Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-103772
333-103772-01
Prospectus Supplement to Prospectus dated April 10, 2003
$35,000,000
[LOGO]
SAVANNAH
ELECTRIC
A SOUTHERN COMPANY
Series F 5.50% Senior Notes due December 15, 2028
-----------------
Savannah Electric and Power Company will pay interest on the Series F Senior
Notes on the fifteenth day of each month. The first payment will be made on
January 15, 2004. The Series F Senior Notes are redeemable by Savannah Electric
and Power Company on or after December 17, 2008. The Series F Senior Notes will
be issued only in denominations of $1,000 and integral multiples of $1,000.
See "Risk Factors" on page S-2 of this Prospectus Supplement for information on
certain risks related to the purchase of these securities.
Payment of the principal of and interest on the Series F Senior Notes when due
will be insured by a financial guaranty insurance policy to be issued by XL
Capital Assurance Inc.
[LOGO] XL CAPITAL ASSURANCE SM
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this Prospectus Supplement or the accompanying Prospectus. Any
representation to the contrary is a criminal offense.
-----------------
Per
Series F
Senior Note Total
----------- -----------
Initial Public Offering Price(1)................... 100.00% $35,000,000
Underwriting Discounts and Commissions............. 3.15% $ 1,102,500
Net Proceeds, before expenses, to Savannah Electric
and Power Company................................ 96.85% $33,897,500
-----------------
(1) The initial public offering price set forth above does not include accrued
interest, if any. Interest on the Series F Senior Notes will accrue from the
date the Series F Senior Notes are issued.
The underwriters expect to deliver the Series F Senior Notes in book-entry form
only through the facilities of The Depository Trust Company against payment on
or about December 17, 2003.
-----------------
Edward D. Jones & Co., L.P.
SunTrust Robinson Humphrey
The date of this Prospectus Supplement is December 11, 2003
RISK FACTORS
Investing in the Series F Senior Notes involves risk. Please see the risk
factors in Savannah Electric and Power Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002, which is incorporated by reference in
this Prospectus Supplement and the accompanying Prospectus. Before making an
investment decision, you should carefully consider these risks as well as other
information contained or incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus. The risks and uncertainties not
presently known to Savannah Electric and Power Company or that Savannah
Electric and Power Company currently deems immaterial may also impair its
business operations, its financial results and the value of the Series F Senior
Notes (as defined below).
THE COMPANY
Savannah Electric and Power Company (the "Company") is a corporation
organized under the laws of the State of Georgia on August 5, 1921. The Company
has its principal office at 600 Bay Street, East, Savannah, Georgia 31401,
telephone (912) 644-7171. The Company is a wholly owned subsidiary of The
Southern Company.
The Company is a regulated public utility engaged in the generation,
transmission, distribution and sale of electric energy within an approximately
2,000 square mile service area comprising the City of Savannah, Georgia and
portions of the surrounding five-county area.
SELECTED FINANCIAL INFORMATION
The following selected financial data for the years ended December 31, 1998
through December 31, 2002 has been derived from the Company's audited financial
statements and related notes, incorporated by reference in this Prospectus
Supplement and the accompanying Prospectus. The following selected financial
data for the nine months ended September 30, 2003 has been derived from the
Company's unaudited financial statements and related notes, incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus. The
information set forth below is qualified in its entirety by reference to and,
therefore, should be read together with management's discussion and analysis of
results of operations and financial condition, the financial statements and
related notes and other financial information incorporated by reference in this
Prospectus Supplement and the accompanying Prospectus.
Nine Months
Year Ended December 31, Ended
-------------------------------------------- September 30,
1998 1999 2000 2001 2002 2003(1)
-------- -------- -------- -------- -------- -------------
(Thousands, except ratios)
Operating Revenues........... $254,455 $251,594 $295,718 $283,852 $299,552 $248,158
Earnings Before Income Taxes. 40,811 34,891 36,543 33,772 35,313 38,821
Net Income after Dividends on
Preferred Stock............ 23,644 23,083 22,969 22,063 22,880 24,183
Ratio of Earnings to Fixed
Charges(2)................. 4.17 3.23 3.24 3.12 3.36 4.87
Capitalization
As of September 30, 2003
------------------------------
Actual As Adjusted(3)
-------- ------------------
(Thousands, except percentages)
Common Stock Equity......................... $191,877 $191,877 46.3%
Shares Subject to Mandatory Redemption...... 40,000 -- --
Senior Notes................................ 100,000 160,000 38.6
Other Long-Term Debt........................ 67,612 62,612 15.1
-------- -------- -----
Total, excluding amounts due within one year $399,489 $414,489 100.0%
======== ======== =====
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- --------
(1) Due to the seasonal variations in the demand for energy, operating results
for the nine months ended September 30, 2003 do not necessarily indicate
operating results for the entire year.
(2) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Earnings Before Income Taxes" "Interest expense, net of amounts
capitalized," "Distributions on shares subject to mandatory redemption" and
the debt portion of allowance for funds during construction and (ii) "Fixed
Charges" consist of "Interest expense, net of amounts capitalized,"
"Distributions on shares subject to mandatory redemption" and the debt
portion of allowance for funds used during construction.
(3) Reflects (i) the redemption in December 2003 of $5,000,000 of a variable
rate revolving credit note which matures September 6, 2005; (ii) the
proposed issuance in December 2003 of $25,000,000 aggregate principal
amount of Series E 4.90% Senior Notes due December 15, 2013; (iii) the
proposed redemption in January 2004 by Savannah Electric Capital Trust I of
$40,000,000 aggregate liquidation amount of its 6.85% Trust Preferred
Securities; and (iv) the issuance of the Series F Senior Notes offered
hereby.
USE OF PROCEEDS
The proceeds from the sale of the Series F Senior Notes will be applied by
the Company, along with other monies of the Company, to redeem in January 2004
$40,000,000 outstanding aggregate liquidation amount of Savannah Electric
Capital Trust I 6.85% Trust Preferred Securities. The redemption is subject to
the Company's closing the sale of the Series F Senior Notes.
DESCRIPTION OF THE SERIES F SENIOR NOTES
Set forth below is a description of the specific terms of the Series F 5.50%
Senior Notes due December 15, 2028 (the "Series F Senior Notes"). This
description supplements, and should be read together with, the description of
the general terms and provisions of the senior notes set forth in the
accompanying Prospectus under the caption "Description of the Senior Notes."
The following description does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the description in the
accompanying Prospectus and the Senior Note Indenture dated as of March 1,
1998, as supplemented (the "Senior Note Indenture"), between the Company and
The Bank of New York, as trustee (the "Senior Note Indenture Trustee").
General
The Series F Senior Notes will be issued as a series of senior notes under
the Senior Note Indenture. The Series F Senior Notes will initially be issued
in the aggregate principal amount of $35,000,000. The Company may, without the
consent of the holders of the Series F Senior Notes, issue additional notes
having the same ranking and the same interest rate, maturity and other terms,
including the benefit of the Policy (as defined below), as the Series F Senior
Notes. Any additional notes having such similar terms, together with the Series
F Senior Notes, will constitute a single series of senior notes under the
Senior Note Indenture.
The entire principal amount of the Series F Senior Notes will mature and
become due and payable, together with any accrued and unpaid interest thereon,
on December 15, 2028. The Series F Senior Notes are not subject to any sinking
fund provision. The Series F Senior Notes are available for purchase in
denominations of $1,000 and any integral multiple of $1,000.
Interest
Each Series F Senior Note shall bear interest at the rate of 5.50% per annum
(the "Securities Rate") from the date of original issuance, payable monthly in
arrears on the fifteenth day of each month (each an "Interest Payment Date") to
the person in whose name such Series F Senior Note is registered at the close
of business on the fifteenth calendar day prior to such payment date (whether
or not a Business Day). The initial Interest Payment Date is January 15, 2004.
The amount of interest payable will be computed on the basis of a 360-day
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year of twelve 30-day months. In the event that any date on which interest is
payable on the Series F Senior Notes 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), with the same force and effect as if made on such date. "Business
Day" means a day other than (i) a Saturday or Sunday, (ii) a day on which banks
in New York, New York are authorized or obligated by law or executive order to
remain closed or (iii) a day on which the Senior Note Indenture Trustee's
corporate trust office is closed for business.
Ranking
The Series F Senior Notes will be direct, unsecured and unsubordinated
obligations of the Company ranking equally with all other unsecured and
unsubordinated obligations of the Company. The Series F Senior Notes will be
effectively subordinated to all secured debt of the Company, including its
first mortgage bonds, aggregating approximately $26,000,000 outstanding at
September 30, 2003. The Senior Note Indenture contains no restrictions on the
amount of additional indebtedness that may be incurred by the Company.
Optional Redemption
The Company shall have the right to redeem the Series F Senior Notes, in
whole or in part, without premium, from time to time, on or after December 17,
2008, upon not less than 30 nor more than 60 days' notice, at a redemption
price (the "Redemption Price") equal to 100% of the principal amount to be
redeemed plus any accrued and unpaid interest to the date of redemption (the
"Redemption Date").
If notice of redemption is given as aforesaid, the Series F Senior Notes so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price together with any accrued interest thereon, and from and after
such date (unless the Company shall default in the payment of the Redemption
Price and accrued interest) such Series F Senior Notes shall cease to bear
interest. If any Series F Senior Note called for redemption shall not be paid
upon surrender thereof for redemption, the principal shall, until paid, bear
interest from the Redemption Date at the Securities Rate. See "Description of
the Senior Notes--Events of Default" in the accompanying Prospectus.
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 Series
F Senior Notes by tender, in the open market or by private agreement.
Special Insurance Provisions of the Senior Note Indenture
Subject to the provisions of the Senior Note Indenture, so long as the
Insurer (as defined below) is not in default under the Policy, the Insurer
shall be entitled to control and direct the enforcement of all rights and
remedies with respect to the Series F Senior Notes upon the occurrence and
continuation of an Event of Default (as defined in the Senior Note Indenture).
Book-Entry Only Issuance--The Depository Trust Company
The Depository Trust Company ("DTC") will act as the initial securities
depositary for the Series F Senior Notes. The Series F Senior Notes 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 or more fully registered global Series F Senior
Notes certificates will be issued, representing in the aggregate the total
principal amount of Series F Senior Notes, and will be deposited with the
Senior Note Indenture Trustee on behalf of DTC.
DTC, the world's largest depository, 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
S-4
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 "1934 Act"). DTC holds and provides asset servicing for over 2 million
issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues
and money market instruments from over 85 countries that DTC's participants
("Direct Participants") deposit with DTC. DTC also facilitates the post-trade
settlement among Direct Participants of sales and other securities transactions
in deposited securities, through electronic computerized book-entry transfers
and pledges between Direct Participants' accounts. This eliminates the need for
physical movement of securities certificates. Direct Participants include both
U.S. and non-U.S. securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. DTC is a wholly-owned
subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC, in
turn, is owned by a number of Direct Participants of DTC and members of the
National Securities Clearing Corporation, Government Securities Clearing
Corporation, MBS Clearing Corporation and Emerging Markets Clearing Corporation
(NSCC, GSCC, MBSCC and EMCC, also subsidiaries of DTCC), as well as by the New
York Stock Exchange, Inc., the American Stock Exchange LLC and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as both U.S. and non-U.S. securities brokers and
dealers, banks, trust companies and clearing corporations that clear through or
maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants" and, together with the Direct Participants,
the "Participants"). The DTC rules applicable to its Participants are on file
with the Securities and Exchange Commission (the "Commission"). More
information about DTC can be found at www.dtcc.com.
Purchases of Series F Senior Notes within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Series F
Senior Notes on DTC's records. The ownership interest of each actual purchaser
of Series F Senior Notes ("Beneficial Owner") is in turn to be recorded on the
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 Participants through which the
Beneficial Owners purchased Series F Senior Notes. Transfers of ownership
interests in the Series F Senior Notes are to be accomplished by entries made
on the books of Participants acting on behalf of Beneficial Owners. Beneficial
Owners will not receive certificates representing their ownership interests in
Series F Senior Notes, except in the event that use of the book-entry system
for the Series F Senior Notes is discontinued.
To facilitate subsequent transfers, all Series F Senior Notes deposited by
Direct Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co., or such other name as may be requested by an authorized
representative of DTC. The deposit of Series F Senior Notes with DTC and their
registration in the name of Cede & Co. or such other DTC nominee do not effect
any change in beneficial ownership. DTC has no knowledge of the actual
Beneficial Owners of the Series F Senior Notes. DTC's records reflect only the
identity of the Direct Participants to whose accounts such Series F Senior
Notes are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Redemption notices shall be sent to DTC. If less than all of the Series F
Senior Notes are being redeemed, DTC's practice is to determine by lot the
amount of the interest of each Direct Participant in such issue to be redeemed.
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.
Although voting with respect to the Series F Senior Notes is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. (nor any other
DTC nominee) will itself consent or vote with respect to Series F Senior Notes.
Under its usual procedures, DTC mails an Omnibus Proxy to the Company as soon
as possible
S-5
after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or
voting rights to those Direct Participants to whose accounts the Series F
Senior Notes are credited on the record date (identified in a listing attached
to the Omnibus Proxy).
Payments on the Series F Senior Notes will be made to Cede & Co., or such
other nominee as may be requested by an authorized representative of DTC. DTC's
practice is to credit Direct Participants' accounts upon DTC's receipt of funds
and corresponding detail information from the Company or the Senior Note
Indenture Trustee 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 account of customers
registered in "street name," and will be the responsibility of such Participant
and not of DTC, its nominee or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment to Cede
& Co. (or such nominee as may be requested by an authorized representative of
DTC) is the responsibility of the Company, 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 Participants.
Except as provided herein, a Beneficial Owner of a global Series F Senior
Note will not be entitled to receive physical delivery of Series F Senior
Notes. Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Series F Senior Notes. 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 Series F Senior Note.
DTC may discontinue providing its services as securities depositary with
respect to the Series F Senior Notes at any time by giving reasonable notice to
the Company. Under such circumstances, in the event that a successor securities
depositary is not obtained, Series F Senior Notes certificates will be printed
and delivered to the holders of record. Additionally, the Company may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary) with respect to the Series F Senior Notes. In that event,
certificates for the Series F Senior Notes will be printed and delivered to the
holders of record.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but
the Company takes no responsibility for the accuracy thereof. The Company has
no responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
S-6
THE POLICY AND THE INSURER
The Policy
Concurrently with the issuance of the Series F Senior Notes, XL Capital
Assurance Inc. (the "Insurer") will issue a financial guaranty insurance policy
relating to the Series F Senior Notes (the "Policy"). The form of the Policy is
attached to this Prospectus Supplement as Appendix A. The following summary of
the terms of the Policy does not purport to be complete and is qualified in its
entirety by reference to the Policy. Any capitalized terms used in this section
but not defined herein have the meanings ascribed to them in the Policy.
The Policy guarantees the scheduled payment of principal of and interest on
the Series F Senior Notes when due. The Policy will extend for the term of the
Series F Senior Notes and, once issued, cannot be canceled by the Insurer. The
Policy will insure payment only on the stated maturity date, in the case of
principal, and on stated dates for payment, in the case of interest. If any
Series F Senior Notes become subject to redemption and insufficient funds are
available for redemption of all such outstanding Series F Senior Notes, the
Insurer will remain obligated to pay principal of and interest on such
outstanding Series F Senior Notes on the originally scheduled principal and
interest payment dates. In the event of any acceleration of the principal of
the Series F Senior Notes, the insured payments will be made at such times and
in such amounts as would have been made had there not been an acceleration.
In the event the Senior Note Indenture Trustee has notice that any payment
of principal of or interest on a Series F Senior Note which has become Due for
Payment on any regularly scheduled principal payment date or Interest Payment
Date and which is made to a holder by or on behalf of the Company has been
deemed a preferential transfer and theretofore recovered from its holder
pursuant to the United States Bankruptcy Code in accordance with a final,
nonappealable order of a court of competent jurisdiction, such holder will be
entitled to payment from the Insurer to the extent of such recovery if
sufficient funds are not otherwise available.
The Policy does not insure any risk other than Nonpayment. Specifically, the
Policy does not cover:
a. payment on acceleration, as a result of a call for redemption or as a
result of any other advancement of maturity;
b. nonpayment of principal or interest caused by the insolvency or
negligence of the Senior Note Indenture Trustee; or
c. losses suffered as a result of a holder's inability to sell Series F
Senior Notes.
Upon payment of the insurance benefits with respect to a Series F Senior
Note, the Insurer will become the owner of such Series F Senior Note or right
to payment of principal or interest on such Series F Senior Note and will be
fully subrogated to the rights to payment of the surrendering holder.
The Insurer
The information set forth below has been provided by the Insurer for use in
this Prospectus Supplement. None of the Company, the Senior Note Indenture
Trustee or any Underwriter makes any representation or warranty or assumes any
responsibility with respect to the information concerning the Insurer, its
parent or the Policy contained or incorporated into this Prospectus Supplement.
Neither the Company nor any Underwriter has made any independent investigation
of the Policy or the Insurer, and reference should be made to the information
set forth below for a description of the Policy. The Policy does not constitute
a part of the contract between the Company and the holders. Except for the
payment of the premium for the Policy to the Insurer, the Company has no
responsibility whatsoever with respect to the Policy, including the maintenance
or enforcement of the Policy or collection of amounts payable under the Policy.
The Insurer accepts no responsibility for the accuracy or completeness of
this Prospectus Supplement or any other information or disclosure contained
herein, or omitted herefrom, other than with respect to the
S-7
accuracy of the information regarding the Insurer and its affiliates set forth
under this heading. In addition, the Insurer makes no representation regarding
the Series F Senior Notes or the advisability of investing in the Series F
Senior Notes.
General. The Insurer is a monoline financial guaranty insurance company
incorporated under the laws of the State of New York. The Insurer is currently
licensed to do insurance business in, and is subject to the insurance
regulation and supervision by, the State of New York, forty-seven other states,
the District of Columbia, Puerto Rico, the U.S. Virgin Islands and Singapore.
The Insurer has license applications pending, or intends to file an
application, in each of those states in which it is not currently licensed.
The Insurer is an indirect wholly owned subsidiary of XL Capital Ltd, a
Cayman Islands corporation ("XL Capital Ltd"). Through its subsidiaries, XL
Capital Ltd is a leading provider of insurance and reinsurance coverages and
financial products to industrial, commercial and professional service firms,
insurance companies and other enterprises on a worldwide basis. The common
stock of XL Capital Ltd is publicly traded in the United States and listed on
the New York Stock Exchange (NYSE:XL). XL Capital Ltd is not obligated to pay
the debts of or claims against the Insurer.
The Insurer was formerly known as The London Assurance of America Inc.
("London"), which was incorporated on July 25, 1991 under the laws of the State
of New York. On February 22, 2001, XL Reinsurance America Inc. ("XL Re")
acquired 100% of the stock of London. XL Re merged its former financial
guaranty subsidiary, known as XL Capital Assurance Inc. (formed September 13,
1999), with and into London, with London as the surviving entity. London
immediately changed its name to XL Capital Assurance Inc. All previous business
of London was 100% reinsured to Royal Indemnity Company, the previous owner at
the time of acquisition.
Reinsurance. The Insurer has entered into a facultative quota share
reinsurance agreement with XL Financial Assurance Ltd ("XLFA"), an insurance
company organized under the laws of Bermuda and an affiliate of the Insurer.
Pursuant to this reinsurance agreement, the Insurer expects to cede up to 90%
of its business to XLFA. The Insurer may also cede reinsurance to third parties
on a transaction-specific basis, which cessions may be any or a combination of
quota share, first loss or excess of loss. Such reinsurance is used by the
Insurer as a risk management device and to comply with statutory and rating
agency requirements and does not alter or limit the Insurer's obligations under
any financial guaranty insurance policy. With respect to any transaction
insured by the Insurer, the percentage of risk ceded to XLFA may be less than
90% depending on certain factors including, without limitation, whether the
Insurer has obtained third party reinsurance covering the risk. As a result,
there can be no assurance as to the percentage reinsured by XLFA of any given
financial guaranty insurance policy issued by the Insurer, including the Policy.
Ratings. Based on the audited financials of XLFA as of December 31, 2002,
XLFA had total assets, liabilities, redeemable preferred shares and
shareholders' equity of $611,791,000, $245,750,000, $39,000,000 and
$327,041,000, respectively, determined in accordance with generally accepted
accounting principles in the United States. XLFA's insurance financial strength
is rated "Aaa" by Moody's Investors Service, Inc. ("Moody's") and "AAA" by
Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("Standard &
Poor's"), and Fitch Ratings ("Fitch"). In addition, XLFA has obtained a
financial enhancement rating of "AAA" from Standard & Poor's.
The obligations of XLFA to the Insurer under the reinsurance agreement
described above are unconditionally guaranteed by XL Insurance (Bermuda) Ltd
("XLI"), a Bermuda company and one of the world's leading excess commercial
insurers. XLI is a wholly owned indirect subsidiary of XL Capital Ltd. In
addition to having an "A+" rating from A.M. Best, XLI's financial strength
rating is "Aa2" by Moody's and "AA" by Standard & Poor's and Fitch. The ratings
of XLFA and XLI are not recommendations to buy, sell or hold securities,
including the Series F Senior Notes, and are subject to revision or withdrawal
at any time by Moody's, Standard & Poor's or Fitch.
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Notwithstanding the capital support provided to the Insurer described in
this section, the holders of the Series F Senior Notes will have direct
recourse against the Insurer only, and neither XLFA nor XLI will be directly
liable to the holders of the Series F Senior Notes.
Financial Strength and Financial Enhancement Ratings of the Insurer. The
Insurer's insurance financial strength is rated "Aaa" by Moody's and "AAA" by
Standard & Poor's and Fitch. In addition, the Insurer has obtained a financial
enhancement rating of "AAA" from Standard & Poor's. These ratings reflect
Moody's, Standard & Poor's and Fitch's current assessment of the Insurer's
creditworthiness and claims-paying ability as well as the reinsurance
arrangement with XLFA described under "--Reinsurance" above.
The above ratings are not recommendations to buy, sell or hold securities,
including the Series F Senior Notes, and are subject to revision or withdrawal
at any time by Moody's, Standard & Poor's or Fitch. Any downward revision or
withdrawal of these ratings may have an adverse effect on the market price of
the Series F Senior Notes. The Insurer does not guaranty the market price of
the Series F Senior Notes nor does it guaranty that the ratings on the Series F
Senior Notes will not be revised or withdrawn.
Capitalization of the Insurer. Based on the audited statutory financial
statements for the Insurer as of December 31, 2001, the Insurer had total
admitted assets of $158,442,157, total liabilities of $48,899,961 and total
capital and surplus of $109,542,696 determined in accordance with statutory
accounting practices prescribed or permitted by insurance regulatory
authorities ("SAP"). Based on the audited statutory financial statements for
the Insurer as of December 31, 2002, the Insurer has total admitted assets of
$180,993,189, total liabilities of $58,685,217 and total capital and surplus of
$122,307,972 determined in accordance with SAP.
For further information concerning the Insurer and XLFA, see the financial
statements of the Insurer and XLFA, and the notes thereto, incorporated by
reference in this Prospectus Supplement. The financial statements of the
Insurer and XLFA are included as exhibits to the periodic reports filed with
the Commission by XL Capital Ltd and may be reviewed at the EDGAR website
maintained by the Commission. All financial statements of the Insurer and XLFA
included in, or as exhibits to, documents filed by XL Capital Ltd pursuant to
Section 13(a), 13(c), 14 or 15(d) of the 1934 Act on or prior to the date of
this Prospectus Supplement, or after the date of this Prospectus Supplement but
prior to termination of the offering of the Series F Senior Notes, shall be
deemed incorporated by reference in this Prospectus Supplement. Except for the
financial statements of the Insurer and XLFA, no other information contained in
XL Capital Ltd's reports filed with the Commission is incorporated by
reference. Copies of the statutory quarterly and annual statements filed with
the State of New York Insurance Department by the Insurer are available upon
request to the State of New York Insurance Department.
Regulation of the Insurer. The Insurer is regulated by the Superintendent
of Insurance of the State of New York. In addition, the Insurer is subject to
regulation by the insurance laws and regulations of the other jurisdictions in
which it is licensed. As a financial guaranty insurance company licensed in the
State of New York, the Insurer is subject to Article 69 of the New York
Insurance Law, which, among other things, limits the business of each insurer
to financial guaranty insurance and related lines, prescribes minimum standards
of solvency, including minimum capital requirements, establishes contingency,
loss and unearned premium reserve requirements, requires the maintenance of
minimum surplus to policyholders and limits the aggregate amount of insurance
which may be written and the maximum size of any single risk exposure which may
be assumed. The Insurer is also required to file detailed annual financial
statements with the New York Insurance Department and similar supervisory
agencies in each of the other jurisdictions in which it is licensed.
The extent of state insurance regulation and supervision varies by
jurisdiction, but New York and most other jurisdictions have laws and
regulations prescribing permitted investments and governing the payment of
dividends, transactions with affiliates, mergers, consolidations, acquisitions
or sales of assets and incurrence of liabilities for borrowings.
THE FINANCIAL GUARANTY INSURANCE POLICIES ISSUED BY THE INSURER, INCLUDING
THE POLICY, ARE NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND
SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
S-9
The principal executive offices of the Insurer are located at 1221 Avenue of
the Americas, 31st Floor, New York, New York 10020-1001 and its telephone
number at this address is (212) 478-3400.
RATINGS
It is anticipated that Standard & Poor's and Moody's will assign the Series
F Senior Notes the ratings of "AAA" and "Aaa", respectively, conditioned upon
the issuance and delivery by the Insurer at the time of delivery of the Series
F Senior Notes of the Policy, insuring the timely payment of the principal of
and interest on the Series F Senior Notes. Such ratings reflect only the views
of such ratings agencies, and an explanation of the significance of such
ratings may be obtained only from such rating agencies at the following
addresses: Moody's Investors Service, Inc., 99 Church Street, New York, New
York 10007; and Standard & Poor's, 25 Broadway, New York, New York 10004. There
is no assurance that such ratings will remain in effect for any period of time
or that they will not be revised downward or withdrawn entirely by said rating
agencies if, in their judgment, circumstances warrant. Neither the Company nor
any Underwriter has undertaken any responsibility to oppose any proposed
downward revision or withdrawal of a rating on the Series F Senior Notes. Any
such downward revision or withdrawal of such ratings may have an adverse effect
on the market price of the Series F Senior Notes.
At present, each of such rating agencies maintains four categories of
investment grade ratings. They are for Standard & Poor's--AAA, AA, A and BBB
and for Moody's--Aaa, Aa, A and Baa. Standard & Poor's defines "AAA" as the
highest rating assigned to a debt obligation. Moody's defines "Aaa" as
representing the best quality debt obligation carrying the smallest degree of
investment risk.
S-10
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated the date hereof, the Company has agreed to sell to each of the
Underwriters named below and each of the Underwriters severally has agreed to
purchase the principal amount of Series F Senior Notes set forth opposite its
name below:
Principal
Amount of
Series F
Name Senior Notes
---- ------------
Edward D. Jones & Co., L.P....... $25,000,000
SunTrust Capital Markets, Inc.... $10,000,000
-----------
Total.......................... $35,000,000
===========
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Series F Senior Notes are
subject to, among other things, the approval of certain legal matters by their
counsel and certain other conditions. The Underwriters are obligated to take
and pay for all the Series F Senior Notes if any are taken.
Series F Senior Notes sold by the Underwriters to the public will initially
be offered at the initial public offering price set forth on the cover of this
Prospectus Supplement. Any Series F Senior Notes sold by the Underwriters to
securities dealers may be sold at a discount from the initial public offering
price of up to 3.00% of the principal amount of Series F Senior Notes. If all
the Series F Senior Notes are not sold at the initial offering price, the
Underwriters may change the offering price and the other selling terms.
Prior to this offering, there has been no public market for the Series F
Senior Notes. The Underwriters have advised the Company that they intend to
make a market in the Series F Senior Notes. The Underwriters will have no
obligation to make a market in the Series F Senior Notes, however, and may
cease market making activities, if commenced, at any time. There can be no
assurance of a secondary market for the Series F Senior Notes or the continued
liquidity of such market if one develops. It is not anticipated that the Series
F Senior Notes will be listed on any securities exchange.
The underwriting discounts and commissions to be paid to the Underwriters by
the Company with this offering will be 3.15% per Series F Senior Note, for a
total of $1,102,500. In addition, the Company estimates that it will incur
other offering expenses of approximately $800,000, which includes the premium
for the Policy.
In connection with this offering and in compliance with applicable law and
industry practice, the Underwriters may overallot or effect transactions which
stabilize, maintain or otherwise affect the market price of the Series F Senior
Notes at levels above those which might otherwise prevail in the open market,
including by entering stabilizing bids, purchasing Series F Senior Notes to
cover syndicate short positions and imposing penalty bids. A stabilizing bid
means the placing of any bid, or the effecting of any purchase, for the purpose
of pegging, fixing or maintaining the price of a security. Covering a syndicate
short position means placing a bid or effecting a purchase of a security on
behalf of the underwriting syndicate to reduce a short position created in
connection with the offering. Imposing a penalty bid means purchasing a
security in the open market to reduce the underwriting syndicate's short
position or to stabilize the price of the security and in connection therewith
reclaiming the amount of the selling concession from the underwriters and
selling group members who sold such 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 security 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
discouraged resales of the security.
S-11
Neither the Company nor any Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Series F Senior Notes. In
addition, neither the Company nor any Underwriter makes any representation that
such transactions will be engaged in or that such transactions, once commenced,
will not be discontinued without notice.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Underwriters and their affiliates engage in transactions with and
perform services for the Company in the ordinary course of business and have
engaged, and may in the future engage, in commercial banking and/or investment
banking transactions with the Company or its affiliates.
EXPERTS
The consolidated balance sheets of the Insurer as of December 31, 2002 and
December 31, 2001 and the related consolidated statements of operations and
comprehensive income, changes in shareholder's equity and cash flows for each
of the three years in the period ended December 31, 2002, incorporated by
reference in this Prospectus Supplement, have been incorporated in this
Prospectus Supplement in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The balance sheets of XLFA as of December 31, 2002 and December 31, 2001 and
the related statements of operations and comprehensive income, changes in
shareholder's equity and cash flows for each of the three years in the period
ended December 31, 2002, incorporated by reference in this Prospectus
Supplement, have been incorporated in this Prospectus Supplement in reliance on
the report of PricewaterhouseCoopers, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
S-12
[CAPITAL ASSURANCE LOGO HERE]
1221 Avenue of the Americas
New York, New York 10020
Telephone: (212) 478-3400
Facsimile: (212) 478-3597
FINANCIAL GUARANTY
INSURANCE POLICY
OBLIGOR: Policy No:
INSURED
OBLIGATIONS: Effective Date:
XL Capital Assurance Inc. (XLCA), a New York stock insurance company, in
consideration of the payment of the premium, hereby unconditionally and
irrevocably guarantees to the Trustee for the benefit of the Owners of the
Insured Obligations, the full and complete payment by the Obligor of Scheduled
Payments in respect of the Insured Obligations, subject only to the terms of
this Policy (which includes the Endorsement attached hereto).
XLCA will pay the Insured Amount to the Trustee upon the presentation of a
Payment Notice to XLCA (which Payment Notice shall include an irrevocable
assignment to XLCA of all rights and claims in respect of the relevant Insured
Obligation, as specified in the Payment Notice), on the later of (a) one (1)
Business Day following receipt by XLCA of a Payment Notice or (b) the Business
Day on which Scheduled Payments are due for payment. XLCA shall be subrogated
to the Owners' rights to payment on the Insured Obligations to the extent of
any payment by XLCA hereunder. The obligations of XLCA with respect to a
Scheduled Payment will be discharged to the extent funds to pay such Scheduled
Payment are deposited in the account specified in the Payment Notice, whether
such funds are properly applied by the Trustee or claimed by an Owner.
In addition, in the event that any Scheduled Payment which has become due
for payment and which is made to an Owner by or on behalf of the Trustee is
recovered or is recoverable from the Owner pursuant to a final order of a court
of competent jurisdiction in an Insolvency Proceeding that such payment
constitutes an avoidable preference to such Owner within the meaning of any
applicable bankruptcy law, XLCA unconditionally and irrevocably guarantees
payment of the amount of such recovery (in accordance with the Endorsement
attached hereto).
This Policy sets forth in full the undertaking of XLCA and shall not be
cancelled or revoked by XLCA for any reason, including failure to receive
payment of any premium due hereunder or under the Insurance Agreement, and may
not be further endorsed or modified without the written consent of XLCA. The
premium on this Policy is not refundable for any reason. This Policy does not
insure against loss of any prepayment or other acceleration payment which at
any time may become due in respect of any Insured Obligation, other than at the
sole option of XLCA, nor against any risk other than Nonpayment and Avoided
Payment, including any shortfalls, if any, attributable to the liability of the
Obligor for taxes or withholding taxes if any, including interest and penalties
in respect of such liability.
THIS POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE SECURITY FUND
SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
Any capitalized terms not defined herein shall have the meaning given such
terms in the Endorsement attached hereto and forming a part hereof, or in the
Insurance Agreement referenced therein. In witness whereof, XLCA has caused
this Policy to be executed as of the Effective Date.
------------------------- -------------------------
Name: SPECIMEN Name: SPECIMEN
Title: Title:
A-1
Financial Guaranty Insurance Policy Endorsement
Effective Date
Attached to and forming part of
Financial Guaranty Insurance Policy No.
Obligor:
Insured Obligations:
Beneficiary:
Capitalized terms used herein and not otherwise defined herein or in the Policy
shall have the meanings assigned to them in the Insurance Agreement as defined
below.
As used herein the term "Business Day" means any day other than Saturday or
Sunday on which commercial banking institutions in New York, New York are
generally open for banking business.
As used herein the term "Insolvency Proceeding" means the commencement,
after the date hereof, of any bankruptcy, insolvency, readjustment of debt,
reorganization, marshalling of assets and liabilities or similar proceedings by
or against any Person, the commencement, after the date hereof, of any
proceedings by or against any Person for the winding up or liquidation of its
affairs, or the consent, after the date hereof, to the appointment of a
trustee, conservator, receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, reorganization, marshalling of assets and liabilities or
similar proceedings of or relating to any Person.
As used herein the term "Indenture" means the ______ Indenture dated as of
______ between the Obligor and ______, as Trustee (the "Trustee"), as amended
and supplemented, including by the ______ Supplemental Indenture dated as of
.
As used herein the term "Insurance Agreement" means the Insurance Agreement
dated as of ______ by and among XLCA, ______ and the Trustee, as may be amended
or modified from time to time.
As used herein the term "Insured Amount" means that portion of the Scheduled
Payments that shall become due for payment but shall be unpaid by reason of
Nonpayment.
As used herein the term "Nonpayment" means, with respect to any Payment
Date, the failure of the Trustee to receive in full, in accordance with the
terms of the Indenture, that Scheduled Payment that is due for payment with
respect to such date.
A-2
As used herein the term "Owner" means the registered owner of any Insured
Obligation as indicated in the registration books maintained by or on behalf of
the Obligor for such purpose or, if the Insured Obligation is in bearer form,
the holder of the Insured Obligation.
As used herein, the term "Payment Date" means, in the case of scheduled
interest on the Insured Obligations, each ______, ______, ______ and ______ of
each year during the Term of this Policy, beginning ______, and, in the case of
scheduled principal of the Insured Obligations, .
As used herein, the term "Person" means an individual, a partnership, a
limited liability company, a joint venture, a corporation, a trust, an
unincorporated organization, and a government or any department or agency
thereof.
As used herein the term "Scheduled Payment" means, with respect to any
Payment Date during the Term of this Policy, scheduled payments of interest and
principal, in accordance with the original terms of the Insured Obligations and
the Indenture when issued and without regard to any subsequent amendment or
modification of the Insured Obligations or the Indenture that has not been
consented to in writing by XLCA. Notwithstanding the foregoing, "Scheduled
Payments" shall in no event include payments which become due on an accelerated
basis as a result of (a) any default by the Obligor, (b) the occurrence of an
Event of Default under the Indenture, (c) mandatory or optional redemption, in
whole or in part or (d) any other cause, unless XLCA elects, in its sole
discretion, to pay such amounts in whole or in part (in which event Scheduled
Payments shall include such esaccelerated payments as, when, and to the extent
so elected by XLCA). In the event that it do not make such election, Scheduled
Payments shall include payments due in accordance with the original scheduled
terms without regard to any acceleration. In addition, "Scheduled Payment"
shall not include, nor shall coverage be provided under the Policy in respect
of, (i) any make whole, redemption or call premium payable in respect of the
Insured Obligations, (ii) any amounts due in respect of the Insured Obligations
attributable to any increase in interest rate, penalty or other sum payable by
the Issuer by reason of any default or event of default in respect of the
Insured Obligations, or by reason of any deterioration of the creditworthiness
of the Issuer or (iii) any taxes, withholding or other charge imposed by any
governmental authority due in connection with the payment of any Scheduled
Payment to any holder of an Insured Obligation.
As used herein the term "Term of this Policy" means the period from and
including the Effective Date to and including the first date on which (i) all
Scheduled Payments have been paid that are required to be paid by the Obligor
under the Indenture; (ii) the 91-day period during which any Scheduled Payment
could have been avoided in whole or in part as a preference payment under
applicable bankruptcy, insolvency, receivership or similar law has expired, and
(iii) if any proceedings requisite to avoidance as a preference payment have
been commenced prior to the occurrence of (i) and (ii) above, a final and
nonappealable order in resolution of each such proceeding has been entered;
provided, however, that if the Owners are required to return any Avoided
A-3
Payment (as defined below) as a result of such insolvency proceeding, then the
Term of the Policy shall terminate on the date on which XLCA has made all
payments required to be made under the terms of this Policy in respect of all
such Avoided Payments.
To make a claim under the Policy, the Trustee shall deliver to XLCA Payment
Notice in the form of Exhibit A hereto (a "Payment Notice"), appropriately
completed and executed by the Trustee. A Payment Notice under this Policy may
be presented to XLCA by (i) delivery of the original Payment Notice to XLCA at
its address set forth below, or (ii) facsimile transmission of the original
Payment Notice to XLCA at its facsimile number set forth below. If presentation
is made by facsimile transmission, the Trustee shall (x) simultaneously confirm
transmission by telephone to XLCA at its telephone number set forth below, and
(y) as soon as reasonably practicable, deliver the original Payment Notice to
XLCA at its address set forth below. Any Payment Notice received by XLCA after
10:00 a.m., New York City time, on a Business Day, or on any day that is not a
Business Day, will be deemed to be received by XLCA at 9:00 a.m., New York City
time, on the next succeeding Business Day. XLCA shall make payments due in
respect of Insured Amounts no later than 2:00 p.m. New York City time to the
Trustee upon the presentation of a Payment Notice to XLCA on the later of (a)
one (1) Business Day following receipt by XLCA of a Payment Notice or (b) the
Business Day on which Scheduled Payments are due for payment.
Subject to the foregoing, if the payment of any amount with respect to the
Scheduled Payment is voided (a "Preference Event") as a result of an Insolvency
Proceeding and as a result of such Preference Event, the Owner is required to
return such voided payment, or any portion of such voided payment, made in
respect of the Insured Obligation (an "Avoided Payment"), XLCA will pay an
amount equal to such Avoided Payment, as and when such payment would otherwise
be due pursuant to the Insured Obligation and the Indenture without regard to
acceleration or prepayment, and upon payment of such Avoided Payment and
receipt by XLCA from the Trustee on behalf of such Owner of (x) a certified
copy of a final order of a court exercising jurisdiction in such Insolvency
Proceeding to the effect that the Owner or the Trustee on behalf of the Owner
is required to return any such payment or portion thereof because such payment
was voided under applicable law, with respect to which order the appeal period
has expired without an appeal having been filed (the "Final Order"), (y) an
assignment, substantially in the form attached hereto as Exhibit B, properly
completed and executed by such Owner irrevocably assigning to XLCA all rights
and claims of such Owner relating to or arising under such Avoided Payment, and
(z) a Payment Notice in the form of Exhibit A hereto appropriately completed
and executed by the Trustee.
XLCA shall make payments due in respect of Avoided Payments no later than
2:00 p.m. New York City time on the Business Day following XLCA's receipt of
the documents required under clauses (x) through (z) of the preceding
paragraph. Any such documents received by XLCA after 10:00 a.m. New York City
time on any Business Day or on any day that is not a Business Day shall be
deemed to have been received by XLCA at 9:00 a.m., New York City time, on the
next succeeding Business Day. All payments made by XLCA hereunder on account of
any Avoided Payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Final
A-4
Order and not to any Owner directly (unless an Owner previously paid such
amount to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Final Order, in which case such payment shall be
disbursed to the Trustee for distribution to such Owner upon proof of such
payment reasonably satisfactory to XLCA).
XLCA hereby waives and agrees not to assert any and all rights to require
the Trustee to make demand on or to proceed against any person, party or
security prior to the Trustee demanding payment under this Policy.
No defenses, set-offs and counterclaims of any kind available to XLCA so as
to deny payment of any amount due in respect of this Policy will be valid and
XLCA hereby waives and agrees not to assert any and all such defenses
(including, without limitation, defense of fraud in the inducement or fact, or
any other circumstances which would have the effect of discharging a surety in
law or in equity), set-offs and counterclaims, including, without limitation,
any such rights acquired by subrogation, assignment or otherwise. Upon any
payment hereunder, in furtherance and not in limitation of XLCA's equitable
right of subrogation and XLCA's rights under the Insurance Agreement, XLCA will
be subrogated to the rights of the Owner in respect of which such payment was
made to receive any and all amounts due in respect of the obligations in
respect of which XLCA has made a payment hereunder. Any rights of subrogation
acquired by XLCA as a result of any payment made under this Policy shall, in
all respects, be subordinate and junior in right of payment to the prior
indefeasible payment in full of any amounts due the Owner on account of
payments due under the Insured Obligation.
This Policy is neither transferable nor assignable, in whole or in part,
except to a successor trustee duly appointed and qualified under the Indenture.
All Payment Notices and other notices, presentations, transmissions, deliveries
and communications made by the Trustee to XLCA with respect to this Policy
shall specifically refer to the number of this Policy and shall be made to XLCA
at:
XL Capital Assurance Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Surveillance
Telephone: (212) 478-3400
Facsimile: (212) 478- 3597
or such other address, telephone number or facsimile number as XLCA may
designate to the Trustee in writing from time to time. Each such Payment Notice
and other notice, presentation, transmission, delivery and communication shall
be effective only upon actual receipt by XLCA.
The obligations of XLCA under this Policy are irrevocable, primary, absolute
and unconditional, subject to satisfaction of the conditions for making a claim
under the Policy, and neither the failure of any Person to perform any covenant
or obligation in favor of XLCA (or otherwise), nor the failure or omission to
make a
A-5
demand permitted hereunder, nor the failure of any assignment or grant of any
security interest, nor the commencement of any Insolvency Proceeding shall in
any way affect or limit XLCA's obligations under this Policy. If a successful
action or proceeding to enforce this Policy is brought by the Trustee, the
Trustee shall be entitled to recover from XLCA costs and expenses reasonably
incurred, including, without limitation, reasonable fees and expenses of
counsel.
This Policy and the obligations of XLCA hereunder shall terminate on the
expiration of the Term of this Policy. This Policy shall be returned to XLCA by
the Trustee upon the expiration of the Term of this Policy.
The Property/Casualty Insurance Security Fund specified in Article 76 of the
New York Insurance Law does not cover this Policy. The Florida Insurance
Guaranty Association created under Part II of Chapter 631 of the Florida
Insurance Code does not cover this Policy. In the event that XLCA were to
become insolvent, the California Insurance Guaranty Association, established
pursuant to Article 14.2 of Chapter 1 of Part 2 of Division 1 of the California
Insurance Code excludes from coverage any claims arising under this Policy.
THIS POLICY SHALL BE CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THAT WOULD
REQUIRE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
In the event any term or provision of the form of this Policy is
inconsistent with the provision of this Endorsement, the provision of this
Endorsement shall take precedence and be binding.
[Remainder of Page Intentionally Left Blank]
A- 6
IN WITNESS WHEREOF, XL Capital Assurance Inc. has caused this Endorsement to
the Policy to be executed on the Effective Date.
------------------------- -------------------------
Name: SPECIMEN Name: SPECIMEN
Title: Title:
A-7
Exhibit A to Financial Guaranty Policy No.
XL Capital Assurance Inc.
1221 Avenue of the Americas
New York, New York 10020
Attention: Surveillance
PAYMENT NOTICE
UNDER FINANCIAL GUARANTY POLICY NO.
______, as Trustee (the "Trustee"), hereby certifies to XL Capital Assurance
Inc. ("XLCA") with reference to that certain Financial Guaranty Policy, No.
______, dated ______ (the "Policy"), issued by XLCA in favor of the Trustee
under the ______ Indenture dated as of ______ between ______ and the Trustee,
as amended and supplemented, including by the ______ Supplemental Indenture
dated as of ______ (the "Indenture"), as follows:
1. The Trustee is the trustee under the Indenture and the beneficiary on
behalf of each Owner of the Policy.
2. The Trustee is entitled to make a demand under the Policy pursuant to the
Indenture.
3. This notice relates to the [insert date] Payment Date. The amount
demanded is to be paid in immediately available funds to the [Specify Account]
at [Identify Financial Institution Holding Account] account number[______].
[For a Payment Notice in respect of Insured Amounts other than Avoided
Payment, use paragraph 4.]
4. The Trustee demands payment of $______ which is an amount equal to the
amount by which the Scheduled Payment due on the above Payment Date exceeds the
funds made available to the Trustee to pay such Scheduled Payment.
[For a Payment Notice in respect of an Avoided Payment use the following
paragraphs [4] or [5].]
[4.] or [5.] The Trustee hereby represents and warrants, based upon
information available to it, that (i) the amount entitled to be drawn under the
Policy on the date hereof in respect of Avoided Payments is the amount paid or
to be paid simultaneously with such draw on the Policy by the Owner on account
of a Preference Event [$______] (the "Avoided Payment Amount"), (ii) the Owner
with respect to which the drawing is being made under the Policy has paid or
simultaneously with such draw on the Policy will pay such Avoided Payment
Amount, and (iii) the documents required by the Policy to be delivered in
connection with such Avoided Payment and Avoided Payment Amount have previously
been presented to XLCA or are attached hereto.
A-8
[6] The Trustee agrees that, following payment of funds by XLCA, it shall
use reasonable efforts to procure (a) that such amounts are applied directly to
the payment of any Insured Amount which is due for payment; (b) that such funds
are not applied for any other purpose; and (c) the maintenance of accurate
records of such payments in respect of the Insured Obligation and the
corresponding claim on the Policy and the proceeds thereof.
[7] The Trustee, on behalf of itself and the Owners, hereby assigns to XLCA
all rights and claims (including rights of actions and claims in respect of
securities laws violations or otherwise) of the Trustee and the Owners with
respect to the Insured Obligation to the extent of any payments under the
Policy. The foregoing assignment is in addition to, and not in limitation of,
rights of subrogation otherwise available to XLCA in respect of such payments.
The Trustee shall take such action and deliver such instruments as may be
reasonably required by XLCA to effectuate the purposes of this paragraph [7].
[8] The Trustee, on behalf of itself and the Owners, hereby appoints XLCA as
agent and attorney-in-fact for the Trustee and the Owners in any legal
proceeding in respect of the Insured Obligation. The Trustee, on behalf of
itself and the Owners, thereby (and without limiting the generality of the
preceding sentence) agrees that XLCA may, at any time during the continuation
of any proceeding by or against any debtor with respect to which a Preference
Claim (as defined below) or other claim with respect to the Insured Obligation
is asserted under any Insolvency Proceeding, direct all matters relating to
such Insolvency Proceeding, including, without limitation, (a) all matters
relating to any claim in connection with a Insolvency Proceeding seeking the
avoidance as a preferential transfer of any payment made with respect to the
obligations (a "Preference Claim"), (b) the direction of any appeal of any
order relating to any Preference Claim and (c) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition, the
Trustee, on behalf of itself and the Owners, hereby agrees that XLCA shall be
subrogated to, and the Trustee, on behalf of itself and the Owners, hereby
delegates and assigns, to the fullest extent permitted by law, the rights of
the Trustee and the Owners in the conduct of any Insolvency Proceeding,
including, without limitation, all rights of any party to an adversary
proceeding or action with respect to any court order issued in connection with
any such Insolvency Proceeding.
A-9
Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to them in the Policy or Indenture.
IN WITNESS WHEREOF, this notice has been executed this ______ day of ______,
______.
______________________, as Trustee
By: ____________________
Authorized Officer
Any Person Who Knowingly And With Intent To Defraud Any Insurance Company Or
Other Person Files An Application For Insurance Or Statement Of Claim
Containing Any Materially False Information, Or Conceals For The Purpose Of
Misleading Information Concerning Any Fact Material Thereof, Commits A
Fraudulent Insurance Act, Which Is A Crime, And Shall Also Be Subject To A
Civil Penalty Not To Exceed Five Thousand Dollars And The Stated Value Of The
Claim For Each Such Violation
A-10
Exhibit B to Financial Guaranty Insurance Policy, No.
Form of Assignment
Reference is made to the Financial Guaranty Insurance Policy No. ______,
dated ______ (together with the Endorsement attached thereto, the "Policy"),
issued by XL Capital Assurance Inc. ("XLCA") relating to the ______ due ______
issued by ______. Unless otherwise defined herein, capitalized terms used in
this Assignment shall have the meanings assigned thereto in the Policy as
incorporated by reference therein. In connection with the Avoided Payment of [$
] paid by the undersigned (the "Owner") on [______] and the payment by XLCA in
respect of such Avoided Payment pursuant to the Policy, the Owner hereby
irrevocably and unconditionally, without recourse, representation or warranty
(except as provided below), sells, assigns, transfers, conveys and delivers all
of such Owner's rights, title and interest in and to any rights or claims,
whether accrued, contingent or otherwise, which the Owner now has or may
hereafter acquire, against any person relating to, arising out of or in
connection with such Avoided Payment. The Owner represents and warrants that
such claims and rights are free and clear of any lien or encumbrance created or
incurred by such Owner.[1]
--------------------------------------
Owner
- --------
[1] In the event that the terms of this form of assignment are reasonably
determined to be insufficient solely as a result of a change of law or
applicable rules after the date of the Policy to fully vest all of the
Owner's right, title and interest in such rights and claims, the Owner and
XLCA shall agree on such other form as is reasonably necessary to effect
such assignment, which assignment shall be without recourse, representation
or warranty except as provided above.
A-11
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TABLE OF CONTENTS
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Page
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Prospectus Supplement
Risk Factors.................................... S-2
The Company..................................... S-2
Selected Financial Information.................. S-2
Use of Proceeds................................. S-3
Description of the Series F Senior Notes........ S-3
The Policy and the Insurer...................... S-7
Ratings......................................... S-10
Underwriting.................................... S-11
Experts......................................... S-12
Appendix A -- Form of Policy.................... A-1
Prospectus
About this Prospectus........................... 2
Risk Factors.................................... 2
Available Information........................... 2
Incorporation of Certain Documents by
Reference....................................... 3
Savannah Electric and Power Company............. 3
Selected Information............................ 4
The Trust....................................... 5
Accounting Treatment of the Trust............... 5
Use of Proceeds................................. 5
Description of the Senior Notes................. 6
Description of the Junior Subordinated Notes.... 9
Description of the Preferred Securities......... 15
Description of the Guarantee.................... 15
Relationship Among the Preferred Securities, the
Junior Subordinated Notes and the
Guarantee..................................... 17
Plan of Distribution............................ 19
Legal Matters................................... 19
Experts......................................... 20
$35,000,000
[LOGO]
SAVANNAH
ELECTRIC
A SOUTHERN COMPANY
Series F 5.50% Senior Notes
due December 15, 2028
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PROSPECTUS SUPPLEMENT
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Edward D. Jones & Co., L.P.
SunTrust Robinson Humphrey
December 11, 2003
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