indenture Act. Whenever particular provisions or defined terms in the
Indenture are referred to herein, such provisions or defined terms are
incorporated by reference herein.
GENERAL
The Subordinated Debt Securities will be unsecured, subordinated obligations
of the Company. The Indenture does not limit the aggregate principal amount of
Subordinated Debt Securities which may be issued thereunder and provides that
the Subordinated Debt Securities may be issued from time to time in one or
more series. The Subordinated Debt Securities are issuable in one or more
series pursuant to an indenture supplemental to the Indenture or a resolution
of the Company's Board of Directors or a special committee thereof (each, a
"Supplemental Indenture").
In the event Subordinated Debt Securities are issued to a TCIC Trust or a
trustee of such Trust in connection with the issuance of Trust Securities by
such TCIC Trust, such Subordinated Debt Securities subsequently may be
distributed pro rata to the holders of such Trust Securities in connection
with the termination of such TCIC Trust upon the occurrence of certain events
described in the Prospectus Supplement relating to such Trust Securities. Only
one series of Subordinated Debt Securities will be issued to a TCIC Trust or a
trustee of such Trust in connection with the issuance of Trust Securities by
such TCIC Trust.
Reference is made to the accompanying Prospectus Supplement for the
following terms of the series of Subordinated Debt Securities being offered
thereby: (i) the specific title of such Subordinated Debt Securities; (ii) any
limit on the aggregate principal amount of such Subordinated Debt Securities;
(iii) the date or dates on which the principal of such Subordinated Debt
Securities is payable and the right, if any, to extend such date or dates;
(iv) the rate or rates at which such Subordinated Debt Securities will bear
interest or the method of determination of such rate or rates; (v) the date or
dates from which such interest shall accrue, the interest payment dates on
which such interest will be payable or the manner of determination of such
interest payment dates and the record dates for the determination of holders
to whom interest is payable on any such interest payment dates; (vi) the
right, if any, to extend the interest payment periods and the duration of such
extension; (vii) the period or periods within which, the price or prices at
which, and the terms and conditions upon which, such Subordinated Debt
Securities may be redeemed, in whole or in part, at the option of the Company;
(viii) the right and/or obligation, if any, of the Company to redeem or
purchase such Subordinated Debt Securities pursuant to any sinking fund or
analogous provisions or at the option of the holder thereof and the period or
periods during which, the price or prices at which, and the terms and
conditions upon which, such Subordinated Debt Securities shall be redeemed or
purchased, in whole or part, pursuant to such right and/or obligation; (ix)
the terms of subordination; (x) if other than denominations of $25 or any
integral multiple thereof, the denominations in which such Subordinated Debt
Securities shall be issuable; (xi) any and all other terms with respect to
such series; and (xii) whether such Subordinated Debt Securities are issuable
as a global security, and in such case, the identity of the depositary.
The Indenture does not contain any provisions that afford holders of
Subordinated Debt Securities protection in the event of a highly leveraged
transaction involving the Company.
SUBORDINATION
The Subordinated Debt Securities will be subordinated and junior in right of
payment to certain other indebtedness of the Company to the extent set forth
in the accompanying Prospectus Supplement.
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CERTAIN COVENANTS
If Subordinated Debt Securities are issued to a TCIC Trust or a trustee of
such Trust in connection with the issuance of Trust Securities by such TCIC
Trust and (i) there shall have occurred and be continuing any event that would
constitute an Event of Default under the Indenture or (ii) the Company shall
be in default with respect to its payment of any obligations under the related
Preferred Securities Guarantee or Common Securities Guarantee, and such
default shall be continuing, then (a) the Company shall not declare or pay any
dividend on, make any distributions with respect to, or redeem, purchase or
make a liquidation payment with respect to, any of its capital stock, (b) the
Company shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any debt securities issued by the Company
which rank pari passu with or junior to such Subordinated Debt Securities and
(c) the Company shall not make any guarantee payments (other than pursuant to
the Preferred Security Guarantees) with respect to the foregoing.
If Subordinated Debt Securities are issued to a TCIC Trust or a trustee of
such Trust in connection with the issuance of Trust Securities by such TCIC
Trust and the Company shall have given notice of its election to defer
payments of interest on such Subordinated Debt Securities by extending the
interest payment period as provided in the Indenture and such period, or any
extension thereof, shall be continuing, then (a) the Company shall not declare
or pay any dividend on, make any distributions with respect to, or redeem,
purchase or make a liquidation payment with respect to, any of its capital
stock, (b) the Company shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt securities issued
by the Company which rank pari passu with or junior to such Subordinated Debt
Securities and (c) the Company shall not make any guarantee payments (other
than pursuant to the Preferred Security Guarantees) with respect to the
foregoing.
Notwithstanding the foregoing restrictions, the Company will be permitted,
in any event, to make dividend, redemption, liquidation and guarantee payments
on capital stock, and interest, principal, redemption and guarantee payments
on debt securities issued by the Company ranking pari passu with or junior to
Subordinated Debt Securities, where the payment is made by way of (i)
securities (including capital stock) that rank junior to the securities on
which such payment is being made or (ii) securities (including capital stock)
of TCI.
In the event Subordinated Debt Securities are issued to a TCIC Trust or a
trustee of such Trust in connection with the issuance of Trust Securities of
such TCIC Trust, for so long as such Trust Securities remain outstanding, the
Company will covenant (i) to directly or indirectly maintain 100% ownership of
the Common Securities of such TCIC Trust; provided, however, that any
permitted successor of the Company under the Indenture may succeed to the
Company's ownership of such Common Securities, (ii) not to cause, as sponsor
of such TCIC Trust, or to permit, as holder of the Common Securities of such
TCIC Trust, the termination, dissolution or winding-up of such TCIC Trust,
except in connection with a distribution of the Subordinated Debt Securities
as provided in the Declaration and in connection with certain mergers,
consolidations or amalgamations, (iii) to use its reasonable efforts to cause
such TCIC Trust (a) to remain a statutory business trust, except in connection
with the distribution of Subordinated Debt Securities to the holders of Trust
Securities in liquidation of such TCIC Trust, the redemption of all of the
Trust Securities of such TCIC Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of such TCIC Trust, and
(b) to otherwise continue not to be classified as an association taxable as a
corporation or partnership for United States federal income tax purposes and
(iv) to use reasonable efforts to cause each holder of Trust Securities of
such TCIC Trust to be treated as owning an undivided beneficial interest in
the Subordinated Debt Securities issued to such TCIC Trust.
FORM, EXCHANGE, REGISTRATION AND TRANSFER
Subordinated Debt Securities of each series will be issued in registered
form and in either certificated form or represented by one or more global
securities. If not represented by one or more global securities, Subordinated
Debt Securities may be presented for registration of transfer (with the form
of transfer endorsed thereon duly executed) or exchange at the office of the
Debt Registrar or at the office of any transfer agent designated by the
Company for such purpose with respect to any series of Subordinated 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. Such transfer or exchange will be effected upon
the Debt
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Register or such transfer agent, as the case may be, being satisfied with the
documents of title and identity of the person making the request. The Company
has appointed the Debt Trustee as Debt Registrar with respect to each series
of Subordinated Debt Securities. If a Prospectus Supplement refers to any
transfer agents (in addition to the Debt Registrar) initially designated by
the Company with respect to any series of Subordinated Debt Securities, the
Company may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent acts,
except that the Company will be required to maintain a transfer agent in each
Place of Payment for such series. The Company may at any time designate
additional transfer agents with respect to any series of Subordinated Debt
Securities.
In the event of any redemption in part, the Company shall not be required to
(i) issue, register the transfer of or exchange any Subordinated Debt
Securities during a period beginning at the opening of business 15 days before
any selection for redemption of Subordinated Debt Securities of like tenor and
of the series of which such Subordinated Debt Securities are a part, and
ending at the close of business on the earliest date on which the relevant
notice of redemption is deemed to have been given to all holders of
Subordinated Debt Securities of like tenor and of such series to be redeemed
and (ii) register the transfer of or exchange any Subordinated Debt Securities
so selected for redemption, in whole or in part, except the unredeemed portion
of any Subordinated Debt Securities being redeemed in part.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of and premium, if any, on any Subordinated Debt Securities will
be made only against surrender to the Paying Agent of such Subordinated Debt
Securities. Unless otherwise indicated in an applicable Prospectus Supplement,
principal of, any premium, if any, and interest, if any, on Subordinated Debt
Securities will be payable, subject to any applicable laws and regulations, at
the office of such Paying Agent or Paying Agents as the Company may designate
from time to time, 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 as shall appear in the Debt Register with respect to
such Subordinated Debt Securities. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of interest on a Subordinated Debt Security on
any Interest Payment Date will be made to the person in whose name such
Subordinated Debt Security (or predecessor security) is registered at the
close of business on the Regular Record Date for such interest payment.
The Debt Trustee will act as Paying Agent with respect to each series of
Subordinated Debt Securities. The Company may at any time designate additional
Paying Agents or rescind the designation of any Paying Agents or approve a
change in the office through which any Paying Agent acts, except that the
Company will be required to maintain a Paying Agent in each Place of Payment
for each series of Subordinated Debt Securities.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or premium or interest, if any, on any Subordinated Debt
Securities of any series which remain unclaimed at the end of two years after
such principal or premium or interest, if any, shall have become due and
payable will be repaid to the Company and the holder of such Subordinated Debt
Securities will thereafter look only to the Company for payment thereof.
GLOBAL SECURITIES
If any Subordinated Debt Securities of a series are represented by one or
more global securities (each, a "Global Security"), the applicable Prospectus
Supplement will describe the circumstances, if any, under which beneficial
owners of interests in any such Global Security may exchange such interests
for Subordinated Debt Securities of such series and of like tenor and
principal amount in any authorized form and denomination. Principal of and any
premium, if any, and interest on a Global Security will be payable in the
manner described in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any portion
of a series of Subordinated Debt Securities to be represented by a Global
Security will be described in the applicable Prospectus Supplement.
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MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting the Company and the Debt
Trustee, with the consent of the holders of not less than a majority in
principal amount of the Subordinated Debt Securities of each series which are
affected by the modification, to modify the Indenture or any supplemental
indenture affecting that series or the rights of the holders of that series of
Subordinated Debt Securities; provided that no such modification may, without
the consent of the holder of each outstanding Subordinated Debt Security
affected thereby, (i) extend the fixed maturity of any Subordinated Debt
Securities of any series, or reduce the principal amount thereof, or reduce
the rate or extend the time of payment of interest thereon, or reduce any
premium payable upon the redemption thereof, without the consent of the holder
of each Subordinated Debt Security so affected or (ii) reduce the percentage
of Subordinated Debt Securities the holders of which are required to consent
to any such supplemental indenture, without the consent of the holders of each
then outstanding Subordinated Debt Security affected thereby.
In addition, the Company and the Debt Trustee may execute, without the
consent of any holder of Subordinated Debt Securities, any supplemental
indenture for certain other usual purposes including the creation of any new
series of Subordinated Debt Securities.
EVENTS OF DEFAULT
With respect to a particular series of Subordinated Debt Securities, the
Indenture provides (or the Supplemental Indenture for such series will
provide) that any one or more of the following described events which has
occurred and is continuing constitutes an "Event of Default" with respect to
such series of Subordinated Debt Securities:
(a) failure for 30 days to pay interest on the Subordinated Debt
Securities of that series, including any Additional Interest in respect
thereof, when due; provided, however, that a valid extension of the
interest payment period by the Company shall not constitute a default in
the payment of interest for this purpose; or
(b) failure to pay principal or premium, if any, on the Subordinated Debt
Securities of that series when due whether at maturity, upon redemption, by
declaration or otherwise, or to make any sinking fund payment with respect
to that series; or
(c) failure to observe or perform any other covenant (other than those
specifically relating to another series) contained in the Indenture for 90
days after written notice to the Company from the Debt Trustee or the
holders of at least 25% in principal amount of the outstanding Subordinated
Debt Securities of that series; or
(d) certain events of bankruptcy, insolvency or reorganization of the
Company; or
(e) in the event Subordinated Debt Securities are issued to a TCIC Trust
or a trustee of such Trust in connection with the issuance of Trust
Securities by such TCIC Trust, the voluntary or involuntary dissolution,
winding-up or termination of such TCIC Trust, except in connection with the
distribution of Subordinated Debt Securities to the holders of Trust
Securities in liquidation of such TCIC Trust, the redemption of all of the
Trust Securities of such TCIC Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration of such TCIC Trust.
The holders of a majority in aggregate outstanding amount of any series of
Subordinated Debt Securities have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debt
Trustee for the series. The Debt Trustee or the holders of not less than 25%
in aggregate outstanding principal amount of any particular series of the
Subordinated Debt Securities may declare the principal immediately due and
payable upon an Event of Default with respect to such series, but the holders
of a majority in aggregate outstanding principal amount of such series may
annul such declaration and waive the default with respect to such series if
the Event of Default has been cured and a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration and
any applicable premium has been deposited with the Debt Trustee. If an Event
of Default results from the failure of the Company to pay when due principal
of or interest on the Subordinated Debt Securities issued to a TCIC Trust,
during the continuance of such an Event of Default a holder of Preferred
Securities issued by such TCIC Trust may immediately institute a legal
proceeding
13
<PAGE>
directly against the Company to obtain payment of such principal or interest
on Subordinated Debt Securities having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities owned of record by
such holder.
The holders of a majority in aggregate outstanding principal amount of any
series of Subordinated Debt Securities affected thereby may, on behalf of the
holders of all the Subordinated Debt Securities of such series, waive any past
default, except (i) a default in the payment of principal, premium, if any, or
interest (unless such default has been cured and a sum sufficient to pay all
matured installments of interest and principal due otherwise than by
acceleration and any applicable premium has been deposited with the Debt
Trustee) or (ii) a default in the covenants described in the first or second
paragraph under "--Certain Covenants" above.
CONSOLIDATION, MERGER AND SALE
The Indenture does not contain any covenant which restricts the ability of
the Company to merger or consolidate with or into any other corporation, sell
or convey all or substantially all of its assets to any person, firm or
corporation or otherwise engage in restructuring transactions.
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, the Company will be discharged from any
and all obligations in respect of the Subordinated Debt Securities of any
series (except in each case for certain obligations to register the transfer
or exchange of Subordinated Debt Securities, replace, stolen, lost or
mutilated Subordinated Debt Securities, maintain paying agencies and hold
moneys for payment in trust) if the Company deposits with the Debt Trustee, in
trust, moneys or Government Obligations in an amount sufficient to pay all the
principal of, and interest on, the Subordinated Debt Securities of such series
on the dates such payments are due in accordance with the terms of such
Subordinated Debt Securities.
GOVERNING LAW
The Indenture and the Subordinated Debt Securities will be governed by, and
construed in accordance with, the internal laws of the State of New York.
INFORMATION CONCERNING THE DEBT TRUSTEE
The Debt Trustee, prior to default, undertakes to perform only such duties
as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Debt Trustee
is under no obligation to exercise any of the powers vested in it by the
Indenture at the request of any holder of Subordinated Debt Securities, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Debt Trustee is not required
to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Debt Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
The Company and certain of its affiliates maintain a deposit account and
banking relationship with the Debt Trustee. The Debt Trustee serves as trustee
under other indentures pursuant to which unsecured debt securities of the
Company are outstanding.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned
subsidiary of the Company; provided, that in the event of any such assignment,
the Company will remain liable for all of its obligations thereunder. Subject
to the foregoing, the Indenture will be binding upon and inure to the benefit
of the parties thereto and their respective successors and assigns. The
Indenture provides that it may not otherwise be assigned by the parties
thereto.
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<PAGE>
PLAN OF DISTRIBUTION
The Company may sell any series of Subordinated Debt Securities and the TCIC
Trusts may sell the Preferred Securities in one or more of the following ways
from time to time: (i) to or through underwriters or dealers, (ii) directly to
purchasers or (iii) through agents. The Prospectus Supplement with respect to
any Offered Securities will set forth (i) the terms of the offering of such
Offered Securities, including the name or names of any underwriters, dealers
or agents, (ii) the purchase price of such Offered Securities and the proceeds
to the Company or the applicable TCIC Trust, as the case may be, from such
sale, (iii) any underwriting discounts and commissions or agency fees and
other item's constituting underwriters' or agents' compensation, (iv) any
initial public offering prices, (v) any discounts or concessions allowed or
reallowed or paid to dealers and (vi) any securities exchange or other
securities market on which such Offered Securities may be listed.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale. The Offered Securities may be offered to the public either through
underwriting syndicates represented by one or more managing underwriters or
directly by one or more firms acting as underwriters. The underwriter or
underwriters with respect to a particular underwritten offering of Offered
Securities will be named in the Prospectus Supplement relating to such
offering and, if any underwriting syndicate is used, the managing underwriter
or underwriters will be set forth on the cover of the Prospectus Supplement.
Unless otherwise set forth in the Prospectus Supplement relating thereto, the
obligations of the underwriters to purchase the Offered Securities will be
subject to certain conditions precedent, and the underwriters will be
obligated to purchase all the Offered Securities if any are purchased.
If dealers are utilized in the sale of Offered Securities, the Company or
the applicable TCIC Trust will sell such Offered Securities to the dealers as
principals. The dealers may then resell such Offered Securities to the public
at varying prices to be determined by such dealers at the time of resale. The
names of the dealers and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
Any series of Subordinated Debt Securities may be sold from time to time
either directly by the Company or through agents designated by the Company.
Any series of Preferred Securities may be sold from time to time either
directly by the applicable TCIC Trust or by agents of the applicable TCIC
Trust designated by such TCIC Trust. Any agent involved in the offer or sale
of the Offered Securities in respect to which this Prospectus is delivered
will be named, and any commissions payable by the Company or the applicable
TCIC Trust to such agent will be set forth, in the Prospectus Supplement
relating thereto. Unless otherwise indicated in the Prospectus Supplement, any
such agent will be acting on a best efforts basis for the period of its
appointment.
The Subordinated Debt Securities may be sold directly by the Company and the
Preferred Securities may be sold directly by the applicable TCIC Trust 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 sales will be described in the Prospectus Supplement
relating thereto.
If so indicated in the Prospectus Supplement, the Company or the applicable
TCIC Trust will authorize agents, underwriters or dealers to solicit offers
from certain types of institutions to purchase Offered Securities from the
Company or such TCIC Trust 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 only to those conditions set forth in the Prospectus Supplement, and
the Prospectus Supplement will set forth the commission payable for
solicitation of such contracts.
Underwriters, dealers and agents may be entitled under agreements entered
into with the Company or the applicable TCIC Trust (or both) to
indemnification by the Company or such TCIC Trust (or both) against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which such underwriters, dealers or
agents may be required to make in respect thereof. Underwriters, dealers and
agents may be customers of, engage in transactions with, or perform services
for the Company and its affiliates in the ordinary course of business.
15
<PAGE>
Each series of Offered Securities will be a new issue of securities and will
have no established trading market. Any underwriters to whom Offered
Securities are sold by the Company or by a TCIC Trust for public offering and
sale may make a market in such Offered Securities, but such underwriters will
not be obligated to do so and may discontinue any market making at any time
without notice. The Offered Securities may or may not be listed on a national
securities exchange. No assurance can be given that there will be a market for
the Offered Securities.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the TCIC Trusts by Richards,
Layton & Finger, special Delaware counsel to the TCIC Trusts. The validity of
the Subordinated Debt Securities and the Preferred Securities Guarantees will
be passed upon on behalf of the Company by Baker & Botts, LLP, New York, New
York. Jerome H. Kern, a partner of Baker & Botts, LLP, is a director of Tele-
Communications, Inc., which owns all of the common stock of the Company.
Certain legal matters will be passed upon on behalf of any underwriters by
Brown & Wood, New York, New York.
EXPERTS
The consolidated balance sheets of the Company and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of
operations, stockholder's(s') equity, and cash flows for each of the years in
the three year period ended December 31, 1994, and the related financial
statement schedules, which appear in the Company's Annual Report on Form 10-K
for the year ended December 31, 1994, as amended, have been incorporated by
reference herein in reliance upon the reports, dated March 27, 1995, of KPMG
Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing. The reports of KPMG Peat Marwick LLP covering the December 31,
1994 consolidated financial statements refer to the adoption of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," in 1994.
The financial statements of Tele-Cable Corporation as of December 31, 1993
and 1992 and for each of the two years in the period ended December 31, 1993,
incorporated in this Prospectus by reference to the Company's Current Report
on Form 8-K dated August 26, 1994, have been so incorporated in reliance on
the report of Price Waterhouse L.L.P., independent accountants, given on the
authority of said firm as experts in auditing and accounting.
16
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR IN-
CORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPEC-
TUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RE-
LIED UPON AS HAVING BEEN AUTHORIZED BY TCI COMMUNICATIONS, INC., TCI COMMUNI-
CATIONS FINANCING II OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PRO-
SPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF TCI COMMUNICATIONS, INC. OR TCI COMMUNICATIONS FINANCING II SINCE
THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTI-
TUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SO-
LICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... S-4
Risk Factors............................................................. S-6
The Company.............................................................. S-11
The Trust................................................................ S-11
Selected Financial Information of the Company............................ S-13
Capitalization of the Company............................................ S-15
Accounting Treatment..................................................... S-15
Use of Proceeds.......................................................... S-15
Description of the Preferred Securities.................................. S-16
Description of the Preferred Securities Guarantee........................ S-27
Description of the Subordinated Debt Securities.......................... S-29
Effect of Obligations Under the Subordinated Debt Securities and the
Preferred Securities Guarantee.......................................... S-37
Certain Federal Income Tax Consequences.................................. S-38
Underwriting............................................................. S-42
Legal Matters............................................................ S-43
Experts.................................................................. S-43
Definitions.............................................................. S-44
Prospectus
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 3
The Company.............................................................. 4
The TCI Communications Financing Trusts.................................. 4
Accounting Treatment..................................................... 5
Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends............................................................... 5
Use of Proceeds.......................................................... 5
Description of the Preferred Securities.................................. 6
Description of the Preferred Securities Guarantees....................... 7
Description of the Subordinated Debt Securities.......................... 10
Plan of Distribution..................................................... 15
Legal Matters............................................................ 16
Experts.................................................................. 16
</TABLE>
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20,000,000
PREFERRED SECURITIES
TCI COMMUNICATIONS
FINANCING II
% TRUST PREFERRED SECURITIES
GUARANTEED TO THE EXTENT SET
FORTH HEREIN BY
TCI COMMUNICATIONS, INC.
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PROSPECTUS SUPPLEMENT
May , 1996
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LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
A.G. EDWARDS & SONS, INC.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
Incorporated
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
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