DISCLAIMER: THE CITY OF LOS ANGELES HAS NOT PREPARED OR REVIEWED THIS PROSPECTUS
SUPPLEMENT AND IS NOT RESPONSIBLE FOR ITS CONTENTS. THE CITY OF LOS ANGELES DOES
NOT GUARANTEE THE COMPLETENESS OR ACCURACY OF THE INFORMATION PRESENTED HEREIN.
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED SEPTEMBER 19, 2001)
$308,600,000
PRINCIPAL AMOUNT PLUS INTEREST
LIQUIDITY FACILITY
OF
FGIC SECURITIES PURCHASE, INC.
IN SUPPORT OF
THE CITY OF LOS ANGELES WASTEWATER SYSTEM
SUBORDINATE REVENUE BONDS VARIABLE RATE REFUNDING
SERIES 2001-A, SERIES 2001-B, SERIES 2001-C AND SERIES 2001-D
Date of the bonds: Date of Delivery Due: December 1, 2031
-------------------------
LIQUIDITY FACILITY: We are providing a liquidity facility in the form
of a standby bond purchase agreement for each series of the bonds described in
this prospectus supplement. Each standby bond purchase agreement will expire
five years from the date of delivery of the bonds, unless it is extended or
terminated sooner in accordance with its terms.
TERMS OF THE BONDS: The bonds will constitute subordinate revenue
obligations of the City of Los Angeles, California, issued pursuant to the
Charter of the City of Los Angeles and the California Government Code, Sections
53570 et seq. The bonds are payable solely from and secured solely by a
subordinated lien on and pledge of certain revenues and other moneys of the
City. 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 OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Our obligations under the standby bond purchase agreements 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 and the accompanying prospectus, appropriately
supplemented, 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
under the heading "THE COMPANY," located in the prospectus accompanying this
prospectus supplement.
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UBS PAINEWEBBER INC. JPMORGAN STONE & YOUNGBERG LLC THE CHAPMAN COMPANY
Series 2001-A Bonds Series 2001-B Bonds Series 2001-C Bonds Series 2001-D Bonds
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The date of this prospectus supplement is October 29, 2001.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not, and UBS PaineWebber Inc., J.P. Morgan Securities Inc., Stone & Youngberg
LLC and The Chapman Company, the underwriters of the bonds, 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 four liquidity facilities each in
the form of a standby bond purchase agreement in support of $308,600,000
aggregate principal amount of the City of Los Angeles Wastewater System
Subordinate Revenue Bonds Variable Rate Refunding, Series 2001-A, Series 2001-B,
Series 2001-C and Series 2001-D, which will be issued on or about November 7,
2001, by the City of Los Angeles, California, issued pursuant to the Charter of
the City of Los Angeles and the California Government Code, Sections 53570 et
seq, and which will be governed by the terms of a subordinate general bond
resolution adopted by the Council of the City on May 6, 1991, as amended and
supplemented, and the fifth supplemental resolution adopted by the Council of
the City on October 26, 2001. Owners of the bonds will have the right to tender,
or in certain cases be required to tender, the bonds. U. S. Bank Trust National
Association will act as paying agent, the entity responsible for accepting
tender notices and tendered bonds. The remarketing agents, and any successors,
will be obligated to use their best efforts to remarket the bonds. We will enter
into a separate standby bond purchase agreement with the paying agent with
respect to each series of the bonds, which will obligate us under certain
circumstances to purchase unremarketed bonds from holders 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 each standby bond
purchase agreement will expire five years from the date of delivery of the bonds
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 each 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. Our obligations under each standby bond
purchase agreement will expire five years from the date of delivery of the bonds
unless the standby bond purchase agreement is extended or terminated sooner in
accordance with its terms.
DESCRIPTION OF THE BONDS
GENERAL
The bonds will be issuable as fully-registered bonds and, when
delivered, will be registered in the name of Cede & Co., as nominee of The
Depository Trust Company ("DTC"). DTC will act as securities depository for the
bonds. Ownership interests in the bonds may be purchased in book-entry form
only. So long as DTC or its nominee is the owner of the bonds, principal,
redemption premium, if any, and purchase price of and interest on the bonds will
be made as described in "Book-Entry Only System" below.
The bonds will be dated the date of delivery and will initially bear
interest in the long mode at the long rate. Interest on the bonds will initially
be paid on October 31, 2002, the last day of the initial long mode. On October
31, 2002, the interest rate mode will automatically convert to the weekly mode,
and the bonds will not be subject to mandatory tender, unless a different
interest rate mode is selected by the City. In the weekly mode, interest on the
bonds will be payable on the first business day of each month. At the City's
discretion, bonds may bear interest from time to time at: a daily rate during a
daily rate period; a weekly rate during a weekly rate period; bond interest term
rates during a short-term rate period; a long rate during a long period; or a
fixed interest rate, as more fully described below. Each series may bear
interest calculated pursuant to a different interest rate (which may be the
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daily rate, weekly rate, short-term rate or long rate, as described herein) or
at a fixed interest rate; provided, however, that all bonds of the same series
must bear the same type of interest rate.
Interest will be computed, in the case of a daily rate period, weekly
rate period or a short-term rate period, on the basis of a 365 or 366-day year,
as appropriate, for the actual number of days elapsed, and, in the case of a
long period or fixed interest rate, on the basis of a 360-day year consisting of
twelve 30-day months. When any of the bonds bear interest at a daily rate,
weekly rate or bond interest term rates, the authorized denominations will be
$100,000 and any integral multiple of $100,000, and when any of the bonds bear
interest at a long rate or fixed interest rate, the authorized denominations
will be $5,000 and any integral multiple of $5,000.
A daily rate period means each period during which a daily rate is in
effect; and daily rate means any rate of interest payable with respect to any
series of the bonds established for a daily rate period in accordance with the
paying agent agreement.
A weekly rate period means each period during which a weekly rate is in
effect; and weekly rate means any rate of interest payable with respect to any
series of the bonds established for a weekly rate period in accordance with the
paying agent agreement.
A short-term rate period means each period, comprised of bond interest
terms, during which bond interest term rates are in effect.
A bond interest term means, with respect to bonds of the appropriate
series, a period established in accordance with the paying agent agreement
during which such series bears interest at bond interest term rate; and bond
interest term rates means, with respect to each series of the bonds, term,
non-variable interest rates established in accordance with the paying agent
agreement.
A long period means each period during which a long rate is in effect;
and long rate means a rate of interest with respect to any series of the bonds
established for a long rate, adjusted at intervals determined by the applicable
remarketing agent in accordance with the paying agent agreement.
A fixed interest rate means an annual rate of interest payable with
respect to any series of the bonds established to maturity pursuant to the
paying agent agreement.
Interest on the bonds will be payable by the fiscal agent on an
interest payment date which means: with respect to the daily rate period or the
weekly rate period, the first business day of each month; with respect to any
short-term rate period, the day next succeeding the last day of each bond
interest term; with respect to any long period or period in which the applicable
bonds bear a fixed interest rate, each June 1 and December 1 (subject to
holidays and except with respect to the bonds initially bearing interest at the
long rate, which interest will be payable at the end of such initial period);
with respect to each interest rate period, the day next succeeding the last day
thereof (or the day next succeeding the day that would have been the last day of
such interest rate period had certain events specified in the paying agent
agreement, including failure to obtain a favorable opinion of bond counsel when
required, not occurred); and with respect to bonds owned by us, the dates
provided in the applicable standby bond purchase agreement. Business day means a
day other than a day on which banks located in the City of New York, New York or
the cities in which the respective principal offices of the fiscal agent, the
paying agent, the applicable remarketing agent or the liquidity provider are
located, are required or authorized by law or executive order to close, and on
which the New York Stock Exchange is open. Interest rate period means any of the
daily rate period, the weekly rate period, the short-term rate period and the
long period.
The terms of the bonds will be divided into consecutive interest rate
periods selected by the City. Except as otherwise provided in the paying agent
agreement and the applicable liquidity facility with respect to bonds owned by
us, the bonds will bear interest from and including the interest accrual date
immediately preceding the date of authentication thereof, or, if such date of
authentication will be an interest accrual date to which interest on the bonds
has been paid in full or duly provided for or the date of initial authentication
of the bonds, from such date of authentication; provided, however, that if, as
shown by the records of the paying agent, interest on any series of bonds will
be in default, bonds issued in exchange for bonds surrendered for registration
or transfer or exchange will bear interest from the date to which interest has
been paid in full on such exchanged bonds or, if no interest has been
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paid on such bonds, from the date of the first authentication thereof. Interest
accrual date means: with respect to any daily rate period or weekly rate period,
the first day thereof and, thereafter, the first business day of each month
during that daily rate period or weekly rate period; with respect to each bond
interest term within a short-term period, the first day thereof; and with
respect to any long period or period in which any bond bears interest at a fixed
interest rate, the first day thereof and, thereafter, each interest payment date
in respect thereof.
Interest on the bonds will be payable on each respective interest
payment date thereof for the period beginning on the immediately preceding
interest accrual date (or as otherwise provided in the paying agent agreement)
and ending on the day immediately preceding such respective interest payment
date. In any event, interest on the bonds will be payable for the final interest
rate period thereof to the date on which the applicable bonds have been paid in
full.
Within each interest rate period, the applicable interest rate will be
the rate of interest per annum determined by the applicable remarketing agent
(based on the examination of tax-exempt obligations comparable, in the judgment
of the applicable remarketing agent, to the applicable bonds and known by the
applicable remarketing agent to have been priced or traded under then-prevailing
market conditions) to be the minimum interest rate which, if represented by the
applicable bonds, would enable the applicable remarketing agent to sell such
applicable bonds on such date of determination at a price (without regard to
accrued interest) equal to the principal amount thereof.
INTEREST RATE PROVISIONS
DETERMINATION OF DAILY RATE. The interest rate payable with respect to
the any series of the bonds (other than bonds owned by us) in a daily rate will
be determined by the applicable remarketing agent on each business day for such
business day. The daily rate for any day that is not a business day will be the
same as the daily rate for the immediately preceding business day. If the
remarketing agent fails to establish a daily rate for any business day, then:
the daily rate for such day will be the same as the daily rate for the
immediately preceding day if the daily rate for such preceding day was
determined by the applicable remarketing agent; or if no daily rate for the
immediately preceding day was determined by the applicable remarketing agent, or
in the event that the daily rate determined by the applicable remarketing agent
is held to be invalid or unenforceable by a court of law, then the interest rate
for such day will be equal to 100% of The Bond Market Association Municipal Swap
Index of Municipal Market Data, made available for such day, or if such index is
no longer available or no such index was so made available for such day, 70% of
the interest rate on 30-day high-grade unsecured commercial paper notes sold
through dealers by major corporations as reported in The Wall Street Journal or
The Bond Buyer on the day the daily rate would otherwise be determined for such
daily rate period as specified by the City to the paying agent.
ADJUSTMENT TO DAILY RATE. The City, by written direction to the fiscal
agent, the paying agent, the liquidity provider and the applicable remarketing
agent, may elect, subject to the provisions of the paying agent agreement, that
any series of the bonds will bear interest at a daily rate. Such direction of
the City will specify: the effective date of such adjustment to a daily rate
which will be (x) a business day not earlier than the 30th day following the
second business day after receipt by the paying agent of such direction, and (y)
in the case of an adjustment from a long period, the day immediately following
the last day of the then-current long period, or (z) in the case of an
adjustment from a weekly rate period or a short-term rate period, the day
immediately following the last day of the interest rate period with respect to
such bonds; and the date of delivery for such bonds to be purchased (if other
than such effective date). During each daily rate period beginning on a date so
specified and ending on the day immediately preceding the effective date of the
next succeeding interest rate period, the interest rate borne by the applicable
bonds will be a daily rate.
NOTICE OF ADJUSTMENT IN DAILY RATE. The paying agent will give notice,
together with the notice provided in the paying agent agreement, by first-class
mail of an adjustment to a daily rate to the owners of the applicable bonds (or
to DTC if a book-entry system is in effect), not less than 30 days prior to the
effective date of such daily rate. Such notice will state: that the interest
rate on the applicable bonds will be adjusted to a daily rate unless in the case
of an adjustment from a long rate, bond counsel fails to deliver to the paying
agent, the fiscal agent, the City, the liquidity provider and the applicable
remarketing agent a favorable opinion of bond counsel as to such adjustment on
the effective date of such adjustment; the effective date of such daily rate
period; that the applicable bonds are subject to mandatory tender for purchase
on such effective date, setting forth the applicable purchase
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price; and if the applicable series of the bonds are not longer in book-entry
form, information with respect to the required delivery of bond certificates and
payment of the prior purchase price under the paying agent agreement.
DETERMINATION OF WEEKLY RATE. The interest rate payable with respect to
bonds (other than bonds owned by us) in a weekly rate will be determined by the
applicable remarketing agent by no later than 5:00 P.M. (New York City time) on
Wednesday of each week during such weekly rate period; or if such day is not a
business day, then on the next succeeding business day. The initial weekly rate
with respect to the first weekly rate period for the bonds, and the first weekly
rate determined for each weekly rate period which follows a daily rate period,
short-term rate period or long period, will be determined on or prior to the
first day of such weekly rate period and will apply to the period beginning on
the first day of such weekly rate period and ending on the next succeeding
Wednesday. Thereafter, each weekly rate will apply to the period beginning on
the next succeeding Thursday and ending on the next succeeding Wednesday, unless
such weekly rate period will be in effect as of the stated maturity date, in
which event the weekly rate for such weekly rate period will apply to the period
beginning on the Thursday preceding the last day of such weekly rate period and
end on the stated maturity date. If the applicable remarketing agent fails to
establish a weekly rate for any week, then the weekly rate for such week will be
the same as the weekly rate for the immediately preceding week if the weekly
rate for such preceding week was determined by the applicable remarketing agent;
or if no weekly rate for the immediately preceding week was determined by the
applicable remarketing agent, or in the event that the weekly rate determined by
the applicable remarketing agent is held to be invalid or unenforceable by a
court of law, then the interest rate for such week will be equal to 100% of The
Bond Market Association Municipal Swap Index of Municipal Market Data, made
available for the week preceding the date of determination, or if such index is
no longer available or no such index was so made available for the week
preceding the date of determination, 70% of the interest rate on 30-day
high-grade unsecured commercial paper notes sold through dealers by major
corporations as reported in The Wall Street Journal or The Bond Buyer on the day
the weekly rate would otherwise be determined for such weekly rate period as
specified by the City to the paying agent.
ADJUSTMENT TO WEEKLY RATE. The City, by written direction to the fiscal
agent, the paying agent, the liquidity provider and the applicable remarketing
agent, may elect, subject to the provisions of the paying agent agreement, that
any series of the bonds will bear interest at a weekly rate. Such direction of
the City will specify (i) the effective date of such adjustment to a weekly rate
which will be (x) a business day not earlier than the 30th day following the
second business day after receipt by the paying agent of such direction, and (y)
in the case of an adjustment from a long period, the day immediately following
the last day of the then-current long period, or (z) in the case of an
adjustment from a daily rate period or short-term rate period, the day
immediately following the last day of the interest rate period with respect to
such bonds; and the date of delivery for such series of bonds to be purchased
(if other than such effective date). In addition, the direction of the City will
be accompanied by a form of notice to be mailed to the owners of the applicable
bonds by the paying agent as provided for in the notice provisions relating to
mandatory tender for purchase as set forth in the paying agent agreement. During
each weekly rate period beginning on a date so specified and ending on the day
immediately preceding the effective date of the next succeeding interest rate
period, the interest rate borne by the applicable bonds will be a weekly rate.
NOTICE OF ADJUSTMENT IN WEEKLY RATE. The paying agent will give notice,
together with the notice provided in the paying agent agreement, by first-class
mail of an adjustment to a weekly rate (other than the adjustment to the weekly
rate on October 31, 2002) to the owners of the applicable series of bonds (or to
DTC if a book-entry system is in effect) not less than 30 days prior to the
effective date of such weekly rate. Such notice will state: that the interest
rate on the applicable series of bonds will be adjusted to a weekly rate unless
in the case of an adjustment from a long rate, bond counsel fails to deliver to
the paying agent, the fiscal agent, the City, the liquidity provider and the
applicable remarketing agent a favorable opinion of bond counsel as to such
adjustment on the effective date of such adjustment; the effective date of such
weekly rate period; and that the applicable bonds are subject to mandatory
tender for purchase on such effective date, setting forth the applicable
purchase price; and if the applicable series of bonds is no longer in book-entry
form, information with respect to the required delivery of bond certificates and
payment of the purchase price under the paying agent agreement..
DETERMINATION OF BOND INTEREST TERMS AND BOND INTEREST TERM RATES FOR
EACH SHORT-TERM RATE PERIOD. The bond interest term and bond interest term rate
with respect to bonds of the appropriate series (other than bonds owned by us)
in a short-term rate period will be determined by the applicable remarketing
agent no later than 12:00 noon, New York City time, on the first day of each
bond interest term. The bond interest term and the bond interest
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term rate for each series of bonds need not be the same for any two bonds within
a series, even if determined on the same date. Each bond interest term will be a
period of not less than one day nor more than 270 days, determined by the
applicable remarketing agent to be the period which, together with all other
bond interest terms for bonds of a particular series then outstanding, as
applicable, will result in the lowest overall interest expense to the City on
the bonds, taking into account such factors as deemed necessary by the
applicable remarketing agent. Any series of bonds, as applicable, remaining
unsold by the applicable remarketing agent as of the close of business on the
first day of the bond interest term for those bonds will have a bond interest
term of one day or, if that bond interest term would not end on a day
immediately preceding a business day, a bond interest term ending on the day
immediately preceding the next business day. Each bond interest term will end on
either a day that immediately precedes a business day or on the day immediately
preceding the maturity date, but in no event will any bond interest term extend
beyond the day that is three business days prior to the expiration date of the
applicable liquidity facility. If for any reason a bond interest term for any
bonds cannot be so determined by the applicable remarketing agent, or if the
determination of such bond interest term is held by a court of law to be invalid
or unenforceable, then such bond interest term will be 30 days; but if the last
day so determined will not be a day immediately preceding a business day, then
such bond interest term will end on the first day immediately preceding the
business day next succeeding such last day; or if such last day would be after
the day immediately preceding the maturity date, then such bond interest term
will end on the day immediately preceding the maturity date. In determining the
number of days in each bond interest term, the applicable remarketing agent will
take into account such factors as deemed necessary by such remarketing agent.
The bond interest term rate for each bond interest term for each bond,
as applicable, will be the rate of interest per annum determined by the
applicable remarketing agent (based on then prevailing market conditions) to be
the minimum interest rate which, if borne by such bond, would enable such
remarketing agent to sell such bond on the date and at the time of such
determination at a price (without regarding accrued interest) equal to the
principal amount of the bond. If for any reason a bond interest term rate for
any bond is not so established by the applicable remarketing agent for any bond
interest term, or such bond interest term rate is determined by a court of law
to be invalid or unenforceable, then the bond interest term rate for such bond
interest term will be a rate per annum equal to 70% of the interest rate on
high-grade unsecured commercial paper notes sold through dealers by major
corporations as reported in The Wall Street Journal or The Bond Buyer on the
first day of bond interest term and which maturity most nearly equals the bond
interest term for which the bond interest term rate is being calculated.
ADJUSTMENT TO BOND INTEREST TERM RATES. The City may, by written
direction to the fiscal agent, the paying agent, the liquidity provider and the
applicable remarketing agent, may elect, subject to the provisions of the paying
agent agreement, that any bonds will bear interest at bond interest term rates,
provided that the applicable liquidity facilities then in effect have an
interest component of at least 274 days of interest coverage at the maximum
interest rate. Such direction of the City will specify: the effective date of
the short-term rate period (during which the applicable bonds will bear interest
at bond interest term rates), which will be (x) a business day not earlier than
the 30th day following the second business day after receipt by the paying agent
of such direction, and (y) in the case of an adjustment from a long period, the
day immediately following the last day of the then-current long period or a day
on which the applicable bonds would otherwise be subject to optional redemption
pursuant to the paying agent agreement if such adjustment did not occur;
provided that, if prior to the City making such election any series of the bonds
have been called for redemption and such redemption has not theretofore been
effected, the effective date of such short-term rate period will not precede
such redemption date, and (z) in the case of an adjustment from a daily rate
period or a weekly rate period, the day immediately following the last day of
such interest rate period; and the date of delivery of such bonds, as
applicable, to be purchased (if other than such effective date). In addition,
the direction of the City will be accompanied by a form of the notice to be
mailed by the paying agent to the owners of the applicable series as provided in
the paying agent agreement. During each short-term rate period beginning on the
date so specified and ending, with respect to bonds of the appropriate series,
on the day immediately preceding the effective date of the next succeeding
interest rate period with respect to such bonds, each such bond will bear
interest at a bond interest term rate during bond interest terms for such bonds.
NOTICE OF ADJUSTMENT TO SHORT TERM RATES. The paying agent will give
notice, together with the notice as provided in the paying agent agreement, by
first-class mail of an adjustment to a short-term rate period to the owners of
the applicable bonds (or to DTC if a book-entry system is in effect), not less
than 30 days prior to the effective date of such short-term rate period. Such
notice will state: that the interest rate on the applicable bonds will be
adjusted to bond interest term rates, unless, in the case of an adjustment from
a long rate, bond counsel fails to
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deliver to the paying agent, the fiscal agent, the City, the liquidity provider
and the applicable remarketing agent a favorable opinion of bond counsel as to
such adjustment on the effective date of such adjustment in the interest rate
period, in which case the bonds of the appropriate series will continue to bear
interest at a long rate as in effect immediately prior to such proposed
adjustment in the interest rate period; the effective date of such short-term
rate period; that the applicable bonds are subject to mandatory tender for
purchase on such proposed effective date of such short-term rate period, setting
forth the applicable purchase price; and if the applicable bonds are no longer
in book entry form, information with respect to the required delivery of bond
certificates and payment of the purchase price as described in the paying agent
agreement.
At any time during a short-term rate period, the City may elect,
subject to the provisions of the paying agent agreement, that the applicable
bonds no longer will bear interest at bond interest term rates and will instead
bear interest at a daily rate, a weekly rate or a long rate, as specified in
such election.
The date on which all bond interest terms will end will be the last day
of the then-current short-term rate period and the day next succeeding such date
will be the effective date of the daily rate period, weekly rate period or long
period elected by the City.
DETERMINATION OF LONG RATE. The interest rate payable with respect to
the applicable bonds (other than bonds owned by us) bearing interest at the long
rate will be determined by the applicable remarketing agent on a business day no
later than the effective date of such long period with respect to the applicable
bonds. If, for any reason, the long rate is not so determined for any long
period by the applicable remarketing agent on or prior to the first day of such
long period, then the applicable bonds will bear interest at the weekly rate and
will continue to bear interest at a weekly rate determined in accordance with
the provisions described above with respect to the weekly rate until such time
as the interest rate on the applicable bonds is adjusted to a different interest
rate period as provided in the paying agent agreement, and the applicable bonds
will be subject to purchase as provided in the paying agent agreement.
ADJUSTMENT TO OR CONTINUATION OF LONG RATE. The City, by written
direction to the fiscal agent, the paying agent, the liquidity provider and the
applicable remarketing agent, may elect, subject to the provisions of the paying
agent agreement, that any bonds will bear, or continue to bear, interest at a
long rate, provided that the applicable liquidity facility then in effect
provides an interest component of at least 184 days of interest coverage at the
maximum interest rate. The direction of the City required by the first sentence
of this paragraph: will specify the duration of the long period (which is
required to be one year or any integral multiple thereof during which the
applicable bonds will bear interest at a long rate); will specify the effective
date of such long period, which date will be (x) a business day not earlier than
the 30th day following the second business day after receipt by the paying agent
of such direction, and (y) in the case of an adjustment from a long period to
another long period, the day immediately following the last day of the
then-current long period, or (z) in the case of an adjustment from a daily rate
period, weekly rate period or short-term rate period, the day immediately
following the last day of the interest rate period; will specify the last day of
such long period (which last day will be either the maturity date, or a day
which both immediately precedes a business day and is at least 365 days after
the effective date thereof), and will specify a date on or prior to which owners
are required to deliver the bonds of the appropriate series to be purchased (if
other than such effective date). Such direction of the City will be accompanied
by a form of the notice to be mailed by the paying agent to the owners of the
applicable bonds of the appropriate series, as provided in the paying agent
agreement.
If, by the second business day preceding the 29th day prior to the last
day of any long period, the paying agent has not received notice of the City's
election that, during the next succeeding interest rate period, the applicable
bonds will bear interest at a daily rate, weekly rate, bond interest term rates
or a long rate, then the next succeeding interest rate period will be a daily
rate period or weekly rate period as determined by the applicable remarketing
agent, provided that the applicable remarketing agent has received a favorable
opinion of bond counsel and until such time as the City elects a new interest
rate period as provided in the paying agent agreement and the applicable bonds
will be subject to mandatory purchase as described in the paying agent
agreement, on the first day of such daily rate period or weekly rate period.
In the event that the City delivers to the applicable remarketing
agent, the paying agent and the fiscal agent, on or prior to the date that the
interest rate for any long period is determined, a notice to the effect that the
City
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elects to rescind its election to have the applicable bonds bear interest at a
long rate, then the interest rate on such bonds will not be adjusted to a long
rate, and such bonds will bear interest at a daily rate, weekly rate or bond
interest term rates as in effect prior to such event, or if the applicable bonds
are adjusted from a long rate, then such bonds will bear interest at a daily
rate, weekly rate or bond interest term rates as determined by the applicable
remarketing agent, provided that the applicable remarketing agent has received a
favorable opinion of bond counsel, and the applicable bonds will continue to be
subject to mandatory purchase as provided in the paying agent agreement.
NOTICE OF ADJUSTMENT TO OR CONTINUATION OF LONG RATE. The paying agent
will give notice, together with the notice as provided in the paying agent
agreement, by first-class mail of an adjustment to a (or the establishment of
another) long period to the owners of the applicable bonds not less than 30 days
prior to the effective date of such long period. Such notice is required to
state: that the interest rate on the applicable bonds will be adjusted to, or
continue to be, a long rate unless (A) in the case of an adjustment from a daily
rate, a weekly rate or bond interest term rates, bond counsel fails to deliver
to the paying agent, the fiscal agent, the City, the liquidity provider and the
applicable remarketing agent a favorable opinion of bond counsel as to such
adjustment in the interest rate period on the effective date of such adjustment,
or (B) any rating agency fails to deliver to the paying agent, the fiscal agent
and the City a rating confirmation, and that in any such case the applicable
bonds, if being adjusted from a daily rate period, weekly rate period or a
short-term rate period will continue to bear interest at a daily rate, a weekly
rate or bond interest term rates as in effect immediately prior to such proposed
adjustment in the interest rate period; the effective date and the last day of
such long period; and that the applicable bonds are subject to mandatory tender
for purchase on such effective date and the purchase price applicable thereto.
CONVERSION TO FIXED INTEREST RATE. The City has the option, exercisable
one time for each series of bonds (unless the fixed interest rate is not
determined as provided in the paying agent agreement, in which case the City may
exercise the option until such fixed interest rate is determined), to convert
the interest payable with respect to a series of bonds to the fixed interest
rate. The City may exercise such option by giving, not less than 30 days prior
to the fixed interest rate, notice of its election to convert the interest
payable with respect to the applicable bonds to the fixed interest rate. Such
notice must be given to the fiscal agent, the paying agent, the liquidity
provider and the applicable remarketing agent. Such notice will specify the
fixed interest rate, which may be any business day for which owners may be given
timely notice of conversion as provided in the paying agent agreement. In
connection with any optional conversion to the fixed interest rate, the City
will have the right to direct the applicable remarketing agent to remarket the
applicable bonds on the fixed interest rate at a discount or at a premium,
including a premium sufficient to pay any remarketing fees; provided that in
order to exercise such option, the City must deposit with the paying agent on or
prior to the fixed interest date an amount equal to the discount and the
remarketing fee.
Not later than the business day prior to the fixed interest date with
respect to any series of bonds, the applicable remarketing agent will determine
the interest rate which in its judgment, having due regard for prevailing
financial market rate, would enable such remarketing agent to sell all of the
applicable bonds on the fixed interest date with a fixed interest rate until
maturity at 100% of the principal amount of the bonds plus accrued interest, if
any, with respect thereto, plus a premium sufficient to pay any remarketing
fees; provided, however, that if the City exercises its option to have
applicable bonds remarketed on the fixed interest date at a discount, the
applicable remarketing agent will establish the fixed interest rate taking into
account any such discount specified by the City.
If the applicable remarketing agent fails, refuses or is unable to
determine the fixed interest rate prior to the fixed interest date, or if a
court of competent jurisdiction determines that the fixed interest rate is
invalid or unenforceable, then such bonds will bear interest at the weekly rate
as provided in the paying agent agreement, until such time as the City elects a
new interest rate period as provided in the paying agent agreement under the
option or again exercises its option to convert to a fixed interest rate. If at
the direction of the City such applicable remarketing agent resumes
determination of the fixed interest rate, the foregoing provisions will apply as
if there had been no prior invalidation or failure by such applicable
remarketing agent to determine the fixed interest rate.
NOTICE OF CONVERSION TO FIXED INTEREST RATE. In the event the City
exercises its option to convert bonds to the fixed interest rate, the paying
agent will give notice of such conversion to the rating agencies, the liquidity
provider, the applicable remarketing agent and the owners of the applicable
bonds. Such notice will state: that the interest rate with respect to the
applicable bonds will be converted to the fixed interest rate; the fixed
interest date;
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the date the fixed interest rate is to be established; that interest represented
by the applicable bonds will be payable on each June 1 and December 1 after the
fixed interest date; that subsequent to the fixed interest date, the owners will
no longer have the right to deliver the applicable bonds to the paying agent for
purchase; that all outstanding bonds of the appropriate series will be purchased
on the fixed interest date; and that on or after conversion to a fixed interest
rate of bonds, the owners will be deemed to have tendered their bonds of such
series as of the fixed rate date to the paying agent.
From and after the fixed rate date, said owners will not be entitled to
any payment (including any interest to accrue from and after the fixed rate
date) other than the purchase price for such bonds, which will be an amount
equal to the principal amount of the bonds plus accrued interest, if any, with
respect thereto calculated as of the fixed rate date. From and after the fixed
rate date, such bonds will no longer otherwise be entitled to the benefits of
the paying agent agreement. Such bonds will be purchased on the fixed rate date
in accordance with and from the sources of funds specified provided in the
paying agent agreement.
PROVISIONS APPLICABLE TO ALL INTEREST RATES
NOTICE OF ADJUSTMENT. In the event that the City elects to convert the
interest rate on a series of the bonds to a daily rate, a weekly rate, bond
interest term rates or a long rate as provided above, then the written direction
furnished by the City to the fiscal agent, the paying agent, the liquidity
provider and the applicable remarketing agent, as required pursuant to the
paying agent agreement, will be made by registered or certified mail, or by
electronic mail, telex or telecopy confirmed by registered or certified mail.
Any such direction of the City will specify whether the applicable bonds are to
bear interest at the daily rate, weekly rate, bond interest term rates or long
rate and will be accompanied by a copy of the notice.
APPLICABLE ADJUSTABLE INTEREST RATE UPON A FAILURE TO RECEIVE A
FAVORABLE OPINION OF BOND COUNSEL. In connection with the adjustment from a
daily rate, weekly rate or bond interest term rates to a long rate or from a
long rate to a daily rate, weekly rate or bond interest term rates, the City
will cause to be provided to the paying agent, the fiscal agent, the liquidity
provider and the applicable remarketing agent a favorable opinion of bond
counsel on the effective date of such adjustment. If bond counsel fails to
deliver a favorable opinion of bond counsel on any such date, then the interest
rate period on the applicable bonds will not be adjusted. In any event, if
notice of such adjustment has been mailed to the owners of the applicable bonds
and bond counsel fails to deliver a favorable opinion of bond counsel on the
effective date described in the paying agent agreement, the bonds will continue
to be subject to mandatory purchase on the date which would have been the
effective date of such adjustment.
REDEMPTION OF THE BONDS
OPTIONAL REDEMPTION
OPTIONAL REDEMPTION OF THE BONDS IN THE DAILY RATE, THE WEEKLY RATE OR
THE SHORT TERM RATE. Any bonds bearing interest at the daily rate, the weekly
rate or the short-term rate are subject to optional redemption by the City, in
whole, or in part in authorized denominations, on any interest payment date
during a daily rate period, a weekly rate period or a short-term rate period at
a redemption price equal to 100% of the principal being redeemed plus accrued
interest, if any, to such redemption date, without premium.
OPTIONAL REDEMPTION OF THE BONDS BEARING THE FIXED INTEREST RATE OR THE
LONG RATE. Any series of the bonds bearing the fixed interest rate or the long
rate are subject to optional redemption at the option of the City, in whole on
any date or in part on any interest payment date, during the periods specified
below, at the redemption prices (expressed as a percentage of principal amount)
hereinafter indicated, plus accrued interest, if any, to the redemption date:
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LENGTH OF TIME SINCE CONVERSION REDEMPTION PRICE
------------------------------- ----------------
Greater than 10 years After 7 years at 100%
Less than or equal to 10 years and greater than 7 years After 5 years at 100%
Less than or equal to 7 years and greater than 4 years After 3 years at 100%
Less than or equal to 4 years After 2 years at 100%
REDEMPTION OF BONDS OWNED BY LIQUIDITY FACILITY PROVIDER
Bonds owned by us are subject to optional redemption by the City, in
whole or in part at any time, and from time to time, at a redemption price equal
to 100% of the principal being redeemed plus accrued interest, if any, at the
provider bond rate to such redemption date, without premium.
Upon the conversion of any outstanding obligations under a liquidity
facility into a term loan evidenced by bonds owned by a liquidity facility
provider, such provider bonds are subject to mandatory redemption so as to
satisfy the amortization requirements therefore, as more fully provided in such
liquidity facility.
MANDATORY SINKING FUND REDEMPTION OF THE BONDS
The 2001-A bonds are subject to mandatory sinking fund redemption prior
to maturity, beginning on December 1, 2002 and on each December 1 thereafter, at
a redemption price equal to 100% of the principal being redeemed, from mandatory
sinking account payments which have been deposited in the subordinate debt
service fund established under the general resolution, in the principal amounts
set forth below:
REDEMPTION DATE PRINCIPAL AMOUNT REDEMPTION DATE PRINCIPAL AMOUNT
--------------- ---------------- --------------- ----------------
2002 $ 200,000.00 2015 $ 3,100,000.00
2003 600,000.00 2016 3,200,000.00
2004 2,100,000.00 2017 3,200,000.00
2005 2,200,000.00 2018 3,400,000.00
2006 2,200,000.00 2024 1,300,000.00
2007 400,000.00 2025 1,300,000.00
2008 500,000.00 2026 1,400,000.00
2009 500,000.00 2027 1,400,000.00
2010 2,700,000.00 2028 19,600,000.00
2011 2,800,000.00 2029 20,200,000.00
2012 2,900,000.00 2030 20,800,000.00
2013 3,000,000.00 2031* 21,400,000.00
2014 3,000,000.00
*Maturity.
The 2001-B bonds are subject to mandatory sinking fund redemption prior
to maturity, beginning on December 1, 2002 and on each December 1 thereafter, at
a redemption price equal to 100% of the principal being redeemed, from mandatory
sinking account payments which have been deposited in the subordinate debt
service fund established under the general resolution, in the principal amounts
set forth below:
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REDEMPTION DATE PRINCIPAL AMOUNT REDEMPTION DATE PRINCIPAL AMOUNT
--------------- ---------------- --------------- ----------------
2002 $ 200,000.00 2015 $ 3,100,000.00
2003 600,000.00 2016 3,200,000.00
2004 2,100,000.00 2017 3,200,000.00
2005 2,200,000.00 2018 3,400,000.00
2006 2,200,000.00 2024 1,300,000.00
2007 500,000.00 2025 1,300,000.00
2008 400,000.00 2026 1,400,000.00
2009 500,000.00 2027 1,400,000.00
2010 2,700,000.00 2028 19,600,000.00
2011 2,800,000.00 2029 20,200,000.00
2012 2,900,000.00 2030 20,800,000.00
2013 3,000,000.00 2031* 21,400,000.00
2014 3,000,000.00
*Maturity.
The 2001-C bonds are subject to mandatory sinking fund redemption prior
to maturity, beginning on December 1, 2002 and on each December 1 thereafter, at
a redemption price equal to 100% of the principal being redeemed, from mandatory
sinking account payments which have been deposited in the subordinate debt
service fund established under the general resolution, in the principal amounts
set forth below:
REDEMPTION DATE PRINCIPAL AMOUNT REDEMPTION DATE PRINCIPAL AMOUNT
--------------- ---------------- --------------- ----------------
2002 $ 100,000.00 2015 $1,200,000.00
2003 200,000.00 2016 1,200,000.00
2004 800,000.00 2017 1,200,000.00
2005 800,000.00 2018 1,300,000.00
2006 800,000.00 2024 500,000.00
2007 200,000.00 2025 500,000.00
2008 200,000.00 2026 500,000.00
2009 200,000.00 2027 500,000.00
2010 1,000,000.00 2028 7,300,000.00
2011 1,100,000.00 2029 7,600,000.00
2012 1,100,000.00 2030 7,800,000.00
2013 1,100,000.00 2031* 8,000,000.00
2014 1,100,000.00
*Maturity.
The 2001-D bonds are subject to mandatory sinking fund redemption prior
to maturity, beginning on December 1, 2002 and on each December 1 thereafter, at
a redemption price equal to 100% of the principal being redeemed, from mandatory
sinking account payments which have been deposited in the subordinate debt
service fund established under the general resolution, in the principal amounts
set forth below:
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REDEMPTION DATE PRINCIPAL AMOUNT REDEMPTION DATE PRINCIPAL AMOUNT
--------------- ---------------- --------------- ----------------
2002 $200,000.00 2015 $ 400,000.00
2003 200,000.00 2016 300,000.00
2004 200,000.00 2017 500,000.00
2005 200,000.00 2018 300,000.00
2006 300,000.00 2024 200,000.00
2007 100,000.00 2025 200,000.00
2008 100,000.00 2026 100,000.00
2009 100,000.00 2027 200,000.00
2010 400,000.00 2028 2,400,000.00
2011 300,000.00 2029 2,400,000.00
2012 300,000.00 2030 2,600,000.00
2013 300,000.00 2031* 2,700,000.00
2014 500,000.00
*Maturity.
Mandatory sinking account payments for each series of bonds will be
reduced for such series to the extent the City has purchased such bonds of the
appropriate series and surrendered such bonds to the paying agent for
cancellation. If bonds of any series have been optionally redeemed as described
above, then the amount of such bonds of such series so redeemed will be credited
to such future mandatory sinking account payments as may be specified by the
City. A reduction of mandatory sinking account payments for any series in any
twelve-month period ending December 1 will reduce the principal amount of such
bonds subject to mandatory sinking account redemption on that December 1.
SELECTION OF BONDS FOR REDEMPTION
In the case of redemption in part, bonds owned by us will be selected
for redemption by the paying agent prior to selecting any other bonds within a
series, and thereafter, the paying agent will select the bonds within a series
to be redeemed by lot.
When any of the bonds are to be redeemed at the option of the City, the
paying agent must have first received a written notice of an authorized
representative of the exercise of such option at least thirty (30) days but not
more than sixty (60) days prior to the proposed redemption date. Such request
will state the proposed redemption date and the aggregate principal amount of
the applicable bonds to be redeemed and the maturity or maturities from which
each redemption will be made. Such request will state whether such redemption
will be conditioned on a deposit of sufficient funds or if sufficient moneys
will be on deposit prior to sending the notice of redemption as provided in "-
Notice of Redemption" below.
NOTICE OF REDEMPTION
Notice of redemption will be mailed by the paying agent by first-class
mail postage prepaid, not less than thirty (30) nor more than sixty (60) days
prior to the redemption date to (i) the respective owners of bonds designated
for redemption at their addresses appearing on the register, (ii) the applicable
remarketing agent, (iii) the liquidity provider, (iv) the fiscal agent, and (v)
one or more information services. Notice of redemption will also be given by
telecopy, certified, registered or overnight mail to the securities depository
upon mailing of notice of redemption to the owners and the information services.
Each notice of redemption will state the date of such notice, the redemption
date, the redemption price, the place or places of redemption (including the
name and appropriate address or addresses of the paying agent), the CUSIP
number, if any, of the maturity or maturities and, if less than all of such
maturity, the distinctive certificate numbers of the bonds of such maturity to
be redeemed and, in the case of the bonds to be redeemed in part only, the
respective portion of the principal amount of the bonds to be redeemed. Each
such notice will also state that on said date there will become due and payable
with respect to each of said bonds the redemption price of such bonds or of said
specified portion of the principal amount of the bonds in the case of bonds to
be redeemed in part only, and that from and after such redemption date, the
related interest due with respect thereto will cease to accrue, and that such
bonds are required to be surrendered at the address or addresses of the paying
agent specified in the redemption notice. Notice of any redemption will either
(i) state that the proposed redemption is conditioned on there being on deposit
in the applicable fund or account on the redemption date
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sufficient money to pay the full redemption price of the bonds of the
appropriate series to be redeemed, or (ii) be sent only if sufficient money to
pay the full redemption price of the bonds of the appropriate series to be
redeemed is on deposit in the applicable fund or account.
Failure by the paying agent to give notice as described above to the
applicable remarketing agent, the liquidity provider, the owners of any bonds
designated for redemption or any one or more of the information services or
securities depository or any defect in such notice will not affect the
sufficiency of the proceedings for redemption.
EFFECT OF REDEMPTION
If notice of redemption has been duly given as aforesaid and funds for
the payment of the redemption price of the bonds to be redeemed are held by the
paying agent on the designated redemption date, then on the redemption date
designated in such notice, the redemption price of the bonds so called for
redemption will become payable as specified in such notice; and from and after
the date so designated interest due with respect to the bonds, or portions of
such bonds, as applicable, so called for redemption will cease to accrue, such
bonds will cease to be entitled to any benefit, protection or security under the
general resolution and the paying agent agreement and the owners of such bonds
will have no rights in respect thereof except to receive payment of the
redemption price. The paying agent will, upon surrender for payment of any of
the bonds to be redeemed on their redemption dates, pay such bonds at the
redemption price. If said moneys will not be available on the redemption date,
such bonds will continue to bear interest until paid at the same rate they would
have borne had they not been called for redemption. Notwithstanding the
foregoing, any bonds owned by us will remain outstanding until we are paid all
amounts due under such bonds or portions of such bonds to be redeemed on their
redemption dates. Concurrently with payment to us of all amounts due on bonds
owned by us, we will surrender such bonds to the paying agent for cancellation.
TENDER AND PURCHASE OF THE BONDS
PURCHASE OF THE BONDS
GENERAL. The bonds are subject to purchase upon tender by the owners
thereof and subject to mandatory purchase pursuant to the terms of the paying
agent agreement and as described herein. Each series of bonds is subject to
mandatory tender for purchase on the first day of each new interest rate period.
The purchase price on the first day of each new interest rate period will be
equal to the principal amount of and accrued interest on the applicable bonds.
The purchase price of the bonds in a daily rate or weekly rate is payable from
the proceeds of a remarketing of the bonds and, to the extent remarketing
proceeds attributable to such bonds are insufficient or not available therefor,
initially from amounts available under the liquidity facilities and thereafter
from such alternate liquidity facilities as may be obtained by the City to
provide for payment of the purchase price of one or all of the series bonds. The
respective liquidity facilities will each terminate five years after the bonds
are issued, unless extended or terminated sooner in accordance with their
respective terms. Under certain circumstances described herein, our obligation
to purchase the bonds tendered by the owners thereof or subject to mandatory
purchase may be terminated without notice. In such event, sufficient funds may
not be available to purchase the bonds tendered by the registered owners thereof
or subject to mandatory purchase.
OPTIONAL TENDER DURING DAILY RATE PERIOD. During any daily rate period,
any bonds (other than a bond owned by us) will be purchased (in whole) from its
holder at the option of the holder on any business day that the applicable
liquidity facility is in effect at a purchase price equal to the principal
amount of the bonds plus accrued interest, if any, from and including the
interest accrual date immediately preceding the date of purchase through and
including the day immediately preceding the date of purchase, unless the date of
purchase will be an interest accrual date, in which case at a purchase price
equal to the principal amount of the bonds, payable in immediately available
funds, upon delivery to the paying agent at its corporate trust office by no
later than 10:30 a.m., New York City time, on such business day, of an
irrevocable written notice (or a telephonic notice confirmed by a written
notice) which states the principal amount of the bonds and acknowledges that
such bonds will be purchased on such date.
OPTIONAL TENDER DURING WEEKLY RATE PERIOD OR SHORT TERM RATE PERIOD.
During any weekly rate period or short term rate period, any bonds (other than a
bond owned by us) will be purchased (in whole) from its holder at
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the option of the holder on any business day at a purchase price equal to the
principal amount of the bonds plus accrued interest, if any, from and including
the interest accrual date immediately preceding the date of purchase through and
including the day immediately preceding the date of purchase, unless the date of
purchase will be an interest accrual date, in which case at a purchase price
equal to the principal amount of the bonds, payable in immediately available
funds, upon delivery to the paying agent at its corporate trust office of an
irrevocable written notice which states the principal amount of such bonds and
the date on which the same will be purchased, which date will be a business day
not prior to the seventh day next succeeding the date of the delivery of such
notice to the paying agent. Any notice delivered to the paying agent after 4:00
p.m., New York City time, will be deemed to have been received on the next
succeeding business day.
MANDATORY TENDER FOR PURCHASE ON FIRST DAY OF EACH NEW INTEREST RATE
PERIOD AND LAST DAY OF EACH BOND INTEREST TERM. The bonds are subject to
mandatory tender for purchase on the first day of each new interest rate period
(other than the automatic adjustment to a weekly rate on October 31, 2002), or
on the day which would have been the first day of a new interest rate period
(other than the automatic adjustment to a weekly rate on October 31, 2002) had
one of the events not occurred which resulted in the interest rate on the
applicable bonds not being adjusted, at a purchase price, payable in immediately
available funds, equal to the principal amount of and accrued interest on the
applicable bonds of the appropriate series to the date of tender.
On the day next succeeding the last day of each bond interest term for
bonds of the appropriate series, unless such day is the maturity date or the
first day of a new interest rate period (in which event such bonds will be
subject to mandatory purchase as described in the preceding paragraph), such
bonds will be purchased from the owner at a purchase price equal to the
principal amount of the bonds payable in immediately available funds. The
purchase price of any bonds of the appropriate series so purchased will be
payable only upon surrender of such bonds to the paying agent at its corporate
trust office accompanied, when such bonds are not in a book entry system, by an
instrument of transfer of the bonds, in form satisfactory to the paying agent,
executed in blank by the owner of the bonds or his duly authorized attorney,
such signature guaranteed by a bank, trust company or member firm of the New
York Stock Exchange.
MANDATORY TENDER FOR PURCHASE UPON TERMINATION, EXPIRATION OR
REPLACEMENT OF THE LIQUIDITY FACILITIES. If at any time the paying agent gives
notice, which will not be less than 15 days prior to the purchase described in
this paragraph, in accordance with the provisions of the paying agent agreement,
that any bonds which, at such time, are subject to purchase under the applicable
liquidity facility as then in effect, will, on the date specified in such
notice, cease to be subject to purchase under such liquidity facility as a
result of: the termination or expiration of such liquidity facility, or such
liquidity facility being replaced with the effect that the purchase price of
such bonds is no longer payable from such liquidity facility (in each case,
whether or not any alternate liquidity facility has been obtained); or the
liquidity provider notifies the paying agent that an event of default has
occurred under such liquidity facility and that the liquidity provider is
terminating such liquidity facility in accordance with its terms, then on the
second business day preceding any termination, replacement or expiration of such
liquidity facility, such bonds will be purchased or deemed purchased as provided
in the paying agent agreement.
Notwithstanding the provisions described under this sub-heading, if the
City delivers to the fiscal agent, the paying agent and all of the remarketing
agents, prior to the date that notice of such termination, expiration or
replacement of the applicable liquidity facility is given by the paying agent,
written evidence from each rating agency to the effect that such termination,
expiration or replacement of the liquidity facility in and of itself, will not
result in the withdrawal or reduction of the short-term rating(s) then
applicable to the bonds, then the applicable bonds will not be subject to
mandatory tender for purchase as described above solely as a result of such
termination, expiration or replacement of the liquidity facility; provided,
however, if no mandatory tender for purchase of the bonds will be required as a
result of the termination, expiration or replacement of the applicable liquidity
facility, the City will cause a written notice to be provided to the respective
owners, the paying agent, the fiscal agent, the liquidity provider and the
applicable remarketing agent not less than 30 days prior to the effectiveness of
such termination, expiration or replacement of such liquidity facility.
MANDATORY TENDER FOR PURCHASE UPON CONVERSION TO FIXED INTEREST RATE.
Each series of bonds will be subject to mandatory tender for purchase on the
applicable fixed rate date relating to that series of bonds at a purchase price,
payable in immediately available funds, equal to the principal of and interest
accrued to such tender date on the applicable bonds.
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NOTICE REQUIREMENTS RELATING TO TENDER FOR PURCHASE
NOTICE OF MANDATORY TENDER FOR PURCHASE. In connection with any
mandatory tender for purchase of bonds, in accordance with the provisions
described in the paying agent agreement, the paying agent will give notice of a
mandatory tender for purchase as a part of the notice given pursuant to the
provisions of the paying agent agreement. Such notice will state (A) in the case
of a mandatory tender for purchase, the type of interest rate period to commence
on such mandatory purchase date; (B) in the case of a mandatory tender for
purchase that the applicable liquidity facility will expire, terminate or be
replaced, and that the bonds will no longer be payable from the applicable
liquidity facility then in effect and that any short-term rating applicable
thereto may be reduced or withdrawn; (C) that the purchase price of any bonds so
subject to mandatory purchase will be payable only upon surrender of such bonds
to the paying agent at its corporate trust office for delivery of bonds,
accompanied by an instrument of transfer the bonds, in form satisfactory to the
paying agent, executed in blank by the holder of the bonds or his duly
authorized attorney-in-fact, with such signature guaranteed by an eligible
guarantor institution; (D) that, provided that moneys sufficient to effect such
purchase have been provided through the remarketing of such bonds by the
applicable remarketing agent or through the applicable liquidity facility, all
bonds so subject to mandatory tender for purchase will be purchased on the
mandatory purchase date, and that if any owner of a series of bonds subject to
mandatory tender for purchase does not surrender such bonds of such series to
the paying agent for purchase on such mandatory purchase date, and moneys
sufficient to pay the purchase price of the bonds are on deposit with the paying
agent, then such bonds will be deemed to be a undelivered bonds, and that no
interest will accrue thereon on and after such mandatory purchase date and that
the holder of the bonds will have no rights under the general resolution other
than to receive payment of the purchase price of the bonds; and (E) if moneys
sufficient to pay the purchase price of such bonds have not been provided to the
paying agent either through the remarketing of such bonds or from the applicable
liquidity facility, that such bonds will not be purchased or deemed purchased
and will continue to bear interest as if such failed purchase had not occurred.
In connection with any mandatory tender for purchase of bonds as a
result of the replacement, termination or expiration of a liquidity facility,
such notice also will (A) describe generally the liquidity facility in effect
prior to such termination, replacement or expiration and the alternate liquidity
facility in effect or to be in effect upon such termination, replacement or
expiration and identify the provider of such alternate liquidity facility and
whether in the case of each event of termination, replacement or expiration
there is an obligation on the part of such liquidity provider to purchase upon
mandatory tender of the related bonds pursuant to such alternate liquidity
facility, and if not, the events of termination, replacement or expiration which
give rise to the termination, replacement or expiration of the obligation to
purchase under such alternate liquidity facility without an obligation to
purchase upon mandatory tender of the bonds, (B) state the date of such
replacement, termination or expiration, and the date of the proposed provision
of the alternate liquidity facility, if any, (C) specify the ratings, if any, to
be applicable to such bonds after such replacement, termination or expiration of
the liquidity facility, or state that no ratings will be assigned to such bonds
after such replacement, termination or expiration of the liquidity facility, and
(D) describe any special restrictions or procedures (if any) applicable to the
registration of transfer of such bonds.
For payment of the purchase price for any bonds required to be
purchased pursuant to the provisions described under this caption on the date
specified, such bonds must be delivered, at or prior to 9:00 a.m. (or 8:00 a.m.
in the case of bonds in a daily rate period), Los Angeles time, on the purchase
date, to the paying agent at its corporate trust office for delivery of bonds,
accompanied by an instrument of transfer of the bonds, in form satisfactory to
the paying agent, executed in blank by the holder of the bonds or his duly
authorized attorney-in-fact, with such signature guaranteed by an eligible
guarantor institution. If any such bond is delivered after 9:00 a.m. (or 8:00
a.m. in the case of bonds in the daily rate period) Los Angeles time, on the
purchase date, payment of the purchase price of such bonds need not be made
until the business day following the date of delivery of such bonds, but such
bonds will nonetheless be deemed to have been purchased on the date specified in
such notice and no interest will accrue thereon from and after such date.
NOTICE OF OWNER'S ELECTION TO TENDER THE BONDS DEEMED TO BE
IRREVOCABLE; UNDELIVERED BONDS. The giving of notice by an owner of bonds will
constitute the irrevocable tender for purchase of each such bonds with respect
to which such notice has been given, regardless of whether such bonds are
delivered to the paying agent for purchase on the relevant purchase date,
provided that moneys sufficient to pay the purchase price of such bonds are on
deposit with the paying agent for such purpose. The paying agent may refuse to
accept delivery of any bonds for
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which a proper instrument of transfer has not been provided; such refusal,
however, will not affect the validity of the purchase of such bonds as described
herein. If any holder of bonds who has given notice of tender of purchase fails
to deliver such bonds to the paying agent at the place and on the applicable
date and at the time specified, or fails to deliver such bonds properly
endorsed, and moneys sufficient to pay the purchase price of the bonds are on
deposit with the paying agent for such purpose, such bonds will constitute an
undelivered bond. If funds in the amount of the purchase price of the
undelivered bonds (including the undelivered bonds are available for payment to
the holder of the bonds on the date and at the time specified, from and after
the date and time of that required delivery, (1) each undelivered bond will be
deemed to be purchased and will no longer be deemed to be outstanding under the
paying agent agreement; (2) interest will no longer accrue thereon; and (3)
funds in the amount of the purchase price of each such undelivered bond will be
held by the paying agent for the benefit of the holder of the bonds (provided
that the holder will have no right to any investment proceeds derived from such
funds), to be paid on delivery (and proper endorsement) of such undelivered bond
to the paying agent at its corporate trust office for delivery of bonds. Any
funds held by the paying agent as described in clause (3) of the preceding
sentence will be held uninvested and not commingled.
NOTICE OF THE BONDS DELIVERED FOR PURCHASE; PURCHASE OF THE BONDS.
Bonds required to be purchased in accordance with the provisions of the paying
agent agreement will be purchased from the owners of the bonds, on the date and
at the purchase price at which such bonds are required to be purchased. Funds
for the payment of such purchase price will be derived from the following
sources in the following order of priority: (i) proceeds of the sale of such
bonds remarketed to any person (other than the City) under the paying agent
agreement and furnished to the paying agent by the applicable remarketing agent
for deposit into the remarketing proceeds account of the purchase fund; and (ii)
moneys furnished by or at the direction of the fiscal agent to the paying agent
for deposit into the purchase account of the purchase fund representing moneys
received from the liquidity provider pursuant to the liquidity facilities.
The City will not have any obligation to pay the purchase price of
bonds required to be purchased if the moneys from the sources described in
clauses (i) and (ii) above are insufficient to provide for such payment. In the
event moneys on deposit with the paying agent are insufficient to pay the
purchase price of the bonds to be purchased the paying agent will determine the
bonds tendered for purchase with respect to which such insufficiency exists by
lot from those bonds tendered for purchase and will return such bonds to the
owners of the bonds together with notice of such insufficiency and the owners of
the bonds will thereafter have the right to again tender such bonds for purchase
to the extent provided in the paying agent agreement and no such insufficiency
will constitute an event of default.
If any bonds purchased as described under this caption are not
presented to the paying agent, the paying agent will segregate and hold the
moneys for the purchase price of such bonds of such series in trust for the
benefit of the former owners of such bonds, who will, except as provided in the
following sentence, thereafter be restricted exclusively to such moneys for the
satisfaction of any claim for the purchase price of such bonds, and such bonds
will no longer be deemed outstanding. Any moneys which the paying agent
segregates and holds in trust for the payment of the purchase price of any bonds
of such series and remaining unclaimed for two years after the date of purchase
will be paid to the City. After the payment of such unclaimed moneys to the
City, the former bondholder of such bonds will look only to the City for the
payment of the bonds, and the City will not be liable for any interest thereon
and will not be regarded as a trustee of such moneys.
REMARKETING OF THE BONDS
Upon notice of the tender for purchase of bonds, the applicable
remarketing agent will offer for sale and use its best efforts to sell such
bonds, any such sale to be made on the date of such purchase as provided in the
paying agent agreement, at the minimum interest rate available in the
marketplace at a purchase price of par plus accrued interest thereon; provided,
however, that the remarketing agent will not remarket any bonds unless a
liquidity facility is then in effect with respect to the bonds of such series or
unless such bonds are being remarketed at the fixed interest rate on the fixed
rate date. The remarketing agents have agreed that they will not sell any bonds
to the City, or to any person who controls, is controlled by, or is under common
control with, the City. In addition, the City has agreed that it will not tender
any bonds for purchase under the applicable liquidity facility.
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DEMAND FOR PURCHASE OF THE BONDS UNDER THE LIQUIDITY FACILITIES
By 11:30 a.m., New York City time on the purchase date, the paying
agent is directed to notify the liquidity provider as to the aggregate purchase
price of tendered bonds, as applicable, required to be purchased by the
liquidity provider and to make a demand for purchase of such bonds, as
applicable, under the related liquidity facility in accordance with the terms of
the applicable liquidity facility, such that the paying agent will have amounts
sufficient to pay the purchase price plus accrued interest, if any, of the bonds
of such series so tendered. Upon the receipt (no later than 2:30 p.m. on said
purchase date) of amounts under the applicable liquidity facility, the paying
agent will deposit such purchase price in the purchase account of the purchase
fund. In determining the amount of any such purchase price then due, the paying
agent will not take into consideration any purchase price due on the bonds of
such series registered in the name of the City or any affiliate of the City to
the extent identified to the paying agent and no demand for purchase under the
applicable liquidity facility will be made to pay the purchase price of any of
the bonds of such series registered in the name of the City or any affiliate of
the City to the extent identified to the paying agent. By 4:00 p.m., New York
City time, the paying agent will purchase the tendered bonds, and immediately
remit to the liquidity provider such funds in the purchase account which were
not used to purchase the bonds tendered.
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 such 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 each series 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.
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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 City or the paying agent 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 paying agent or the
City 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 or the paying agent, 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 paying agent
and the City 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 paying agent 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 paying agent and the City
will take all actions necessary to return the bonds to the full book-entry
system of DTC.
The City 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 City 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 such 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 such 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 paying agent and discharging its
responsibilities with respect thereto under applicable law or the City may
terminate participation in the system of book-entry transfers through DTC or any
other securities depository at any time. In the event that the book-entry system
is discontinued, replacement certificates will be printed and delivered.
THE PAYING AGENT, 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
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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 SUCH
NOTICE.
SECURITY FOR THE BONDS
SOURCE OF PAYMENT
All revenues received by the City from the ownership and operation of
the system (less collection fees paid to the Department of Water and Power) are
deposited, after collection, into the sewer construction and maintenance fund
held by the City Treasurer. The sewer construction and maintenance fund has been
operated as a special fund of the City since it was created by an ordinance
adopted by the City Council in 1970. For the City's internal purposes, the City
has also created a sewer operation and maintenance fund and a sewer capital fund
into which amounts from the sewer construction and maintenance fund may be
transferred, and the City may create other funds into which Revenues (as defined
below) are deposited or held. All of such funds are collectively referred to as
the "SCM Fund," and amounts in all of such funds will be held and used as the
SCM Fund. All expenditures related to the construction, operation, maintenance
and repair of the System are accounted for in the SCM Fund. The City is required
to annually prepare audited financial statements of the SCM Fund.
Revenues means all revenues of the SCM Fund and revenues otherwise
attributable to the system, including, but not limited to, those revenues
currently arising as a result of the imposition of sewer service charges,
industrial waste surcharge and inspection fees, sewage disposal contract
charges, sewerage facility charges and bonded sewer fees and all other income
and receipts derived by the City from the ownership or operation of the system
or arising from the system and including amounts attributable to extensions,
additions and improvements to the system and all other amounts received by the
City in payment for providing wastewater collection, treatment and/or disposal
services; and all earnings received from the investment of the SCM Fund, the
debt service fund, the reserve fund and the emergency fund; and all earnings
received on the debt service funds and, if any, reserve funds created for
subordinate bonds provided, however, that revenues shall not include:
any amount received from the levy or collection of taxes;
amounts received under contracts or agreements with
governmental or private entities and designated for capital costs;
grants received from the United States of America, from the
State of California or other political bodies;
earnings on the construction funds as defined in the
subordinate general resolution and earnings on the construction funds
as defined in the senior general resolution;
the proceeds of borrowings; and
proceeds of insurance.
SUBORDINATE PLEDGE OF REVENUES
To secure the payment of all bonds issued pursuant to the terms of the
subordinate general resolution, the City has pledged, placed a second lien upon
and assigned to the owners of the bonds: (1) the revenues as defined in the
subordinate general resolution; and (2) the revenues held in the SCM Fund
including the earnings on such revenues. The City has previously pledged and
assigned the revenues and granted a lien upon the revenues to secure all senior
lien bonds, whenever issued, including senior lien bonds issued subsequent to
the issuance of subordinate bonds (including the 2001 bonds). The pledge,
assignment and lien on the revenues granted to secure the senior lien bonds is,
in all respects, prior to the pledge, assignment and lien granted by the
subordinate general resolution. The revenues, including revenues held in the SCM
Fund and the earnings on such revenues, will be used first to pay the senior
lien bonds as the same become due and make current deposits into the funds held
pursuant to the senior
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general resolution before such revenues will be available to pay subordinate
bonds. This pledge of and lien upon the revenues will be for the equal and
proportionate benefit and security of all subordinate bonds issued under the
terms of the subordinate general resolution, all of which, regardless of the
time or times of their authentication and delivery or maturity, shall be of
equal rank without preference, priority or distinction as to lien or otherwise.
The pledge and lien granted by the subordinate general resolution will remain
effective for so long as any bonds are outstanding thereunder. Amounts in the
subordinate debt service fund and construction fund established for any series
of the bonds are pledged to secure such bonds in accordance with the terms of
the fifth supplemental resolution.
In the resolution, the City represents and states that except for the
pledge granted to secure the senior lien bonds, the City has not previously
pledged the revenues or the SCM Fund nor created any lien thereon, and the City
covenants that, until all the subordinate bonds issued under the provisions of
the resolution and the interest thereon shall have been paid or are deemed to
have been paid, it will not, except to the extent additional senior lien bonds
are issued under the terms of the resolution, grant any prior or parity pledge
of revenues of the SCM Fund, or create or permit to be created any charge or
lien on the revenues ranking prior to or on a parity with the charge and lien
which secures the bonds issued pursuant to the resolution. The City will not, by
the provisions of the resolution, be restricted or limited in its ability to
issue additional senior lien bonds, all of which shall rank prior to the bonds
with respect to the pledge of, lien on and assignment of the revenues. The City
may create or permit to be created a charge or lien on the revenues ranking
junior and subordinate to the charge and lien which secures the bonds issued
pursuant to the resolution.
THE STANDBY BOND PURCHASE AGREEMENTS
The obligations will rank equally with all of our other general
unsecured and unsubordinated obligations. The obligations are not issued under
an indenture or resolution. As of the date of this prospectus supplement, we
have approximately $3.6 billion of obligations currently outstanding, including
the obligations we are issuing under this prospectus supplement.
Owners of the bonds will be entitled to the benefits and will be
subject to the terms of the related standby bond purchase agreement. Under each
standby bond purchase agreement, we agree to make available to a specified
intermediary, upon receipt of an appropriate demand for payment, the purchase
price for the bonds. Our obligations under each standby bond purchase agreement
will be sufficient to pay a purchase price equal to the principal of the related
series of the bonds and, for the period from the date of issuance of the bonds
through and including October 31, 2002, the full amount of interest on that
series of bonds at the rate of interest on such series for such period, and for
the period after October 31, 2002, up to 34 days of interest on that series of
bonds at an assumed rate of 12% per year.
TERMINATION EVENTS
The scheduled expiration date of each standby bond purchase agreement
is five years from the date of delivery of the bonds, 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:
o nonpayment of any amount with respect to the bonds or of any
commitment fees payable to us in respect of the standby bond purchase
agreement when due;
o nonpayment of any other fees, or any other amount, when due
in respect of the standby bond purchase agreement, if such failure to
pay when due continues for three (3) business days;
o the failure by the City to have at all times a remarketing
agent performing the duties contemplated by the supplemental
resolution;
S-19
o the breach by the City of any covenant or agreement in the
standby bond purchase agreement which is not remedied within 90 days
after written notice has been received by the City from us;
o the occurrence and continuation of any default by the City
in the payment of principal of or premium, if any, or interest on any
bond, note or other evidence of indebtedness (including the bonds)
issued, assumed or guaranteed by the City, which under the subordinate
general resolution is senior to, or on parity with, the bonds;
o the City 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;
o a court of competent jurisdiction enters an order, judgment
or decree declaring the City insolvent, or adjudging it bankrupt, or
appointing a trustee or receiver of the City, or approving a petition
filed against the City seeking reorganization of the City 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;
o 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 and the custody or control is not be terminated
within (60) days from the date of assumption of the custody or control;
o any occurrrence of an event of default under the subordinate
general resolution or the supplemental resolution;
o any action by the State of California materially impairing
the power of the City to comply with the subordinate general resolution
or the supplemental resolution or impairing any of our rights or
remedies or those of Bondholders; or
o any material provision of the standby bond purchase
agreement, the supplemental resolution or the bonds ceases for any
reason whatsoever to be a valid and binding agreement of the City or
the City contests the validity or enforceability of the standby bond
purchase agreement, the supplemental resolution or the bonds.
If a termination event occurs, we may deliver notice to the City, 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 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 agreements, 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
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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 such 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 agreements. 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 or 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
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.
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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 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.
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APPENDIX A
TENDER TIMELINE
TENDERS FOR BONDS
PURCHASE DATE
(New York City time)
--------------------------------------------------------------------------------
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| | | |
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---------- --------------------- ------------------- ---------
11:30 a.m. 11:45 a.m. 2:15 p.m. 2:30 p.m.
[1] [2] [3] [4]
1. The paying agent 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
$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
1
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.
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 periods ended March 31, 2001 and June 30,
2001, 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.
2
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 such 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
3
agreement or similar contractual agreement, 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.
4
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.
5
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TABLE OF CONTENTS
Page
PROSPECTUS SUPPLEMENT
INTRODUCTION...................................S-1
DESCRIPTION OF THE BONDS.......................S-1
REDEMPTION OF THE BONDS........................S-8
TENDER AND PURCHASE OF THE BONDS..............S-12
BOOK-ENTRY SYSTEM.............................S-16
SECURITY FOR THE BONDS........................S-18
THE STANDBY BOND PURCHASE AGREEMENTS..........S-19
THE STANDBY LOAN AGREEMENT; GE CAPITAL........S-20
LEGAL MATTERS.................................S-22
EXPERTS.......................................S-22
PROSPECTUS
WHERE YOU CAN FIND MORE INFORMATION..............2
INCORPORATION BY REFERENCE.......................2
SUMMARY..........................................3
THE COMPANY......................................4
THE LIQUIDITY FACILITIES.........................4
THE STANDBY LOAN AGREEMENT.......................4
PLAN OF DISTRIBUTION.............................5
EXPERTS..........................................5
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$308,600,000
principal amount, plus interest
LIQUIDITY FACILITY OBLIGATIONS
issued by
FGIC Securities
Purchase, Inc.
in support of
The City of Los Angeles Wastewater System
Subordinate Revenue Bonds
Variable Rate Refunding
Series 2001-A, Series 2001-B,
Series 2001-C and Series 2001-D
PROSPECTUS SUPPLEMENT
October 29, 2001
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