<PAGE>
FILED PURSUANT TO RULE NO. 424(b)(5)
REGISTRATION NO. 333-16985 AND 333-16985-02
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 WITHOUT THE DELIVERY OF A FINAL PROSPECTUS +
+SUPPLEMENT AND PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND THE 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 MARCH 17, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 21, 1997)
8,000,000 PREFERRED SECURITIES
TCI COMMUNICATIONS FINANCING IV
% TRUST PREFERRED SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED 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 IV, 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") representing common undivided beneficial
interests in the assets of the Trust. The Trust exists for the exclusive
(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") under the symbol "TFI PrB." 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........................... $200,000,000 (3) $200,000,000
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Plus accrued distributions, if any, from March , 1997.
(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
100,000 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
March , 1997.
------------
JOINT BOOK-RUNNING MANAGERS
LEHMAN BROTHERS MERRILL LYNCH & CO.
------------
BEAR, STEARNS & CO. INC.
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
------------
The date of this Prospectus Supplement is March , 1997.
<PAGE>
(continued from previous page)
purposes of issuing and selling the Trust Securities and investing the
proceeds thereof in an equivalent principal amount of % Subordinated
Deferrable Interest Notes due December 31, 2036 (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 March , 1997 and payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year,
commencing June 30, 1997 ("distributions"). The distribution payable on June
30, 1997, which will be calculated at the above rate and based on a period
that is longer 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 (other than the Company's guarantees of (i)
the 8.72% Trust Originated Preferred Securities SM issued by TCI
Communications Financing I, (ii) the 10% Trust Preferred Securities issued by
TCI Communications Financing II and (iii) the 9.65% Capital Securities issued
by TCI Communications Financing III (collectively, the "Prior Trust Preferred
Securities"), which each rank pari passu with the Preferred Securities
Guarantee) 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 and pari passu
with each of the Company's 8.72% Subordinated Deferrable Interest Notes due
January 31, 2045, 10% Subordinated Deferrable Interest Notes due May 31, 2045
and 9.65% Subordinated Deferrable Interest Notes due March 31, 2027
(collectively, the "Prior Subordinated Notes"). The Senior Indebtedness of the
Company aggregated approximately $9,234 million at September 30, 1996 and, as
of such date, indebtedness ranking pari passu with the Subordinated Debt
Securities aggregated $1,000 million. Subsequent to September 30, 1996, the
Company issued an additional approximately $300 million of indebtedness that
ranks pari passu with the Subordinated Debt Securities. 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 September 30, 1996, the subsidiaries of the Company had total
debt (excluding debt owed to the Company) of approximately $5,257 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"), provided that no Extension Period may extend beyond the
maturity of the
S-2
<PAGE>
Subordinated Debt Securities. 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.
The Subordinated Debt Securities are redeemable by the Company (in whole or
in part) from time to time, on or after March 31, 2002, or at any time in
certain circumstances upon the occurrence of a Tax Event (as defined herein)
at 100% of the principal amount of the Subordinated Debt Securities to be
redeemed plus accrued and unpaid interest thereon to the date fixed for
redemption. If the Company redeems Subordinated Debt Securities, the Trust
must redeem Trust Securities on a pro rata basis having an aggregate
liquidation amount equal to the aggregate principal amount of the 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 and
Optional Redemption." The Trust Securities will be redeemed at the Redemption
Price upon maturity of the Subordinated Debt Securities. The Subordinated Debt
Securities mature on December 31, 2036. 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 Trust 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.
----------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF
PREFERRED SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF
PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
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-47
for the location in this Prospectus Supplement of the definitions of certain
capitalized terms used herein.
PREFERRED SECURITIES OFFERED
8,000,000 % 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 March , 1997 and payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year, commencing on June 30,
1997. The distribution payable on June 30, 1997, which will be calculated at
the above rate and based on a period that is longer 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 December 31, 2036 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 (other than the Company's guarantees of the
Prior Trust Preferred Securities, which rank pari passu with the Preferred
Securities Guarantee) 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
Obligations Under 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, provided that no Extension Period may extend beyond the maturity of
the Subordinated Debt Securities. 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 December 31, 2036, 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 and Optional 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 March 31, 2002, 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 on a pro rata basis 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 and Optional 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 the Company's
commercial paper program. The Company may use the proceeds from the sale of
additional commercial paper (together with other borrowings) to effect open
market purchases from time to time (depending on market conditions) of publicly
traded debt securities of the Company. 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 PrB."
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."
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 other liabilities of the
Company (other than the Company's guarantees of the Prior Trust Preferred
Securities, which rank pari passu with the Preferred Securities Guarantee) 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. 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 and pari passu
with the Prior Subordinated Notes. 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 September 30, 1996, Senior Indebtedness of the Company aggregated
approximately $9,234 million and, as of such date, indebtedness ranking pari
passu with the Subordinated Debt Securities aggregated $1,000 million.
Subsequent to September 30, 1996, the Company issued an additional
approximately $300 million of indebtedness that ranks pari passu with the
Subordinated Debt Securities. 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 September 30, 1996,
the subsidiaries of the Company had total debt (excluding debt owed to the
Company) of approximately $5,257 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 (i) would be able to
proceed directly against the Company to the extent described under
"Enforcement of Certain Rights by Holders of Preferred
S-6
<PAGE>
Securities" below or (ii) 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).
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 Debt Securities--Option to Extend Interest Payment Period."
In January of 1996, TCI Communications Financing I issued 20,000,000 of its
8.72% Trust Originated Preferred SecuritiesSM. The proceeds from such
issuance, together with the proceeds from the issuance of common securities to
the Company, were used by such trust to purchase from the Company
approximately
S-7
<PAGE>
$515.5 million aggregate principal amount of its 8.72% Subordinated Deferrable
Interest Notes due January 31, 2045. In May of 1996, TCI Communications
Financing II issued 20,000,000 of its 10% Trust Preferred Securities. The
proceeds from such issuance, together with the proceeds from the issuance of
common securities to the Company, were used by such trust to purchase from the
Company approximately $515.5 million aggregate principal amount of its 10%
Subordinated Deferrable Interest Notes due May 31, 2045. On March 14, 1997,
TCI Communications Financing III issued 300,000 of its 9.65% Capital
Securities. The proceeds from such issuance, together with the proceeds from
the issuance of common securities to the Company, were used by such trust to
purchase from the Company approximately $309.3 million aggregate principal
amount of its 9.65% Subordinated Deferrable Interest Notes due March 31, 2027.
The Subordinated Debt Securities rank pari passu in right of payment with each
of the Prior Subordinated Notes. As a result, in the event the Company
exercises its right to defer interest on the Subordinated Debt Securities, the
Company will be prohibited from making payments on the Prior Subordinated
Notes and, in the event the Company exercises its right to defer interest on
any series of Prior Subordinated Notes, the Company will be prohibited from
making payments on the Subordinated Debt Securities.
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 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
S-8
<PAGE>
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 February 6, 1997, President Clinton proposed certain tax law changes that
would, among other things, prevent companies from deducting interest on debt
instruments which (a) have a maximum term of more than 15 years and (b) are
not shown as indebtedness on the consolidated balance sheet of the issuer. If
this proposed legislation is enacted, and if the effective date of such
legislation is prior to the date the proceeds of the Trust Securities are
invested in the Subordinated Debt Securities, the Company will not be able to
deduct interest paid on the Subordinated Debt Securities. President Clinton
has proposed that this tax law change be effective on the date of first
Congressional committee action. As of the date of this Prospectus Supplement,
there has been no such committee action. There can be no assurances, however,
that if such proposed legislation is enacted, the effective date will not be
earlier than the date contained in the Clinton Administration proposal, or
that other legislation enacted after the date hereof will not otherwise
adversely affect the ability of the Company to deduct the interest payable on
the Subordinated Debt Securities. 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 the occurrence of
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 February 6, 1997 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 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."
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
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<PAGE>
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 September 30, 1996, the
subsidiaries of the Company had total debt (excluding debt owed to the
Company) of approximately $5,257 million.
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.
LOSSES INCURRED BY THE COMPANY
The Company incurred net losses of $120 million and $5 million for the years
ended December 31, 1995 and 1993, respectively, and net losses of $260 million
and $50 million for the nine months ended September 30, 1996 and 1995,
respectively. 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, and $1,642
million and $1,541 million for the nine months ended September 30, 1996 and
1995, 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, and $760 million and $713
million for the nine months ended September 30, 1996 and 1995, respectively).
The Company's interest coverage ratios for the years ended December 31, 1995,
1994 and 1993 were 212%, 232% and 254%, respectively, and for each of the nine
month periods ended September 30, 1996 and 1995 were 216%. 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,
and $783 million and $854 million for the nine months ended September 30, 1996
and 1995, 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.
CREDIT RATING ON DEBT
On October 18, 1996, Standard & Poor's Securities, Inc. ("Standard &
Poor's"), a national statistical rating agency, issued a press release stating
that the Company's senior debt would be placed on its CreditWatch with
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<PAGE>
negative implications. On January 24, 1997, Standard & Poor's announced that
it had removed the Company's senior debt from CreditWatch and affirmed the
current rating for such debt while reporting a negative outlook thereon. The
Company's senior debt is currently rated BBB- by Standard & Poor's (the last
level of investment grade). A downgrade by Standard & Poor's of the Company's
senior debt would lower such debt to below investment grade. Any such
downgrade may adversely affect the Company's overall cost of future
borrowings.
The Company's debt is also rated by Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Service, L.P. ("Fitch") and Duff & Phelps Credit
Rating Co. ("Duff & Phelps"). On April 25, 1996 Duff & Phelps, and on April
26, 1996 Moody's, lowered their respective investment grade rating of the
Company's senior debt to the first level below investment grade. Fitch, which
rates the Company's senior debt at its last level of investment grade, has not
changed (or indicated to the Company that it may change) its rating of the
Company's debt.
THE COMPANY
The Company is principally engaged in the construction, acquisition,
development, ownership and operation of cable television systems. The Company
is the largest provider of basic 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, 1996.
The Company is a subsidiary of TCI which, in addition to the operations of
the Company, is engaged in the provision of 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 Guarantee 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 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 at least 3% of the total capital
of the Trust. The Trust exists for the exclusive purposes of (i) issuing and
selling 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
governed by the Declaration, the Trust Indenture Act and the Trust Act (as
defined below). Pursuant to the
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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 in the State of Delaware (the
"Delaware Trustee") and meets any other requirements of applicable law. The
Bank of New York (Delaware) will initially 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.
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<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 and for the nine months ended September 30, 1996 and 1995. The selected
financial data for each of the five fiscal years in the period ended December
31, 1995 are derived from the audited consolidated financial statements of the
Company. The selected financial data for the interim periods are derived from
the unaudited consolidated financial statements of the Company, which have
been prepared on the same basis as the Company's audited consolidated
financial statements and, in the opinion of management, contain all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair presentation of the financial position and results of operations of the
Company for those periods. 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>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------- --------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
DATA:
Revenue................ $ 4,554 3,741 5,118 4,318 4,153 3,574 3,214
Operating income....... 615 660 803 818 916 864 674
Earnings (loss) from:
Continuing operations.. (260) (50) (120) 94 (5) 8 (77)
Discontinued
operations............ -- -- -- -- -- (15) (19)
------- ------ ------ ------ ------ ------ ------
(260) (50) (120) 94 (5) (7) (96)
Dividend requirement on
redeemable preferred
stocks................ (7) -- -- -- (2) (15) --
------- ------ ------ ------ ------ ------ ------
Net earnings (loss)
attributable to common
stockholders.......... $ (267) (50) (120) 94 (7) (22) (96)
======= ====== ====== ====== ====== ====== ======
OTHER DATA:
Ratio of earnings to
combined fixed charges
and preferred stock
dividends(1).......... -- -- -- 1.21x 1.22x 1.00x --
Cash provided by
operating activities.. $ 783 854 1,263 1,142 1,251 957 583
Cash used in investing
activities............ $(1,638) (1,928) (2,713) (2,003) (1,170) (1,814) (1,092)
Cash provided by (used
in) financing
activities............ $ 862 1,068 1,444 866 (114) 859 511
Operating income before
depreciation,
amortization,
compensation relating
to stock appreciation
rights, adjustment to
stock appreciation
rights and
restructuring charge.. $ 1,642 1,541 2,043 1,801 1,858 1,637 1,430
Consolidated basic
cable subscribers..... 13.9 12.2 12.4 11.1 10.3 9.9 8.9
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------------------
1996 1995 1994 1993 1992 1991
------------- ------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY BALANCE SHEET
DATA:
Property and equipment,
net.................... $ 8,368 6,988 5,579 4,935 4,562 4,081
Franchise costs, net.... $14,624 11,563 9,297 9,197 9,300 8,104
Net assets of
discontinued
operations............. $ -- -- -- -- -- 242
Total assets............ $25,305 20,364 15,880 16,527 16,315 15,169
Debt.................... $14,491 12,635 10,712 9,900 10,285 9,455
Company-obligated
mandatorily redeemable
preferred securities of
subsidiary trusts
holding solely
subordinated debt
securities of the
Company................ $ 1,000 -- -- -- -- --
Stockholders' equity.... $ 1,822 1,729 683 2,116 1,728 1,571
Shares outstanding (net
of treasury shares)(3):
Class A Common Stock.... 1 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 1.21, 1.22, and 1.00 for the years ended
December 31, 1994, 1993 and 1992, 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, 1995 and 1991, and for the
nine months ended September 30, 1996 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 $170 million and
$177 million for the years ended December 31, 1995 and 1991, respectively,
and $388 million and $63 million for the nine months ended September 30,
1996 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 fixed charges
(minus capitalized interest), distributions from and losses of less than
50%-owned affiliates with debt not guaranteed by the Company
(footnotes continued on following page)
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<PAGE>
(footnotes continued from preceding page)
(net of earnings not distributed of less than 50%-owned affiliates),
minority interests in earnings (losses) of consolidated subsidiaries, the
elimination of preferred stock dividend requirements of consolidated
subsidiaries to 50%-owned affiliates, and preferred stock dividend
requirements of 50%-owned affiliates, other than amounts to the Company.
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, (ii) the
elimination of interest of consolidated subsidiaries to 50%-owned
affiliates, (iii) the Company's proportionate share of interest of 50%-owned
affiliates, (iv) that portion of rental expense the Company believes to be
representative of interest (one-third of rental expense), (v) amortization
of debt expense, (vi) that portion of minority interests in earnings
(losses) of consolidated subsidiaries that represent the amount of pretax
earnings that would be required to cover preferred stock dividend
requirements of consolidated subsidiaries, (vii) that portion of the
Company's earnings (losses) that represent the amount of pretax earnings
that would be required to cover preferred stock dividend requirements of the
Company, (viii) the elimination of preferred stock dividend requirements of
consolidated subsidiaries to 50%-owned affiliates, and (ix) the preferred
stock dividend requirements of 50%-owned affiliates, other than amounts 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.
Fixed charges of $5 million, $5 million, $14 million, $3 million and $1
million relating to such guarantees for the years ended December 31, 1995,
1994, 1993, 1992 and 1991, respectively, and fixed charges of $3 million and
$3 million relating to such guarantees for the nine months ended September
30, 1996 and 1995, respectively, have not been included in fixed charges.
(2) Operating income before depreciation, amortization, compensation relating
to stock appreciation rights ($7 million for the nine months ended
September 30 , 1995, $17 million for the year ended December 31, 1995, $31
million for the year ended December 31, 1993 and $1 million for the year
ended December 31, 1992), adjustment to compensation relating to stock
appreciation rights ($12 million for the nine months ended September 30,
1996 and $5 million for the year ended December 31, 1994) and restructuring
charge ($8 million for the year ended December 31, 1992) is a commonly used
measure of value and borrowing capacity within the Company's industry, but
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.
PRELIMINARY OPERATING RESULTS
The following preliminary fourth quarter results were released by the Company
on March 3, 1997. The preliminary fourth quarter results reflect the Company's
cable operations, wireline telephony and microwave businesses, and two months
of the Company's satellite business, which was distributed to stockholders of
TCI on December 4, 1996. The Company does not expect final reported results to
be materially different from those reported herein.
The Company's preliminary fourth quarter revenues were $1,620 million
compared to $1,315 million for the same period in 1995, a 23.2% increase.
Revenue from acquisitions, net of dispositions, represented approximately $177
million of the year-over-year increase in 1996 revenue. Excluding the impact of
acquisitions and dispositions, fourth quarter 1996 revenues grew $128 million,
or 10.3%, versus fourth quarter 1995.
The Company's preliminary operating cash flow (defined as operating income
before restructuring charges, depreciation, amortization, and certain non-cash
charges) for the fourth quarter of 1996 was $598 million, a 19.1% increase
versus 1995 fourth quarter operating cash flow of $502 million. Excluding the
impact of acquisitions and dispositions, fourth quarter operating cash flow
grew $28 million, or 5.9%, on a year-over-year basis. Restructuring charges
taken by the Company in the fourth quarter totaled $36 million, of which $27
million related to the Company's previously announced work force reduction and
$9 million related to the movement of
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<PAGE>
certain accounting functions previously performed in regional divisions to the
Company's headquarters in Denver, Colorado. Operating cash flow 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.
The Company's satellite business, including PRIMESTAR operations and
intercompany fulfillment arrangements, contributed $77 million in revenue and
nominal operating cash flow to the Company's 1996 fourth quarter results, and
the Company's telephony and microwave units contributed aggregate preliminary
revenue of approximately $17 million and nominal operating cash flow during
that period. Due to the spin-off of TCI Satellite Entertainment, Inc. and the
previously announced restructuring of the Company's telephony and microwave
businesses, the Company's results will not reflect the contributions from
these operations in future periods. Excluding the impact of these businesses,
the Company's fourth quarter 1996 operating margins would have been 38.5%, an
increase of 1.6 percentage points versus fourth quarter 1995.
Programming expense increases continued to outpace revenue growth during the
fourth quarter. Fourth quarter 1996 programming expenses were $346 million,
compared to $248 million during the same period in 1995, a 39.5% increase
year-over-year. Excluding the impact of acquisitions and dispositions, fourth
quarter 1996 programing expenses grew approximately $57 million, or 24.2%,
versus fourth quarter 1995.
At December 31, 1996, based on preliminary numbers, the Senior Indebtedness
of the Company aggregated approximately $8,669 million and the subsidiaries of
the Company had total debt (excluding debt owed to the Company) of
approximately $5,649 million.
The Company ended 1996 with 13.947 million cable subscribers. During 1996,
the Company added 1.5 million customers representing an increase of 11.6%.
Excluding the impact of acquisitions and dispositions, the Company's customer
base grew by 108,000 subscribers during the twelve months ended December 31,
1996.
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<PAGE>
CAPITALIZATION OF THE COMPANY
The following table sets forth the unaudited consolidated capitalization of
the Company at September 30, 1996, and as adjusted to reflect (a) the sale by
TCI Communications Financing III of Capital Securities on March 14, 1997 and
the application of the net proceeds received by the Company in connection
therewith and (b) the offering of the Preferred Securities by the Trust and
the application of the estimated net proceeds received by the Company in
connection therewith 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>
SEPTEMBER 30,
1996
----------------------
AS AS
REPORTED ADJUSTED
-------- --------
(IN MILLIONS)
<S> <C> <C>
Total Debt........................................... $14,491 $13,991
------- -------
Minority interests in equity of consolidated
subsidiaries........................................ 821 821
Redeemable preferred stock........................... 232 232
Company-obligated mandatorily redeemable preferred
securities of subsidiary trusts holding solely
subordinated debt securities of the Company......... 1,000(/1/) 1,500(/2/)
------- -------
Stockholders' equity:
Class A Common Stock............................... 1 1
Class B Common Stock............................... -- --
Additional paid-in capital......................... 3,679 3,679
Unrealized holding gains for available-for-sale
securities........................................ 4 4
Accumulated deficit................................ (630) (630)
Investment in Tele-Communications, Inc. ........... (1,143) (1,143)
Due from Tele-Communications, Inc.................. (89) (89)
------- -------
Total stockholders' equity........................ 1,822 1,822
------- -------
Total capitalization............................. $18,366 $18,366
======= =======
</TABLE>
- --------
(1) On January 29, 1996, TCI Communications Financing I, a Delaware business
trust ("Trust I") sponsored by the Company, issued preferred securities
with an aggregate liquidation amount of $500 million. The sole asset of
Trust I is $515,463,925 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. On May 17, 1996, TCI Communications Financing II, a Delaware
business trust ("Trust II") sponsored by the Company, issued preferred
securities with an aggregate liquidation amount of $500 million. The sole
asset of Trust II is $515,463,925 principal amount of 10% Subordinated
Deferrable Interest Notes of the Company due May 31, 2045. Upon redemption
of such debt, the preferred securities of Trust II will be mandatorily
redeemable.
(2) On March 14, 1997, TCI Communications Financing III, a Delaware business
trust ("Trust III") sponsored by the Company, issued preferred securities
(titled Capital Securities) with an aggregate liquidation amount of $300
million. The sole asset of Trust III is $309,279,000 principal amount of
9.65% Subordinated Deferrable Interest Notes of the Company due March 31,
2027. Upon redemption of such debt, the preferred securities of Trust III
will be mandatorily redeemable. As described in this Prospectus
Supplement, the Trust will issue Preferred Securities with an aggregate
liquidation amount of $200 million. The sole asset of the Trust will be
the % Subordinated Deferrable Interest Notes due December 31, 2036 of
the Company with a principal amount of $206,185,575. Upon redemption of
such debt, the Preferred Securities 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 December 31, 2036 in the
principal amount of $206,185,575 which will eliminate upon consolidation of
the Trust.
S-16
<PAGE>
USE OF PROCEEDS
The proceeds from 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 to
repay outstanding indebtedness under its commercial paper program. The
weighted average interest rate of indebtedness outstanding under the Company's
commercial paper program as of March 14, 1997 was approximately 5.7% per
annum. The Company may use the proceeds from the sale of additional commercial
paper (together with other borrowings) to effect open market purchases from
time to time (depending on market conditions) of publicly traded debt
securities of the Company.
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 Act and 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 (the form 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 as
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 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 March , 1997, 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, 1997, when, as and if available
for payment by
S-17
<PAGE>
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, 1997, will be
based on a period longer than a full quarter (March to June 30, 1997) 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 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 as described 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
S-18
<PAGE>
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 AND OPTIONAL REDEMPTION
The Subordinated Debt Securities will mature on December 31, 2036 and may be
redeemed, in whole or in part, at any time on or after March 31, 2002, or at
any time in certain circumstances upon the occurrence of a Tax Event, in each
case at a price equal to the sum of (i) 100% of the principal amount of the
Subordinated Debt Securities to be redeemed and (ii) accrued and unpaid
interest thereon to the date fixed for redemption. 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 on a pro rata basis
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 notice
of such redemption. See "--Redemption Procedures" and "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 as described under "--Book-Entry Only Issuance--The
Depository Trust Company" below.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Distribution upon the Occurrence of a Special Event. If, at any time, a Tax
Event or an Investment Company Event (each, as defined below, a "Special
Event") shall occur and be continuing, the Trust shall, except in the
circumstances described below under "Redemption Upon the Occurrence of a Tax
Event", 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 a nationally recognized
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.
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 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.
S-19
<PAGE>
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 upon
termination and liquidation of the Trust, may trade at a discount to the price
that the investor paid to purchase the Preferred Securities.
Redemption Upon the Occurrence of a Tax Event. If, in the case of the
occurrence and continuation of a Tax Event, (i) the Company has received an
opinion (a "Redemption Tax Opinion") from a nationally recognized 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 under "Distribution Upon
the Occurrence of a Special Event" or (ii) the Regular Trustees shall have
been informed by such tax counsel 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 at
a price equal to the sum of (x) 100% of the principal amount of the
Subordinated Debt Securities to be redeemed and (y) accrued and unpaid
interest thereon to the date fixed for redemption, 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.
Definitions. "Tax Event" means that the Regular Trustees shall have received
an opinion from a nationally recognized 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 is, or will be within 90 days of the date thereof,
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 is not, or will not be within 90
days of the date thereof, deductible in whole or in part by the Company for
United States federal income tax purposes or (iii) the Trust is, or will be
within 90 days of the date thereof, subject to more than a de minimis amount
of other taxes, duties or other governmental charges.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion from a nationally recognized 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.
Proposed Tax Law Changes. On February 6, 1997, President Clinton proposed
certain tax law changes that would, among other things, prevent companies from
deducting interest on debt instruments which (a) have a maximum term of more
than 15 years and (b) are not shown as indebtedness on the consolidated
balance sheet
S-20
<PAGE>
of the issuer. If this proposed legislation is enacted, and if the effective
date of such legislation is prior to the date the proceeds of the Trust
Securities are invested in the Subordinated Debt Securities, the Company will
not be able to deduct interest paid on the Subordinated Debt Securities.
President Clinton has proposed that this tax law change be effective on the
date of first Congressional committee action. As of the date of this
Prospectus Supplement, there has been no such committee action. There can be
no assurances, however, that if such proposed legislation is enacted, the
effective date will not be earlier than the date contained in the Clinton
Administration proposal, or that other legislation enacted after the date
hereof will not otherwise adversely affect the ability of the Company to
deduct the interest payable on the Subordinated Debt Securities. 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 the occurrence of 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 February 6, 1997 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.
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 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
S-21
<PAGE>
of liabilities to creditors, distributions in an amount equal to the aggregate
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 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 March , 2052,
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 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. If a Declaration
Event of Default with respect to the Preferred Securities is waived by holders
of Preferred Securities, such waiver will also constitute the waiver of such
Declaration Event of Default with respect to the Common Securities for all
purposes under the Declaration, without any further act, vote, or consent of
the holders of the Common Securities.
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."
S-22
<PAGE>
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 Subordinated Debt Securities under the Indenture), a
holder of Preferred Securities may to the extent permitted by applicable law
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
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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."
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 a majority 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 a majority 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.
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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 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.
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(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 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 by lot the amount of
the interest of each Direct Participant in the Preferred Securities to be
redeemed.
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
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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 or 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.
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.
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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.
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 (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) 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 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
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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 constitutes an event of default
under the Preferred Securities Guarantee or the Declaration, then (a) the
Company shall not declare or 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 consent will
be required), the Preferred Securities Guarantee may be amended only with the
prior approval of the holders of not less than a majority 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
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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 (other than the Company's guarantees of the Prior
Trust Preferred Securities, which rank pari passu with the Preferred
Securities Guarantee), including the Subordinated Debt Securities, except
those liabilities of the 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.
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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 Fourth Supplemental
Indenture (as so supplemented, the "Indenture"), between the Company and The
Bank of New York, as Trustee (the "Debt Trustee"), which (or the form of
which) are filed as exhibits 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
(which has been qualified under the Trust Indenture Act) 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."
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 $206,185,575, such amount being the
sum of the aggregate 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, on December 31, 2036.
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
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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 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 (including the Prior
Subordinated Notes which rank pari passu in right of payment with the
Subordinated Debt Securities, and the Company's guarantees of the Prior Trust
Preferred Securities, which rank junior in right of payment to 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 September 30, 1996, Senior
Indebtedness of the Company aggregated approximately $9,234 million, and as of
such date, indebtedness ranking pari passu with the Subordinated Debt
Securities aggregated $1,000 million. Subsequent to September 30, 1996, the
Company issued an additional approximately $300 million of indebtedness that
ranks pari passu with the Subordinated Debt Securities.
CERTAIN COVENANTS
If (i) there shall have occurred and be continuing any event that
constitutes 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
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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 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 March 31, 2002, 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 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 March , 1997, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (each, an "Interest Payment Date"),
commencing June 30, 1997, 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 Trust
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.
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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 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.
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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.
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
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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 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
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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.
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
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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 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 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 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.
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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 and sell 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 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 described under "Description
of the Preferred Securities Guarantee." If the Company does not make 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.
S-39
<PAGE>
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 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 THE SUBORDINATED DEBT SECURITIES
The Company intends to take the position that the Subordinated Debt
Securities will be classified for United States federal income tax purposes as
indebtedness of the Company under current law and, by acceptance of a
Preferred Security, each Holder covenants to treat the Subordinated Debt
Securities as indebtedness and the Preferred Securities as evidence of an
indirect beneficial ownership interest in the Subordinated Debt Securities. No
assurance can be given, however, that such position will not be challenged by
the Internal Revenue Service, or if challenged, that such a challenge will not
be successful. The remainder of this discussion assumes that the Subordinated
Debt Securities will be classified as indebtedness of the Company for United
States federal income tax purposes.
CLASSIFICATION OF TCI COMMUNICATIONS FINANCING IV
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
S-40
<PAGE>
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 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. If, however, the Trust is characterized for United States
federal income tax purposes as an association taxable as a corporation at the
time of its dissolution, the distribution of the Subordinated Debt Securities
may constitute a taxable event to Holders of Preferred Securities and a
Holder's holding period in Subordinated Debt Securities would begin on the
date such Subordinated Debt Securities were received.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), the Subordinated Debt Securities may be redeemed for
cash and the proceeds of such redemption distributed to Holders in redemption
of their Preferred Securities. Under current law, such a redemption would, for
United States federal income tax purposes, constitute a taxable disposition of
the redeemed Preferred Securities, and a Holder could recognize gain or loss
as if it sold such redeemed Preferred Securities for cash. See "--Sale of
Preferred Securities."
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.
S-41
<PAGE>
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.
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 February 6, 1997, President Clinton proposed certain tax law changes that
would, among other things, prevent companies from deducting interest on debt
instruments which (a) have a maximum term of more than 15 years and (b) are
not shown as indebtedness on the consolidated balance sheet of the issuer. If
this proposed legislation is enacted, and if the effective date of such
legislation is prior to the date the proceeds of the Trust Securities are
invested in the Subordinated Debt Securities, the Company will not be able to
deduct interest paid on the Subordinated Debt Securities. President Clinton
has proposed that this tax law change be effective on the date of first
Congressional committee action. As of the date of this Prospectus Supplement,
there has been no such committee action. There can be no assurances, however,
that if such proposed legislation is enacted, the
S-42
<PAGE>
effective date will not be earlier than the date contained in the Clinton
Administration proposal, or that other legislation enacted after the date
hereof will not otherwise adversely affect the ability of the Company to
deduct the interest payable on the Subordinated Debt Securities. 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 the occurrence of 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 February 6, 1997
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-43
<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. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated 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. ..................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated..................................
Bear, Stearns & Co. Inc. ..............................
Morgan Stanley & Co. Incorporated......................
PaineWebber Incorporated...............................
Prudential Securities Incorporated.....................
Smith Barney Inc. .....................................
---------
Total............................................. 8,000,000
=========
</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 100,000 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
same-day funds of $ per Preferred Security (or $ in the aggregate),
provided that such compensation for sales of 100,000 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.
S-44
<PAGE>
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.
Until the distribution of the Preferred Securities is completed, rules of
the Securities and Exchange Commission may limit the ability of the
Underwriters and certain selling group members to bid for and purchase the
Preferred Securities. As an exception to these rules, the Representatives are
permitted to engage in certain transactions that stabilize the price of the
Preferred Securities. Such transactions consist of bids or purchases for the
purpose of pegging, fixing or maintaining the price of the Preferred
Securities.
If the Underwriters create a short position in the Preferred Securities in
connection with this offering, i.e. if they sell more Preferred Securities
than are contemplated on the cover page of this Prospectus Supplement, the
Representatives may reduce that short position by purchasing Preferred
Securities in the open market.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
Preferred Securities in the open market to reduce the Underwriters' short
position or to stabilize the price of the Preferred Securities they may
reclaim the amount of the selling concession from the Underwriters and selling
group members who sold those securities as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the securities to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above might have on the price of the Preferred
Securities. In addition, neither the Company nor any of the Underwriters makes
any representation that the Representatives will engage in such transactions
or that such transactions, once commenced, will not be discontinued without
notice.
S-45
<PAGE>
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, L.L.P., New York, New York. Certain United States federal income
taxation matters will be passed upon for the Company and the Trust by Baker &
Botts, L.L.P. Jerome H. Kern, special counsel to Baker & Botts, L.L.P., is a
director of TCI, which owns all of the Common Stock of the Company. Certain
attorneys with Baker & Botts, L.L.P. hold options to purchase shares of TCI's
Tele-Communications, Inc. Series A TCI Group Common Stock and hold restricted
shares and options to purchase shares of Tele-Communications, Inc. Series A
Liberty Media Group Common Stock. Certain legal matters will be passed upon on
behalf of the Underwriters by Brown & Wood llp, New York, New York.
S-46
<PAGE>
DEFINITIONS
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
Additional Interest........................................................ S-34
Beneficial Owner........................................................... S-26
Business Day............................................................... S-19
Change in 1940 Act Law..................................................... S-20
Common Securities.......................................................... S-1
Common Securities Guarantee................................................ S-29
Company.................................................................... S-1
Company Trustees........................................................... S-11
Creditor................................................................... S-25
DTC........................................................................ S-25
Debt Trustee............................................................... S-31
Declaration................................................................ S-11
Declaration Event of Default............................................... S-22
Delaware Trustee........................................................... S-12
Direct Participants........................................................ S-26
Dissolution Tax Opinion.................................................... S-20
distributions.............................................................. S-2
Duff & Phelps.............................................................. S-11
Event of Default........................................................... S-35
Exchange Act............................................................... S-26
Extension Period........................................................... S-2
Fitch...................................................................... S-11
Global Security............................................................ S-35
Guarantee Payments......................................................... S-28
Holder..................................................................... S-40
Indenture.................................................................. S-31
Indenture Event of Default................................................. S-22
Indirect Participants...................................................... S-26
Interest Payment Date...................................................... S-33
Investment Company Event................................................... S-20
Liquidation Distribution................................................... S-22
Moody's.................................................................... S-11
New York Stock Exchange.................................................... S-1
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
1940 Act................................................................... S-20
No Recognition Opinion..................................................... S-19
OID........................................................................ S-40
Participants............................................................... S-26
Preferred Guarantee Trustee................................................ S-12
Preferred Securities....................................................... S-1
Preferred Securities Guarantee............................................. S-2
Prior Subordinated Notes................................................... S-2
Prior Trust Preferred Securities........................................... S-2
Property Account........................................................... S-12
Property Trustee........................................................... S-12
Purchase Agreement......................................................... S-44
Redemption Price........................................................... S-3
Redemption Tax Opinion..................................................... S-20
Regular Trustees........................................................... S-12
Representatives............................................................ S-44
Senior Indebtedness........................................................ S-32
Special Event.............................................................. S-19
Sponsor.................................................................... S-11
Standard & Poor's.......................................................... S-10
Successor Securities....................................................... S-25
Subordinated Debt Securities............................................... S-2
Super-Majority............................................................. S-23
TCI........................................................................ S-3
Tax Event.................................................................. S-20
Trust...................................................................... S-1
Trust Act.................................................................. S-12
Trust Indenture Act........................................................ S-11
Trust I.................................................................... S-16
Trust II................................................................... S-16
Trust III.................................................................. S-16
Trust Securities........................................................... S-1
Underwriters............................................................... S-44
Underwriters' Compensation................................................. S-44
</TABLE>
S-47
<PAGE>
PROSPECTUS
$500,000,000
TCI COMMUNICATIONS, INC.
SUBORDINATED DEBT SECURITIES
---------------
TCI COMMUNICATIONS FINANCING III
TCI COMMUNICATIONS FINANCING IV
TCI COMMUNICATIONS FINANCING V
TCI COMMUNICATIONS FINANCING VI
PREFERRED SECURITIES
GUARANTEED 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 III, TCI Communications Financing IV, TCI
Communications Financing V and TCI Communications Financing VI (each, a "TCIC
Trust"), each a statutory business trust formed under the laws of Delaware,
may from time to time offer preferred securities evidencing preferred
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 as 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
$500,000,000. 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 21, 1997
<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 Securities and Exchange
Commission (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, proxy statements, information statements and other
information with the Commission. Such reports, proxy statements, information
statements 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. The Commission maintains a site
on the World Wide Web that contains reports, proxy and information statements
and other information regarding registrants (including the Company) that file
electronically with the Commission. The address of the Commission's Web site
is http://www.sec.gov. Reports, proxy statements, information statements and
other information concerning the Company can also be inspected at The Nasdaq
Stock Market at 1735 K Street, N.W., Washington, D.C. 20006.
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. TCI
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Communications Financing III and TCI Communications Financing IV have each
obtained written assurance from the Commission in a letter, dated May 14,
1996, that the Commission will not raise any objection if such trusts do not
comply with the informational reporting requirements of the Exchange Act. The
remaining TCIC Trusts will become subject to the informational reporting
requirements of the Exchange Act upon the effectiveness of the Registration
Statement of which this Prospectus forms a part, and will seek and expect to
receive exemptions therefrom.
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, 1995; (ii) its Quarterly Reports on Form 10-Q for the quarters ended March
31, 1996, (as amended by Form 10-Q/A (Amendment No. 1)), June 30, 1996 and
September 30, 1996; (iii) its Current Reports on Form 8-K dated February 9,
1996, February 14, 1996, May 22, 1996, June 7, 1996, June 19, 1996, July 2,
1996, August 5, 1996, September 3, 1996, September 11, 1996 and December 17,
1996; and (iv) the financial statements and notes thereto of Cablevision, (a
combination of certain cable television assets of Cablevision S.A., Televisora
Belgrano S.A., Construred S.A. and Univent's S.A.) as of December 31, 1994 and
1993, and for each of the years in the three-year period ended December 31,
1994, which appear in the Current Report on Form 8-K of the Company, dated
April 20, 1995 (as amended by Form 8-K/A (Amendment No. 1)).
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, including any
beneficial owner, 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 (unless
such exhibits are specifically incorporated by reference into the documents
that this Prospectus incorporates). 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.
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<PAGE>
THE COMPANY
The Company is principally engaged in the construction, acquisition,
development, 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, 1996.
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
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 III, TCI Communications Financing IV,
TCI Communications Financing V and TCI Communications Financing VI is a
statutory business trust formed under Delaware law pursuant to (i) a separate
declaration of trust, 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. 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 and selling 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, the Trust Indenture Act and the Trust Act. 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 that has issued Trust Securities
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 holding solely subordinated debt securities of
the Company. 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 designation, 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,
--------------------------- ------------------
1995 1994 1993 1992 1991 1996 1995
---- ----- ----- ----- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to combined
fixed charges and preferred
stock dividends (1)......... -- 1.21x 1.22x 1.00x -- -- --
</TABLE>
- --------
(1) The ratio of earnings to combined fixed charges and preferred stock
dividends of the Company was 1.21, 1.22, and 1.00 for the years ended
December 31, 1994, 1993 and 1992, 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, 1995 and 1991, and for the
nine months ended September 30, 1996 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 $170 million and
$177 million for the years ended December 31, 1995 and 1991, respectively,
and $388 million and $63 million for the nine months ended September 30,
1996 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 fixed charges
(minus capitalized interest), distributions from and losses of less than
50%-owned affiliates with debt not guaranteed by the Company (net of
earnings not distributed of less than 50%-owned affiliates), minority
interests in earnings (losses) of consolidated subsidiaries, the
elimination of preferred stock dividend requirements of consolidated
subsidiaries to 50%-owned affiliates, and preferred stock dividend
requirements of 50%-owned affiliates, other than amounts to the Company.
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, (ii)
the elimination of interest of consolidated subsidiaries to 50%-owned
affiliates, (iii) the Company's proportionate share of interest of 50%-
owned affiliates, (iv) that portion of rental expense the Company believes
to be representative of interest (one-third of rental expense), (v)
amortization of debt expense, (vi) that portion of minority interests in
earnings (losses) of consolidated subsidiaries that represent the amount
of pretax earnings that would be required to cover preferred stock
dividend requirements of consolidated subsidiaries, (vii) that portion of
the Company's earnings (losses) that represent the amount of pretax
earnings that would be required to cover preferred stock dividend
requirements of the Company, (viii) the elimination of preferred stock
dividend requirements of consolidated subsidiaries to 50%-owned
affiliates, and (ix) the preferred stock dividend requirements of 50%-
owned affiliates, other than amounts 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. Fixed charges of $5 million,
$5 million, $14 million, $3 million and $1 million relating to such
guarantees for the years ended December 31, 1995, 1994, 1993, 1992 and
1991, respectively, and fixed charges of $3 million and $3 million
relating to such guarantees for the nine months ended September 30, 1996
and 1995, respectively, have not been included in fixed charges.
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<PAGE>
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.
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 and
the Trust 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 as described under "Description of the Preferred
Securities Guarantees" below. 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
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<PAGE>
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. 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. In addition, subsequent to the
publication of such joint statement, Senator Daniel Patrick Moynihan and
Representatives Sam M. Gibbons and Charles B. Rangel wrote letters to Treasury
Department officials concurring with the view expressed in such joint
statement. The Company 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 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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<PAGE>
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 a majority in aggregate 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 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, 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
11
<PAGE>
Registrar 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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<PAGE>
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
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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 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 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.
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<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, L.L.P., New York,
New York. Jerome H. Kern, special counsel to Baker & Botts, L.L.P., is a
director of Tele-Communications, Inc., which owns all of the common stock of
the Company. Certain attorneys with Baker & Botts, L.L.P. hold options to
purchase shares of TCI's Tele-Communications, Inc. Series A TCI Group Common
Stock and hold restricted shares and options to purchase shares of Tele-
Communications, Inc. Series A Liberty Media Group Common Stock. Certain legal
matters will be passed upon on behalf of any underwriters by Brown & Wood llp,
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.
The combined balance sheets of Cablevision (a combination of certain cable
television assets of Cablevision S.A., Televisora Belgrano S.A., Construed
S.A. and Univent's S.A.) as of December 31, 1994 and 1993, and the related
combined statements of operations and deficit and cash flows for each of the
years in the three-year period ended December 31, 1994, which appear in the
Current Report on Form 8-K of TCI Communications, Inc. dated April 20, 1995,
as amended, have been incorporated by reference herein in reliance upon the
report, dated March 24, 1995, of KPMG Finsterbusch Pickenhayn Sibille,
independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The combined financial statements of VII Cable which appear in TCI
Communications, Inc.'s Current Report on Form 8-K dated June 19, 1996, have
been incorporated by reference herein in reliance on the report dated February
14, 1996 of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
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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
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY TCI COMMUNICATIONS, INC., TCI
COMMUNICATIONS FINANCING IV OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS 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 IV
SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE 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
SOLICITATION 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
PAGE
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PROSPECTUS SUPPLEMENT
<TABLE>
<S> <C>
Prospectus Summary....................................................... S-4
Risk Factors............................................................. S-6
The Company.............................................................. S-11
The Trust................................................................ S-11
Selected Financial Data of the Company................................... S-13
Capitalization of the Company............................................ S-16
Accounting Treatment..................................................... S-16
Use of Proceeds.......................................................... S-17
Description of the Preferred Securities.................................. S-17
Description of the Preferred Securities Guarantee........................ S-28
Description of the Subordinated Debt Securities.......................... S-31
Effect of Obligations Under the Subordinated Debt Securities and the
Preferred Securities Guarantee.......................................... S-39
Certain Federal Income Tax Consequences.................................. S-40
Underwriting............................................................. S-44
Legal Matters............................................................ S-46
Definitions.............................................................. S-47
PROSPECTUS
Available Information.................................................... 2
Incorporation of 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.......................................................... 6
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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8,000,000
PREFERRED SECURITIES
TCI COMMUNICATIONS
FINANCING IV
% TRUST PREFERRED SECURITIES
GUARANTEED BY
TCI COMMUNICATIONS, INC.
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PROSPECTUS SUPPLEMENT
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LEHMAN BROTHERS
MERRILL LYNCH & CO.
BEAR, STEARNS & CO. INC.
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
MARCH , 1997
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