Rule 424(b)5
Registration Statement No. 333-47446
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 19, 2001)
$142,125,000*
PRINCIPAL AMOUNT PLUS INTEREST
LIQUIDITY FACILITY
OF
FGIC SECURITIES PURCHASE, INC.
IN SUPPORT OF
CITY OF DETROIT, MICHIGAN
SEWAGE DISPOSAL SYSTEM SECOND LIEN REVENUE BONDS (VARIABLE RATE DEMAND),
SERIES 2001(E)
Date of the Bonds: Date of Delivery Due: July 1, 20
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LIQUIDITY FACILITY: We are providing a liquidity facility in the form
of a standby bond purchase agreement for the bonds described in this prospectus
supplement. The standby bond purchase agreement will expire on October 1, 2006,
unless it is extended or terminated sooner in accordance with its terms. The
final terms for the bonds will be included in a pricing supplement.
TERMS OF THE BONDS: The bonds are not general obligations of the City
of Detroit, Michigan, a municipality organized and existing under the laws of
the State of Michigan. The bonds are payable solely from net revenues of the
City of Detroit's sewage disposal system. Net revenues are the amounts remaining
from the income derived from the operation of the system (which includes income
derived from rates, charges, fees and rentals charges for service as well as
earnings derived from the investment of monies in certain of the funds and
accounts established by the ordinances authorizing bonds for the system), after
deducting the reasonable expenses of administration, operation and maintenance
of the system. The rights of the owners of the bonds are subordinate with
respect to the net revenues and any other pledged funds or security to the
rights of the owners of certain second lien bonds, on a parity with the rights
of the owners of other outstanding second lien bonds and second lien bonds
issued in the future, and senior to the rights of the owners of any junior lien
bonds issued as other than second lien bonds. The bonds are subject to mandatory
and optional redemption prior to maturity and to optional and mandatory tender
for purchase, as described in this prospectus supplement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS OR ANY PRICING SUPPLEMENT IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Our obligations under the standby bond purchase agreement are not being
sold separately from the bonds. The bonds are being sold under a separate
disclosure document. Our obligations may not be traded separately from the
bonds. This prospectus supplement, the accompanying prospectus, appropriately
supplemented, and a pricing supplement may also be delivered in connection with
any remarketing of bonds purchased by us.
Unless the context otherwise requires, the terms "company," "we," "us,"
or "our" mean FGIC Securities Purchase, Inc. You should read the information
below the heading "THE COMPANY," located in the prospectus accompanying this
prospectus supplement.
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UBS PAINEWEBBER INC.
SIEBERT BRANDFORD SHANK & CO., LLC BEAR, STEARNS & CO., INC.
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The date of this prospectus supplement is October 11, 2001
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* Preliminary, subject to change.
At the time the bonds are offered, we will attach a pricing supplement
to this prospectus supplement. The pricing supplement will contain the specific
description of the bonds being offered and the terms of the offering. The
pricing supplement may also add, update or change information contained in this
prospectus supplement. You should not assume that the information provided by
this prospectus supplement or the accompanying prospectus is accurate as of any
date other than the date on the front of this prospectus supplement.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the accompanying prospectus and any
pricing supplement. We have not, and the underwriters have not, authorized any
other person to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. We are
not, and the underwriters are not, making an offer to sell these securities in
any jurisdiction where the offer or sale is not permitted.
INTRODUCTION
We are providing you with this prospectus supplement to furnish
information regarding our obligations under a liquidity facility in the form of
a standby bond purchase agreement in support of $142,125,000* aggregate
principal amount of Sewage Disposal System Second Lien Revenue Bonds (Variable
Rate Demand), Series 2001(E) which will be issued on or about October 23, 2001
by the City of Detroit, a municipality organized and existing under the laws of
the State of Michigan. The bonds are authorized to be issued pursuant to the
Revenue Bond Act of 1933, Act No. 94, Public Acts of Michigan, 1933, as amended,
and Ordinance 27-86 of the City Council of the City, effective December 17,
1986, as supplemented and amended by Ordinance No. 7-87, effective March 27,
1987, Ordinance No. 38-92, effective December 11, 1992, Ordinance No. 3-93,
effective February 19, 1993, Ordinance No. 31-95, effective October 20, 1995,
Ordinance No. 16-97, effective June 23, 1997, Ordinance No. 24-97, effective
July 21, 1997, Ordinance No. 36-99, adopted November 24, 1999 and a Resolution
supplementing the 1986 Ordinance adopted by the City Council on August 1, 2001,
as amended on October , 2001 and a Sale Order of the Finance Director of the
City of Detroit, dated as of October , 2001.
U.S. Bank Trust National Association, Detroit, Michigan, has been
appointed to act as trustee and U.S. Bank Trust National Association, New York,
New York, has been appointed to act as tender agent for the bonds. We will enter
into a standby bond purchase agreement with the trustee, which will obligate us
under certain circumstances to purchase unremarketed bonds from the owners
optionally or mandatorily tendering their bonds for purchase. In order to obtain
funds to purchase the bonds, we will enter into a standby loan agreement with
General Electric Capital Corporation which will irrevocably obligate GE Capital
to loan funds to us as needed to purchase bonds. Our obligations under the
standby bond purchase agreement will expire on October 1, 2006, unless the
standby bond purchase agreement is extended or terminated sooner in accordance
with its terms.
GE Capital has the unilateral right to assign its rights and
obligations pursuant to the terms of the standby loan agreement, subject only to
confirmation from the applicable rating agency that the assignment will not
result in a lower credit rating of the obligations. This means that GE Capital
will be released of all liabilities and obligations under any standby loan
agreement which it has assigned.
DESCRIPTION OF THE BONDS
GENERAL
The bonds will initially be issued bearing interest at a flexible rate
in denominations of $100,000 and integral multiples of $5,000 in excess of
$100,000 and will be dated as of the date of initial delivery. The bonds will be
issued in fully-registered form, and will be registered in the name of Cede &
Co., as nominee for the Depository Trust Company, which will act as securities
depository for the bonds. See "Book-Entry System" below. While the bonds bear
interest at the flexible rate, the bonds will be available in the authorized
denominations of $100,000 or any integral multiple of $5,000 in excess of
$100,000. The bonds are variable interest rate bonds and are subject to
mandatory and optional redemption prior to maturity and, while bearing interest
at the flexible rate, to mandatory tender, as described below. The bonds will
bear interest from their date of initial delivery at flexible rates. The
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* Preliminary, subject to change.
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initial flexible rate for the bonds will be % per annum, as set forth in the
sale order pertaining to the bonds issued by the City of Detroit, which also
sets the initial flexible rate period to be the period beginning on the date of
delivery of the bonds and ending on , 200 . The City of Detroit may
determine to convert all of the bonds to bear interest at any one of four
interest rates: the weekly rate; the daily rate; the term rate or the fixed
rate. This prospectus supplement in general describes the bonds only while the
bonds bear interest at the flexible rate.
INTEREST ON THE BONDS
The bonds will initially bear interest at the flexible rate. The bonds
will bear interest at the flexible rate from and including the first day of a
flexible rate period to, but not including, the last day of such flexible rate
period. Each flexible rate period will begin and end on a business day and will
not be longer than the least of 365 days, the stated maturity of the bonds and
the last business day occuring not more than five days before the scheduled
expiration date of the then current liquidity facility. Each flexible rate
period is to be a period of not less than one nor more than 365 days, as
determined by the remarketing agent in consultation with the City of Detroit,
with the intention of yielding the lowest interest on the bonds, taking into
account general economic and market conditions relevant to the bonds and such
other facts, circumstances and conditions as the remarketing agent determines to
be relevant.
The flexible rate for a flexible rate period is the interest rate for
the bonds, determined by the remarketing agent not later than 12:30 p.m., New
York time, on the first day of the flexible rate period. No flexible rate may
exceed 12% per annum unless the maximum rate is changed as provided in the sale
order. The flexible rate for each flexible rate period will be the rate of
interest which, if borne by the bonds for the flexible rate period, would, in
the judgment of the remarketing agent, be the lowest interest rate that would
enable the remarketing agent to remarket the bonds at a price of par on the
first day of the flexible rate period. The remarketing agent will determine the
flexible rate for the bonds taking into account the prevailing financial market
conditions on the rate determination date. The determination of the interest
rate for the bonds will be conclusive and binding. Upon proper request, the
remarketing agent will give any bondowner notice of the anticipated interest
rate on, and the anticipated flexible rate period for, the bonds. If the
remarketing agent fails to give any required notice, or any defect in such
notice, the failure will not affect the interest rate on the bonds.
If for any reason the remarketing agent does not determine the flexible
rate or the flexible rate period, or the flexible rate or the flexible rate
period cannot be established, then the flexible rate period for the bonds will
be one business day and the flexible rate for the bonds will be the alternate
weekly rate.
Scheduled interest payment dates for interest accrued on the bonds
while bearing interest at the flexible rate are the last day of each flexible
rate period. The record date therefor is the day before such interest payment
date. Interest on the bonds bearing interest at the flexible rate will be
computed on the basis of a year of 365 or 366 days, as applicable, and actual
days elapsed.
TENDER OF BONDS FOR PURCHASE
Tender at Option of Bondowner. The bonds are not subject to optional
tender by the bondowner during the flexible rate period. If the bonds are
converted to bear interest at another short-term rate, the bonds will be subject
to optional tender by the bondowners.
Mandatory Tender Without Notice on the Last Day of Each Flexible Rate
Period. The bonds are subject to mandatory tender for purchase (with no right to
retain) on the last day of each flexible rate period, at a purchase price equal
to 100% of the principal amount of such bonds, plus accrued interest to the
purchase date. No notice of mandatory tender is required at the end of each
flexible rate period.
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Mandatory Tender Upon Conversion to Another Interest Rate. If the City
of Detroit changes the interest rate of the bonds to another interest rate, the
bonds will be subject to mandatory tender for purchase (with no right to retain)
on the proposed date of such conversion to another interest rate. Such a
conversion can only occur on an interest payment date. The tender agent is
required to give bondowners and the liquidity provider prior notice of any such
conversion.
Mandatory Tender Upon Expiration of Liquidity Facility. If the tender
agent has not accepted an alternate liquidity facility to replace an expiring
liquidity facility on or before the 20th day before the day on which the
liquidity facility is scheduled to expire or terminate, then the tender agent
will give notice to all bondowners that their bonds are subject to mandatory
purchase (with no right to retain) at a purchase price equal to 100% of the
principal amount of the bonds plus accrued interest to the purchase date on the
last business day to occur not less than five days before the expiration date.
The tender agent is required to give at least 15 days prior notice to bondowners
before the mandatory purchase date.
Mandatory Tender Upon Substitution of Alternate Liquidity Facility. If
the City of Detroit delivers an alternate liquidity facility for the bonds that
is not provided by us then all bonds will be subject to mandatory tender
(without right to retain) for purchase on the date on which such alternate
liquidity facility is to be substituted for the then current liquidity facility.
The tender agent, no later than 15 days before the substitution date, is
required to give notice to the bondowners stating that the then effective
liquidity facility is being replaced by an alternate liquidity facility and that
the bonds are required to be tendered for purchase on the substitution date.
Mandatory Tender Upon Certain Termination Events. We may elect to
terminate the standby bond purchase agreement upon at least 30 days' notice to
the City of Detroit, the remarketing agent, the transfer agent and the tender
agent if certain events occur. See "THE STANDBY BOND PURCHASE AGREEMENT -
TERMINATION EVENTS." Upon receipt of notice from us that any such event has
occurred, all bonds will be subject to mandatory purchase. The tender agent will
give notice to the owners of the bonds specifying the purchase date.
PURCHASE OF THE BONDS
The purchase price for any bond (or any authorized denomination of
$100,000 or any integral multiple of $5,000 in excess of $100,000) optionally
tendered (after conversion out of the flexible interest rate mode), or subject
to mandatory tender for purchase, will be 100% of the principal amount of the
bonds plus accrued interest, if any, to the purchase date (unless the purchase
date is an interest payment date, in which case interest is paid by the City of
Detroit in the normal course). Funds for the payment of the purchase price will
be derived only from the following sources in the following order of priority:
immediately available funds derived from the remarketing of the bonds and
immediately available funds representing proceeds of a drawing by the tender
agent under the liquidity facility. None of the City of Detroit, the transfer
agent, the tender agent, the remarketing agent or the bond insurer will be
obligated to provide funds for the payment of the purchase price from any other
source. Bonds purchased by us with amounts drawn under the standby bond purchase
agreement will bear interest at the rate specified in the standby bond purchase
agreement.
During any period that the bonds are registered in the name of DTC or a
nominee thereof, it will not be necessary for bonds to be physically delivered
on the date specified for their purchase, but such purchase will be made as if
such bonds had been so delivered, and the purchase price of the bonds will be
paid to DTC by 3:00 p.m., New York time. In accepting a notice of tender, the
trustee and the tender agent may conclusively assume that the person providing
the notice of tender is the owner of the bond being tendered and therefore
entitled to tender them. Neither the trustee nor the tender agent assume any
liability to anyone in accepting a notice of tender from a person whom it
reasonably believes to be an owner of the bonds or, in its discretion, rejecting
such tender, if it reasonably believes such person has not demonstrated its
status as an owner. While the book-entry only system is in effect, tenders and
purchases will be made as described above and under the caption "BOOK-ENTRY
SYSTEM" below. The following paragraphs apply if the book-entry system is not in
effect.
The bonds to be purchased must be delivered (with all necessary
endorsements) at or before 12:00 noon, New York time, on the purchase date or
mandatory purchase date, as the case may be, at the designated office of the
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tender agent; provided, however, that payment of the purchase price of any bonds
purchased pursuant to optional tender (after conversion out of the flexible rate
interest mode) will be made only if the bonds delivered to the tender agent
conform in all respects to their description in the notice of tender. On or
before the close of business on the purchase date or the mandatory purchase
date, as the case may be, the tender agent will purchase the bonds from the
owners at the purchase price. Payment of the purchase price will be made by the
tender agent by wire transfer in immediately available funds, or by check mailed
to any owner of such bonds who has not provided, or caused to be provided, wire
transfer instructions.
Any bonds sold by the remarketing agent will be delivered by the
remarketing agent to the purchasers of those bonds by 3:00 p.m., New York time,
on the purchase date or the mandatory purchase date, as the case may be. If any
bond to be purchased is not delivered to the tender agent by 12:00 noon, New
York time, on the purchase date, as the case may be, the tender agent is
required to hold any funds received for the purchase of such bonds in trust in a
separate account to pay such funds to the former bondowners upon presentation.
Any undelivered bonds will be deemed tendered and will cease to accrue interest
on the purchase date or mandatory purchase date, as the case may be. Any funds
held by the tender agent for payment of any undelivered bond that remains
unclaimed by the former bondowner for a period of five years after delivery of
such funds to the Tender Agent will, to the extent permitted by law and in
accordance with the provisions of the ordinances, be paid to the City of
Detroit, and thereafter such former bondowner may look only to the City of
Detroit for payment.
CHANGES IN MODES
In addition to the flexible interest rate mode, the ordinances provide
that the City of Detroit may change the rate at which the bonds bear interest,
but only on an interest payment date: to a daily rate, during which the
remarketing agent will set the rates of interest for the bonds on each business
day; to a weekly rate, during which the remarketing agent will set the rates of
interest on the bonds on each Thursday for the period through and including the
following Wednesday; to a term rate, where the interest rate borne by the bonds
will be fixed for a term to be designated by the City of Detroit; or to a fixed
rate, where the interest rate borne by the bonds will be set to maturity. The
ordinances provide the methods by which changes from one interest rate mode to
another will be made, which methods include the giving of notice of such change
to the bondowners, and describing in detail the provisions of the new interest
rate mode. In addition, upon a proposed change in interest rate mode, each
bondowner will be subject to mandatory tender of all bonds for purchase on the
proposed date of such interest rate change. The interest rate on the bonds may
be changed from one short-term rate to another short-term rate or to the term
rate as often as determined by the City of Detroit. However, once the bonds are
changed to bear interest at a fixed rate, the bonds will continue bearing
interest at that fixed rate and may not be subsequently changed to bear
interest at a short-term rate or term rate.
REMARKETING OF THE BONDS
The City of Detroit and UBS PaineWebber Inc. are entering into a
remarketing agreement pursuant to which the City of Detroit will agree to pay
the remarketing agent a fee for its services as remarketing agent and the
remarketing agent will agree, among other things, to use its best efforts to
find purchasers for all bonds mandatorily tendered for purchase at the purchase
price. The remarketing agent will promptly notify the tender agent of the amount
of any bonds that were not remarketed. The tender agent will promptly thereafter
direct the transfer agent at our request (or the issuer of any alternate
liquidity facility) to purchase under the standby bond purchase agreement (or
the then applicable alternate liquidity facility) on the designated purchase
date, at the purchase price described below, all such bonds tendered or deemed
tendered and which the remarketing agent has been unable to remarket.
REDEMPTION
Optional Redemption. While bearing interest at the flexible rate, the
bonds are subject to redemption prior to maturity, at the option of the City of
Detroit, in whole or in part on any interest payment date, at a redemption price
equal to 100% of the principal amount of the bonds to be redeemed, together with
the interest accrued on such principal amount to the date fixed for redemption.
Mandatory Sinking Fund Redemption. The bonds are subject to mandatory
redemption in part by the City of Detroit, by lot, before their scheduled
maturity from moneys to be deposited by the City of Detroit in the sinking
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fund established under the Ordinances in satisfaction of applicable mandatory
redemption requirements, at a redemption price equal to the principal amount,
without premium, plus accrued interest to the date fixed for redemption in the
amounts in the table below:
MANDATORY REDEMPTION PRINCIPAL
DATE (JULY 1 OF YEARS) AMOUNT
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*Final maturity
The City of Detroit will receive a credit with respect to any mandatory
sinking fund redemption requirement on account of bonds that have been redeemed
(other than by application of mandatory sinking fund redemption requirements) or
otherwise acquired by the City of Detroit before giving notice of redemption and
that have not been applied as a credit against any other mandatory sinking fund
redemption requirements. Not less than 40 days before any mandatory sinking fund
redemption date for bonds, the City of Detroit will give notice to the transfer
agent that such bonds are to be so credited. Each such bond will be credited by
the transfer agent at 100% of the principal amount of such bonds against the
mandatory sinking fund redemption requirement, and the principal amount of bonds
to be redeemed on such mandatory sinking fund redemption date will be reduced
accordingly and any excess over such amount will be credited to future mandatory
sinking fund redemption requirements in such order as the City of Detroit will
elect. However, any excess resulting from the purchase, at less than par, of
bonds under the Ordinances, may be transferred to the receiving fund.
GENERAL REDEMPTION PROVISIONS
Any bonds to be redeemed will be redeemed only in authorized
denominations of $100,000 or any integral multiple of $5,000 in excess of
$100,000. In the event of any partial redemption (optional or mandatory) of
bonds, the transfer agent will first select for redemption all provider bonds.
The transfer agent will promptly give to us, the tender agent and the
remarketing agent notice by telephone of the selection of any bonds purchased by
us and selected for redemption. In the event that less than all of the bonds are
to be redeemed and for so long as the book-entry system remains in effect for
the bonds, the bonds (or portions thereof) to be redeemed will be selected by
DTC in such manner as DTC may determine. If the book-entry system for the bonds
is no longer in effect, selection for redemption of less than all the bonds of
any one maturity will be made by the transfer agent by lot or in any other
manner of selection the transfer agent in its discretion will deem appropriate
and fair.
Bonds duly called for redemption will not bear interest after the date
fixed for redemption, whether presented for redemption or not, provided that
funds are on hand with the transfer agent to redeem such bonds. Owners of bonds
selected for redemption in part, upon surrender of such bonds for redemption
will receive, without cost, a new bond with the same interest rate and maturity,
and in the amount of the unredeemed portion of such bond which was surrendered.
Any new bond issued will be executed by the City of Detroit and authenticated by
the transfer agent.
So long as DTC or its nominee is the owner, the City of Detroit, the
transfer agent and the tender agent will recognize DTC or its nominee as the
owner for all purposes, including notices and voting. 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 and
regulatory requirements as may be in effect from time to time.
The transfer agent will give notice of redemption to the owners, while
the bonds bear interest at a flexible rate, not less than 15 days prior to the
date fixed for redemption. While the bonds bear interest at a fixed rate, the
transfer agent will give notice of redemption to the owners not less than 30
days prior to the date fixed for redemption. Failure to mail notice to a
particular owner, or any defect in the notice to such owner, will not affect the
redemption of any bond. So long as DTC or its nominee is the owner of the bonds,
the transfer agent or the tender agent will send any notice of redemption only
to DTC. Any failure on the part of DTC to advise any direct participant, or any
failure of a direct or indirect participant to notify any beneficial owner, of
such notice of
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redemption will not affect the validity or sufficiency of the proceedings
relating to the redemption of the bonds called for redemption or any other
action premised on such notice. See "BOOK-ENTRY SYSTEM."
TRANSFER OF BONDS
So long as Cede & Co., as nominee of DTC, is the registered owner of
the bonds, beneficial ownership interests in the bond may only be transferred
through a DTC direct participant or indirect participant and recorded on the
book-entry-only system operated by DTC. In the event the book-entry system is
discontinued by either DTC or the City of Detroit, any bond may be transferred
by the owner, in person or by his duly authorized attorney or legal
representative, upon surrender of the bond to the transfer agent or the tender
agent for cancellation, together with a duly executed written instrument of
transfer in a form approved by the transfer agent or the tender agent. Whenever
any bonds are surrendered for transfer, the transfer agent will authenticate and
deliver a new bond or bonds in authorized denominations of $100,000 or any
integral multiple of $5,000 in excess of $100,000 for the same aggregate
principal amount and bearing the same interest rate as the surrendered bond. The
transfer agent or tender agent will require the owner requesting the transfer to
pay any tax or other governmental charge required to be paid with respect to the
transfer. The transfer agent or the tender agent will not be required to issue,
register the transfer of, or exchange any bond during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of bonds selected for redemption and ending at the close of business
on the day of that mailing, or register the transfer of or exchange any bond
selected for redemption in whole or in part, except the unredeemed portion of
the bonds being redeemed in part.
BOOK-ENTRY SYSTEM
DTC will act as securities depository for the bonds. The bonds will be
issued as fully-registered bonds in the name of Cede & Co. (DTC's partnership
nominee) or any other name as may be requested by an authorized representative
of DTC. One fully-registered bond will be issued in the aggregate principal
amount of the bonds and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its direct participants deposit with it.
DTC also facilitates the settlement among direct participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in its direct participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its direct participants and 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
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a direct participant of DTC, either
directly or indirectly. The rules applicable to DTC and its direct and indirect
participants are on file with the Securities and Exchange Commission.
Purchases of the bonds under the DTC system must be made by or through
direct participants, which will receive a credit for the bonds on DTC's records.
The ownership interest of each actual purchaser, or "beneficial owner," of each
bond 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, but beneficial owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the direct or indirect participants through which beneficial
owners entered into the transaction. Transfers of ownership interests in the
bonds are to be accomplished by entries made on the books of DTC's participants
acting on behalf of beneficial owners. Beneficial owners will not receive
certificates representing their ownership interests in the bonds, unless the use
of the book-entry system for the bonds is discontinued.
To facilitate subsequent transfers, all bonds deposited by direct
participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. or such other nominee as may be requested by an authorized
representative of DTC. The deposit of bonds with DTC and their registration in
the name of Cede & Co. or such
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other nominee effect no change in beneficial ownership. DTC has no knowledge of
the actual beneficial owners of the bonds. DTC's records reflect only the
identity of its direct participants to whose accounts the securities are
credited, which may or may not be the beneficial owners. DTC's direct and
indirect participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to its direct
participants, by its direct participants to its indirect participants, and by
its direct participants and its indirect participants to beneficial owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements which may be in effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the
bonds within an issue are being redeemed, DTC's practice is to determine by lot
the amount of the interest of each of its direct participants in that issue to
be redeemed.
Neither DTC nor Cede & Co. (nor such other nominee) will consent or
vote with respect to the bonds. Under its usual procedures, DTC mails an omnibus
proxy to an issuer as soon as possible after the record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those direct participants to
whose accounts the bonds are credited on the record date (identified in a
listing attached to the omnibus proxy).
Principal and interest payments and payments of purchase price with
respect to the bonds will be made to DTC. DTC's practice is to credit its direct
participants' accounts, upon receipt of funds and corresponding detail
information from the issuer or the trustee on payment dates in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payment on the date payable. Payments by DTC's
participants to beneficial owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of the DTC participant and not of DTC, the trustee or the City of
Detroit subject to any statutory or regulatory requirements which may be in
effect from time to time. Payment of principal and interest to DTC is the
responsibility of the City of Detroit or the trustee, disbursement of those
payments to direct participants will be the responsibility of DTC, and
disbursement of those payments to the beneficial owners will be the
responsibility of direct and indirect participants.
Regardless of the statements above, if any bond is tendered but not
remarketed, with the result that the bond becomes owned by us, the trustee and
the City of Detroit will, if requested by us, take all action necessary to
remove the bonds from the book-entry system of DTC and to register that tendered
but not remarketed bond in our name. Bonds owned by us not in the book-entry
system of DTC will be held by us, or at our option, by the trustee on our
behalf, and for our benefit. When all bonds owned by us have been remarketed, we
no longer own any bonds and we have been reinstated in full, the trustee and the
bond issuer will take all actions necessary to return the bonds to the full
book-entry system of DTC.
The bond issuer and the underwriters cannot and do not give any
assurances that DTC, DTC's participants or others will distribute payments of
principal, interest or premium with respect to the bonds paid to DTC or its
nominee as the owner, or will distribute any prepayment notices or other
notices, to the beneficial owners, or that they will do so on a timely basis or
will serve and act in the manner described in this prospectus supplement. The
bond issuer and the underwriters are not responsible or liable for the failure
of DTC or any participant to make any payment or give any notice to a beneficial
owner with respect to the bonds or an error or delay relating thereto.
The foregoing description of the procedures and record-keeping with
respect to beneficial ownership interests in the bonds, payment of principal,
interest and other payments on the bonds to DTC's participants or beneficial
owners of the bonds, confirmation and transfer of beneficial ownership interests
in the bonds and other related transactions by and between DTC, DTC's
participants and the beneficial owners of the bonds is based solely on
information provided by DTC. Accordingly, no representations can be made
concerning these matters and neither the DTC participants nor the beneficial
owners should rely on the foregoing information with respect to these matters,
but should instead confirm the same with DTC or DTC's participants, as the case
may be.
DTC may discontinue providing its services with respect to the bonds at
any time by giving notice to the trustee and discharging its responsibilities
with respect thereto under applicable law or the City of Detroit may
7
terminate participation in the system of book-entry transfers through DTC or any
other securities depository at any time. If the book-entry system is
discontinued, replacement certificates will be printed and delivered.
THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS,
WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY
FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO
NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICES AND ITS CONTEXT OR EFFECT WILL NOT
AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION
OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON THE
NOTICE.
SOURCES OF PAYMENT FOR THE BONDS
NATURE OF OBLIGATION
The bonds are self-liquidating obligations of the City of Detroit,
principal of and interest on which are payable solely from the net revenues of
the City of Detroit's sewage disposal system and other monies available.
Pursuant to the act and the ordinances, the net revenues are pledged to the
bonds and a statutory lien is created on those revenues which is a second lien,
subordinated to the pledge of the City of Detroit to the owners of senior lien
bonds. The enforceability of the bonds, the ordinances and the act, including
the statutory liens, may be delayed, limited or eliminated by the exercise of
judicial discretion in accordance with general equitable principles and by
bankruptcy, insolvency, moratorium and other laws affecting creditors' rights
generally or enacted to the extent constitutionally enforceable.
Net revenues are defined in the ordinances as the amounts remaining
from the income derived from the operation of the City of Detroit's sewage
disposal system, after deducting the reasonable expenses of administration,
operation and maintenance of the City of Detroit's sewage disposal system, which
income includes: income derived from rates, charges, fees and rentals charged
for services; earnings derived from the investment of monies in the various
funds and accounts established by the ordinances, other than the escrow fund and
the construction fund for any fiscal year in which the Board of Water
Commissioners does not transfer earnings on the construction fund to the
receiving fund; and amounts transferred from the rate stabilization fund to the
receiving fund. In 1999, the City of Detroit amended the ordinances to include
earnings on the construction fund, to the extent transferred to the receiving
fund, in the definition of net revenues for rate covenant purposes and for
purposes of the additional bonds tests. However, the amounts transferred to the
receiving fund from the construction fund and the rate stabilization fund may
not be included as net revenues unless at all times the City of Detroit fixes
rates sufficient to produce net revenues, exclusive of such transferred monies,
equal to at least 100% of debt service on all senior lien bonds and junior lien
bonds then outstanding during the next fiscal year. The bonds do not constitute
an indebtedness of the City of Detroit within any constitutional, statutory or
charter limitation or a charge against the general credit or taxing power of the
City of Detroit.
THE STANDBY BOND PURCHASE AGREEMENT
The obligations will rank equally with all of our other general
unsecured and unsubordinated obligations. The obligations are not issued under
an indenture. As of the date of this prospectus supplement, we have
approximately $3.3 billion of obligations currently outstanding.
Owners of the bonds will be entitled to the benefits and will be
subject to the terms of the standby bond purchase agreement. Under the standby
bond purchase agreement, we agree to make available to a specified intermediary
the purchase price for the bonds when we receive an appropriate demand for
payment. Our obligations under the standby bond purchase agreement will be
sufficient to pay a purchase price equal to the principal of the bonds and up to
34 days' interest on the bonds at the maximum rate of 12% per year.
8
TERMINATION EVENTS
The scheduled expiration date of the standby bond purchase agreement is
October 1, 2006, unless it is extended or terminated sooner in accordance with
its terms.
Under certain circumstances, we may terminate our obligation to
purchase bonds. The following events would permit such termination:
- any portion of the commitment fee for the standby
bond purchase agreement has not been paid when due on the
quarterly payment date or any other amount payable under the
standby bond purchase agreement has not been paid when due,
and in either case, the failure will continue for three
business days after notice thereof to the City of Detroit;
- the State of Michigan takes any action which would
have a materially adverse effect on the ability of the City of
Detroit to comply with the payment and security interest and
lien covenants and obligations under the bonds, the
ordinances, the standby bond purchase agreement, the payment
agreement, and all other documents relating to the issuance of
the bonds, or any right or remedy of the company or any owners
of the bonds from time to time to enforce the covenants and
obligations;
- the City of Detroit fails to observe or perform any
covenant or agreement contained in the bonds, the ordinances,
the standby bond purchase agreement or the payment agreement
(and any amendments, substitutions or modifications of these
agreements), and, if the failure is the result of a covenant
breach which is capable of being remedied, the failure
continues for ninety (90) days following written notice
thereof to the City of Detroit from us. However, if the
failure (other than a payment default) cannot be cured or
corrected within the ninety day period, it will not constitute
an event of default if the City of Detroit institutes curative
or corrective action within the period and diligently pursues
the curative or corrective action until the failure of
performance is cured or corrected, or there has not been at
all times a remarketing agent performing its duties;
- an event of default has occurred and is continuing
under any of the ordinances, the standby bond purchase
agreement, the payment agreement or the remarketing agreement
(and any amendments, substitutions or modifications of these
agreements), as "event of default" is defined in the
applicable document;
- any representation, warranty, certification or
statement made by the City of Detroit in the ordinances, the
standby bond purchase agreement, the payment agreement or the
remarketing agreement (and any amendments, substitutions or
modifications of these agreements) or in any certificate,
financial statement or other document delivered under those
agreements proves to have been incorrect in any material
respect when made;
- any default by the City of Detroit has occurred and
continues in the payment of principal of or premium, if any,
or interest on any bond, note or other evidence of
indebtedness of the City of Detroit, under any "Related
Documents," as defined in the standby bond purchase agreement,
which is senior to, or on parity with, the bonds;
- the City of Detroit files a petition in voluntary
bankruptcy for the composition of its affairs or for its
corporate reorganization under any state or federal bankruptcy
or insolvency law, or makes an assignment for the benefit of
creditors, or admits in writing to its insolvency or inability
to pay debts as they mature, or consents in writing to the
appointment of a trustee or receiver for itself;
- a court of competent jurisdiction enters an order,
judgment or decree declaring the City of Detroit insolvent, or
adjudging it bankrupt, or appointing a trustee or receiver of
the
9
City of Detroit, or approving a petition filed against the
City of Detroit seeking reorganization of the City of Detroit
under any applicable law or statute of the United States of
America or any state thereof, and the order, judgment or
decree is not vacated or set aside or stayed within sixty (60)
days from the date of the entry thereof;
- under the provisions of any other law for the
relief or aid of debtors, any court of competent jurisdiction
assumes custody or control of the City of Detroit and the
custody or control is not be terminated within (60) days from
the date of assumption of the custody or control;
- any material provision of the ordinances, the
standby bond purchase agreement, the payment agreement, the
remarketing agreement and all other documents relating to the
issuance of the bonds or the bonds (including bonds owned by
us) ceases for any reason whatsoever to be a valid and binding
agreement of the City of Detroit, or the City of Detroit
contests the validity or enforceability of those agreements;
or
- the City of Detroit fails to pay when due any
amount payable under any bond (regardless of any waiver of
that failure by the owners of the bonds).
If a termination event happens, we may deliver notice to the City of
Detroit, the trustee, the remarketing agent and any applicable paying agent or
tender agent regarding our intention to terminate the standby bond purchase
agreement. In that case, the standby bond purchase agreement would terminate,
effective at the close of business on the 30th day following the date of the
notice, or if that date is not a business day, on the next business day. Before
the time at which termination takes effect, the bonds will be subject to
mandatory tender for purchase from the proceeds of a drawing under the standby
bond purchase agreement. The termination of the standby bond purchase agreement,
however, does not result in an automatic acceleration of the bonds.
The obligations of the City of Detroit are described in a separate
disclosure document relating to the bonds.
THE STANDBY LOAN AGREEMENT; GE CAPITAL
In order to obtain funds to fulfill our obligations under the standby
bond purchase agreement, we will enter into a standby loan agreement with GE
Capital, under which GE Capital will be irrevocably obligated to lend funds to
us as needed to purchase bonds. The amount of each loan under the standby loan
agreement will be no greater than the purchase price for tendered bonds. The
purchase price represents the outstanding principal amount of the tendered bonds
and interest accrued on the principal to but excluding the date we borrow funds
under the standby loan agreement. Each loan will mature on a date specified in
the standby loan agreement, which will be set forth in the applicable prospectus
supplement. The proceeds of each loan will be used only for the purpose of
paying the purchase price for tendered bonds. When we wish to borrow funds under
the standby loan agreement, we must give GE Capital prior written notice by a
specified time on the proposed borrowing date. GE Capital will make available
the amount of the borrowing requested no later than a specified time on each
borrowing date (if GE Capital has received the related notice of borrowing by
the necessary time on the borrowing date).
The standby loan agreement will expressly provide that it is not a
guarantee by GE Capital of the bonds or of our obligations under the standby
bond purchase agreement. GE Capital will not have any responsibility or incur
any liability for any act, or any failure to act, by us which results in our
failure to purchase tendered bonds with the funds provided under the standby
loan agreement.
GE Capital has the unilateral right at any time to assign its rights
and obligations under the standby loan agreement to another standby lender
unrelated to GE Capital, provided that the assignment does not result in a
reduction in the credit rating of the obligations. This means that GE Capital
will be released of all obligations and liabilities under any standby loan
agreement which it has assigned. In the event of any assignment, you will not
receive prior notice of the assignment nor will you have any additional rights
with respect to the obligations of the bonds.
10
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the consolidated ratio of earnings to
fixed charges of GE Capital for the periods indicated:
Year Ended December 31, Six Months
---------------------------------------------------------------------------- Ended
1996 1997 1998 1999 2000 June 30, 2001
---------------- ---------------- ---------------- ---------------- ---------------- ---------------
1.53 1.48 1.50 1.60 1.52 1.60
For purposes of computing the consolidated ratio of earnings to fixed charges,
earnings consist of net earnings adjusted for the provision for income taxes,
minority interest, interest capitalized (net of amortization) and fixed charges.
Fixed charges consist of interest on all indebtedness and one-third of annual
rentals, which GE Capital believes reasonably approximates the interest factor
of such rentals.
WHERE YOU CAN FIND MORE INFORMATION REGARDING GE CAPITAL
GE Capital files annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information which GE Capital files at the SEC's
public reference room located at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. GE Capital's SEC filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at "http://www.sec.gov."
INCORPORATION OF INFORMATION REGARDING GE CAPITAL
The SEC allows us to "incorporate by reference" information into this
prospectus supplement, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus
supplement, except for any information superseded by information in this
prospectus supplement. This prospectus supplement incorporates by reference the
documents set forth below that GE Capital has previously filed with the SEC.
These documents contain important information about GE Capital, its business and
its finances.
DOCUMENT PERIOD
-------- ------
Annual Report on Form 10-K.................... Year ended December 31, 2000
Quarterly Reports on Form 10-Q................ Quarters ended March 31, 2001 and June 30, 2001
LEGAL MATTERS
The legality of the obligations has been passed upon by in house
counsel to Financial Guaranty Insurance Company, an affiliate of the company.
11
EXPERTS
The financial statements and schedule of General Electric Capital
Corporation and consolidated affiliates as of December 31, 2000 and 1999, and
for each of the years in the three-year period ended December 31, 2000,
appearing in GE Capital's Annual Report on Form 10-K for the year ended December
31, 2000, have been incorporated by reference in this prospectus supplement in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference in this prospectus supplement, and upon the authority
of said firm as experts in accounting and auditing.
12
APPENDIX A
TENDER TIMELINE
TENDERS FOR BONDS
PURCHASE DATE
(New York City time)
--------------------------------------------------------------------------
| | | |
| | | |
---------- ---------- --------- ---------
11:30 a.m. 11:45 a.m. 2:15 p.m. 2:30 p.m.
[1] [2] [3] [4]
1. Tender agent or the trustee will give immediate telephonic notice, in
any event not later than 11:30 a.m. on the purchase date, to FGIC-SPI
specifying the aggregate principal amount of bonds to be purchased by
FGIC-SPI on the purchase date.
2. FGIC-SPI must give GE Capital prior written notice of a borrowing under
the Standby Loan Agreement by 11:45 a.m. on the date of the proposed
borrowing.
3. No later than 2:15 p.m. on each purchase date, GE Capital will make
available the amount of borrowing requested.
4. FGIC-SPI purchases bonds, for which remarketing proceeds are
unavailable, by 2:30 p.m. on the purchase date.
1
$1,000,000,000
PRINCIPAL AMOUNT PLUS INTEREST
LIQUIDITY FACILITY OBLIGATIONS
OF
FGIC SECURITIES PURCHASE, INC.
FGIC Securities Purchase, Inc. (the "Company") intends to offer from
time to time, in connection with the issuance by municipal authorities or other
issuers of adjustable or floating rate debt securities (the "Securities"), its
obligations (the "Obligations") under one or more liquidity facilities (the
"Liquidity Facilities"). The Obligations will not be sold separately from the
Securities, which will be offered pursuant to a separate prospectus or offering
statement. The Obligations will not be severable from the Securities and may not
be separately traded. This Prospectus, appropriately supplemented, may also be
delivered in connection with any remarketing of Securities purchased by FGIC
Securities Purchase, Inc. or its affiliates.
Unless otherwise specified in a prospectus supplement to the Prospectus
(a "Prospectus Supplement"), we will issue the Obligations from time to time to
provide liquidity for certain adjustable or floating rate Securities issued by
municipal or other issuers. We will describe the specific terms of the
Obligations and the Securities to which they relate in a Prospectus Supplement.
Each issue of Obligations may vary, where applicable, depending upon the terms
of the Securities to which the issuance of Obligations relates.
We are a Delaware corporation that was incorporated in 1990. Our
principal executive office is 115 Broadway, New York, New York 10006 and our
telephone number is (212) 312-3000. Unless the context otherwise indicates, the
terms "Company," "we," "us" or "our" mean FGIC Securities Purchase, Inc. You
should read the information below under the heading "THE COMPANY."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is September 19, 2001
We have provided the information contained in this Prospectus. We are
submitting this Prospectus in connection with the future sale of securities
summarized below under the heading "SUMMARY," and this Prospectus may not be
reproduced or used, in whole or in part, for any other purposes.
The reader of this Prospectus should rely only on the information
contained or incorporated by reference in this Prospectus. We have not, and the
underwriters have not, authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not, and the underwriters are not, making an
offer to sell these securities in any jurisdiction where the offer or sale is
not permitted.
This Prospectus and the applicable Prospectus Supplement constitute a
prospectus with respect to the Obligations of the Company under the Liquidity
Facilities to be issued from time to time by us in support of the Securities. We
do not anticipate that registration statements with respect to the Securities
issued by municipal authorities will be filed under the Securities Act of 1933,
as amended.
WHERE YOU CAN FIND MORE INFORMATION
We file annual and other reports and information with the Securities
and Exchange Commission (the "Commission"). You may read and copy any of these
documents at the Commission's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. Our
Commission filings are also available to the public at the Commission's web site
at http://www.sec.gov. We do not intend to deliver to holders of the Obligations
an annual report or other report containing financial information.
2
INCORPORATION BY REFERENCE
The Commission allows us to "incorporate by reference" the information
we file with it, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be part of this Prospectus and later information that we will
file with the Commission will automatically update or supersede this
information. We incorporate by reference (i) the Company's Annual Report on Form
10-K for the year ended December 31, 2000 and (ii) the Company's Quarterly
Reports on Form 10-Q for the quarterly period ended March 31, 2001, all
heretofore filed with the Commission pursuant to Section 13 of the Securities
Act of 1934, as amended. We also incorporate by reference any future filings
made with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, until such time as all of the
Obligations covered by this Prospectus have been sold.
You may request a copy of these filings, at no cost, as follows:
Corporate Communications Department, FGIC Securities Purchase, Inc., 115
Broadway, New York, New York 10006, Telephone: (212) 312-3000.
You should not assume that the information in this Prospectus and the
accompanying Prospectus Supplement is accurate as of any date other than the
date on the front of those documents regardless of the time of delivery of this
Prospectus and the accompanying Prospectus Supplement or any sale of the
Obligations. Additional updating information with respect to the matters
discussed in this Prospectus and the accompanying Prospectus Supplement may be
provided in the future by means of appendices or supplements to this Prospectus
and the accompanying Prospectus Supplement or other documents including those
incorporated by reference.
3
SUMMARY
The proposed structure will be utilized to provide liquidity through a
"put" mechanism for floating or adjustable rate securities and other derivative
debt securities issued by municipal authorities or other issuers. Such
securities typically include a tender feature that permits broker-dealers to
establish interest rates on a periodic basis which would enable the securities
to be remarketed at par and that provides a secondary market liquidity mechanism
for holders desiring to sell their securities. Such securities will be
remarketed pursuant to an agreement under which the broker-dealers will be
obligated to use "best efforts" to remarket the securities. In the event that
the securities cannot be remarketed, the Company will be obligated, pursuant to
a standby purchase agreement or similar contractual arrangement with the issuer,
remarketing agent, tender agent or trustee of the securities, to purchase
unremarketed securities, from the holders desiring to tender their securities
(the "put option") or upon certain other events. This facility will assure the
holders of liquidity for their securities even when market conditions preclude
successful remarketing.
The proposed structure may also be used in connection with concurrent
offerings of variable rate demand securities ("VRDNs") and convertible inverse
floating rate securities ("INFLOs"). VRDNs and INFLOs are municipal derivative
securities pursuant to which (i) the interest rate on the VRDNs is a variable
interest rate which is re-set by the remarketing agent from time to time (not to
exceed a stated maximum rate) (the "VRDN Rate") and (ii) the interest rate on
the INFLOs is concurrently re-set at a rate equal to twice a specified linked
rate minus the fee charged by the Company for the liquidity facility. The owners
of VRDNs have the optional right to tender their VRDNs to the issuer for
purchase and, in the event the remarketing agent does not successfully remarket
the tendered VRDNs, the Company is obligated to pay the purchase price therefor
pursuant to the terms of its liquidity facility.
If an Owner of INFLOs desires a fixed rate of interest not subject to
fluctuation based on the inverse floating rate equation described above, such
Owner may elect to purchase from VRDN holders an amount of VRDNs equal to the
principal amount of INFLOs for which the INFLO Owner desires a fixed rate of
interest. The net effect of such purchase is to "link" an equal principal amount
of VRDNs and INFLOs and thereby set a fixed interest rate on the combined
securities. If the Owner of such combined securities so elects, the owner may
"de-link" his or her VRDNs and INFLOs. The remarketing agent will then remarket
the VRDNs at a re-set interest rate and the INFLOs retained by the de-linking
Owner will again continue to vary and to be re-set whenever the interest rate of
the VRDNs are re-set. An INFLOs Owner may also elect to permanently link his or
her INFLOs with an equal principal amount of VRDNs and thereby permanently fix
the interest rate on the combined securities to their stated maturity; once
permanent linkage is effected, no subsequent de-linkage is permitted.
Until such time as VRDNs are permanently linked to INFLOs, the VRDNs
will remain subject to remarketing in the manner noted above and the Company
will remain obligated to purchase unremarketed VRDNs in connection with the
optional right of holders to tender their VRDNs for purchase.
The fees for providing the liquidity mechanism will be paid by the
issuer or other entity specified in the applicable Prospectus Supplement,
typically over the life of the liquidity agreement or, in the case of VRDNs,
until such time as a VRDN is permanently linked with an INFLO. Except as
otherwise provided in a Prospectus Supplement, in order to obtain funds to
purchase unremarketed securities, the Company will enter into standby loan
agreements with one or more financial institutions (the "Standby Lenders") under
which the Standby Lenders will be irrevocably obligated to lend funds to the
Company as needed to purchase Securities for which the put option has been
exercised. Except as otherwise provided in a Prospectus Supplement, the standby
purchase agreement or similar contractual agreement between the Company and the
trustee, issuer or other specified entity will provide that, without the consent
of the issuer and the trustee for the security holders, the Company will not
agree or consent to any amendment, supplement or modification of the related
standby loan agreement, nor waive any provision thereof, if such amendment,
supplement, modification or waiver would materially adversely affect the issuer
or other specified entity, or the security holders. Except as otherwise provided
in a Prospectus Supplement, the obligations of the Company under the standby
purchase agreement or similar contractual agreement may only be terminated upon
the occurrence of certain events of non-payment, default or insolvency on the
part of the issuer or other specified entity. In the event of a termination of
the obligations of the Company under the standby purchase
4
agreement or similar contractual agreement terminate, the securities will be
subject to a mandatory tender. Prior to such time, security holders will have
the option to tender their securities, all as set forth in the applicable
Prospectus Supplement.
The above structure is intended to receive the highest ratings from the
rating agencies and to provide public issuers with the lowest cost of financing.
There can be no assurances, however, that such ratings will be maintained.
THE COMPANY
The Company was incorporated in 1990 in the State of Delaware. All
outstanding capital stock of the Company is owned by FGIC Holdings, Inc., a
Delaware corporation.
Unless otherwise specified in a Prospectus Supplement, the business of
the Company consists and will consist of providing liquidity for certain
adjustable and floating rate Securities, issued by municipal authorities or
other issuers, through Liquidity Facilities. The securities are typically
remarketed by registered broker-dealers at par on a periodic basis to establish
the applicable interest rate for the next interest period and to provide a
secondary market liquidity mechanism for security holders desiring to sell their
securities. Pursuant to standby purchase agreements or similar contractual
agreements with issuers of the securities, the Company will be obligated to
purchase unremarketed securities from the holders thereof who voluntarily or
mandatorily tender their Securities for purchase. In order to obtain funds to
purchase the Securities, the Company will enter into one or more standby loan
agreements with Standby Lenders under which the Standby Lenders will be
irrevocably obligated to lend funds as needed to the Company to purchase
Securities as required.
The Company's principal executive offices are located at 115 Broadway,
New York, New York 10006, Telephone No. (212) 312-3000.
THE LIQUIDITY FACILITIES
The Obligations will rank equally with all other general unsecured and
unsubordinated obligations of the Company. The Obligations are not issued
pursuant to an indenture.
Owners of the Securities will be entitled to the benefits and subject
to the terms of the applicable liquidity facility as specified in the applicable
Prospectus Supplement. Pursuant to the liquidity facilities, the Company will
agree to make available to a specified intermediary, upon receipt of an
appropriate demand for payment, the purchase price for the Securities to which
such liquidity facility relates. The obligation of the Company under each
liquidity facility will be sufficient to pay a purchase price equal to the
principal of the Security to which such facility relates and up to a specified
amount of interest at a specified rate set forth in the applicable Prospectus
Supplement.
THE STANDBY LOAN AGREEMENT
In order to obtain funds to fulfill our obligations under the liquidity
facilities, we will enter into one or more standby loan agreements with one or
more standby lenders under which the standby lenders will be irrevocably
obligated to loan funds to us as needed to purchase the securities to which the
applicable liquidity facility relates. Each standby loan agreement will have the
terms set forth in the applicable prospectus supplement. We anticipate that each
loan under a standby loan agreement will be in an amount not exceeding the
purchase price for the Securities tendered by the holders which will represent
the outstanding principal amount of such securities and accrued interest thereon
for a specified period. The proceeds of each loan will be used only for the
purpose of paying the purchase price for tendered Securities. If stated in the
applicable prospectus supplement, the standby lender may have the unilateral
right to assign its rights and obligations pursuant to the terms of each standby
loan agreement subject only to confirmation from the applicable rating agency or
rating agencies that the assignment will not result in a lower credit rating on
the obligations. We do not anticipate that a standby lender will guarantee the
Securities to which its standby loan agreement relates or our obligation under
any standby purchase agreement. Standby lenders will be identified in the
appropriate prospectus supplement.
5
PLAN OF DISTRIBUTION
The Obligations will not be sold separately from the Securities, which
will be offered pursuant to a separate prospectus, official statement or
offering circular.
EXPERTS
The financial statements of FGIC Securities Purchase, Inc. as of
December 31, 2000 and 1999, and for each of the years in the three-year period
ended December 31, 2000, appearing in FGIC Securities Purchase, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 2000, have been incorporated
by reference in the Prospectus in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference in the
Prospectus, and upon the authority of said firm as experts in accounting and
auditing.
6
================================================================================
TABLE OF CONTENTS
Page
----
PROSPECTUS SUPPLEMENT
INTRODUCTION................................................................S-1
DESCRIPTION OF THE BONDS....................................................S-1
BOOK-ENTRY SYSTEM...........................................................S-6
SOURCES OF PAYMENT
FOR THE BONDS......................................................S-8
THE STANDBY BOND PURCHASE
AGREEMENT..........................................................S-8
THE STANDBY LOAN AGREEMENT;
GE CAPITAL.........................................................S-10
LEGAL MATTERS...............................................................S-11
EXPERTS.....................................................................S-12
WHERE YOU CAN FIND MORE
INFORMATION........................................................2
INCORPORATION BY REFERENCE..................................................3
SUMMARY.....................................................................4
THE COMPANY.................................................................5
THE LIQUIDITY FACILITIES....................................................5
THE STANDBY LOAN AGREEMENT..................................................5
PLAN OF DISTRIBUTION........................................................6
EXPERTS.....................................................................6
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$142,125,000*
principal amount, plus interest
LIQUIDITY FACILITY OBLIGATIONS
issued by
FGIC Securities
Purchase, Inc.
in support of
City of Detroit Sewage Disposal System
Second Lien Revenue Bonds
(Variable Rate Demand), Series 2001(E)
PROSPECTUS SUPPLEMENT
October 11, 2001
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* Preliminary, subject to change.