FILED PURSUANT TO RULE 424(b)5
REGISTRATION STATEMENT NO. 333-47446
PRICING SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 19, 2001 AND PROSPECTUS SUPPLEMENT DATED OCTOBER
11, 2001)
$139,080,000
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, 2031
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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 the 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.
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 pricing supplement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PRICING SUPPLEMENT, THE PROSPECTUS SUPPLEMENT OR THE PROSPECTUS 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 pricing supplement, the prospectus supplement and the prospectus,
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
pricing supplement.
------------------------------------
UBS PAINEWEBBER INC.
SIEBERT BRANDFORD SHANK & CO., LLC BEAR, STEARNS & CO., INC.
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The date of this pricing supplement is October 18, 2001
You should rely only on the information contained or incorporated by
reference in this pricing supplement, the prospectus supplement and the
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.
INTRODUCTION
We are providing you with this pricing supplement to supplement the
information in the prospectus supplement and to furnish information regarding
our obligations under a liquidity facility in the form of a standby bond
purchase agreement in support of $139,080,000 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 10, 2001 and a Sale Order of the Finance Director of the
City of Detroit, dated as of October 18, 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. 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 initial flexible rate for the bonds will
be 2.12% 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
October 3, 2002. The City of Detroit may determine to convert all of the bonds
to bear interest at any one of five other interest rates: the weekly rate; the
daily rate; the term rate, the auction rate or the fixed rate. This pricing
supplement in general describes the bonds only while the bonds bear interest at
the flexible rate.
1
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 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 maximum permitted period, the maturity date of the bonds
and the last business day occurring 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 cost on the bonds under
prevailing market conditions on the rate determination date, but if the
remarketing agent determines that current or anticipated future market
conditions or anticipated future events are such that a different interest rate
period would result in a lower interest cost on the bonds, then the remarketing
agent will
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 this maximum rate is changed by the sale order. The
flexible rate for each flexible rate period will be the rate of interest which,
if borne by the bonds for that 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 next flexible rate period and
the anticipated flexible rate for such period. If the remarketing agent fails to
give any required notice, or if there is any defect in such notice, that 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 first flexible rate period for the bonds
will begin will begin on the day the remarketing agent would have otherwise
determined such flexible rate period and will end on the next succeeding
interest adjustment date for the bonds as if they were bearing interest at a
weekly rate and each flexible rate period after that will begin and end on
successive interest adjustment dates for the bonds as if they were bearing
interest at a weekly rate, until the rate suspension event is no longer
continuing.
Scheduled interest payment dates 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 each 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 a flexible rate period. If the bonds are
converted to bear interest at a daily or weekly 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.
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 fifteen days prior notice
of such conversion.
Mandatory Tender Upon Expiration of Liquidity Facility. If the tender
agent has not received a commitment to provide an alternate liquidity facility
to replace an expiring liquidity facility on or before the 20th
2
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 tender for 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. If the conditions contained in a commitment for an alternate liquidity
facility are not satisfied, or if the alternate liquidity facility is not
otherwise delivered, there will be a mandatory tender of the affected bonds as
if an event of termination had occurred.
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 for
purchase (without right to retain) at least five days before the sooner of the
effective date of the alternate liquidity facility and the expiration date of
the then current liquidity facility. The tender agent, no later than 15 days
before the substitution date, will 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 any of 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.
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 described below. 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 to request that we (or the
issuer of any alternate liquidity facility) purchase under the standby bond
purchase agreement (or the then applicable alternate liquidity facility) on the
designated purchase date, at the purchase price, all such bonds tendered or
deemed tendered and which the remarketing agent has been unable to remarket.
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. Funds for the payment
of the purchase price will be derived only from the following sources: funds
derived from the remarketing of the bonds and 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, tenders and purchases will be made as described above and under
the caption "BOOK-ENTRY SYSTEM" below. If the book-entry system is not in
effect, upon transfer of the bonds to be purchased to the transfer agent with
all necessary endorsements, the tender agent will pay the purchase price to the
bondowners no later than the close of business on the business day of transfer
(but not before the purchase date) if such bonds are transferred to the transfer
agent at or before 3:00 p.m., New York time, and no later than the close of
business on the business day following the business day of transfer (but not
before the purchase date) if such bonds are transferred to the transfer agent
after 3:00 p.m., New York time.
3
Our commitment under the standby bond purchase agreement is limited to
the purchase price of tendered bonds, and does not cover the payment of
principal of, premium, if any, or interest on any bonds owned by us. In the
event we purchase any tendered bond in accordance with the provisions of the
standby bond purchase agreement, we will be entitled to exercise all of the
rights of (except the right to tender bonds for purchase under the sale order),
and will be secured to the same extent as, any other holder of bonds under the
sale order, including, without limitation, the right to receive payments of
principal and interest, all rights with respect to payments under the bond
insurance policy, the right to have bonds owned by us remarketed pursuant to the
sale order and the remarketing agreement and all rights under the sale order
upon the occurrence and continuation beyond any applicable grace period of any
"event of default" under the Sale Order.
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 Wednesday for the period beginning on the next
succeeding Thursday 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; to an auction rate, where the interest rate
will be fixed pursuant to special auction procedures, 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 an auction rate or a fixed rate, the bonds must
continue bearing interest at that auction rate or fixed rate and may not be
subsequently changed to bear interest at a short-term rate or term rate.
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 on a July 1 of certain designated years, at a redemption price equal to
the principal amount of such bonds, without premium, plus accrued interest to
the date fixed for redemption in the amounts as shown in the table below:
MANDATORY REDEMPTION PRINCIPAL
DATE (JULY 1 OF YEARS) AMOUNT
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2024 $2,015,000
2025 2,130,000
2026 2,145,000
2027 2,145,000
2028 1,415,000
2029 1,360,000
2030 62,565,000
2031* 65,305,000
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*Final maturity
4
The City of Detroit will receive a credit with respect to any mandatory
redemption requirement on account of bonds that have been redeemed (other than
by application of mandatory 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 redemption requirements. Not
less than 40 days before any mandatory redemption date for the 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 redemption requirement, and
the principal amount of bonds to be redeemed on such mandatory redemption date
will be reduced accordingly and any excess over such amount will be credited to
future mandatory 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 bonds owned by
us. 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 lot.
Any 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. Bondowers
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 bondowner, the City of Detroit,
the transfer agent and the tender agent will recognize DTC or its nominee as the
bondowner 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 bondowners,
while the bonds bear interest at a short-term rate, not less than 30 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 bondowners not less
than 30 days prior to the date fixed for redemption. Failure to mail notice to a
particular bondowner, or any defect in the notice to such bondowner, will not
affect the redemption of any bond. So long as DTC or its nominee is the
bondowner, 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 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 bondowner
of the bonds, beneficial ownership interests in the bonds 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 bondowner, 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 bonds. The transfer agent or tender agent will require the
bondowner requesting the transfer to pay any tax or other governmental
charge required
5
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 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.
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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 the 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 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.
7
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 pricing supplement, we have approximately
$3 billion of obligations currently outstanding, not including the obligations
described in this pricing supplement.
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
153 days' interest on the bonds at the maximum rate of 12% per year.
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;
8
- 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 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
9
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. 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.
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
10
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 the
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 the prospectus
supplement, except for any information superseded by information in the
prospectus supplement. The 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.
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 the prospectus supplement in
reliance upon the report of KPMG LLP, independent certified public accountants,
incorporated by reference in the prospectus supplement, and upon the authority
of said firm as experts in accounting and auditing.
11
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.
A-1
TABLE OF CONTENTS
(CONTINUED)
TABLE OF CONTENTS
Page
PRICING SUPPLEMENT
INTRODUCTION 1
DESCRIPTION OF THE BONDS 1
BOOK-ENTRY SYSTEM 6
SOURCES OF PAYMENT FOR THE BONDS 8
THE STANDBY BOND PURCHASE AGREEMENT 8
THE STANDBY LOAN AGREEMENT; GE CAPITAL 10
LEGAL MATTERS 11
EXPERTS 11
$139,080,000
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)
PRICING SUPPLEMENT
October 18, 2001