PROSPECTUS SUPPLEMENT
(To Prospectus dated February 7, 2000)
$30,000,000
Entergy New Orleans, Inc.
FIRST MORTGAGE BONDS,
6.65% SERIES DUE MARCH 1, 2004
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Interest payable on March 1 and September 1
---------------------
WE MAY REDEEM THE BONDS PRIOR TO MATURITY, IN WHOLE OR IN PART, AT THE
REDEMPTION PRICES AND UNDER THE CIRCUMSTANCES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT. YOU ALSO HAVE THE RIGHT TO TENDER YOUR BONDS FOR REDEMPTION BY US,
IN WHOLE OR IN PART, AT THE REDEMPTION PRICES AND UNDER THE CIRCUMSTANCES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT.
AS DESCRIBED IN THE ACCOMPANYING PROSPECTUS, THE BONDS ARE A SERIES OF GENERAL
AND REFUNDING MORTGAGE BONDS DESIGNATED AS FIRST MORTGAGE BONDS AND ISSUED UNDER
OUR MORTGAGE AND DEED OF TRUST, WHICH HAS THE BENEFIT OF A FIRST MORTGAGE LIEN
ON SUBSTANTIALLY ALL OF OUR PROPERTY.
---------------------
PRICE 99.887% AND ACCRUED INTEREST, IF ANY
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS ENTERGY NEW ORLEANS
-------- ------------- -------------------
Per bond............................... 99.887% .350% 99.537%
Total.................................. $29,966,100 $105,000 $29,861,100
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The underwriter expects to deliver the bonds to purchasers on or about February
23, 2001.
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MORGAN STANLEY DEAN WITTER
February 20, 2001
You should rely only on the information contained or incorporated by
reference in this prospectus supplement or the accompanying prospectus. We have
not authorized anyone else to provide you with different information. You should
not assume that the information contained in this prospectus supplement, the
accompanying prospectus or the documents incorporated by reference is accurate
as of any date other than as of the dates of these documents or the date these
documents were filed with the SEC. We are not making an offer of the bonds in
any state where the offer is not permitted.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Where You Can Find More Information......................... S-2
Selected Financial Information.............................. S-3
Recent Developments......................................... S-4
Use of Proceeds............................................. S-4
Description of the Bonds.................................... S-4
Underwriter................................................. S-8
Experts and Legality........................................ S-8
PROSPECTUS
About This Prospectus....................................... 1
Where You Can Find More Information......................... 1
The Company................................................. 2
Use of Proceeds............................................. 2
Description of the Bonds.................................... 2
Ratios of Earnings to Fixed Charges......................... 8
Experts and Legality........................................ 9
Plan of Distribution........................................ 9
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WHERE YOU CAN FIND MORE INFORMATION
The SEC allows us to "incorporate by reference" the information filed by us
with the SEC, which means we can refer you to important information without
restating it in this prospectus supplement and the accompanying prospectus. The
information incorporated by reference is considered to be part of this
prospectus supplement and the accompanying prospectus and should be read with
the same care. We incorporate by reference our Annual Report on Form 10-K for
the year ended December 31, 1999, our Quarterly Reports on Form 10-Q for the
quarters ended March 31, June 30 and September 30, 2000, our two Current Reports
on Form 8-K dated July 30, 2000 and filed on July 31, 2000 and August 3, 2000,
and any future filings that we make with the SEC under the Securities Exchange
Act of 1934 if the filings are made prior to the time that all the bonds are
sold in this offering. You can also find more information about us from the
sources described under "Where You Can Find More Information" in the
accompanying prospectus.
S-2
SELECTED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
You should read our selected financial information set forth below in
conjunction with the financial statements and other financial information
contained in the documents incorporated by reference.
FOR THE TWELVE MONTHS ENDED
---------------------------------------------------------
DECEMBER 31,
SEPTEMBER 30, -----------------------------------------
2000 1999 1998 1997 1996
------------- -------- -------- -------- --------
(UNAUDITED)
INCOME STATEMENT DATA:
Operating Revenues.................. $574,557 $507,788 $513,750 $504,822 $504,277
Operating Income.................... 44,672 42,536 39,059 42,291 57,578
Interest Expense (net).............. 14,396 13,892 14,573 15,001 16,052
Net Income.......................... 19,846 18,961 16,137 15,451 26,776
Ratio of Earnings to Fixed
Charges(1)....................... 3.15 3.00 2.65 2.70 3.51
AS OF SEPTEMBER 30, 2000
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ACTUAL AS ADJUSTED(2)
------------------------ ------------------------
AMOUNT PERCENT AMOUNT PERCENT
----------- ------- ----------- -------
(UNAUDITED) (UNAUDITED)
BALANCE SHEET DATA:
First Mortgage Bonds...................... $199,008 54.7% $229,008 58.2%
Shareholders' Equity:
Preferred Stock (without sinking
fund)................................ 19,780 5.4 19,780 5.0
Common Stock and Paid in Capital....... 70,038 19.3 70,038 17.8
Retained Earnings...................... 74,930 20.6 74,930 19.0
-------- ------ -------- ------
Total Shareholders' Equity........... 164,748 45.3 164,748 41.8
-------- ------ -------- ------
Total Capitalization.............. $363,756 100.0% $393,756 100.0%
======== ====== ======== ======
- ---------------
(1) "Earnings" as defined by Item 503(d)(3) of SEC Regulation S-K represent the
aggregate of (1) income before the cumulative effect of an accounting
change, (2) taxes based on income, (3) investment tax credit adjustments
-- net and (4) fixed charges. "Fixed Charges" as defined by Item 503(d)(4)
of SEC Regulation S-K include interest (whether expensed or capitalized),
related amortization and estimated interest applicable to rentals charged to
operating expenses.
(2) Adjusted to reflect the issuance and sale of the bonds.
S-3
RECENT DEVELOPMENTS
We provide electric and gas service to the City of New Orleans under City
ordinances. These ordinances contain a continuing option for the City of New
Orleans to purchase our electric and gas properties. On January 18, 2001, three
members of the Council of the City of New Orleans filed a resolution for
consideration by the Utility, Cable and Telecommunications Committee of the
Council which, if adopted, would direct the Council Utility Regulatory Office
and the Director of Utilities to conduct a study and report to the Council,
among other things, whether the acquisition of our electric and gas properties
through the exercise of this purchase option would produce material advantages
for ratepayers. On February 14, 2001, this committee deferred action on the
resolution until its meeting in May 2001. In order for the resolution to be
approved, the committee must recommend its adoption and the full Council must
then adopt the resolution.
Our electric rate schedules include a fuel adjustment clause designed to
recover the cost of fuel in the second prior month, adjusted by a surcharge or
credit for deferred fuel expense arising from the monthly reconciliation of
actual fuel costs incurred with fuel cost revenues billed to customers. Our gas
rate schedules include an adjustment to reflect estimated gas costs for the
billing month, adjusted by a surcharge or credit similar to that included in the
electric fuel adjustment clause. On February 1, 2001, the Council of the City of
New Orleans adopted a resolution noting the increase in our rates caused by
increasing natural gas prices and ordering us to "show cause" by February 9,
2001 why any and all automatic adjustment charges should not be revoked and why
we should not be required to propose a schedule of fixed rates without the use
of any automatic or "flow-through" adjustment charges. On February 9, 2001, we
filed a response with the Council stating that it is a fundamental regulatory
principle that regulated enterprises like us are entitled to recover their
prudently incurred costs. In addition, we indicated that the current
methodologies for recovering purchased gas costs (for the provision of gas
service) and fuel and purchased power costs (for the provision of electric
service) are appropriate. A public hearing was held on February 14, 2001. On
February 15, 2001, the Council adopted a revised resolution retaining the "show
cause" requirement. The revised resolution also noted that the Council did not
intend to deny full recovery of regulated utilities' prudently incurred and
recoverable costs related to purchased power, fuel and resale gas costs, but
instead intended to consider the means by which these costs are recovered to
mitigate the effect on ratepayers of sudden rises in fuel and natural gas costs,
as well as to consider incentives for us to procure lower cost gas supplies. The
revised resolution also directed certain advisors to the Council to prepare a
report and recommendation concerning the fuel adjustment methodologies. We
cannot predict the outcome of this proceeding, but believe, based on the
February 15th revised Council resolution, that the outcome will not have a
material adverse effect on our financial condition.
USE OF PROCEEDS
We anticipate our net proceeds from the sale of the bonds will be
approximately $29,747,600, after deducting underwriting discounts and
commissions and estimated offering expenses of $113,500. We will use the net
proceeds we receive from the issuance and sale of the bonds to reduce short-term
debt that was incurred for our capital spending program, for working capital
needs and for other general corporate purposes.
DESCRIPTION OF THE BONDS
INTEREST, MATURITY AND PAYMENT
We are issuing $30 million of First Mortgage Bonds, 6.65% Series due March
1, 2004 under the G&R Mortgage described in the accompanying prospectus. We will
pay interest on the bonds on March 1 and September 1 of each year. So long as
the bonds are registered in the name of DTC or its nominee, the record date for
interest payable on any interest payment date shall be the close of business on
the Business Day immediately preceding such interest payment date. We will begin
paying interest on the bonds on September 1, 2001. Interest starts to accrue
from the date the bonds are issued. The bonds will be issued on the basis of net
property additions. As of September 30, 2000, approximately $99 million of G&R
Bonds could have been issued on the basis of net property additions. We have
agreed to pay interest on any overdue
S-4
principal and, if such payment is enforceable under applicable law, on any
overdue installment of interest on the bonds at a rate of 7.65% per annum to
holders of record at the close of business on the Business Day immediately
preceding our payment of such interest.
As long as the bonds are registered in the name of DTC or its nominee, we
will pay principal, any premium, and interest due on the bonds to DTC. DTC will
then make payment to its participants for disbursement to the beneficial owners
of the bonds as described in the accompanying prospectus under the heading
"Description of the Bonds -- Book-Entry System Bonds."
REDEMPTION OF BONDS AT OUR OPTION
We may redeem the bonds, in whole or in part, at our option, at any time
before the maturity of the bonds, on not less than 30 days' nor more than 60
days' notice,
(1) by the application of proceeds of insurance or of cash deposited
with the corporate trustee pursuant to the provisions of the G&R Mortgage
relating to eminent domain or sales to governmental entities or designees
thereof of property subject to the G&R Mortgage at the special redemption
price of 100% of the principal amount of the bonds being redeemed, or
(2) at a redemption price equal to the greater of
(a) 100% of the principal amount of the bonds being redeemed and
(b) as determined by the Independent Investment Banker, the sum of
the present values of the remaining scheduled payments of principal of
and interest on the bonds being redeemed (excluding the portion of any
such interest accrued to the redemption date), discounted (for purposes
of determining such present values) to the redemption date on a
semi-annual basis (assuming a 360-day year consisting of twelve 30-day
months) at the Adjusted Treasury Rate plus 0.15%,
plus, in each case, accrued interest thereon to the redemption date. In the
event that the City of New Orleans takes or acquires all or substantially all of
our property subject to the G&R Mortgage as described under "Redemption of Bonds
at Option of Holders," (x) under clause (1) above, we may only redeem the bonds,
in whole or in part, at the special redemption price of 101% of the principal
amount of the bonds being redeemed plus accrued interest thereon to the
redemption date and (y) under clause (2) above, during the period commencing on
the occurrence of such event and ending on the day following the date that the
bonds are redeemable by us as described under "Redemption of Bonds at Option of
Holders," the redemption price shall not be less than 101% of the principal
amount of the bonds being redeemed plus accrued interest thereon to the
redemption date.
If, at the time notice of redemption is given, the redemption monies are
not held by the corporate trustee, the redemption may be made subject to receipt
of such monies before the date fixed for redemption, and such notice shall be of
no effect unless such monies are so received.
We may apply cash we deposit under any provision of the G&R Mortgage, with
certain exceptions, to the redemption or purchase, including the purchase from
us, of G&R Bonds of any series including the bonds offered by this prospectus
supplement.
The bonds are not subject to redemption under any sinking or improvement
fund or any maintenance or replacement fund.
REDEMPTION OF BONDS AT OPTION OF HOLDERS
The terms of the franchise ordinances pursuant to which we provide electric
and gas service to the City of New Orleans state that the City has a continuing
option to purchase our electric and gas properties. If all or substantially all
of our property subject to the G&R Mortgage is taken or acquired by the City of
New Orleans or any instrumentality or designee thereof, upon the consummation of
this taking or acquisition, we have agreed to direct the corporate trustee to
send a written notice to each registered holder of bonds then outstanding
stating that each such holder has the right to require us to redeem its bonds,
in whole or in part, at
S-5
the special redemption price of 101% of the principal amount of the bonds being
redeemed plus accrued interest thereon to the redemption date.
Upon the mailing of notice by the corporate trustee, each holder will have
45 days to deliver written notice to the corporate trustee of such holder's
intent to have its bonds redeemed by us in accordance with the preceding
paragraph on the 60th day following the date of the notice upon delivery and
surrender of such bond. Only Cede & Co., DTC's nominee, as the registered holder
of the bonds, may elect to have bonds so redeemed. Accordingly, beneficial
owners that desire to elect to have bonds so redeemed must instruct the
participant through which they own their interest to direct DTC to elect to have
their bonds so redeemed on their behalf by sending the requisite written notice
to the corporate trustee. In order to ensure that the corporate trustee receives
the requisite written notice in a timely fashion, the applicable beneficial
owner should consult the participant through which it owns an interest in the
bonds for the participant's deadline for receiving instructions of this type.
Participants may have different deadlines for accepting instructions from their
customers.
EXCHANGE OR REDEMPTION UPON MERGER OR CONSOLIDATION
We have not waived our right under the G&R Mortgage to make an exchange
offer for all outstanding G&R Bonds under the circumstances described in the
accompanying prospectus under the heading "Description of the
Bonds -- Redemption and Purchase -- Exchange or Redemption upon Merger or
Consolidation". Accordingly, if this type of exchange offer is made, holders of
all outstanding G&R Bonds, including the bonds, either must accept the exchange
offer or tender their bonds to us for redemption at a redemption price of 100%
of the principal amount of the bonds plus accrued interest thereon to the
redemption date.
CERTAIN DEFINITIONS
"Adjusted Treasury Rate" means, with respect to any redemption date:
(1) the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication
which is published weekly by the Board of Governors of the Federal Reserve
System and which establishes yields on actively traded United States
Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities," for the maturity corresponding to the
Comparable Treasury Issue (if no maturity is within three months before or
after the remaining term of the bonds, yields for the two published
maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Adjusted Treasury Rate shall be interpolated or
extrapolated from such yields on a straight line basis, rounding to the
nearest month); or
(2) if such release (or any successor release) is not published during
the week preceding the calculation date for the Adjusted Treasury Rate or
does not contain such yields, the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue, calculated
using a price for the Comparable Treasury Issue (expressed as a percentage
of its principal amount) equal to the Comparable Treasury Price for such
redemption date.
The Adjusted Treasury Rate shall be calculated on the third Business Day
preceding the redemption date.
"Business Day" means any day other than a Saturday or a Sunday or a day on
which banking institutions in The City of New York are authorized or required by
law or executive order to remain closed or a day on which the corporate trust
office of the corporate trustee is closed for business.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable to
the remaining term of the bonds that would be utilized, at the time of selection
and in accordance with customary financial practice, in pricing new issues of
corporate debt securities of comparable maturity to the remaining term of the
bonds.
S-6
"Comparable Treasury Price" means, with respect to any redemption date, (1)
the average of five Reference Treasury Dealer Quotations for such redemption
date after excluding the highest and lowest such Reference Treasury Dealer
Quotations or (2) if the Independent Investment Banker obtains fewer than five
such Reference Treasury Dealer Quotations, the average of all such Reference
Treasury Dealer Quotations.
"Independent Investment Banker" means Morgan Stanley & Co. Incorporated or,
if such firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed by us.
"Reference Treasury Dealer" means (1) Morgan Stanley & Co. Incorporated and
its successors; provided, however, that if it shall cease to be a primary U.S.
Government securities dealer in New York City (a "Primary Treasury Dealer"), we
will substitute therefor another Primary Treasury Dealer, and (2) any other
Primary Treasury Dealer selected by the Independent Investment Banker after
consultation with us.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Independent Investment Banker, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Independent Investment Banker at 5:00
p.m. on the third Business Day preceding such redemption date.
DIVIDEND COVENANT
We covenant in substance that, so long as any bonds remain outstanding, we
will not pay any cash dividends on common stock or purchase common stock after
January 31, 2001 if, after giving effect to such dividends or purchases, the
aggregate amount of such dividends or purchases after January 31, 2001 (other
than dividends we have declared on or before January 31, 2001) exceeds credits
to earned surplus after January 31, 2001 plus $150 million and plus such
additional amounts as shall be approved by the SEC.
TRUSTEES
The Bank of New York (successor to Harris Trust Company of New York and
Bank of Montreal Trust Company) and Stephen J. Giurlando (successor to Mark F.
McLaughlin and Z. George Klodnicki) are the trustees under the G&R Mortgage.
ADDITIONAL INFORMATION
For additional information about the bonds, see "Description of the Bonds"
in the accompanying prospectus, including:
(1) additional information about the terms of the bonds, including
security,
(2) general information about the G&R Mortgage and the trustees,
(3) a description of certain restrictions contained in the G&R
Mortgage,
(4) a description of events of default under the G&R Mortgage, and
(5) the meaning of certain capitalized terms used but not defined in
this prospectus supplement.
S-7
UNDERWRITER
Under the terms and conditions set forth in the underwriting agreement
dated the date of this prospectus supplement, we have agreed to sell to Morgan
Stanley & Co. Incorporated as underwriter, and the underwriter has agreed to
purchase, $30,000,000 principal amount of bonds.
Under the terms and conditions of the underwriting agreement, the
underwriter has committed, subject to the terms and conditions set forth
therein, to take and pay for all of the bonds if any of the bonds are taken.
The underwriter has advised us that it proposes to offer all or part of the
bonds directly to purchasers at the public offering price set forth on the cover
page of this prospectus supplement and to certain securities dealers at such
price less a concession not in excess of .20% of the principal amount of the
bonds. The underwriter may allow, and such dealers may reallow to certain
brokers and dealers, a concession not in excess of .10% of the principal amount
of the bonds. After the bonds are released for sale to the public, the public
offering price and other selling terms may from time to time be varied.
We have agreed to indemnify the underwriter against certain liabilities,
including liabilities under the Securities Act of 1933.
There is presently no trading market for the bonds and there is no
assurance that a market will develop since we do not intend to apply for listing
of the bonds on a national securities exchange. Although it is under no
obligation to do so, the underwriter presently intends to act as a market maker
for the bonds in the secondary trading market, but may discontinue such
market-making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the bonds.
In order to facilitate the offering of the bonds, the underwriter may
engage in transactions that stabilize, maintain or otherwise affect the price of
the bonds. Specifically, the underwriter may overallot in connection with the
offering, creating a short position in the bonds for its own account. In
addition, to cover overallotments or to stabilize the price of the bonds, the
underwriter may bid for, and purchase, the bonds in the open market. Finally,
the underwriter may reclaim selling concessions allowed to a dealer for
distributing the bonds in the offering, if it repurchases previously distributed
bonds in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the
market price for the bonds above independent market levels. The underwriter is
not required to engage in these activities and may end any of these activities
at any time.
The underwriter or its affiliates may engage, or have engaged, in various
general financing and banking transactions from time to time with us or our
affiliates.
EXPERTS AND LEGALITY
The financial statements incorporated in this prospectus supplement and the
accompanying prospectus by reference to our Annual Report on Form 10-K for the
year ended December 31, 1999 have been so incorporated in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The legality of the bonds will be passed upon for the Company by Denise C.
Redmann, Senior Counsel -- Corporate and Securities, of Entergy Services, Inc.
and for the underwriter by Pillsbury Winthrop LLP, New York, New York. All legal
matters pertaining to the Company's organization, titles to property, franchises
and the lien of the G&R Mortgage and all matters pertaining to Louisiana law
will be passed upon by Denise C. Redmann.
S-8
PROSPECTUS
$150,000,000
GENERAL AND REFUNDING MORTGAGE BONDS
ENTERGY NEW ORLEANS, INC.
1600 PERDIDO STREET
NEW ORLEANS, LOUISIANA 70119
(504) 670-3600
ENTERGY NEW ORLEANS, INC. (sometimes referred to as the Company) --
- May periodically offer its General and Refunding Mortgage Bonds in one or
more series; and
- Will determine the price and terms when sold.
THE BONDS --
- Offered with this prospectus are General and Refunding Mortgage Bonds
designated as First Mortgage Bonds;
- Offered with this prospectus will be rated in one of the four highest
rating categories by at least one nationally recognized rating
organization;
- Will be issued as part of a designated series; and
- Will be issued in book-entry form.
BONDHOLDERS --
- Will receive interest payments in the amounts and on the dates specified
in an accompanying prospectus supplement.
This prospectus may be used to offer and sell series of Bonds only if
accompanied by the prospectus supplement for that series. Entergy New Orleans
will provide the specific terms of each series of Bonds in a supplement to this
prospectus. Such supplement may also add, update, change or delete information
in this prospectus.
YOU SHOULD READ THIS PROSPECTUS AND ANY SUPPLEMENT CAREFULLY BEFORE YOU
INVEST.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION (SEC) NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE BONDS OR DETERMINED
THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
FEBRUARY 7, 2000
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement filed with the SEC
utilizing a "shelf" registration process. Under this shelf process, the Company
may sell the securities described in this prospectus in one or more offerings up
to a total dollar amount of $150,000,000. The Company is registering
$140,000,000 of bonds currently, which will be offered along with $10,000,000 of
Bonds registered under a previously filed registration statement. This
prospectus provides a general description of the Bonds being offered. Each time
the Company sells a series of Bonds, it will provide a prospectus supplement
containing specific information about the terms of that series of Bonds and the
offering.
WHERE YOU CAN FIND MORE INFORMATION
The Company is required to file annual, quarterly and current reports,
proxy statements and other information with the SEC. These filings are available
to the public on the Internet at the SEC's home page (http://www.sec.gov) or you
may read and copy any document at the SEC Public Reference Rooms located at:
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549-1004;
CitiCorp Center
500 W. Madison Street
Suite 1400
Chicago, Illinois 60661; and
7 World Trade Center
13th Floor
New York, New York 10048.
Call the SEC at 1-800-732-0330 for more information about the public reference
rooms and requesting documents.
The SEC allows the Company to incorporate by reference information filed by
the Company, which means that we can refer you to important information without
restating it in this prospectus. The information incorporated by reference is an
important part of this prospectus, and information that the Company files later
with the SEC will automatically update and supersede this information. The
Company is incorporating by reference the documents listed below, along with
filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 after the date of this prospectus and until the
Company has sold all of the Bonds:
1. Annual Report on Form 10-K for the year ended December 31, 1998;
and
2. Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30, and September 30, 1999.
You may request a copy of any or all of these filings, free of charge, by
writing or telephoning the Company at the following address:
Mr. Christopher T. Screen
Assistant Secretary
Entergy New Orleans, Inc.
P. O. Box 61000
New Orleans, Louisiana 70161
(504) 576-4212
or at our web site (http://www.entergy.com). You may also direct your requests
via e-mail to cscreen@entergy.com.
1
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. The Company has not
authorized anyone else to provide you with information about the Bonds or the
Company. The Company is not making an offer of the Bonds in any state where the
offer is not permitted. You should not assume that the information in this
prospectus or any supplement is accurate as of any date other than the date on
the front of those documents.
THE COMPANY
Entergy New Orleans, Inc. is an electric and gas public utility company
providing services to customers in New Orleans, Louisiana since 1926.
The Company is owned by Entergy Corporation ("Entergy"), which is a public
utility holding company registered under the Public Utility Holding Company Act
of 1935. The other major public utilities owned by Entergy are Entergy Arkansas,
Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc. and Entergy
Mississippi, Inc. Entergy also owns all of the common stock of System Energy
Resources, Inc., the principal asset of which is the Grand Gulf Nuclear Electric
Generating Station ("Grand Gulf").
Capacity and energy from Grand Gulf is allocated among the Company, Entergy
Arkansas, Inc., Entergy Louisiana, Inc., and Entergy Mississippi, Inc. under a
Unit Power Sales Agreement. The Company's allocated share of Grand Gulf's
capacity and energy, together with related costs, is 17%. Payments made by the
Company under the Unit Power Sales Agreement are generally recovered through
rates set by the City Council of the City of New Orleans, Louisiana (the
"Council"), which regulates electric and gas service, rates and charges and
issuances of securities.
Together with Entergy Arkansas, Inc., Entergy Louisiana, Inc. and Entergy
Mississippi, Inc., the Company owns all of the capital stock of System Fuels,
Inc. System Fuels, Inc. is a special purpose company that implements and
maintains certain programs for the purchase, delivery and storage of fuel
supplies for Entergy's utility subsidiaries.
The information above concerning the Company is only a summary and is not
complete. You should read the incorporated documents for more specific
information regarding significant contingencies, capital requirements, and
financing plans and capabilities, including short-term borrowing capacity,
earnings coverage requirements under the Company's Restatement of Articles of
Incorporation, as amended, which limit the amount of additional preferred stock
that the Company may issue, and earnings coverage and other requirements under
the Company's General and Refunding Mortgage (described below), which limit the
amount of additional Bonds that the Company may issue.
USE OF PROCEEDS
The net proceeds from the offering of the Bonds will be used either to
repay, acquire or redeem one or more series of outstanding G&R Bonds or
preferred securities on their stated due dates or in some cases prior to their
due dates, or for other general corporate purposes including the repayment of
short term debt incurred in connection with the Company's capital spending
program. The specific securities, if any, to be redeemed with the proceeds of a
series of Bonds will be set forth in the prospectus supplement relating to that
series.
DESCRIPTION OF THE BONDS
GENERAL
The Bonds will be issued under one or more separate supplemental indentures
to the Mortgage and Deed of Trust dated as of May 1, 1987 (the "G&R Mortgage"),
between the Company and Harris Trust Company of New York (formerly The Bank of
Montreal Trust Company), as Corporate Trustee, and Mark F. McLaughlin, as
Co-Trustee (together referred to as the "Trustees"). All bonds issued or to be
issued under the Mortgage (including the Bonds) are referred to herein generally
as "G&R Bonds."
2
The statements in this prospectus concerning the Bonds, the G&R Bonds and
the G&R Mortgage are not comprehensive and are subject to the detailed
provisions of the G&R Mortgage.
The Company's Mortgage and Deed of Trust, dated as of July 1, 1944, to The
Chase National Bank of the City of New York (The Bank of New York, successor)
and Carl E. Buckley (W.T. Cunningham, successor), as Trustees, as supplemented
(the "Former Mortgage"), has been terminated and released. All of the Company's
mortgage bonds (the "Former First Mortgage Bonds") issued under the Former
Mortgage have been retired and cancelled. The G&R Mortgage provides generally
that, once all of the Former First Mortgage Bonds have been retired, the G&R
Bonds may be designated as "First Mortgage Bonds" of the Company. Because the
Former Mortgage has been terminated and released and all Former First Mortgage
Bonds have been retired and cancelled, all G&R Bonds will be designated as
"First Mortgage Bonds".
TERMS OF SPECIFIC SERIES OF THE BONDS
A prospectus supplement and a supplemental indenture relating to each
series of Bonds being offered by the Company will include descriptions of
specific terms relating to the offering of that series. These terms will include
some or all of the following:
- The designation (or name) of the series of Bonds;
- The aggregate principal amount of the series;
- The date on which the series will mature;
- The interest rate the series will bear;
- The date from which interest accrues;
- The dates on which interest will be payable; and
- The prices and other terms and conditions, if any, upon which the series
may be redeemed prior to maturity.
SECURITY
The Bonds, together with all other G&R Bonds issued now or in the future
under the G&R Mortgage, will be secured by the G&R Mortgage. As a result of the
termination and release of the Former Mortgage, the G&R Mortgage now
constitutes, in the opinion of the Company's legal counsel, a first mortgage
lien on substantially all of the Company's property, subject to (1) excepted
encumbrances, (2) minor defects and encumbrances customarily found in similar
utility properties, but which do not materially impair the use of the property
in the conduct of the Company's business, (3) other liens, defects and
encumbrances, if any, existing or created when the Company acquired the property
and (4) limitations under bankruptcy law.
Some of the Company's properties are not covered by the lien of the G&R
Mortgage; these include:
- properties released under the terms of the G&R Mortgage;
- cash and securities;
- merchandise, equipment, apparatus, materials or supplies held for sale or
other disposition in the usual course of business or consumable during
use;
- automobiles, vehicles and aircraft;
- timber, minerals, mineral rights and royalties; and
- receivables, contracts, leases and operating agreements.
The G&R Mortgage contains provisions that impose a lien on property
acquired by the Company after the date of the G&R Mortgage, subject to
pre-existing liens, and subject to limitations in the case of consolidation,
merger or a sale of substantially all of the Company's assets.
3
The G&R Mortgage also provides that the Trustees have a lien upon the
mortgaged property, prior to the lien in favor of holders of the G&R Bonds, to
ensure the payment of reasonable compensation, expenses and disbursements of the
Trustees and for indemnity against certain liabilities.
ISSUANCE OF ADDITIONAL G&R BONDS
The Company can issue up to $10 billion G&R Bonds under the G&R Mortgage.
G&R Bonds of any series may be issued from time to time on the following bases:
(a) 70% of property additions after adjustments to offset retirements; (b)
retirements of G&R Bonds or certain Former First Mortgage Bonds; or (c) the
deposit of cash with the Trustees. Deposited cash may be withdrawn upon the
bases stated in clause (a) and (b) above. Property additions generally include
electric, gas, steam or hot water property acquired after December 31, 1986.
Property additions do not include securities, automobiles, vehicles or aircraft,
or property used principally for the production or gathering of natural gas.
With certain exceptions, when G&R Bonds are issued on the basis of retired
G&R Bonds as described in clause (b) above, the issuance must meet an "earnings"
test. The adjusted net earnings for 12 of the preceding 18 months, before income
taxes, must be at least twice the annual interest requirements on all G&R Bonds
outstanding at the time, plus the G&R Bonds to be issued, plus all indebtedness,
if any, of prior rank. Generally, interest on variable interest rate bonds, if
any, is calculated using the average rate in effect during such 12-month period.
Net property additions available for the issuance of G&R Bonds at September
30, 1999 were approximately $164.6 million.
The G&R Mortgage contains restrictions on the issuance of G&R Bonds against
property subject to prior liens.
Other than the security afforded by the lien of the G&R Mortgage and the
restrictions on the issuance of additional G&R Bonds described above, the G&R
Mortgage contains no provisions that grant protection to bondholders in the
event of a highly leveraged transaction. However, such a transaction would
require regulatory approval from the Council.
RELEASE AND SUBSTITUTION OF PROPERTY
Property other than the Municipalization Interest (as defined in the G&R
Mortgage) may be released without applying any earnings test, upon the bases of
(a) the deposit with the Trustees of cash or, to a limited extent, purchase
money mortgages; (b) property additions under the G&R Mortgage, after
adjustments in certain cases to offset retirements and after making adjustments
for certain prior lien bonds, if any, outstanding against property additions;
and (c) a waiver of the right to issue G&R Bonds. The Company can withdraw cash
upon the bases stated in clause (b) and (c) above.
Property owned by the Company on December 31, 1986, may be released from
the lien of the G&R Mortgage on the basis of its depreciated book value.
Unfunded property may be released without meeting the earnings test if, after
its release, the Company would have at least one dollar ($1) in unfunded
property that remains subject to the lien of the G&R Mortgage. All other
property may be released on the basis of its cost, as defined in the G&R
Mortgage.
SATISFACTION AND DISCHARGE OF G&R MORTGAGE
Once the Company has provided for the payment of all G&R Bonds (including
the Bonds currently being offered under this prospectus) and has paid all other
sums due under the G&R Mortgage, the G&R Mortgage may be deemed satisfied and
discharged. The G&R Bonds will be considered paid once funds (which may be cash
or obligations of the United States of America that do not permit redemption at
the issuer's option) sufficient to pay the G&R Bonds at maturity or upon
redemption have been irrevocably set apart or deposited with the Trustees. The
Trustees are entitled to receive an opinion of legal counsel to the effect that
such setting apart or deposit does not require registration under the Investment
Company Act of 1940, does not
4
violate any applicable laws and does not result in a taxable event with respect
to the bondholders prior to the time when they have a right to receive payment.
DIVIDEND COVENANT
Unless otherwise specified in a prospectus supplement, so long as any bonds
of a particular series remain outstanding, the Company will not pay any cash
dividends on common stock or repurchase common stock after a selected date close
to the date of the original issuance of a series of Bonds, except from credits
to earned surplus accrued after such selected date plus an amount not to exceed
$150,000,000 and plus such additional amounts as shall be approved by the SEC
under the Public Utility Holding Company Act of 1935. This does not include
dividends that may be declared before such selected date.
REDEMPTION AND PURCHASE
General
The prospectus supplement for a particular series of Bonds will contain the
terms and conditions, if any, for redemption prior to maturity.
Exchange or Redemption upon Merger or Consolidation
Although the Company does not currently have any plans to merge or
consolidate with Entergy Louisiana, Inc., the G&R Mortgage provides that, in the
event of such a merger or consolidation, the Company would have the right to
offer to exchange all outstanding G&R Bonds for a like principal amount of the
new merged or consolidated company's first mortgage bonds with the same interest
rates, interest payment dates, maturity dates and redemption provisions. Unless
the Company waives this right, the holders of outstanding G&R Bonds either must
accept such first mortgage bonds in exchange for all or a portion of their G&R
Bonds or must tender to the Company for redemption any G&R Bonds not so
exchanged. The redemption price applicable for these purposes to the G&R Bonds
will be 100% of the principal amount plus accrued interest, unless otherwise
provided in a prospectus supplement.
DEFAULTS AND NOTICES THEREOF
Defaults under the G&R Mortgage are defined to include:
(1) default in the payment of principal;
(2) default for 30 days in the payment of interest;
(3) certain events of bankruptcy, insolvency or reorganization;
(4) the continuation of a default in other covenants for 90 days after
notice (unless the Company has in good faith commenced efforts to perform
the covenant); and
(5) default under a supplemental indenture.
The Corporate Trustee or the holders of 25% in aggregate principal amount
of the G&R Bonds may declare the principal and interest thereon to be due and
payable on default. However, a majority of the holders may annul such
declaration if the Company has cured the default. No holders of G&R Bonds may
enforce the lien of the G&R Mortgage without giving the Trustees written notice
of a default and unless
(a) the holders of 25% in aggregate principal amount of the G&R Bonds
have requested the Trustees to act and offered them reasonable opportunity
to act and indemnity satisfactory to them against the cost, expense and
liabilities to be incurred thereby; and
(b) the Trustees have failed to act.
The holders of a majority in aggregate principal amount of the G&R Bonds may
direct the time, method and place of conducting any proceedings for any remedy
available to the Trustees or exercising any trust or power
5
conferred upon the Trustees. The Trustees are not required to risk their funds
or incur personal liability if a reasonable ground exists for believing that
repayment is not reasonably assured.
EVIDENCE FURNISHED TO THE TRUSTEES
Compliance with G&R Mortgage provisions is evidenced by written statements
of the Company's officers or persons selected or paid by the Company. In certain
cases, opinions of counsel and certifications by an engineer, accountant,
appraiser or other expert (who in some cases must be independent) are required.
The Company provides to the Trustees an annual statement as to whether or not we
have fulfilled our obligations under the G&R Mortgage throughout the preceding
calendar year.
MODIFICATION
The rights of holders of G&R Bonds may be modified with the consent of the
holders of a majority in aggregate principal amount of the G&R Bonds. If less
than all series of G&R Bonds are adversely affected by a modification, the
consent of the holders of a majority in aggregate principal amount of the G&R
Bonds adversely affected is required. No modification of the terms of payment of
the principal of and, premium, if any, and interest on, the G&R Bonds, and no
modification affecting the lien of the G&R Mortgage or reducing the percentage
required for modification, is effective against any holder of G&R Bonds without
such holder's consent.
BOOK-ENTRY SYSTEM BONDS
Unless otherwise specified in the applicable prospectus supplement, The
Depository Trust Company, New York, New York ("DTC") will act as securities
depository for the Bonds. The Bonds will be issued only as fully registered
securities registered in the name of Cede & Co., DTC's nominee or such other
name as may be requested by an authorized representative of DTC. One
fully-registered certificate will be issued for each series of Bonds,
representing the aggregate principal amount of that series of Bonds, and will be
deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Direct Participants")
deposit with DTC. DTC also facilitates the settlement among Direct Participants
of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized records for Direct Participants'
accounts. This eliminates the need for physical movement of securities
certificates.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its Direct Participants and the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly (the "Indirect Participants," and together with the Direct
Participants, the "Participants"). The rules applicable to DTC and its
Participants are on file with the SEC.
Purchases of Bonds within the DTC system must be made by or through Direct
Participants which will receive a credit for the Bonds on DTC's records. The
ownership interest of each actual purchaser of a Bond (a "Beneficial Owner")
will, in turn, be recorded on the Direct and Indirect Participant's respective
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 transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Bonds are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive
6
certificates representing the Bonds, except in the event that the use of the
book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.,
or such other name as may be requested by an authorized representative of DTC.
The deposit of the Bonds with DTC and their registration in the name of Cede &
Co. or such other nominee do not effect any change in beneficial ownership. DTC
has no knowledge of actual beneficial ownership of the Bonds; DTC's records
reflect only the identity of the Direct Participants to whose accounts Bonds are
credited, which Direct Participants may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Giving 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 that may be
applicable. Beneficial Owners of the Bonds may wish to take certain steps to
augment transmission to them of notices of significant events with respect to
the Bonds, such as redemptions, tenders, defaults and proposed amendments to the
security documents. Beneficial Owners of the Bonds may wish to ascertain that
the nominee holding the Bonds for their benefit has agreed to obtain and
transmit notices to Beneficial Owners, or in the alternative, Beneficial Owners
may wish to provide their names and addresses to the registrar and request
copies of the notices be provided directly to them.
Redemption notices (if any) will be sent to Cede & Co. If less than all of
the Bonds of a particular series are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each Direct Participant in such
series to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the Bonds.
Under its usual procedures, DTC mails an omnibus proxy (an "Omnibus Proxy") to
the Company as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Bonds are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Payments of the principal of, premium, if any, and interest on the Bonds
will be made to DTC, or such other nominee as may be requested by an authorized
representative of 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. Payments by Participants to Beneficial Owners will be governed
by standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in
"street-name," and will be the responsibility of such Participant and not of
DTC, the underwriters, dealers or agents, or the Company, subject to any
statutory or regulatory requirements that may be in effect from time to time.
Payment of principal, premium, if any, and interest to DTC is the responsibility
of the Company or that of the Trustees. 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.
DTC may discontinue providing its services as securities depository with
respect to the Bonds at any time by giving reasonable notice to the Company.
Under such circumstances and in the event that a successor securities depository
is not obtained, certificates for the Bonds are required to be printed and
delivered. In addition, the Company may discontinue use of the system of
book-entry transfers through DTC (or a successor securities depository) at any
time. In that event, certificates for the Bonds will also be printed and
delivered.
The Company will not have any responsibility or obligation to Participants
or the persons for whom they act as nominees with respect to the accuracy of the
records of DTC, its nominee or any Direct or Indirect Participant with respect
to any ownership interest in the Bonds, or with respect to payments to, or
providing of notice to, the Direct Participants, the Indirect Participants or
the Beneficial Owners.
7
So long as Cede & Co. is the registered owner of any series of Bonds, as
nominee of DTC, references herein to holders of such series of Bonds shall mean
Cede & Co. or DTC and shall not mean the Beneficial Owners of the Bonds.
DTC management is aware that some computer applications, systems and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates after January 1, 2000, may encounter "Year 2000 problems." DTC
has informed its Participants and other members of the financial community that
it has developed and is implementing a program so that its Systems, as the same
relate to the timely payment of distributions (including principal and income
payments) to security holders, book entry, deliveries, and settlement of trades
within DTC, continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, DTC's plan includes a testing phase, which is expected to be
completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the financial community that it is contacting
(and will continue to contact) third party vendors from whom DTC acquires
services to: (a) impress upon them the importance of such services being Year
2000 compliant and (b) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In addition, DTC
is in the process of developing such contingency plans as it deems appropriate.
DTC has established a Year 2000 Project Office and will provide information
concerning DTC's Year 2000 compliance to persons requesting that information.
The address is as follows:
The Depository Trust Company
Year 200 Project Office
55 Water Street
New York, New York 10041
(212) 855-8068 or
(212) 855-8881
In addition, information concerning DTC's Year 2000 compliance can be obtained
from its web site at the following address: (http://www.dtc.org).
According to DTC, the foregoing information with respect to DTC has been
provided to the financial community for informational purposes only and is not
intended to serve as a representation, warranty or contract modification of any
kind.
The information in this section concerning DTC, its Year 2000 efforts and
its book-entry system has been obtained form DTC. Neither the Company, the
Trustees nor the underwriters, dealers or agents takes responsibility for its
accuracy or completeness.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratios of earnings to fixed charges, calculated pursuant to
Item 503 of SEC Regulation S-K, are as follows:
TWELVE MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------
1999 1998 1997 1996 1995 1994
- ------------- ---- ---- ---- ---- ----
3.65 2.65 2.70 3.51 3.93 1.91
"Earnings," as defined by Regulation S-K, represent the aggregate of (1)
income before the cumulative effect of an accounting change, (2) taxes based on
income, (3) investment tax credit adjustments--net and (4) fixed charges.
8
"Fixed Charges" include interest (whether expensed or capitalized), related
amortization and interest applicable to rentals charged to operating expenses.
EXPERTS AND LEGALITY
The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-K of the Company for the year ended December 31,
1998 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The legality of the bonds will be passed upon for the Company by Laurence
M. Hamric, Associate General Counsel -- Corporate and Securities, of Entergy
Services, Inc. and for any underwriters, dealers or agents by Winthrop, Stimson,
Putnam & Roberts, New York, New York. All legal matters pertaining to the
Company's organization, titles to property, franchises and the lien of the G&R
Mortgage and all matters pertaining to Louisiana law will be passed upon by
Laurence M. Hamric.
The statements in this Prospectus as to matters of law and legal
conclusions made under "Description of the Bonds" have been reviewed by Laurence
M. Hamric, and are set forth herein in reliance upon the opinion of said counsel
and upon his authority as an expert.
PLAN OF DISTRIBUTION
METHODS AND TERMS OF SALE
The Company may use any variety of methods to sell the Bonds. These include
sales:
(a) through one or more underwriters or dealers;
(b) directly to one or more purchasers;
(c) through one or more agents; or
(d) through a combination of any such methods of sale.
The prospectus supplement relating to a series of the Bonds will set forth the
terms of the offering of the Bonds, including
- the name or names of any underwriters, dealers or agents;
- the initial public offering price of such Bonds;
- the proceeds to the Company from such sale;
- any underwriting discounts and other items constituting underwriters'
compensation; and
- any discounts or concessions allowed or reallowed or paid by any
underwriters to dealers.
UNDERWRITERS
If the Company sells the Bonds through underwriters, the underwriters will
acquire the Bonds for their own account and may resell them 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
underwriters for a particular underwritten offering of Bonds will be named in
the applicable prospectus supplement and, if an underwriting syndicate is used,
the managing underwriter or underwriters will be named on the cover page. In
connection with the sale of Bonds, the underwriters may receive compensation
from the Company or from purchasers in the form of discounts, concessions or
commissions. The obligations of the underwriters to purchase the Bonds will be
subject to certain conditions. The underwriters will be obligated to purchase
all of the Bonds of a particular series if any are purchased. However, the
underwriters may purchase
9
less than all of the Bonds of a particular series should certain circumstances
involving a default of one or more underwriters occur.
The initial public offering price and any discounts or concessions allowed
or reallowed or paid to dealers by any underwriters may be changed from time to
time.
STABILIZING TRANSACTIONS
Any underwriters may engage in stabilizing transactions and syndicate
covering transactions in accordance with Rule 104 under the Securities Exchange
Act of 1934. Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the Bonds in the open
market after the distribution has been completed in order to cover syndicate
short positions. Such stabilizing transactions and syndicate covering
transactions may cause the price of the Bonds to be higher than it would be if
such transactions had not occurred.
AGENTS
If the Company sells the Bonds through agents, the applicable prospectus
supplement will set forth the name of any agent involved in the offer or sale of
the Bonds, as well as any commissions the Company will pay to them. Unless
otherwise indicated in the prospectus supplement, any agent will be acting on a
best efforts basis for the period of its appointment.
In a prospectus supplement, the Company may authorize agents, underwriters
or dealers to solicit offers by certain specified institutions to purchase Bonds
at the public offering price set forth in the prospectus supplement pursuant to
delayed delivery contracts with payment and delivery on a specified date in the
future. The terms and conditions governing these contracts and any commission
the Company pays for solicitation of these contracts will be included in the
prospectus supplement.
INDEMNIFICATION
The Company will agree to indemnify any underwriters, dealers, agents or
purchasers and their controlling persons against certain civil liabilities,
including liabilities under the Securities Act of 1933, as amended.
10