PROSPECTUS SUPPLEMENT
(To Prospectus dated May 21, 2004)
[LOGO]
SAVANNAH
ELECTRIC
A SOUTHERN COMPANY
1,800,000 Shares
6.00% Series Preferred Stock
Non-Cumulative, Par Value $25 Per Share
-----------------
This is a public offering by Savannah Electric and Power Company of
1,800,000 shares of 6.00% Series Preferred Stock, Non-Cumulative, Par Value $25
Per Share.
On or after July 1, 2009, Savannah Electric and Power Company may redeem
shares of the new Stock, in whole or in part, at a redemption price equal to
$25.00 per share plus accrued and unpaid dividends.
When, as and if declared by Savannah Electric and Power Company, dividends
on the new Stock will be payable quarterly on January 1, April 1, July 1 and
October 1 of each year, beginning July 1, 2004. Dividends on the new Stock are
not cumulative and, accordingly, if Savannah Electric and Power Company does
not declare a dividend or declares less than a full dividend on the new Stock
for a quarterly dividend period, holders of the new Stock will have no right to
receive a dividend or the full dividend, as the case may be, for that period,
and Savannah Electric and Power Company will have no obligation to pay a
dividend for that period, whether or not Savannah Electric and Power Company
pays dividends in full or has sufficient funds to pay dividends in the future.
See "RISK FACTORS" beginning on page S-3 of this Prospectus Supplement for a
description of certain risks associated with investing in the new Stock.
Application will be made to list the new Stock on the New York Stock
Exchange. If approved, Savannah Electric and Power Company expects trading of
the new Stock to begin within 30 days after the new Stock is first issued.
Proceeds to
Public Savannah Electric
Offering Underwriting and Power Company
Price(1) Discount Before Expenses
----------- ------------ -----------------
Per Share $ 25.00 $ 0.50 $ 24.50
Total.... $45,000,000 $900,000 $44,100,000
- --------
(1)Plus accrued dividends, if any, from the date of original issuance.
The new Stock should be delivered in book-entry form through The Depository
Trust Company on or about June 11, 2004.
-----------------
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.
-----------------
LEHMAN BROTHERS
May 27, 2004
In making your investment decision, you should rely only on the information
contained or incorporated by reference in this Prospectus Supplement and the
accompanying Prospectus. We have not authorized anyone to provide you with any
other information. If you receive any unauthorized information, you must not
rely on it.
We are offering to sell the new Stock only in places where sales are
permitted.
You should not assume that the information contained or incorporated by
reference in this Prospectus Supplement or the attached Prospectus, including
information incorporated by reference, is accurate as of any date other than
its respective date.
-----------------
TABLE OF CONTENTS
Prospectus Supplement Page
--------------------- ----
Risk Factors.................. S-3
The Company................... S-3
Selected Financial Information S-4
Recent Developments........... S-5
Use of Proceeds............... S-5
Certain Terms of the New Stock S-6
Underwriting.................. S-10
Prospectus Page
---------- ----
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 New Stock................ 6
Description of the Senior Notes............. 7
Description of the Junior Subordinated
Notes..................................... 10
Description of the Preferred Securities..... 16
Description of the Guarantee................ 17
Relationship Among the Preferred Securities,
the Junior Subordinated Notes and the
Guarantee................................. 19
Plan of Distribution........................ 20
Legal Matters............................... 21
Experts..................................... 21
S-2
RISK FACTORS
Investing in the new Stock 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, 2003, 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 new Stock.
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 ("Southern").
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.
S-3
SELECTED FINANCIAL INFORMATION
The following selected financial data for the years ended December 31, 1999
through December 31, 2003 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 three months ended March 31, 2004 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.
Three
Months
Year Ended December 31, Ended
-------------------------------------------- March 31,
1999 2000 2001 2002 2003 2004(1)
-------- -------- -------- -------- -------- ---------
(Thousands, except ratios)
Operating Revenues..................... $251,594 $295,718 $283,852 $299,552 $314,055 $72,835
Earnings Before Income Taxes........... 34,891 36,543 33,772 35,313 37,915 4,946
Net Income............................. 23,083 22,969 22,063 22,880 22,807 3,148
Ratio of Earnings to Fixed Charges(2).. 3.23 3.24 3.12 3.36 3.91 2.43
Ratio of Earnings to Fixed Charges Plus
Preferred Dividend Requirements (Pre-
Income Tax Basis)(3)................. 3.23 3.24 3.12 3.36 3.91 2.43
Capitalization
As of March 31, 2004
------------------------------
Actual As Adjusted(4)
-------- ------------------
(Thousands, except percentages)
Common Stock Equity......................... $183,894 $214,894 43.6%
Preferred Stock............................. -- 45,000 9.1
Senior Notes................................ 160,000 160,000 32.5
Other Long-Term Debt........................ 62,725 72,725 14.8
-------- -------- -----
Total, excluding amounts due within one year $406,619 $492,619 100.0%
======== ======== =====
- --------
(1)Due to seasonal valuations in the demand for energy, operating results for
the three months ended March 31, 2004 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 mandatorily redeemable preferred securities"
and the debt portion of allowance for funds using during construction; and
(ii) "Fixed Charges" consist of "Interest expense, net of amounts
capitalized," "Distributions on mandatorily redeemable preferred securities"
and the debt portion of allowance for funds used during construction.
(3)In computing this ratio, "Preferred Dividend Requirements" represent the
before-tax earnings necessary to pay such dividends, computed at the
effective tax rates for the applicable periods. The Company had no Preferred
Dividend Requirements for any period presented.
(4)Reflects: (i) contributions to capital from Southern in May 2004 in the
amount of $31,000,000; (ii) the borrowing in May 2004 of $10,000,000 under a
variable rate revolving credit note which matures September 6, 2005; and
(iii) the proposed issuance of the new Stock offered hereby.
S-4
RECENT DEVELOPMENTS
For information regarding the construction of Plant McIntosh combined cycle
units 10 and 11 by Southern Power Company ("Southern Power"), Georgia Public
Service Commission (the "GPSC") certification of purchased power agreements
between Southern Power and Georgia Power Company ("Georgia Power") and the
Company for the Plant McIntosh unit 10 and 11 capacity beginning June 2005 (the
"McIntosh PPAs") and the Federal Energy Regulatory Commission (the "FERC")
approval process for the McIntosh PPAs, see Item 7--MANAGEMENT'S DISCUSSION AND
ANALYSIS--"Future Earnings Potential--FERC Matters--Southern Power PPA" and
Note 3 to the financial statements of the Company under "FERC Matters" in the
Annual Report on Form 10-K for the year ended December 31, 2003. Also see
MANAGEMENT'S DISCUSSION AND ANALYSIS--"Future Earnings Potential--FERC Matters"
and Note (C) to the Condensed Financial Statements of the Company in the
Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
To ensure the timely completion of construction on McIntosh units 10 and 11
and their availability in the summer of 2005 as supply side resources for the
retail customers in the State of Georgia, on May 7, 2004, Georgia Power and the
Company requested the GPSC to direct them to purchase the McIntosh combined
cycle units 10 and 11 construction project from Southern Power. Georgia Power
and the Company proposed to place the units in rate base at a cost approved by
the GPSC and to recover the unit operation and maintenance costs as retail
service expenses as may be approved by the GPSC. After the project is purchased
by Georgia Power and the Company, the McIntosh PPAs would no longer be
effective.
On May 18, 2004, the GPSC ordered Georgia Power and the Company to purchase
within 30 days the McIntosh combined cycle units 10 and 11 construction project
from Southern Power. The GPSC also directed Georgia Power and the Company to
file an application within 10 days of completing such purchase to amend the
resource certificate granted by the GPSC in 2002 to describe the capacity
resource as being the McIntosh units 10 and 11 (as opposed to the McIntosh
PPAs), the approximate construction schedule (which is not expected to change)
and the proposed ratebase treatment. The GPSC is expected to review the
application by Georgia Power and the Company in accordance with its affiliate
transaction guidelines and will have up to 180 days to respond. The ultimate
outcome of the GPSC's review cannot now be determined.
The purchase occurred on May 24, 2004 at a cost to the Company of
approximately $77 million. As a result of this transfer, the Company's
estimated construction expenditures for 2004 have increased by approximately
$84.1 million. See MANAGEMENT'S DISCUSSION AND ANALYSIS--"Financial Condition
and Liquidity--Capital Requirements and Contractual Obligations" of the Company
in the Annual Report on Form 10-K for the year ended December 31, 2003.
USE OF PROCEEDS
The proceeds from the sale of the new Stock will be applied by the Company
to repay a portion of its outstanding short-term indebtedness, which aggregated
approximately $50.6 million as of May 27, 2004 and was primarily incurred by
the Company to purchase units 10 and 11 of Plant McIntosh as described in
"Recent Developments" above.
S-5
CERTAIN TERMS OF THE NEW STOCK
The following is a summary of the terms of the 6.00% Series Preferred Stock,
Non-Cumulative, Par Value $25 Per Share (the "new Stock"). This summary is not
complete and should be read together with the general terms and provisions of
the new Stock in the accompanying Prospectus under the caption "Description of
the New Stock." To the extent this summary is inconsistent with information in
the accompanying Prospectus, this summary controls.
Dividends
Dividends on the new Stock will be payable, when, as and if declared by the
Company's Board of Directors out of funds legally available, at a rate per
annum equal to 6.00%.
Dividends on the new Stock are payable on January 1, April 1, July 1 and
October 1 of each year, commencing July 1, 2004, when, as and if declared by
the Company, or, if any such date is not a business day, on the next business
day.
Dividends on the new Stock are not cumulative and, accordingly, if the
Company does not declare a dividend or declares less than a full dividend on
the new Stock for a quarterly dividend period, holders of the new Stock will
have no right to receive a dividend or the full dividend, as the case may be,
for that period, and the Company will have no obligation to pay a dividend for
that period, whether or not the Company pays dividends in full or has
sufficient funds to pay dividends in the future.
Redemption
The Company shall have the right to redeem the new Stock, in whole or in
part, without premium, from time to time, on or after July 1, 2009, upon not
less than 30 nor more than 60 days' notice, at a redemption price equal to
$25.00 per share plus accrued and unpaid dividends (whether or not declared)
from the immediately preceding dividend payment date to the redemption date
(without accumulation of accrued and unpaid dividends for prior dividend
periods unless previously declared, in which case accrued and unpaid dividends
for such prior dividend periods shall be paid at redemption). For any shares of
new Stock to be redeemed, dividends will cease to accrue and all rights of
holders of such shares, except the right to receive the redemption price, will
cease as of the redemption date.
No sinking fund will be provided for the purchase or redemption of the new
Stock.
Transfer Agent, Registrar and Paying Agent
Southern Company Services, Inc. will be the transfer agent, registrar and
paying agent for the new Stock.
Voting Rights
Except as hereinafter set forth or when some mandatory provision of law
shall be controlling, the holders of the new Stock will have no voting power.
S-6
Holders of the Company's preferred stock (the "Preferred Stock"), including
the new Stock, are entitled to vote on certain matters relating to (1)
authorization of stock, other than Preferred Stock, ranking prior to or on a
parity with the Preferred Stock, or a security convertible into shares of stock
of such kind; (2) change of the express terms of any series of Preferred Stock
in a manner prejudicial to the holders; (3) except where required by a
regulatory agency, a reduction of capital allocable to Preferred Stock or a
reduction of capital allocable to common stock, if such reduction causes common
stock equity to be less than the amount payable to holders of Preferred Stock
upon liquidation, dissolution or winding up of the Company; and (4)(A) issuance
of additional shares of Preferred Stock unless, for any twelve-month period
within the preceding fifteen months, net income available for the payment of
dividends on the Preferred Stock and gross income available for the payment of
interest charges on indebtedness shall have been, respectively, at least 2 1/2
times the dividend requirements upon the entire amount of Preferred Stock then
to be outstanding, and at least 1 1/2 times the aggregate of such dividend
requirements and interest charges for such period on the entire amount of
indebtedness then to be outstanding and (B) issuance of additional Preferred
Stock, unless the capital of the Company represented by its common stock
together with its surplus shall in the aggregate be at least equal to the
involuntary liquidation, dissolution or winding up value of the Preferred Stock
then to be outstanding. With respect to (1), (2), (3) and (4) above, the
consent or affirmative vote of at least two-thirds of the outstanding Preferred
Stock (or of the affected series in the case of a change prejudicial to less
than all series) is required. However, no consent of the holders of any series
of Preferred Stock as described in this paragraph shall be required if
provision is made for the redemption of all of the shares of such series, or
provision is made that the proposed action will not be effective unless
provision is made for the purchase, redemption or other retirement of all
shares of such series.
In the event that any six quarterly dividends (whether or not consecutive
and whether or not earned and declared) have not been paid in full on the new
Stock, the holders of such new Stock will have the right, voting separately as
a class with holders of shares of any one or more other series of Preferred
Stock upon which like voting rights have been conferred and are exercisable, at
the next meeting of stockholders called for the election of directors, to elect
two members of the Board of Directors of the Company and the size of the
Company's Board of Directors will be increased accordingly to effect such
election. The rights of such holders of new Stock to elect (together with the
holders of shares of any one or more other series of Preferred Stock upon which
like voting rights have been conferred and are exercisable) members of the
Board of Directors of the Company will continue until such time as full
dividends on such new Stock have been paid or declared and set apart regularly
for at least one year (i.e., four consecutive full quarterly dividend periods),
at which time such right will terminate, subject to revesting in the event of
each and every subsequent failure to pay dividends of the character described
above. Upon any termination of the right of the holders of shares of Preferred
Stock to vote as a class for directors, the term of office of all directors
then in office elected by such holders voting as a class will terminate
immediately.
Sinking Fund
The holders of the new Stock will not be entitled to the benefit of a
sinking fund or purchase fund.
Book-Entry Only Issuance--The Depository Trust Company
The Depository Trust Company ("DTC") will act as the initial securities
depository for the new Stock. The new Stock 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 new Stock certificates will be issued,
representing in the aggregate the total par amount of new Stock, and will be
deposited with Southern Company Services, Inc. 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 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. DTC holds and provides
asset servicing for over 2 million issues of U.S. and non-U.S.
S-7
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"). DTC has Standard & Poor's highest rating: AAA. The
DTC rules applicable to its Direct and Indirect Participants are on file with
the Securities and Exchange Commission. More information about DTC can be found
at www.dtcc.com.
Purchases of new Stock under the DTC system must be made by or through
Direct Participants, which will receive a credit for the new Stock on DTC's
records. The ownership interest of each actual purchaser of new Stock
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase. Beneficial Owners, however, are expected to receive
written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect Participants
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the new Stock are to be accomplished by entries made on
the books of Direct and Indirect Participants acting on behalf of Beneficial
Owners. Beneficial Owners will not receive certificates representing their
ownership interests in new Stock, except in the event that use of the
book-entry system for the new Stock is discontinued.
To facilitate subsequent transfers, all new Stock deposited by Direct
Participants with DTC is 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 new Stock 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 new Stock; DTC's records reflect only the identity of the Direct
Participants to whose accounts such new Stock is credited, which may or may not
be the Beneficial Owners. The Direct and Indirect 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 shares of
new Stock within an issue 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.
Neither DTC nor Cede & Co. (nor any other DTC nominee) will itself consent
or vote with respect to new Stock, unless authorized by a Direct Participant in
accordance with DTC's procedures. Under its usual procedures, DTC mails an
Omnibus Proxy to the Company as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the new Stock are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
S-8
Payments on the new Stock 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 Southern Company Services,
Inc., on the payable 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 in bearer form or 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 Direct and Indirect Participants.
Except as provided herein, a Beneficial Owner of the global new Stock will
not be entitled to receive physical delivery of the new Stock. Accordingly,
each Beneficial Owner must rely on the procedures of DTC to exercise any rights
under the new Stock. 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 the
global new Stock.
DTC may discontinue providing its services as securities depositary with
respect to the new Stock at any time by giving reasonable notice to the Company
or Southern Company Services, Inc. Under such circumstances, in the event that
a successor securities depositary is not obtained, new Stock certificates are
required to 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). In that event, certificates for the
new Stock 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 Direct or Indirect
Participants of their respective obligations as described herein or under the
rules and procedures governing their respective operations.
S-9
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to Lehman Brothers Inc. (the "Underwriter") and the
Underwriter has agreed to purchase from the Company the new Stock.
In the Underwriting Agreement, the Underwriter has agreed, subject to the
terms and conditions set forth therein, to purchase all of the new Stock
offered hereby if any of the new Stock is purchased.
The Underwriter proposes to offer the new Stock directly to the public at
the initial public offering price set forth on the cover page of this
Prospectus Supplement, and may offer the new Stock to certain securities
dealers at such price less a concession not in excess of $0.30 per share of the
new Stock. The Underwriter may allow, and such dealers may reallow, a
concession not in excess of $0.20 per share of the new Stock to certain brokers
and dealers. After the new Stock is released for sale to the public, the
offering price and other selling terms may from time to time be varied by the
Underwriter.
Prior to this offering, there has been no public market for the new Stock.
The new Stock is expected to be approved for listing on the New York Stock
Exchange (the "NYSE"), subject to official notice of issuance. Trading of the
new Stock on the NYSE is expected to commence within a 30-day period after the
initial delivery of the new Stock. The Underwriter has advised the Company that
it intends to make a market in the new Stock prior to the commencement of
trading on the NYSE. However, the Underwriter will have no obligation to make a
market in the new Stock and may cease market making activities, if commenced,
at any time.
It is expected that delivery of the new Stock will be made against payment
therefor on or about the 10th business day following the date of this
Prospectus Supplement. Trades in the secondary market generally are required to
settle in three business days, unless the parties to any such trade expressly
agree otherwise. Accordingly, purchasers who wish to trade the new Stock before
final settlement will be required, by virtue of the fact that the new Stock
will settle in T+10, to specify an alternative settlement cycle at the time of
any such trade to prevent a failed settlement.
The Company has agreed with the Underwriter, that during the period of 15
days from the date of the Underwriting Agreement, not to sell, offer to sell,
grant any option for the sale of, or otherwise dispose of any Preferred Stock
of the Company, any security convertible into, exchangeable into or exercisable
for Preferred Stock of the Company or any securities substantially similar to
the new Stock (except for the new Stock issued pursuant to the Underwriting
Agreement), without the prior written consent of the Underwriter.
In order to facilitate the offering of the new Stock, the Underwriter may
engage in transactions that stabilize, maintain or otherwise affect the price
of the new Stock. Specifically, the Underwriter may over-allot in connection
with the offering, creating short positions in the new Stock for its own
account. In addition, to cover over-allotments or to stabilize the price of the
new Stock, the Underwriter may bid for, and purchase, new Stock in the open
market. The Underwriter may reclaim selling concessions allowed to an
underwriter or dealer for distributing new Stock in the offering, if the
Underwriter repurchases previously distributed new Stock in transactions to
cover short positions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the new Stock above
independent market levels. The Underwriter is not required to engage in these
activities and may end any of these activities at any time.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate 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 were to discourage resales of the security.
Neither the Company nor the 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 new Stock. In addition, neither
the Company nor the Underwriter makes any representation that the Underwriter
will engage in such transactions or that such transactions, once commenced,
will not be discontinued without notice.
S-10
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Company's expenses associated with the offer and sale of the new Stock
are estimated to be $270,000.
The Underwriter and its affiliates engage in transactions with, and, from
time to time, have performed investment and commercial banking services for,
the Company and its affiliates in the ordinary course of business and may do so
in the future.
S-11
PROSPECTUS
$120,000,000
[LOGO]
SAVANNAH
ELECTRIC
A SOUTHERN COMPANY
Savannah Electric and Power Company
Preferred Stock, Par Value up to $100 Per Share
Senior Notes
Junior Subordinated Notes
-----------------
Savannah Electric Capital Trust II
Trust Preferred Securities
Fully and unconditionally guaranteed, as set forth in this Prospectus, by
Savannah Electric and Power Company
a subsidiary of The Southern Company
-----------------
We will provide the specific terms of these securities in supplements to
this Prospectus. You should read this Prospectus and the applicable Prospectus
Supplement carefully before you invest.
See "Risk Factors" on page 2 for information on certain risks related to the
purchase of securities offered by this Prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this Prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
May 21, 2004
ABOUT THIS PROSPECTUS
This Prospectus is part of a registration statement filed with the
Securities and Exchange Commission (the "Commission") using a "shelf"
registration process under the Securities Act of 1933, as amended (the "1933
Act"). Under the shelf process, Savannah Electric and Power Company (the
"Company") may sell, in one or more transactions,
. preferred stock (the "new Stock")
. senior notes (the "Senior Notes")
. junior subordinated notes (the "Junior Subordinated Notes")
and Savannah Electric Capital Trust II (the "Trust") may sell
. trust preferred securities or capital securities (the "Preferred
Securities")
in one or more offerings up to a total dollar amount of $120,000,000. This
Prospectus provides a general description of those securities. Each time the
Company sells securities, the Company will provide a prospectus supplement that
will contain specific information about the terms of that offering ("Prospectus
Supplement"). The Prospectus Supplement may also add, update or change
information contained in this Prospectus. You should read this Prospectus and
the applicable Prospectus Supplement together with additional information under
the heading "Available Information."
RISK FACTORS
Investing in the Company's securities involves risk. Please see the risk
factors described in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2003, which is incorporated by reference in this
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. The risks and uncertainties described are not the only ones
facing the Company. Additional risks and uncertainties not presently known to
the Company or that the Company currently deems immaterial may also impair its
business operations, its financial results and the value of its securities.
AVAILABLE INFORMATION
The Company and the Trust have filed with the Commission a combined
registration statement on Form S-3 (the "Registration Statement," which term
encompasses any amendments of the Registration Statement and exhibits to the
Registration Statement) under the 1933 Act. As permitted by the rules and
regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules to the Registration Statement, to which reference is made.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance with the
1934 Act files reports and other information with the Commission. Such reports
and other information can be inspected and copied at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The Commission maintains a Web site
that contains reports, proxy and information statements and other information
regarding registrants including the Company that file electronically at
http://www.sec.gov. In addition, reports and other material concerning the
Company can be inspected at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
No separate financial statements of the Trust are included in this
Prospectus. The Company considers that such statements would not be material to
holders of the Preferred Securities because the Trust has no independent
operations and exists for the sole purpose of investing the proceeds of the
sale of the Trust Securities (as defined below) in Junior Subordinated Notes.
2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission pursuant to the
1934 Act and are incorporated by reference in this Prospectus and made a part
of this Prospectus:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2003;
(b) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2004; and
(c) the Company's Current Reports on Form 8-K dated May 7, 2004 and May
18, 2004.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference in this Prospectus and made a part of this Prospectus
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained in this Prospectus or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference in this Prospectus modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all documents incorporated by reference in this Prospectus but
not delivered with this Prospectus (other than the exhibits to such documents
unless such exhibits are specifically incorporated by reference in this
Prospectus). Such requests should be directed to Kirby R. Willis, Vice
President, Treasurer and Chief Financial Officer, Savannah Electric and Power
Company, 600 Bay Street, East, Savannah, Georgia 31401, telephone: (912)
644-7171.
SAVANNAH ELECTRIC AND POWER COMPANY
The Company was incorporated under the laws of the State of Georgia on
August 5, 1921. The principal executive offices of the Company are located at
600 Bay Street, East, Savannah, Georgia 31401, and the telephone number is
(912) 644-7171.
The Company is a wholly owned subsidiary of The Southern Company
("Southern"), a holding company registered under the Public Utility Holding
Company Act of 1935, as amended. The Company is engaged in the generation and
purchase of electricity and the distribution and sale of electricity at retail
and, as a member of the Southern electric system power pool, the transmission
and sale of wholesale energy. The Company has approximately 140,000 customers
in a five-county area in Eastern Georgia containing approximately 2,000 square
miles, including the City of Savannah and its environs, most of Chatham County,
most of Effingham County and portions of Bryan, Bulloch and Screven Counties.
The Company's service area has a population of approximately 320,000 with
approximately 93% located in metropolitan Savannah. The City of Savannah is one
of the largest general cargo ports, and a leading foreign trade port, on the
Southeast U.S. Atlantic coast.
3
SELECTED INFORMATION
The following material, which is presented in this Prospectus solely to
furnish limited introductory information regarding the Company, has been
selected from, or is based upon, the detailed information and financial
statements appearing in the documents incorporated by reference in this
Prospectus or elsewhere in this Prospectus, is qualified in its entirety by
reference to those documents and, therefore, should be read together with those
documents.
Savannah Electric and Power Company
Business.......................................... Generation, transmission, distribution and sale of
electric energy
Service Area...................................... Approximately 2,000 square miles comprising the
City of Savannah, Georgia and portions of the
surrounding five-county area
Customers at December 31, 2003.................... 139,826
Generating Capacity at December 31, 2003
(kilowatts)..................................... 787,631
Sources of Generation during 2003 (kilowatt-hours) Coal (94%), Gas (4%) and Oil (2%)
Certain Ratios
The following table sets forth the Ratios of Earnings to Fixed Charges and
Earnings to Fixed Charges Plus Preferred Dividend Requirements (Pre-Income Tax
Basis) for the periods indicated.
Three Months
Year Ended December 31, Ended
- - ------------------------ March 31,
1999 2000 2001 2002 2003 2004(1)
---- ---- ---- ---- ---- ------------
Ratio of Earnings to Fixed Charges(2)..................... 3.23 3.24 3.12 3.36 3.91 2.43
Ratio of Earnings to Fixed Charges Plus Preferred Dividend
Requirements (Pre-Income Tax Basis)(3).................. 3.23 3.24 3.12 3.36 3.91 2.43
- --------
(1) Due to seasonal variations in the demand for energy, operating results for
the three months ended March 31, 2004 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 mandatorily redeemable preferred
securities" and the debt portion of allowance for funds used during
construction, and (ii) "Fixed Charges" consist of "Interest expense, net of
amounts capitalized," "Distributions on mandatorily redeemable preferred
securities" and the debt portion of allowance for funds used during
construction.
(3) In computing this ratio, "Preferred Dividend Requirements" represent the
pre-tax earnings necessary to pay such dividends, computed at the effective
tax rates for the applicable periods. The Company had no Preferred Dividend
Requirements for any period presented.
4
THE TRUST
The Trust is a statutory trust created under Delaware law pursuant to the
filing of a certificate of trust with the Delaware Secretary of State on March
23, 2001. The Trust's business is defined in a trust agreement, executed by the
Company, as Depositor, and the Delaware Trustee of the Trust. This trust
agreement will be amended and restated in its entirety substantially in the
form filed as an exhibit to the Registration Statement of which this Prospectus
forms a part (the "Trust Agreement"). The Trust Agreement will be qualified as
an indenture under the Trust Indenture Act of 1939, as amended (the "1939
Act"). The Company will own all of the common securities (the "Common
Securities" and, together with the Preferred Securities, the "Trust
Securities") of the Trust. The Trust Securities represent undivided beneficial
interests in the assets of the Trust. The Trust exists for the exclusive
purposes of (i) issuing the Trust Securities representing undivided beneficial
interests in the assets of the Trust, (ii) investing the gross proceeds of the
Trust Securities in a related series of Junior Subordinated Notes, and (iii)
engaging in only those other activities necessary, appropriate, convenient or
incidental to these purposes. The payment of periodic cash distributions on the
Preferred Securities and payments on liquidation and redemption with respect to
the Preferred Securities, in each case to the extent the Trust has funds
legally and immediately available for these purposes, will be guaranteed by the
Company (the "Guarantee") to the extent set forth under "Description of the
Guarantee."
The Trust's business and affairs will be conducted by its trustees, which
shall be appointed by the Company as the holder of the Common Securities: two
officers of the Company as Administrative Trustees; The Bank of New York as
Property Trustee; and The Bank of New York (Delaware) as Delaware Trustee
(collectively, the "Securities Trustees"). The Property Trustee of the Trust
will act as the indenture trustee with respect to the Trust for purposes of
compliance with the provisions of the 1939 Act.
The principal place of business of the Trust shall be c/o the Company, 600
Bay Street, East, Savannah, Georgia 31401, telephone (912) 644-7171, Attn:
Treasurer.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities for further information concerning the Trust.
ACCOUNTING TREATMENT OF THE TRUST
For financial reporting purposes, the Trust is a variable interest entity.
The Company accounts for its investment in the Trust under the equity method in
accordance with Financial Accounting Standards Board Interpretation No. 46R,
"Consolidation of Variable Interest Entities." The Junior Subordinated Notes
payable to the Trust will be presented as a separate line item in the Company's
balance sheet. Interest payable on the Junior Subordinated Notes will be
reflected as a separate line item on the Company's income statement and
appropriate disclosures concerning the Preferred Securities, the Guarantee and
the Junior Subordinated Notes will be included in the notes to the Company's
financial statements.
USE OF PROCEEDS
The Trust will invest the proceeds received from the sale of its Preferred
Securities in Junior Subordinated Notes. Except as may be otherwise described
in an applicable Prospectus Supplement, the net proceeds received by the
Company from such investment and any proceeds received from the sale of its new
Stock or its Senior Notes or other sales of its Junior Subordinated Notes will
be used in connection with its ongoing construction program, to pay scheduled
maturities and/or refundings of its securities, to repay short-term
indebtedness to the extent outstanding and for other general corporate purposes.
5
DESCRIPTION OF THE NEW STOCK
Set forth below is a description of the general terms of the new Stock. The
statements in this Prospectus concerning the new Stock are an outline and do
not purport to be complete. Such statements make use of defined terms and are
qualified in their entirety by reference to the charter of the Company (the
"Charter") and the amendments thereto, a copy of which is filed as an exhibit
to the Registration Statement of which this Prospectus forms a part or
incorporated by reference in the Registration Statement, for complete
statements and for the definitions of various terms. The general provisions
which apply to the Preferred Stock of the Company of all classes, which are now
or may later be authorized or created, are set forth in the Charter.
General
The new Stock is to be created by amendment to the Charter. The new Stock
consists of an authorized class of preferred stock, with such par value per
share (up to $100 per share) (the "Preferred Stock") as shall be fixed by
resolution duly adopted by the common stockholders of the Company prior to the
issue and sale of the new Stock. All such Preferred Stock ranks on a parity
with respect to dividends and amounts payable upon liquidation, dissolution or
winding up of the Company.
At March 31, 2004, there were no shares of Preferred Stock outstanding.
Any proposed listing of the new Stock on a securities exchange will be
described in the applicable Prospectus Supplement.
Transfer Agent and Registrar
Unless otherwise indicated in the applicable Prospectus Supplement, the
transfer agent for the new Stock will be Southern Company Services, Inc., 270
Peachtree Street, N.W., Atlanta, Georgia 30303, which will also serve as the
registrar.
Dividend Rights and Provisions
Dividends on the new Stock are payable, when and if declared by the Board of
Directors, at the rate per annum determined for each respective series. Unless
otherwise indicated in the applicable Prospectus Supplement, dividends will be
payable to holders of record of Preferred Stock as they appear on the books of
the Company on the record dates fixed by the Board of Directors.
The applicable Prospectus Supplement will set forth the par value of the new
Stock, the dividend rate provisions of the new Stock, including the payment
date and the rate or rates, or the method of determining the rate or rates
(which may involve periodic dividend rate settings through remarketing or
auction procedures or pursuant to one or more formulae, as described in the
applicable Prospectus Supplement) and whether dividends shall be cumulative
and, if so, from which date or dates.
Redemption Provisions
The redemption provisions applicable to the new Stock will be described in
the applicable Prospectus Supplement.
Voting Rights
Except as provided in the applicable Prospectus Supplement or otherwise
provided by law, the holders of the new Stock will have no voting power.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of each share of Preferred Stock
shall be entitled to receive, for each share of Preferred Stock, the par
6
value plus, in a voluntary liquidation, dissolution or winding up, an amount
per share equal to the redemption premium, if any, together in each case with
accrued dividends, before any distribution of assets may be made to the holders
of any Common Stock.
Sinking Fund
The terms and conditions of a sinking or purchase fund, if any, for the
benefit of the holders of the new Stock will be set forth in the applicable
Prospectus Supplement.
Other Rights
The holders of the new Stock do not have any pre-emptive or conversion
rights, except as otherwise described in the applicable Prospectus Supplement.
DESCRIPTION OF THE SENIOR NOTES
Set forth below is a description of the general terms 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 Senior Note Indenture
dated as of March 1, 1998 between the Company and The Bank of New York, as
trustee (the "Senior Note Indenture Trustee"), as to be supplemented by a
supplemental indenture to the Senior Note Indenture establishing the Senior
Notes of each series (the Senior Note Indenture, as so supplemented, is
referred to as the "Senior Note Indenture"), the forms of which are filed as
exhibits to the Registration Statement of which this Prospectus forms a part.
The terms of the Senior Notes will include those stated in the Senior Note
Indenture and those made a part of the Senior Note Indenture by reference to
the 1939 Act. Certain capitalized terms used in this Prospectus and not defined
in this Prospectus are defined in the Senior Note Indenture.
General
The Senior Notes will be issued as unsecured senior debt securities under
the Senior Note Indenture and will rank equally with all other unsecured and
unsubordinated debt of the Company. The Senior Notes will be effectively
subordinated to all secured debt of the Company, including its first mortgage
bonds, aggregating approximately $23,000,000 outstanding at March 31, 2004. The
Senior Note Indenture does not limit the aggregate principal amount of Senior
Notes that may be issued under the Senior Note Indenture and provides that
Senior Notes may be issued from time to time in one or more series pursuant to
an indenture supplemental to the Senior Note Indenture. The Senior Note
Indenture gives the Company the ability to reopen a previous issue of Senior
Notes and issue additional Senior Notes of such series, unless otherwise
provided.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Senior Notes being offered
by such Prospectus Supplement: (i) the title of such Senior Notes; (ii) any
limit on the aggregate principal amount of such Senior Notes; (iii) the date or
dates on which the principal of such Senior Notes is payable; (iv) the rate or
rates at which such Senior Notes shall bear interest, if any, or any method by
which such rate or rates will be determined, the date or dates from which such
interest will accrue, the interest payment dates on which such interest shall
be payable, and the regular record date for the interest payable on any
interest payment date; (v) the place or places where the principal of (and
premium, if any) and interest, if any, on such Senior Notes shall be payable;
(vi) the period or periods within which, the price or prices at which and the
terms and conditions on which such Senior Notes may be redeemed, in whole or in
part, at the option of the Company or at the option of the holder prior to
their maturity; (vii) the obligation, if any, of the Company to redeem or
purchase such Senior Notes; (viii) the denominations in which such Senior Notes
shall be issuable; (ix) if other than the principal amount of the Senior Notes,
the portion of the principal amount of such Senior Notes which shall be payable
upon declaration of acceleration of the maturity of such Senior Notes; (x) any
deletions from, modifications of or additions to the Events of Default or
covenants of the Company as
7
provided in the Senior Note Indenture pertaining to such Senior Notes; (xi)
whether such Senior Notes shall be issued in whole or in part in the form of a
Global Security; and (xii) any other terms of such Senior Notes.
The Senior Note Indenture does not contain provisions that afford holders of
Senior Notes protection in the event of a highly leveraged transaction
involving the Company.
Events of Default
The Senior Note Indenture provides that any one or more of the following
described events with respect to the Senior Notes of any series, which has
occurred and is continuing, constitutes an "Event of Default" with respect to
the Senior Notes of such series:
(a) failure for 10 days to pay interest on the Senior Notes of such
series, when due on an interest payment date other than at maturity or upon
earlier redemption; or
(b) failure to pay principal or premium, if any, or interest on the
Senior Notes of such series when due at maturity or upon earlier redemption;
or
(c) failure for three Business Days to deposit any sinking fund payment
when due by the terms of a Senior Note of such series; or
(d) failure to observe or perform any other covenant or warranty of the
Company in the Senior Note Indenture (other than a covenant or warranty
which has expressly been included in the Senior Note Indenture solely for
the benefit of one or more series of Senior Notes other than such series)
for 90 days after written notice to the Company from the Senior Note
Indenture Trustee or the holders of at least 25% in principal amount of the
outstanding Senior Notes of such series; or
(e) certain events of bankruptcy, insolvency or reorganization of the
Company.
The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Senior Note Indenture Trustee with respect to the Senior Notes of such series.
If a Senior Note Indenture Event of Default occurs and is continuing with
respect to the Senior Notes of any series, then the Senior Note Indenture
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of the Senior Notes of such series may declare the principal amount of
the Senior Notes due and payable immediately by notice in writing to the
Company (and to the Senior Note Indenture Trustee if given by the holders), and
upon any such declaration such principal amount shall become immediately due
and payable. At any time after such a declaration of acceleration with respect
to the Senior Notes of any series has been made and before a judgment or decree
for payment of the money due has been obtained as provided in Article Five of
the Senior Note Indenture, the holders of not less than a majority in aggregate
outstanding principal amount of the Senior Notes of such series may rescind and
annul such declaration and its consequences if the default has been cured or
waived and the Company has paid or deposited with the Senior Note Indenture
Trustee a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration and all sums paid or advanced by
the Senior Note Indenture Trustee, including reasonable compensation and
expenses of the Senior Note Indenture Trustee.
The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series may, on behalf of the holders of all
the Senior Notes of such series, waive any past default with respect to such
series, except (i) a default in the payment of principal or interest or (ii) a
default in respect of a covenant or provision which under Article Nine of the
Senior Note Indenture cannot be modified or amended without the consent of the
holder of each outstanding Senior Note of such series affected.
Registration and Transfer
The Company shall not be required to (i) issue, register the transfer of or
exchange Senior Notes of any series during a period of 15 days immediately
preceding the date notice is given identifying the Senior Notes of
8
such series called for redemption, or (ii) register the transfer of or exchange
any Senior Notes so selected for redemption, in whole or in part, except the
unredeemed portion of any Senior Note being redeemed in part.
Payment and Paying Agent
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of any Senior Notes will be made only against surrender to the
Paying Agent of such Senior Notes. Principal of and interest on Senior Notes
will be payable subject to any applicable laws and regulations, at the office
of such Paying Agent or Paying Agents as the Company may designate from time to
time, except that, at the option of the Company, payment of any interest may be
made by wire transfer or by check mailed to the address of the person entitled
to an interest payment as such address shall appear in the Security Register
with respect to the Senior Notes. Payment of interest on Senior Notes on any
interest payment date will be made to the person in whose name the Senior Notes
(or predecessor security) are registered at the close of business on the record
date for such interest payment.
Unless otherwise indicated in an applicable Prospectus Supplement, the
Senior Note Indenture Trustee will act as Paying Agent with respect to the
Senior Notes. The Company may at any time designate additional Paying Agents or
rescind the designation of any Paying Agents or approve a change in the office
through which any Paying Agent acts.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or interest on the Senior Notes of any series which remain
unclaimed at the end of two years after such principal or interest shall have
become due and payable will be repaid to the Company, and the holder of such
Senior Notes will from that time forward look only to the Company for payment
of such principal and interest.
Modification
The Senior Note Indenture contains provisions permitting the Company and the
Senior Note Indenture Trustee, with the consent of the holders of not less than
a majority in principal amount of the outstanding Senior Notes of each series
that is affected, to modify the Senior Note Indenture or the rights of the
holders of the Senior Notes of such series; provided, that no such modification
may, without the consent of the holder of each outstanding Senior Note that is
affected, (i) change the stated maturity of the principal of, or any
installment of principal of or interest on, any Senior Note, or reduce the
principal amount thereof or the rate of interest on any Senior Note or any
premium payable upon the redemption of any Senior Note, or change the method of
calculating the rate of interest on any Senior Note, or impair the right to
institute suit for the enforcement of any such payment on or after the stated
maturity of any Senior Note (or, in the case of redemption, on or after the
redemption date), or (ii) reduce the percentage of principal amount of the
outstanding Senior Notes of any series, the consent of whose holders is
required for any such supplemental indenture, or the consent of whose holders
is required for any waiver (of compliance with certain provisions of the Senior
Note Indenture or certain defaults under the Senior Note Indenture and their
consequences) provided for in the Senior Note Indenture, or (iii) modify any of
the provisions of the Senior Note Indenture relating to supplemental
indentures, waiver of past defaults, or waiver of certain covenants, except to
increase any such percentage or to provide that certain other provisions of the
Senior Note Indenture cannot be modified or waived without the consent of the
holder of each outstanding Senior Note that is affected.
In addition, the Company and the Senior Note Indenture Trustee may execute,
without the consent of any holders of Senior Notes, any supplemental indenture
for certain other usual purposes, including the creation of any new series of
Senior Notes.
Consolidation, Merger and Sale
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any person, unless (1) such other corporation or person is a
9
corporation organized and existing under the laws of the United States, any
state in the United States or the District of Columbia and such other
corporation or person expressly assumes, by supplemental indenture executed and
delivered to the Senior Note Indenture Trustee, the payment of the principal of
(and premium, if any) and interest on all the Senior Notes and the performance
of every covenant of the Senior Note Indenture on the part of the Company to be
performed or observed; (2) immediately after giving effect to such
transactions, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have happened and be
continuing; and (3) the Company has delivered to the Senior Note Indenture
Trustee an officers' certificate and an opinion of counsel, each stating that
such transaction complies with the provisions of the Senior Note Indenture
governing consolidation, merger, conveyance, transfer or lease and that all
conditions precedent to the transaction have been complied with.
Information Concerning the Senior Note Indenture Trustee
The Senior Note Indenture Trustee, prior to an Event of Default with respect
to Senior Notes of any series, undertakes to perform, with respect to Senior
Notes of such series, only such duties as are specifically set forth in the
Senior Note Indenture and, in case an Event of Default with respect to Senior
Notes of any series has occurred and is continuing, shall exercise, with
respect to Senior Notes of such series, the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject to
such provision, the Senior Note Indenture Trustee is under no obligation to
exercise any of the powers vested in it by the Senior Note Indenture at the
request of any holder of Senior Notes of any series, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which
might be incurred by the Senior Note Indenture Trustee. The Senior Note
Indenture Trustee is not required to expend or risk its own funds or otherwise
incur any financial liability in the performance of its duties if the Senior
Note Indenture Trustee reasonably believes that repayment or adequate indemnity
is not reasonably assured to it.
The Bank of New York, the Senior Note Indenture Trustee, also serves as
Subordinated Note Indenture Trustee, as Property Trustee and as Guarantee
Trustee. The Company and/or certain of its affiliates maintain deposit accounts
and banking relationships with The Bank of New York. The Bank of New York also
serves as trustee under other indentures pursuant to which securities of the
Company and affiliates of the Company are outstanding.
Governing Law
The Senior Note Indenture and the Senior Notes will be governed by, and
construed in accordance with, the internal laws of the State of New York.
Miscellaneous
The Company will have the right at all times to assign any of its rights or
obligations under the Senior Note Indenture to a direct or indirect
wholly-owned subsidiary of the Company; provided, that, in the event of any
such assignment, the Company will remain primarily liable for all such
obligations. Subject to the foregoing, the Senior Note Indenture will be
binding upon and inure to the benefit of the parties to the Senior Note
Indenture and their respective successors and assigns.
DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES
Set forth below is a description of the general terms of the Junior
Subordinated Notes. The following description does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Subordinated Note Indenture dated as of December 1, 1998 between the Company
and The Bank of New York, as trustee (the "Subordinated Note Indenture
Trustee"), as to be supplemented by a supplemental indenture to the
Subordinated Note Indenture establishing the Junior Subordinated Notes of each
series (the Subordinated Note
10
Indenture, as so supplemented, is referred to as the "Subordinated Note
Indenture"), the forms of which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part. The terms of the Junior
Subordinated Notes will include those stated in the Subordinated Note Indenture
and those made a part of the Subordinated Note Indenture by reference to the
1939 Act. Certain capitalized terms used in this Prospectus and not defined in
this Prospectus are defined in the Subordinated Note Indenture.
General
The Junior Subordinated Notes will be issued as unsecured junior
subordinated debt securities under the Subordinated Note Indenture. The
Subordinated Note Indenture does not limit the aggregate principal amount of
Junior Subordinated Notes that may be issued under the Subordinated Note
Indenture and provides that Junior Subordinated Notes may be issued from time
to time in one or more series pursuant to an indenture supplemental to the
Subordinated Note Indenture. The Subordinated Note Indenture gives the Company
the ability to reopen a previous issue of Junior Subordinated Notes and issue
additional Junior Subordinated Notes of such series, unless otherwise provided.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Junior Subordinated Notes
being offered by such Prospectus Supplement: (i) the title of such Junior
Subordinated Notes; (ii) any limit on the aggregate principal amount of such
Junior Subordinated Notes; (iii) the date or dates on which the principal of
such Junior Subordinated Notes is payable; (iv) the rate or rates at which such
Junior Subordinated Notes shall bear interest, if any, or any method by which
such rate or rates will be determined, the date or dates from which such
interest will accrue, the interest payment dates on which such interest shall
be payable, and the regular record date for the interest payable on any
interest payment date; (v) the place or places where the principal of (and
premium, if any) and interest, if any, on such Junior Subordinated Notes shall
be payable; (vi) the period or periods within which, the price or prices at
which and the terms and conditions on which such Junior Subordinated Notes may
be redeemed, in whole or in part, at the option of the Company or at the option
of the holder prior to their maturity; (vii) the obligation, if any, of the
Company to redeem or purchase such Junior Subordinated Notes; (viii) the
denominations in which such Junior Subordinated Notes shall be issuable; (ix)
if other than the principal amount of the Junior Subordinated Notes, the
portion of the principal amount of such Junior Subordinated Notes which shall
be payable upon declaration of acceleration of the maturity of such Junior
Subordinated Notes; (x) any deletions from, modifications of or additions to
the Events of Default or covenants of the Company as provided in the
Subordinated Note Indenture pertaining to such Junior Subordinated Notes;
(xi) whether such Junior Subordinated Notes shall be issued in whole or in part
in the form of a Global Security; (xii) the right, if any, of the Company to
extend the interest payment periods of such Junior Subordinated Notes; and
(xiii) any other terms of such Junior Subordinated Notes. The terms of any
series of Junior Subordinated Notes issued to the Trust will correspond to
those of the Preferred Securities of the Trust as described in the Prospectus
Supplement relating to the Preferred Securities.
The Subordinated Note Indenture does not contain provisions that afford
holders of Junior Subordinated Notes protection in the event of a highly
leveraged transaction involving the Company.
Subordination
The Junior Subordinated Notes are subordinated and junior in right of
payment to all Senior Indebtedness (as defined below) of the Company. No
payment of principal of (including redemption payments, if any), or premium, if
any, or interest on (including Additional Interest (as defined below)) the
Junior Subordinated Notes may be made if (a) any Senior Indebtedness is not
paid when due and any applicable grace period with respect to such default has
ended with such default not being cured or waived or otherwise ceasing to
exist, or (b) the maturity of any Senior Indebtedness has been accelerated
because of a default, or (c) notice has been given of the exercise of an option
to require repayment, mandatory payment or prepayment or otherwise. Upon any
payment or distribution of assets of the Company to creditors upon any
liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors, marshalling of assets or liabilities, or any bankruptcy,
11
insolvency or similar proceedings of the Company, the holders of Senior
Indebtedness shall be entitled to receive payment in full of all amounts due or
to become due on or in respect of all Senior Indebtedness before the holders of
the Junior Subordinated Notes are entitled to receive or retain any payment or
distribution. Subject to the prior payment of all Senior Indebtedness, the
rights of the holders of the Junior Subordinated Notes will be subrogated to
the rights of the holders of Senior Indebtedness to receive payments and
distributions applicable to such Senior Indebtedness until all amounts owing on
the Junior Subordinated Notes are paid in full.
The term "Senior Indebtedness" means, with respect to the Company, (i) any
payment due in respect of indebtedness of the Company, whether outstanding at
the date of execution of the Subordinated Note Indenture or incurred, created
or assumed after the execution of the Subordinated Note Indenture, (a) in
respect of money borrowed (including any financial derivative, hedging or
futures contract or similar instrument) and (b) evidenced by securities,
debentures, bonds, notes or other similar instruments issued by the Company
that, by their terms, are senior or senior subordinated debt securities
including, without limitation, all obligations under its indentures with
various trustees; (ii) all capital lease obligations; (iii) all obligations
issued or assumed as the deferred purchase price of property, all conditional
sale obligations and all obligations of the Company under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business and long-term purchase obligations); (iv) all obligations for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction; (v) all obligations of the type
referred to in clauses (i) through (iv) above of other persons the payment of
which the Company is responsible or liable as obligor, guarantor or otherwise;
and (vi) all obligations of the type referred to in clauses (i) through (v)
above of other persons secured by any lien on any property or asset of the
Company (whether or not such obligation is assumed by the Company), except for
(1) any such indebtedness that is by its terms subordinated to or that ranks
equally with the Junior Subordinated Notes and (2) any unsecured indebtedness
between or among the Company or its affiliates. Such Senior Indebtedness shall
continue to be Senior Indebtedness and be entitled to the benefits of the
subordination provisions contained in the Subordinated Note Indenture
irrespective of any amendment, modification or waiver of any term of such
Senior Indebtedness.
The Subordinated Note Indenture does not limit the aggregate amount of
Senior Indebtedness that may be issued by the Company. As of March 31, 2004,
Senior Indebtedness of the Company aggregated approximately $230,000,000.
Additional Interest
"Additional Interest" is defined in the Subordinated Note Indenture as (i)
such additional amounts as may be required so that the net amounts received and
retained by a holder of Junior Subordinated Notes (if the holder is the Trust)
after paying taxes, duties, assessments or governmental charges of whatever
nature (other than withholding taxes) imposed by the United States or any other
taxing authority will not be less than the amounts the holder would have
received had no such taxes, duties, assessments or other governmental charges
been imposed; and (ii) any interest due and not paid on an interest payment
date, together with interest on such interest due from such interest payment
date to the date of payment, compounded quarterly, on each interest payment
date.
Certain Covenants
The Company covenants in the Subordinated Note Indenture, for the benefit of
the holders of each series of Junior Subordinated Notes, that, (i) if at such
time the Company shall have given notice of its election to extend an interest
payment period for such series of Junior Subordinated Notes and such extension
shall be continuing, (ii) if at such time the Company shall be in default with
respect to its payment or other obligations under the Guarantee with respect to
the Trust Securities, if any, related to such series of Junior Subordinated
Notes, or (iii) if at such time an Event of Default under the Subordinated Note
Indenture with respect to such series of Junior Subordinated Notes shall have
occurred and be continuing, (a) the Company shall not declare or pay any
dividend or make any distributions with respect to, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its capital
stock, and (b) the Company shall not make any payment of interest, principal or
12
premium, if any, on or repay, repurchase or redeem any debt securities
(including guarantees other than the Guarantee) issued by the Company which
rank equally with or junior to the Junior Subordinated Notes. None of the
foregoing, however, shall restrict (i) any of the actions described in the
preceding sentence resulting from any reclassifications of the Company's
capital stock or the exchange or conversion of one class or series of the
Company's capital stock for another class or series of the Company's capital
stock, or (ii) the purchase of fractional interests in shares of the Company's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged.
The Subordinated Note Indenture further provides that, for so long as the
Trust Securities remain outstanding, the Company covenants (i) to directly or
indirectly maintain 100% ownership of the Common Securities; provided, however,
that any permitted successor of the Company under the Subordinated Note
Indenture may succeed to the Company's ownership of such Common Securities, and
(ii) to use its reasonable efforts to cause the Trust (a) to remain a statutory
trust, except in connection with the distribution of Junior Subordinated Notes
to the holders of Trust Securities in liquidation of the Trust, the redemption
of all of the Trust Securities, or certain mergers, consolidations or
amalgamations, each as permitted by the Trust Agreement, and (b) to otherwise
continue to be classified as a grantor trust for United States federal income
tax purposes.
Events of Default
The Subordinated Note Indenture provides that any one or more of the
following described events with respect to the Junior Subordinated Notes of any
series, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Junior Subordinated Notes of such series:
(a) failure for 10 days to pay interest on the Junior Subordinated Notes
of such series, including any Additional Interest (as defined in clause (ii)
of the definition of Additional Interest in the Subordinated Note Indenture)
in respect of the Junior Subordinated Notes, when due on an interest payment
date other than at maturity or upon earlier redemption; provided, however,
that a valid extension of the interest payment period by the Company shall
not constitute a default in the payment of interest for this purpose; or
(b) failure for 10 days to pay Additional Interest (as defined in clause
(i) of the definition of Additional Interest in the Subordinated Note
Indenture); or
(c) failure to pay principal or premium, if any, or interest, including
Additional Interest (as defined in clause (ii) of the definition of
Additional Interest in the Subordinated Note Indenture), on the Junior
Subordinated Notes of such series when due at maturity or upon earlier
redemption; or
(d) failure for three Business Days to deposit any sinking fund payment
when due by the terms of a Junior Subordinated Note of such series; or
(e) failure to observe or perform any other covenant or warranty of the
Company in the Subordinated Note Indenture (other than a covenant or
warranty which has expressly been included in the Subordinated Note
Indenture solely for the benefit of one or more series of Junior
Subordinated Notes other than such series) for 90 days after written notice
to the Company from the Subordinated Note Indenture Trustee or the holders
of at least 25% in principal amount of the outstanding Junior Subordinated
Notes of such series; or
(f) certain events of bankruptcy, insolvency or reorganization of the
Company.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series have the right to direct
the time, method and place of conducting any proceeding for any remedy
available to the Subordinated Note Indenture Trustee with respect to the Junior
Subordinated Notes of such series. If a Subordinated Note Indenture Event of
Default occurs and is continuing with respect to the Junior Subordinated Notes
of any series, then the Subordinated Note Indenture Trustee or the holders of
not less than 25% in aggregate outstanding principal amount of the Junior
Subordinated Notes of such series may declare the principal amount of the
Junior Subordinated Notes due and payable immediately by notice in writing to
the Company (and to the Subordinated Note Indenture Trustee if given by the
holders), and upon any such
13
declaration such principal amount shall become immediately due and payable. At
any time after such a declaration of acceleration with respect to the Junior
Subordinated Notes of any series had been made and before a judgment or decree
for payment of the money due has been obtained as provided in Article Five of
the Subordinated Note Indenture, the holders of not less than a majority in
aggregate outstanding principal amount of the Junior Subordinated Notes of such
series may rescind and annul such declaration and its consequences if the
default has been cured or waived and the Company has paid or deposited with the
Subordinated Note Indenture Trustee a sum sufficient to pay all matured
installments of interest (including any Additional Interest) and principal due
otherwise than by acceleration and all sums paid or advanced by the
Subordinated Note Indenture Trustee, including reasonable compensation and
expenses of the Subordinated Note Indenture Trustee.
A holder of Preferred Securities may institute a legal proceeding directly
against the Company, without first instituting a legal proceeding against the
Property Trustee or any other person or entity, for enforcement of payment to
such holder of principal of or interest on the Junior Subordinated Notes of the
related series having a principal amount equal to the aggregate stated
liquidation amount of the Preferred Securities of such holder on or after the
due dates specified in the Junior Subordinated Notes of such series.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series may, on behalf of the
holders of all the Junior Subordinated Notes of such series, waive any past
default with respect to such series, except (i) a default in the payment of
principal or interest or (ii) a default in respect of a covenant or provision
which under Article Nine of the Subordinated Note Indenture cannot be modified
or amended without the consent of the holder of each outstanding Junior
Subordinated Note of such series affected.
Registration and Transfer
The Company shall not be required to (i) issue, register the transfer of or
exchange Junior Subordinated Notes of any series during a period of 15 days
immediately preceding the date notice is given identifying the Junior
Subordinated Notes of such series called for redemption, or (ii) register the
transfer of or exchange any Junior Subordinated Notes so selected for
redemption, in whole or in part, except the unredeemed portion of any Junior
Subordinated Note being redeemed in part.
Payment and Paying Agent
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of any Junior Subordinated Notes will be made only against
surrender to the Paying Agent of such Junior Subordinated Notes. Principal of
and interest on Junior Subordinated Notes will be payable, subject to any
applicable laws and regulations, at the office of such Paying Agent or Paying
Agents as the Company may designate from time to time, except that, at the
option of the Company, payment of any interest may be made by wire transfer or
by check mailed to the address of the person entitled to an interest payment as
such address shall appear in the Security Register with respect to the Junior
Subordinated Notes. Payment of interest on Junior Subordinated Notes on any
interest payment date will be made to the person in whose name the Junior
Subordinated Notes (or predecessor security) are registered at the close of
business on the record date for such interest payment.
Unless otherwise indicated in an applicable Prospectus Supplement, the
Subordinated Note Indenture Trustee will act as Paying Agent with respect to
the Junior Subordinated Notes. The Company may at any time designate additional
Paying Agents or rescind the designation of any Paying Agents or approve a
change in the office through which any Paying Agent acts.
All moneys paid by the Company to a Paying Agent for the payment of the
principal of or interest on the Junior Subordinated Notes of any series which
remain unclaimed at the end of two years after such principal or interest shall
have become due and payable will be repaid to the Company, and the holder of
such Junior Subordinated Notes will from that time forward look only to the
Company for payment of such principal and interest.
14
Modification
The Subordinated Note Indenture contains provisions permitting the Company
and the Subordinated Note Indenture Trustee, with the consent of the holders of
not less than a majority in principal amount of the outstanding Junior
Subordinated Notes of each series that is affected, to modify the Subordinated
Note Indenture or the rights of the holders of the Junior Subordinated Notes of
such series; provided, that no such modification may, without the consent of
the holder of each outstanding Junior Subordinated Note that is affected, (i)
change the stated maturity of the principal of, or any installment of principal
of or interest on, any Junior Subordinated Note, or reduce the principal amount
of any Junior Subordinated Note or the rate of interest (including Additional
Interest) on any Junior Subordinated Note or any premium payable upon the
redemption thereof, or change the method of calculating the rate of interest on
any Junior Subordinated Note, or impair the right to institute suit for the
enforcement of any such payment on or after the stated maturity of any Junior
Subordinated Note (or, in the case of redemption, on or after the redemption
date), or (ii) reduce the percentage of principal amount of the outstanding
Junior Subordinated Notes of any series, the consent of whose holders is
required for any such supplemental indenture, or the consent of whose holders
is required for any waiver (of compliance with certain provisions of the
Subordinated Note Indenture or certain defaults under the Subordinated Note
Indenture and their consequences) provided for in the Subordinated Note
Indenture, or (iii) modify any of the provisions of the Subordinated Note
Indenture relating to supplemental indentures, waiver of past defaults, or
waiver of certain covenants, except to increase any such percentage or to
provide that certain other provisions of the Subordinated Note Indenture cannot
be modified or waived without the consent of the holder of each outstanding
Junior Subordinated Note that is affected thereby, or (iv) modify the
provisions of the Subordinated Note Indenture with respect to the subordination
of the Junior Subordinated Notes in a manner adverse to such holder.
In addition, the Company and the Subordinated Note Indenture Trustee may
execute, without the consent of any holders of Junior Subordinated Notes, any
supplemental indenture for certain other usual purposes, including the creation
of any new series of Junior Subordinated Notes.
Consolidation, Merger and Sale
The Company shall not consolidate with or merge into any other corporation
or convey, transfer or lease its properties and assets substantially as an
entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state of the United States or the District of Columbia and such other
corporation or person expressly assumes, by supplemental indenture executed and
delivered to the Subordinated Note Indenture Trustee, the payment of the
principal of (and premium, if any) and interest (including Additional Interest)
on all the Junior Subordinated Notes and the performance of every covenant of
the Subordinated Note Indenture on the part of the Company to be performed or
observed; (2) immediately after giving effect to such transactions, no Event of
Default, and no event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be continuing; and (3) the
Company has delivered to the Subordinated Note Indenture Trustee an officers'
certificate and an opinion of counsel, each stating that such transaction
complies with the provisions of the Subordinated Note Indenture governing
consolidation, merger, conveyance, transfer or lease and that all conditions
precedent to the transaction have been complied with.
Information Concerning the Subordinated Note Indenture Trustee
The Subordinated Note Indenture Trustee, prior to an Event of Default with
respect to Junior Subordinated Notes of any series, undertakes to perform, with
respect to Junior Subordinated Notes of such series, only such duties as are
specifically set forth in the Subordinated Note Indenture and, in case an Event
of Default with respect to Junior Subordinated Notes of any series has occurred
and is continuing, shall exercise, with respect to Junior Subordinated Notes of
such series, the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provision, the
Subordinated Note Indenture Trustee is under no obligation to exercise any of
the powers vested in it by the Subordinated Note Indenture at the request of
any holder of Junior Subordinated Notes of any series, unless offered
reasonable indemnity by such holder against the
15
costs, expenses and liabilities which might be incurred by the Subordinated
Note Indenture Trustee. The Subordinated Note Indenture Trustee is not required
to expend or risk its own funds or otherwise incur any financial liability in
the performance of its duties if the Subordinated Note Indenture Trustee
reasonably believes that repayment or adequate indemnity is not reasonably
assured to it.
The Bank of New York, the Subordinated Note Indenture Trustee, also serves
as Senior Note Indenture Trustee, as Property Trustee and as Guarantee Trustee.
The Company and/or certain of its affiliates maintain deposit accounts and
banking relationships with The Bank of New York. The Bank of New York also
serves as trustee under other indentures pursuant to which securities of the
Company and affiliates of the Company are outstanding.
Governing Law
The Subordinated Note Indenture and the Junior Subordinated Notes will be
governed by, and construed in accordance with, the internal laws of the State
of New York.
Miscellaneous
The Company will have the right at all times to assign any of its rights or
obligations under the Subordinated Note Indenture to a direct or indirect
wholly-owned subsidiary of the Company; provided, that, in the event of any
such assignment, the Company will remain primarily liable for all such
obligations. Subject to the foregoing, the Subordinated Note Indenture will be
binding upon and inure to the benefit of the parties to the Subordinated Note
Indenture and their respective successors and assigns.
DESCRIPTION OF THE PREFERRED SECURITIES
The Trust may issue only one series of Preferred Securities having terms
described in the Prospectus Supplement relating to the Preferred Securities.
The Trust Agreement will authorize the Administrative Trustees, on behalf of
the Trust, to issue the Preferred Securities. The Preferred Securities will
have such terms, including distributions, redemption, voting, liquidation
rights and such other preferred, deferral or other special rights or such
restrictions as shall be set forth in the Trust Agreement. Reference is made to
the Prospectus Supplement relating to the Preferred Securities for specific
terms, including (i) the distinctive designation of the Preferred Securities;
(ii) the number of Preferred Securities issued; (iii) the annual distribution
rate (or method of determining such rate) for Preferred Securities and the date
or dates on which such distributions shall be payable; (iv) whether
distributions on the Preferred Securities shall be cumulative and, in the case
of Preferred Securities having cumulative distribution rights, the date or
dates, or method of determining the date or dates, from which distributions on
the Preferred Securities shall be cumulative; (v) the amount or amounts that
shall be paid out of the assets of the Trust to the holders of the Preferred
Securities upon voluntary or involuntary dissolution, winding-up or termination
of the Trust; (vi) the obligation, if any, of the Trust to purchase or redeem
the Preferred Securities and the price or prices at which, the period or
periods within which, and the terms and conditions upon which the Preferred
Securities shall be purchased or redeemed, in whole or in part, pursuant to
such obligation; (vii) the voting rights, if any, of the Preferred Securities
in addition to those required by law, including the number of votes per
Preferred Security and any requirement for the approval by the holders of
Preferred Securities as a condition to specified action or amendments to the
Trust Agreement; (viii) the rights, if any, to defer distributions on the
Preferred Securities by extending the interest payment period on the related
Junior Subordinated Notes; and (ix) any other relative rights, preferences,
privileges, limitations or restrictions of the Preferred Securities not
inconsistent with the Trust Agreement or applicable law. All Preferred
Securities offered by this Prospectus will be guaranteed by the Company to the
extent set forth under "Description of the Guarantee." Any material United
States federal income tax considerations applicable to an offering of Preferred
Securities will be described in the Prospectus Supplement relating to the
Preferred Securities.
16
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be executed and delivered by the Company for the benefit of the holders of
Preferred Securities from time to time. The Guarantee will be qualified as an
indenture under the 1939 Act. The Bank of New York will act as indenture
trustee under the Guarantee (the "Guarantee Trustee") for purposes of the 1939
Act. The terms of the Guarantee will be those set forth in such Guarantee and
those made part of such Guarantee by the 1939 Act. The following summary does
not purport to be complete and is subject in all respects to the provisions of,
and is qualified in its entirety by reference to, the Guarantee, the form of
which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part, and the 1939 Act. The Guarantee will be held by the
Guarantee Trustee for the benefit of holders of the Preferred Securities.
General
Pursuant to the Guarantee, the Company will irrevocably and unconditionally
agree, to the extent set forth in the Guarantee, to pay in full, to the holders
of the Preferred Securities, the Guarantee Payments (as defined below), to the
extent not paid by, or on behalf of, the Trust, regardless of any defense,
right of set-off or counterclaim that the Company may have or assert against
any person. The following payments or distributions with respect to the
Preferred Securities to the extent not paid or made by, or on behalf of, the
Trust will be subject to the Guarantee (without duplication): (i) any accrued
and unpaid distributions required to be paid on the Preferred Securities but if
and only if and to the extent that the Trust has funds legally and immediately
available for these distributions, (ii) the redemption price, including all
accrued and unpaid distributions to the date of redemption (the "Redemption
Price"), with respect to any Preferred Securities called for redemption by the
Trust, but if and only to the extent the Trust has funds legally and
immediately available to pay such Redemption Price, and (iii) upon a
dissolution, winding-up or termination of the Trust (other than in connection
with the distribution of Junior Subordinated Notes to the holders of Trust
Securities or the redemption of all of the Preferred Securities), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on the Preferred Securities to the date of payment, to the extent
the Trust has funds legally and immediately available for such purpose, and (b)
the amount of assets of the Trust remaining available for distribution to
holders of Preferred Securities in liquidation of the Trust (the "Guarantee
Payments"). The Company's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Company to the
holders of the Preferred Securities or by causing the Trust to pay such amounts
to such holders.
The Guarantee will be a guarantee of the Guarantee Payments with respect to
the Preferred Securities from the time of issuance of the Preferred Securities,
but will not apply to the payment of distributions and other payments on the
Preferred Securities when the Trust does not have sufficient funds legally and
immediately available to make such distributions or other payments. If the
Company does not make interest payments on the Junior Subordinated Notes held
by the Property Trustee, the Trust will not make distributions on its Preferred
Securities.
Subordination
The Company's obligations under the Guarantee to make the Guarantee Payments
will constitute an unsecured obligation of the Company and will rank (i)
subordinate and junior in right of payment to all other liabilities of the
Company, including the Junior Subordinated Notes, except those obligations or
liabilities made equal or subordinate by their terms, (ii) equal to the most
senior preferred or preference stock now issued by the Company or issued at a
later date by the Company and with any guarantee now entered into by the
Company or entered into at a later date by the Company in respect of any
preferred or preference securities of any affiliate of the Company, and (iii)
senior to all common stock of the Company. The terms of the Preferred
Securities will provide that each holder of Preferred Securities by acceptance
of Preferred Securities agrees to the subordination provisions and other terms
of the Guarantee. The Company has outstanding common stock that ranks junior to
the Guarantee.
17
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly
against the guarantor to enforce its rights under the guarantee without first
instituting a legal proceeding against any other person or entity).
Amendments and Assignment
Except with respect to any changes that do not materially and adversely
affect the rights of holders of the Preferred Securities (in which case no
consent will be required), the Guarantee may be amended only with the prior
approval of the holders of not less than 66 2/3% in liquidation amount of the
outstanding Preferred Securities. The manner of obtaining any such approval of
holders of the Preferred Securities will be as set forth in an accompanying
Prospectus Supplement. All guarantees and agreements contained in the Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Company and shall inure to the benefit of the holders of the Preferred
Securities then outstanding.
Termination
The Guarantee will terminate and be of no further force and effect as to the
Preferred Securities upon full payment of the Redemption Price of all Preferred
Securities, upon distribution of Junior Subordinated Notes to the holders of
Preferred Securities, or upon full payment of the amounts payable upon
liquidation of the Trust. The Guarantee will continue to be effective or will
be reinstated, as the case may be, if at any time any holder of the Preferred
Securities must restore payment of any sums paid with respect to the Preferred
Securities or under the Guarantee.
Events of Default
An event of default under the Guarantee will occur upon the failure by the
Company to perform any of its payment obligations under such Guarantee. The
holders of a majority in liquidation amount of the Preferred Securities have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Guarantee Trustee in respect of the Guarantee or to
direct the exercise of any trust or power conferred upon the Guarantee Trustee
under the Guarantee. Any holder of the Preferred Securities may institute a
legal proceeding directly against the Company to enforce its rights under the
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee or any other person or entity. The holders of a majority in liquidation
amount of Preferred Securities may, by vote, on behalf of the holders of all
the Preferred Securities, waive any past event of default and its consequences.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, prior to the occurrence of any event of default with
respect to the Guarantee and after the curing or waiving of all events of
default with respect to the Guarantee, undertakes to perform only such duties
as are specifically set forth in the Guarantee and, in case an event of default
has occurred, shall exercise the same degree of care as a prudent individual
would exercise in the conduct of his or her own affairs. Subject to such
provisions, the Guarantee Trustee is under no obligation to exercise any of the
powers vested in it by the Guarantee at the request of any holder of the
Preferred Securities, unless offered reasonable indemnity against the costs,
expenses and liabilities which might be incurred by the Guarantee Trustee.
The Bank of New York, the Guarantee Trustee, also serves as Property
Trustee, as Senior Note Indenture Trustee and as Subordinated Note Indenture
Trustee. The Company and/or certain of its affiliates maintain deposit accounts
and banking relationships with The Bank of New York. The Bank of New York
serves as trustee under other indentures pursuant to which securities of the
Company and affiliates of the Company are outstanding.
Governing Law
The Guarantee will be governed by, and construed in accordance with, the
internal laws of the State of New York.
18
The Agreement as to Expenses and Liabilities
Pursuant to the Agreement as to Expenses and Liabilities to be entered into
by the Company under the Trust Agreement, the Company will irrevocably and
unconditionally guarantee to each person or entity to whom the Trust becomes
indebted or liable the full payment of any indebtedness, expenses or
liabilities of the Trust, other than obligations of the Trust to pay to the
holders of the Preferred Securities or other similar interests in the Trust the
amounts due such holders pursuant to the terms of the Preferred Securities or
such other similar interests, as the case may be.
RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE JUNIOR SUBORDINATED NOTES AND
THE GUARANTEE
As long as payments of interest and other payments are made when due on the
series of Junior Subordinated Notes issued to the Trust, such payments will be
sufficient to cover distributions and payments due on the Trust Securities
primarily because (i) the aggregate principal amount of the series of Junior
Subordinated Notes will be equal to the sum of the aggregate stated liquidation
amount of the Trust Securities; (ii) the interest rate and interest and other
payment dates on the Junior Subordinated Notes will match the distribution rate
and distribution and other payment dates for the Preferred Securities; (iii)
the Company shall pay for all costs and expenses of the Trust pursuant to the
Agreement as to Expenses and Liabilities; and (iv) the Trust Agreement provides
that the Securities Trustees shall not cause or permit the Trust to, among
other things, engage in any activity that is not consistent with the purposes
of the Trust.
Payments of distributions (to the extent funds for such purpose are legally
and immediately available) and other payments due on the Preferred Securities
(to the extent funds for such purpose are legally and immediately available)
will be guaranteed by the Company as and to the extent set forth under
"Description of the Guarantee." If the Company does not make interest payments
on the Junior Subordinated Notes, it is not expected that the Trust will have
sufficient funds to pay distributions on the Preferred Securities. The
Guarantee is a guarantee from the time of its issuance, but does not apply to
any payment of distributions unless and until the Trust has sufficient funds
legally and immediately available for the payment of such distributions.
If the Company fails to make interest or other payments on the Junior
Subordinated Notes when due (taking into account any extension period as
described in the applicable Prospectus Supplement), the Trust Agreement
provides a mechanism that allows the holders of the Preferred Securities to
appoint a substitute Property Trustee. Such holders may also direct the
Property Trustee to enforce its rights under the Junior Subordinated Notes,
including proceeding directly against the Company to enforce the Junior
Subordinated Notes. If the Property Trustee fails to enforce its rights under
the Junior Subordinated Notes, to the fullest extent permitted by applicable
law, any holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce the Property Trustee's rights under the
Junior Subordinated Notes without first instituting any legal proceeding
against the Property Trustee or any other person or entity. Notwithstanding the
foregoing, a holder of Preferred Securities may institute a legal proceeding
directly against the Company, without first instituting a legal proceeding
against the Property Trustee or any other person or entity, for enforcement of
payment to such holder of principal of or interest on Junior Subordinated Notes
having a principal amount equal to the aggregate stated liquidation amount of
the Preferred Securities of such holder on or after the due dates specified in
the Junior Subordinated Notes.
If the Company fails to make payments under the Guarantee, the Guarantee
provides a mechanism that allows the holders of the Preferred Securities to
direct the Guarantee Trustee to enforce its rights under the Guarantee. In
addition, any holder of Preferred Securities may institute a legal proceeding
directly against the Company to enforce the Guarantee Trustee's rights under
the Guarantee without first instituting a legal proceeding against the
Guarantee Trustee or any other person or entity.
The Guarantee, the Subordinated Note Indenture, the Junior Subordinated
Notes, the Trust Agreement and the Agreement as to Expenses and Liabilities, as
described above, constitute a full and unconditional guarantee by the Company
of the payments due on the Preferred Securities.
19
Upon any voluntary or involuntary dissolution, winding-up or termination of
the Trust, unless Junior Subordinated Notes are distributed in connection with
such action, the holders of the Preferred Securities will be entitled to
receive, out of assets legally available for distribution to holders, a
liquidation distribution in cash as described in the applicable Prospectus
Supplement. Upon any voluntary or involuntary liquidation or bankruptcy of the
Company, the Property Trustee, as holder of the Junior Subordinated Notes,
would be a subordinated creditor of the Company, subordinated in right of
payment to all Senior Indebtedness, but entitled to receive payment in full of
principal and interest, before any stockholders of the Company receive payments
or distributions. Because the Company is guarantor under the Guarantee and has
agreed to pay for all costs, expenses and liabilities of the Trust (other than
the Trust's obligations to holders of the Preferred Securities) pursuant to the
Agreement as to Expenses and Liabilities, the positions of a holder of
Preferred Securities and a holder of Junior Subordinated Notes relative to
other creditors and to stockholders of the Company in the event of liquidation
or bankruptcy of the Company would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Subordinated Note Indenture.
However, in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Junior Subordinated Notes
provide that no payments may be made in respect of the Junior Subordinated
Notes until such Senior Indebtedness has been paid in full or any payment
default of Senior Indebtedness has been cured or waived. Failure to make
required payments on the Junior Subordinated Notes would constitute an Event of
Default under the Subordinated Note Indenture with respect to the Junior
Subordinated Notes except that failure to make interest payments on the Junior
Subordinated Notes will not be an Event of Default during an extension period
as described in the applicable Prospectus Supplement.
PLAN OF DISTRIBUTION
The Company may sell the new Stock, Senior Notes and Junior Subordinated
Notes and the Trust may sell the Preferred Securities in one or more of the
following ways from time to time: (i) to underwriters for resale to the public
or to institutional investors; (ii) directly to institutional investors; or
(iii) through agents to the public or to institutional investors. The
Prospectus Supplement with respect to each series of new Stock, Senior Notes,
Junior Subordinated Notes or Preferred Securities will set forth the terms of
the offering of such new Stock, Senior Notes, Junior Subordinated Notes or
Preferred Securities, including the name or names of any underwriters or
agents, the purchase price of such new Stock, Senior Notes, Junior Subordinated
Notes or Preferred Securities and the proceeds to the Company or the Trust from
such sale, any underwriting discounts or agency fees and other items
constituting underwriters' or agents' compensation, any initial public offering
price, any discounts or concessions allowed or reallowed or paid to dealers and
any securities exchange on which such new Stock, Senior Notes, Junior
Subordinated Notes or Preferred Securities may be listed.
If underwriters participate in the sale, such new Stock, Senior Notes,
Junior Subordinated Notes or Preferred Securities will be acquired by the
underwriters for their own account and may be resold from time to time in one
or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale.
Unless otherwise set forth in the Prospectus Supplement, the obligations of
the underwriters to purchase any series of new Stock, Senior Notes, Junior
Subordinated Notes or Preferred Securities will be subject to certain
conditions precedent and the underwriters will be obligated to purchase all of
such series of new Stock, Senior Notes, Junior Subordinated Notes or Preferred
Securities, if any are purchased.
Underwriters and agents may be entitled under agreements entered into with
the Company and/or the Trust to indemnification against certain civil
liabilities, including liabilities under the 1933 Act. Underwriters and agents
may engage in transactions with, or perform services for, the Company in the
ordinary course of business.
Each series of new Stock, Senior Notes, Junior Subordinated Notes or
Preferred Securities will be a new issue of securities and will have no
established trading market. Any underwriters to whom new Stock, Senior
20
Notes, Junior Subordinated Notes or Preferred Securities are sold for public
offering and sale may make a market in such new Stock, Senior Notes, Junior
Subordinated Notes or Preferred Securities, but such underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice. The new Stock, Senior Notes, Junior Subordinated Notes or Preferred
Securities may or may not be listed on a national securities exchange.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of the Company and the Trust by
Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel
to the Company and the Trust. The validity of the new Stock, the Senior Notes,
the Junior Subordinated Notes, the Guarantee and certain matters relating to
such securities will be passed upon on behalf of the Company by Bouhan,
Williams & Levy LLP, Savannah, Georgia, and by Troutman Sanders LLP, Atlanta,
Georgia. Certain legal matters will be passed upon for the underwriters by
Dewey Ballantine LLP, New York, New York.
EXPERTS
The financial statements and the related financial statement schedule as of
and for the years ended December 31, 2003 and 2002 incorporated in this
Prospectus by reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 2003 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated by
reference herein (which report on the financial statements expresses an
unqualified opinion and includes an explanatory paragraph referring to the
Company's change in its method of accounting for asset retirement obligations),
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
Certain of the Company's financial statements incorporated by reference in
this Prospectus have been audited by Arthur Andersen LLP ("Andersen"),
independent public accountants, as indicated in their reports with respect to
the financial statements, and are incorporated by reference in this Prospectus,
in reliance upon the authority of Andersen as experts in giving such reports.
On March 28, 2002, Southern's Board of Directors, upon recommendation of its
Audit Committee, decided not to engage Andersen as the Company's principal
public accountants. The Company has not obtained a reissued report from
Andersen and has been unable to obtain, after reasonable efforts, Andersen's
written consent to incorporate by reference Andersen's reports on the financial
statements. Under these circumstances, Rule 437a under the 1933 Act permits
this Prospectus to be filed without a written consent from Andersen. The
absence of such written consent from Andersen may limit a holder's ability to
assert claims against Andersen under Section 11(a) of the 1933 Act for any
untrue statement of a material fact contained in the financial statements
audited by Andersen or any omissions to state a material fact required to be
stated in the financial statements.
21
[LOGO]
SAVANNAH
ELECTRIC
A SOUTHERN COMPANY
1,800,000 Shares
6.00% Series Preferred Stock
Non-Cumulative, Par Value $25 Per Share
-------------------
PROSPECTUS SUPPLEMENT
May 27, 2004
-------------------
LEHMAN BROTHERS