PROSPECTUS SUPPLEMENT
(To Prospectus dated May 31, 2001)
$21,275,000
principal amount plus interest
liquidity facility
of
FGIC Securities Purchase, Inc.
in support of
BOARD OF TRUSTEES OF GRAND VALLEY STATE UNIVERSITY
General Revenue Variable Rate Demand Bonds, Series 2001B
Date of the Bonds: Date of Delivery Due: June 1, 2027
-------------------------
Liquidity Facility: We are providing a liquidity facility in the form
of a standby bond purchase agreement for the bonds described in this prospectus
supplement. The standby bond purchase agreement will expire 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 are limited obligations of the Board of
Trustees of Grand Valley State University, established under Article VIII,
Section 6 of the Michigan Constitution of 1963. The bonds are payable solely
from amounts in the bond fund established by the indenture and secured solely by
an irrevocable pledge of certain revenues of the Board. 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 agreement are not being
sold separately from the bonds. The bonds are being sold under a separate
disclosure document. Our obligations may not be traded separately from the
bonds. This prospectus supplement 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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NatCity Investments, Inc.
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The date of this prospectus supplement is July 20, 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 NatCity Investments, Inc., the underwriter of the bonds, has 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 underwriter is not, making an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted.
INTRODUCTION
We are providing you with this prospectus supplement to furnish
information regarding our obligations under a liquidity facility in the form of
a standby bond purchase agreement in support of $21,275,000 aggregate principal
amount of General Revenue Variable Rate Demand Bonds, Series 2001B which will be
issued on or about August 7, 2001 by the Board of Trustees of Grand Valley State
University, established under Article VIII, Section 6 of the Michigan
Constitution of 1963 and which will be governed by the terms of a trust
indenture dated as of August 1, 2001 between the Board of Trustees of Grand
Valley State University and National City Bank of Michigan/Illinois, Troy,
Michigan, as trustee for the bonds. Owners of the bonds will have the right to
tender, or in certain cases be required to tender, the bonds. National City Bank
of Michigan/Illinois, Troy, Michigan, will act as tender agent for the bonds.
NatCity Investments, Inc., as the initial remarketing agent, and any successor,
will be obligated to use its best efforts to remarket the bonds. We will enter
into a standby bond purchase agreement with the trustee, which will obligate us
under certain circumstances to purchase unremarketed bonds from 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 obligate GE Capital to loan
funds to us as needed to purchase bonds. Our obligations under the 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, as initially issued, will be dated and bear interest from
the date of issuance and will mature, subject to prior redemption and purchase,
on the due date shown on the cover page of this prospectus supplement. The bonds
will be issued in fully registered form in the denomination of $100,000, or
integral multiples of $5,000 in excess of $100,000. So long as the bonds are
registered in the name of Cede & Co., as nominee of The Depository Trust
Company, principal of, premium, if any, and interest on the bonds will paid as
described under "BOOK-ENTRY SYSTEM."
Purchases of bonds will be made in book-entry-only form as described
under "BOOK-ENTRY SYSTEM." So long as Cede & Co., as nominee for DTC, is the
registered owner of the bonds, the transfer of interests in the bonds will be
the sole responsibility of DTC's participants and indirect participants and the
beneficial owners of the bonds, as explained later in this prospectus
supplement. Neither the bond issuer nor the trustee will have any responsibility
with respect to transfers of interests in the bonds.
The person in whose name the ownership of any bond is registered on the
registration books will be deemed and regarded as the absolute owner of that
bond for all purposes, and payment of or on account of the principal of,
premium, if any, and interest on any bond will be made only to or on the order
of the registered owner of that bond or its legal representative. All payments
on that bond will be valid and effectual to satisfy and discharge the liability
on that bond, including the premium, if any, and interest on that bond, to the
extent of the sum or sums so paid.
The trustee will keep the registration books for the bonds at its
principal office, located at Troy, Michigan. The bonds may be transferred or
exchanged for one or more bonds.
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Modes of Operation
General
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The bonds may operate in one or more of four modes of operation,
provided that the requirements, certain of which are described below, for
entering into that mode or modes are satisfied. The four modes of operation are
the weekly rate mode, the adjustable rate mode, the long term rate mode, and the
fixed rate mode. The bonds may operate in only one mode at any given time.
Generally, the modes have different operating features, including different
demand features, purchase features, redemption provisions, interest rate periods
and interest payment dates. The standby bond purchase agreement will secure the
purchase price of bonds in the weekly rate mode only. Except as otherwise
described below, once a mode is designated for any particular bond, that bond
will remain in that mode until a new mode for that bond is designated as
described below. However, a bond converted to bear interest at a fixed rate will
remain in that fixed rate mode until maturity or redemption of that bond prior
to maturity. The bonds will initially be issued in the weekly rate mode.
In connection with any change to another mode, the trustee will give
written notice to the owner of each affected bond that its bond will be subject
to mandatory tender for purchase on the conversion date at 100% of the principal
amount of the bond, plus accrued interest to the date of purchase. Additional
information regarding mandatory tenders for purchase of bonds appears in this
prospectus supplement in "DESCRIPTION OF THE BONDS - Mandatory Purchase of
Bonds."
If any condition precedent to the conversion from one mode to another
mode (including, but not limited to, the establishment of the appropriate
interest rate for that mode or the duration of the interest rate period, as the
case may be), is not fulfilled with respect to any bond, after the mandatory
tender date that bond will continue in its then current mode for the same period
and bear the same interest rate as was last borne by that bond in that mode.
However, if the then current mode is the adjustable rate mode, then the bonds
will convert to a weekly rate mode, and if the then current mode is the long
term rate mode and a written opinion of nationally recognized bond counsel is
provided, stating that the change is authorized or permitted by the indenture
and that the change will not adversely affect the exclusion from gross income
for purposes of federal income taxation of the interest on the bonds, then the
bonds will convert to a weekly rate mode, but if the opinion is not furnished,
the bonds will remain in a long term rate mode, maintain the same duration as
the immediately preceding long term rate period and maintain the same interest
rate as the immediately preceding long term rate.
The interest rate for the bonds for each rate period will be determined
by the remarketing agent as the lowest rate of interest which, in the judgment
of the remarketing agent, would cause the bonds to have a market value as of the
date of determination equal to the principal amount of the bonds, plus accrued
interest, if any, taking into account prevailing market conditions. However, in
no event will the interest rate on the bonds exceed the rate of the lesser of
10% per annum or the maximum rate permitted by law.
If the remarketing agent fails for any reason to determine the interest
rate for any rate period:
o the interest rate for bonds that accrue interest
at weekly rates will be the weekly rate in effect for the
immediately preceding weekly rate period, but if no weekly
rate has been determined by the remarketing agent for each of
the two immediately preceding weekly rate periods, the
interest rate will be 80% of the then most recent 90-day
United States Treasury Bill Rate as quoted in the Wall Street
Journal; and
o the interest rate for bonds that accrue interest
at adjustable rates will be converted to the weekly rate mode
and the weekly rate will be equal to the BMA Index, or other
index (or percentage of index) selected by the remarketing
agent.
Weekly Rate Mode
----------------
The bonds will initially be issued in the weekly rate mode and will
remain in the weekly rate mode until converted to another rate period. The
initial weekly rate, which will be applicable to all of the bonds, will be as
set
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forth in the bond purchase agreement relating to the original purchase of the
bonds by the underwriter of the bonds. After the date of execution of the bond
purchase agreement, a weekly rate will be determined for each weekly rate period
as follows:
o weekly rate periods will begin on a Thursday and
end on Wednesday of the following week and each weekly rate
period will be followed by another weekly rate period until
the rate period of the bonds is converted to another type of
rate period. However, if the rate period converts to a weekly
rate period from a different rate period, the weekly rate
period will begin on the weekly rate conversion date and will
end on the Wednesday that is not less than seven days later;
and
o the weekly rate for each weekly rate period will
be effective from and including the first day of that weekly
rate period and remain in effect to and including the last day
of that weekly rate period. The remarketing agent will
determine each weekly rate by 4:00 p.m., New York City time,
on the business day next preceding the first day of the weekly
rate period to which it relates.
If no weekly rate is determined by the remarketing agent for a weekly
rate period, the weekly rate for that weekly rate period will be the weekly rate
in effect for the immediately preceding weekly rate period, but if no weekly
rate has been determined by the remarketing agent for each of the two
immediately preceding weekly rate periods, the interest rate will be 80% of the
then most recent 90-day United States Treasury Bill Rate as quoted in the Wall
Street Journal.
Adjustable Rate Mode
--------------------
An adjustable rate will be determined for each adjustable rate period
as follows:
o adjustable rate periods will begin initially on
an adjustable rate conversion date, which will be a business
day, and then on each interest rate adjustment date until the
type of rate period of the bonds is converted to another type
of rate period. Adjustable rate periods will be for a period
of not less than 30 or more than 365 days specified by the
remarketing agent. No adjustable rate period may be
established which is longer than the number of days interest
coverage at the highest lawful rate under the liquidity
facility then in effect, less 21 days; and
o the adjustable rate for each adjustable rate
period will be effective from and including the first day of
that adjustable rate period and remain in effect to and
including the last day of that adjustable rate period. Each
adjustable rate will be determined by the remarketing agent on
the first business day of the adjustable rate period to which
it relates not later than 11:00 a.m., New York City time.
Long Term Rate Mode
-------------------
A long term rate will be determined for each long term rate period as
follows:
o long term rate periods will begin on a long term
rate conversion date and subsequently on a June 1 or December
1 which is at least 12 calendar months after the long term
rate conversion date, and end on the day preceding either the
first day of the following long term rate period or the
conversion date on which a different rate period becomes
effective. Long term rate periods will be for a period more
than 365 days and less than the remaining term of the bonds;
and
o the long term rate for each long term rate
period will be effective from and including the first day of
that long term rate period and remain in effect to and
including the last day of that long term rate period. Each
long term rate will be determined on the first day of that
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long term rate period by 11:00 a.m., New York City time, or,
if the first day is not a business day, on the next preceding
business day.
A liquidity facility may be, but is not required to be, in effect
during a long term rate period. If a liquidity facility is then in effect, long
term rate periods may not extend to a date beyond the termination date of the
liquidity facility then in effect.
Fixed Rate Mode
---------------
The bonds may be converted to bonds bearing interest at a fixed rate.
Bonds bearing interest at a fixed rate may not be converted to any other type of
rate period and will not be covered by any liquidity facility. The fixed rate
period will begin on a fixed rate conversion date and will extend to the earlier
of the date of redemption or the maturity date for each bond accruing interest
at a fixed rate.
Interest Payments
Interest on the bonds will be payable in arrears on each interest
payment date beginning on the first interest payment date after the date of
original issuance of the bonds. The amount of interest payable with respect to
any bonds on any interest payment date will be computed during each weekly rate
period and adjustable rate period, on the basis of a 365- or 366-day year for
the number of days actually elapsed, based on the calendar year in which the
weekly rate period or adjustable rate period begins, and during each long term
rate period and fixed rate period, on the basis of a 360-day year of twelve
30-day months.
"Interest payment date" means any principal payment date or redemption
date, and:
o with respect to bonds accruing interest at
weekly rates, September 4, 2001 and, after September 4, 2001,
the first business day of each calendar month following the
weekly rate period for which interest is payable, and any day
which is a conversion date from a weekly rate period;
o with respect to bonds accruing interest at
adjustable rates, the first business day following the
adjustable rate period for which interest is payable, and any
day which is a conversion date from an adjustable rate period;
o with respect to bonds accruing interest at a
long term rate, each June 1 and December 1 beginning with the
first June 1 and December 1 that is at least 90 days after the
long term rate conversion date, and any day which is a
conversion date from a long term rate period; and
o with respect to bonds accruing interest at a
fixed rate, each June 1 and December 1 beginning with the
first June 1 or December 1 that is at least 90 days after the
fixed rate conversion date through and including the maturity
date of the bonds accruing interest at a fixed rate.
The record date for bonds in the weekly rate mode and the adjustable
rate mode will be the last business day before the next interest rate period.
Interest on the bonds will be payable to the nominee of DTC, as long as
all of the bonds are registered in the name of the nominee.
In no event will interest accrue on the bonds at a rate greater than
the lesser of 10% per annum and the maximum rate of interest permitted by law,
or with respect to bonds purchased by us pursuant to our standby bond purchase
agreement, the lesser of 18% per annum and the maximum rate of interest
permitted by law.
S-4
Conversion Features
The interest rate mode applicable to the bonds may be changed, at the
election of the Board as of an interest period reset date, in the manner
described below.
Each notice of conversion given to the trustee as described below,
given in connection with a change in the interest rate mode between the weekly
rate mode and the adjustable rate mode, from the weekly rate mode or the
adjustable rate mode to a long term rate mode, from a long term rate mode to the
weekly rate mode or the adjustable rate mode, or from the weekly rate mode, the
adjustable rate mode or the long term rate mode to the fixed rate mode, must be
accompanied by an opinion of bond counsel to the effect that the change in the
interest rate mode will not cause the interest on the bonds to be included in
the gross income of the recipients thereof for federal income tax purposes and
that the change is permitted under the indenture.
Conversion Between Floating Rate Modes. The weekly rate mode and the
adjustable rate mode are each known as a floating interest rate mode. On any
interest rate adjustment date, while the bonds bear interest at a floating
interest rate, the interest rate on all of the bonds may be converted to a
different floating interest rate mode, when the trustee, the remarketing agent
and DTC receive written directions from the Board, given not less than 15 days
before the interest period reset date, to convert the interest rate on the bonds
to a different floating interest rate mode.
Each interest period reset date must be the day after the last day of
an interest rate period.
The remarketing agent must establish the interest rate and, except in
the case of the bonds in the weekly rate mode, the first day of the next
interest rate period, on the interest period reset date.
If the interest rate on the bonds is converted to a different floating
interest rate mode, then not less than five business days before the interest
period reset date, the trustee must notify registered owners of all outstanding
bonds by first class mail, that on that interest period reset date the bonds
will be converted to a different floating interest rate mode, which interest
rate mode must be specified, and that all bonds will be subject to mandatory
tender. The notice must state the type of interest rate, the conversion date,
and must inform the registered owners of the bonds that they will be deemed to
have tendered the bonds as of the conversion date and will not be entitled to
further accrual of interest on the bonds after the conversion date. Payment of
the purchase price of the bonds will only occur upon surrender of the bonds at
the principal office of the tender agent if the bonds are not held in a
book-entry only system.
The bonds may not be converted from a weekly rate mode to an adjustable
rate mode without first obtaining a rating confirmation from the rating agency
stating that the conversion will not affect the rating on the bonds.
Conversion to the Long Term Rate Period from a Floating Interest Rate
Mode. On any interest rate adjustment date while the bonds bear interest at a
floating interest rate mode the interest rate on all the bonds may, at the
direction of the Board, be converted to a long term rate mode when the trustee,
the remarketing agent and DTC receive written directions from the Board at least
four business days before the thirtieth day before the proposed interest period
reset date, to convert the interest rate on all of the bonds to a long term rate
mode. If the Board determines that a liquidity facility is to be in effect
following the conversion to the long term rate mode, the amount available under
the liquidity facility for payment of interest must be increased to an amount
equal to at least 210 days' interest on all outstanding bonds at the highest
lawful rate, as defined in the indenture, and the term of the liquidity facility
must extend to a date at least five days after the end of the first interest
rate period in the long term rate mode.
Each interest period reset date must be the day after the last day of
an interest rate period and must also be the interest rate determination date.
If the prior interest rate period ends on the day before a June 1 or December 1
which is not a business day, the interest rate determination date must be the
next preceding business day.
S-5
The remarketing agent must establish the interest rate and the first
day of the next interest rate period, on the interest period reset date.
If the interest rate on the bonds is to be converted to a long term
rate mode then not less than five business days before the proposed interest
period reset date, the trustee must notify the registered owners of all
outstanding bonds by first class mail that on the interest period reset date all
of the bonds will be converted to a long term rate mode, whether or not the
payment of the purchase price of bonds will be secured by a liquidity facility,
and that all bonds will be subject to mandatory tender. The notice must state
the conversion date, and must inform the registered owners of the bonds that any
registered owner of bonds will be deemed to have tendered the bonds as of the
conversion date and will not be entitled to further accrual of interest on the
bonds after the conversion date. Payment of the purchase price of the bonds will
only occur upon surrender of the bonds at the principal office of the tender
agent if the bonds are not held in a book-entry only system.
Conversion from a Long Term Rate Mode to a Floating Interest Rate Mode.
On any interest rate determination date while the bonds bear interest at the
long term rate mode, the interest rate on all the bonds may, at the direction of
the Board, be converted to a floating interest rate mode when the trustee, the
remarketing agent and DTC receive written directions from the Board at least
four business days before the 30th day before the proposed conversion date to
convert the interest rate on the bonds to a floating interest rate mode.
Each interest period reset date in the floating interest rate mode must
be the day after the last day of an interest rate period.
The remarketing agent will establish the interest rate, and except in
the case of bonds in the weekly rate mode, the first day of the next interest
rate period, on the interest period reset date.
If the interest rate on the bonds is to be converted to a floating
interest rate mode, then not less than five business days before the proposed
conversion date, the trustee shall notify the registered owners of all
outstanding bonds by first class mail that on the conversion date all of the
bonds will be converted to the specified floating interest rate mode and that
all bonds will be subject to mandatory tender. The notice must state the type of
interest rate, the conversion date, and must inform the registered owners of the
bonds that they will be deemed to have tendered the bonds as of the conversion
date and will not be entitled to further accrual of interest on the bonds after
the conversion date. Payment of the purchase price of the bonds will only occur
upon surrender of the bonds at the principal office of the tender agent if the
bonds are not held in a book-entry only system.
The bonds may not be converted to a floating interest rate mode without
first obtaining a liquidity facility, if a liquidity facility was not in effect
for the bonds while they were in the long term rate mode, and a rating
confirmation from the rating agency stating that the conversion will not affect
the rating on the bonds.
Conversion to Fixed Rate Mode. On any interest rate adjustment date
while the bonds bear interest at a floating interest rate mode or in the long
term rate mode, the interest rate on all bonds may, at the direction of the
Board, be converted to the fixed rate mode. The date of the conversion will be
the fixed rate conversion date. After the fixed rate conversion date, the
adjustable rate, purchase and tender features of the bonds will be permanently
terminated. After the fixed rate conversion date, all of the bonds will bear
interest at the fixed rate determined in the manner described below. In order to
exercise its option, the Board must deliver notice at least four business days
before the thirtieth day to the trustee, the remarketing agent and DTC directing
the conversion. The notice must specify the fixed rate conversion date, which
must be an interest period reset date not less than 30 days following the date
the notice is sent. On or before the 20th day before the fixed rate conversion
date, the Board may specify that the bonds may have security provisions
different from those set forth in the indenture, but only if it does not
adversely affect the ability of bond counsel to render the opinion described
below.
The fixed rate will be established by the remarketing agent on or
before the seventh day preceding the fixed rate conversion date. When the
remarketing agent has determined the fixed rate, it must immediately notify the
Board, the trustee, and the tender agent of the fixed rate by telephone,
promptly confirmed in writing.
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Not less than 25 days before the proposed fixed rate conversion date
stated in the notice from the Board, the trustee must prepare and send notice by
first class mail to each bondholder and/or to DTC (with a copy to us and the
bond insurer) by facsimile stating:
o that all of the bonds are proposed to be
converted to fixed rate bonds on the fixed rate
conversion date specified in the notice;
o that the adjustable rate, purchase and tender
features of the bonds will terminate on the
fixed rate conversion date and that, from and
after the fixed rate conversion date, the
interest rate(s) on the bonds will become fixed
to maturity;
o the interest rate determination date;
o that after the fixed rate conversion date the
bondholders will no longer have the right to
tender bonds to the remarketing agent (or tender
agent if the bonds are not held in a book-entry
only system) for purchase;
o that in connection with the fixed rate
conversion date the standby bond purchase
agreement or alternate liquidity facility, as
the case may be, if then in effect, will expire
and will no longer secure the bonds or that it
will continue and that these or other security
provisions may be revised;
o that all bonds will be subject to mandatory
purchase on the fixed rate conversion date, and
all information required to be included in a
notice of mandatory purchase pursuant to the
indenture, including that any bonds required to
be purchased which are not delivered to the
tender agent if the bonds are not held in a
book-entry only system on or before 10:30 a.m.
New York City time on the fixed rate conversion
date will be deemed purchased;
o that any bond credit ratings then applicable to
the bonds may change or be withdrawn on or after
the fixed rate conversion date;
o that following the fixed rate conversion date,
bonds may be issued in denominations of $5,000
or integral multiples thereof;
o that following the fixed rate conversion date,
the bonds will mature serially or be subject to
mandatory sinking account redemptions;
o that the conversion may be rescinded on or
before the interest rate determination date at
the option of the Board, or thereafter if all
conditions to conversion are not satisfied, or
in the circumstances described below.
No other notice of the fixed rate conversion will be provided. If the
Board determines on or before the interest rate determination date to rescind
the conversion or thereafter determines in good faith at any time on or before
the fixed rate conversion date that it is unable to meet the conditions to
convert the bonds to the fixed rate(s), the Board will promptly so notify the
trustee and the trustee will give prompt written notice to the bondholders (with
a copy to us and the bond insurer) that the bonds will not be converted to the
fixed rate on the fixed rate conversion date, but rather will be converted to
the weekly rate mode, and will nevertheless be subject to mandatory purchase on
the fixed rate conversion date. If the bonds are in the long term rate mode and
the Board rescinds its option to convert the bonds to the fixed rate mode or the
failure to meet the conditions for conversion results from an event within the
control of the Board, the bonds will remain in the long term rate mode and in
the same long term rate period unless the Board delivers to the trustee an
opinion of bond counsel that the conversion to the weekly rate mode will not
adversely affect the exclusion of the interest on the bonds from gross income
for federal income tax purposes.
S-7
The right of the Board to consummate the fixed rate conversion option
will be contingent:
o upon its ability to obtain on or before the date
of the notice required to be given by the
trustee to the bondholders, an opinion of bond
counsel, dated as of the date of the notice, to
be reaffirmed as of the fixed rate conversion
date, that following the fixed rate conversion
date, the bonds will continue to be the valid
and binding obligations of the Board and that
the exercise of the conversion option will not
adversely affect the excludability of the
interest on the bonds from gross income for
federal income tax purposes; and
o upon its ability to effect, on or before the
15th day before the fixed rate conversion date,
the execution of a contract of purchase relating
to the bonds between the Board and the
remarketing agent or other purchaser,
underwriter or institutional investor, providing
for the simultaneous purchase of all bonds
(including all bonds owned by us).
The Board's exercise of the fixed rate conversion option will be deemed
rescinded if all of the foregoing conditions are not satisfied or if the
obligations incurred by the purchaser under the contract of purchase are not
fulfilled on the proposed fixed rate conversion date for any reason. If that
happens, the bonds will remain in or be converted to the weekly rate mode and
the trustee will promptly notify all bondholders, the bond insurer and us of the
rescission. Additionally, all bonds will remain subject to mandatory purchase on
the proposed fixed rate conversion date. Finally, the bonds will be remarketed
as bonds in the weekly rate mode, subject to the provisions described in the
preceding paragraph.
Any bond tendered to the remarketing agent (or tender agent if the
bonds are not held in a book-entry only system) for purchase from the date the
trustee is required to give notice to the bondholders to and including the
proposed fixed rate conversion date will not be remarketed unless the purchaser
has acknowledged receipt of a form of notice of conversion conforming to the
requirements described above.
On the fixed rate conversion date, the bonds will mature serially on
June 1 of each year in serial maturities or be subject to mandatory sinking fund
redemptions on the first June 1 more than six months after the fixed rate
conversion date and ending on the maturity date of the bonds. The annual serial
maturities or mandatory sinking fund redemptions will be established in amounts
as set forth by the remarketing agent in a certificate delivered to the trustee
and the Board. In the alternative, the bonds will mature in the amounts that are
approved by the Board in a supplemental indenture delivered before the fixed
rate conversion date.
After the bonds are converted to the fixed rate mode, no further
conversions between interest rate modes may be made with respect to the bonds.
Notices of Change in Interest Rate Determination Method. When a change
in the interest rates established in the weekly rate mode, adjustable rate mode
or long term rate mode is to be made, the trustee will notify the owners of the
bonds, by first class mail at the addresses shown on the registration books of
the Board maintained by the trustee, at least 15 but not more than 60 days
before the effective date of the change. The notice must be accompanied by a
copy of the opinion of bond counsel if required by the indenture.
Optional Tender for Purchase in the Weekly Rate Mode
During each weekly rate period, each beneficial owner of a beneficial
interest in the bonds (other than bonds owned by us) may give written notice to
the remarketing agent of a demand for purchase of the beneficial owner's
beneficial interest at a price equal to the principal amount of the beneficial
interest plus accrued and unpaid interest, without premium. Each beneficial
interest will be purchased on the date designated by the beneficial owner, which
must be a business day at least seven days after the date the notice is
delivered. Delivery of notice will be effective only if accomplished by 5:00
p.m. New York City time on any business day. The notice will be irrevocable.
Beneficial interests subject to tender notices will be deemed to be surrendered
on the purchase date specified in the notice.
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The bonds will not be subject to optional tender while in the
adjustable rate mode, the long term rate mode or the fixed rate mode.
Mandatory Purchase of Bonds
The bonds, other than bonds owned by us, are subject to mandatory
purchase on any of the following dates:
o on the fifth day before the last day (a
"termination date") on which a drawing may be made by the
trustee under the standby bond purchase agreement (except any
termination date resulting solely from the conversion of the
bonds to a fixed rate or a long term rate when a liquidity
facility is not being provided, any termination date of a
liquidity facility when an alternate liquidity facility has
been acquired and has become effective, and any termination
date of a liquidity facility that is caused by an event of
default under the standby bond purchase agreement), or if that
day is not a business day, the next succeeding business day;
o on the fifth business day after the trustee
receives a notice from us that an event of default has
occurred under and as defined in the standby bond purchase
agreement;
o on the fifth day before the termination date of
the standby bond purchase agreement when an alternate
liquidity facility has been acquired or, if that day is not a
business day, on the next succeeding business day;
o on the conversion date when bonds are to be
converted from one type of rate period to a different type of
rate period; and
o when the bonds bear interest at an adjustable
rate or a long term rate and a new adjustable rate or long
term rate is to be determined, on the effective date of the
new adjustable rate or long term rate.
Notice of mandatory purchase on the first, second, fourth and fifth
dates described above will be mailed by the trustee, not less than five nor more
than ten days before the mandatory purchase date. The trustee must mail notice
of mandatory purchase on the second date described above on the first business
day after the trustee receives the notice from us. The trustee must mail notice
in each case to the respective owners of the bonds at their addresses maintained
by the trustee. Each notice of mandatory purchase must state the mandatory
purchase date and the place or places of mandatory purchase. If the trustee
gives notice about the third date described above, the notice must also describe
the alternate liquidity facility, and state that the ratings assigned to the
bonds may be changed as a result of the substitution of the alternate liquidity
facility. Each notice must also state that the purchase price of the bonds will
become due and payable on the mandatory purchase date and that from and after
the mandatory purchase date interest will cease to accrue to the prior holder of
the bond to be purchased, and must require that the bonds be surrendered and if
not so surrendered that the bonds will be deemed purchased.
Bondholder's Failure to Deliver the Bonds
If the bonds are not held in a book-entry only system, any bonds which
are required to be tendered for purchase on a purchase date to the tender agent
that are not delivered on the purchase date and for which an amount of money
sufficient to pay the purchase price has been irrevocably deposited with the
trustee will be considered undelivered bonds and will be deemed purchased. If a
bondholder fails to tender its bonds on or before the required date, the owner
of those undelivered bonds will not be entitled to any payment other than the
purchase price and undelivered bonds in the hands of the non-delivering owner
will no longer accrue interest or be entitled to any benefits of the indenture,
except for the payment of the purchase price, but the indebtedness represented
by the undelivered bonds will not be extinguished.
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Redemption
Optional Redemption During Weekly Rate Mode
-------------------------------------------
When interest on the bonds is payable at a weekly rate, the bonds may
be redeemed at the option of the Board in whole or in part on the first business
day of any month, at the principal amount of the bonds, plus accrued interest,
if any, without premium. Bonds owned by us may be redeemed on any business day
at par plus accrued interest, without premium.
Optional Redemption During Adjustable Rate Mode
-----------------------------------------------
When interest on the bonds is payable at an adjustable rate mode, the
bonds may be redeemed at the option of the Board in whole or in part on any
interest rate adjustment date, at the principal amount of the bonds, plus
accrued interest, if any, without premium. Bonds owned by us may be redeemed on
any business day at par plus accrued interest, without premium.
Mandatory Sinking Account Redemption
------------------------------------
Subject to adjustment as described in the next paragraph, the bonds are
subject to mandatory sinking account redemption from mandatory sinking account
payments on June 1 of each year at the principal amount thereof plus accrued
interest, if any, without premium, as follows:
Mandatory Sinking
Account Payment Date Mandatory Sinking
(June 1) Account Payments
-------- ----------------
2003 $ 40,000
2004 80,000
2005 120,000
2006 135,000
2007 170,000
2008 160,000
2009 115,000
2010 730,000
2011 855,000
2012 900,000
2013 940,000
2014 980,000
2015 1,010,000
2016 1,020,000
2017 1,060,000
2018 1,095,000
2019 1,140,000
2020 1,180,000
2021 1,230,000
2022 1,275,000
2023 1,245,000
2024 1,380,000
2025 1,420,000
2026 1,470,000
2027 (maturity) 1,525,000
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The principal amount of bonds to be redeemed will be reduced, in the
order determined by the Board, by the principal amount of bonds which have been
previously redeemed or called for optional redemption, or purchased or acquired
by the Board and delivered to the trustee for cancellation.
Selection of Bonds for Redemption. Whenever less than all of the bonds are to be
redeemed, the trustee will select the bonds to be redeemed from all bonds
subject to redemption or a given portion of those bonds not previously called
for redemption, by lot in any manner which the trustee in its sole discretion
deems appropriate and fair, and for this purpose the trustee will consider each
bond in a denomination larger than the minimum denomination permitted by the
bonds at the time to be separate bonds each in the minimum denomination.
However, any bonds held by us will be redeemed before any other bonds are
redeemed.
Notice of Redemption. The trustee will mail notice of redemption not less than
15 nor more than 60 days before the redemption date (but not less than 30 days
before the redemption date in the case of bonds bearing interest at a long term
rate or a fixed rate) to the respective owners of any bonds designated for
redemption at their addresses appearing on the registration books maintained by
the trustee. Each notice of redemption will state the redemption date, the place
or places of redemption, and, if less than all of the bonds are to be redeemed,
the distinctive number of the bonds to be redeemed and, in the case of bonds to
be redeemed in part only, the respective portions of the principal amount to be
redeemed. Each notice will also state that on the redemption date the principal
and premium, if any, or of a specified portion of the principal in the case of
bonds to be redeemed in part only, together with interest accrued on the bonds
to the redemption date will become due and payable, and that from and after the
redemption date interest on the bonds will cease to accrue, and will require
that the bonds be then surrendered. Notice regarding redemption which has been
mailed will be conclusively presumed to have been given, even if it is not
received. If funds required to pay the redemption price of any bonds being
called for redemption are not on deposit with the trustee on or before the date
the notice of redemption is required to be given, the notice must state that the
redemption can only occur to the extent that the trustee receives funds to pay
the redemption price on or before the redemption date.
Partial Redemption of Bonds. Upon surrender of any bond redeemed in part only,
the Board will execute and the trustee will authenticate and deliver to the
owner of the bond, at the expense of the Board, a new bond or bonds of the same
authorized denominations equal in aggregate principal amount to the unredeemed
portion of the bond surrendered.
Effect of Redemption. If notice of redemption is given by the Board to the
trustee as described above, and moneys for payment of the principal and premium,
if any, of, together with interest accrued to the redemption date on, the bonds
(or portions of the bonds) on the redemption date designated in the notice, the
bonds (or portions of the bonds) called for redemption will become due and
payable, interest on the bonds called for redemption will cease to accrue, the
bonds (or portions of the bonds) will cease to be entitled to any benefit or
security under the indenture, and the owners of the bonds will have no rights in
respect of the bonds except to receive payment of principal, premium, if any,
and accrued interest.
Transfer of the Bonds
So long as Cede & Co., as nominee for DTC, is the registered owner of
the bonds, beneficial ownership interests in the bonds may be transferred only
through a DTC participant or indirect participant and recorded on the
book-entry-only system operated by DTC. The following provisions would apply if
the bonds are no longer held in the book-entry-only system.
Except with respect to purchases and remarketing of bonds, the
registered owner of a bond may only transfer the bond on the books of the Board,
which will be kept for that purpose at the office of the trustee, in person or
by his attorney duly authorized in writing, upon surrender of the bond at the
principal corporate office of the trustee, together with a written instrument of
transfer satisfactory to the trustee duly executed by the registered owner or a
duly authorized attorney. Upon the transfer of any bond, the trustee will issue
in the name of the transferee and cause to be authenticated a new bond or bonds
of the same aggregate principal amount as the surrendered bonds. The trustee
will make a charge for the transfer sufficient to pay for any tax or other
governmental fee or charge required to be paid with respect to the transfer, but
all other costs of making the transfer will be borne by the Board. If the tender
agent is not the trustee, duplicate registration books will be maintained by
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the tender agent for the purpose of registering the transfer of bonds purchased
and remarketed, and registration of bonds by the tender agent will be valid and
binding the same as if the bonds were registered on the books maintained by the
trustee. The trustee and the tender agent will each promptly notify the other of
any registration on the books maintained by it in order to maintain the
reconciliation of the books maintained by each of them.
The trustee will not transfer or exchange any bond called for
redemption within 30 days of the redemption date of the bond (except for the
portion, if any, not called for redemption), nor any bond during the period of
five days next preceding the mailing of a notice of redemption of any bonds.
Subject to the record date, the Board, the remarketing agent, the
trustee and the tender agent may deem and treat the person in whose name any
bond will be registered on the books of the Board as the absolute owner of that
bond, whether that bond is overdue or not, for the purpose of receiving payment
of or on account of the principal and premium, if any, and interest on and
purchase price of the bond, and for all other purposes, including the giving or
receipt of notices, consents or directions, and all payments made to any
registered owner or on his order will be valid and effectual to satisfy and
discharge the liability on the bond to the extent of the sum or sums paid, and
neither the Board, the remarketing agent, the trustee nor the tender agent will
be affected by any notice to the contrary. Any registered owner of the bonds may
take actions relating to consents or directions with respect to a portion (in
authorized denominations) of the bonds which are inconsistent with the actions
taken with respect to other portions (in authorized denominations) of the bonds.
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 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
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the bonds. DTC's records reflect only the identity of its direct participants to
whose accounts the securities are credited, which may or may not be the
beneficial owners. DTC's direct and indirect participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to its direct
participants, by its direct participants to its indirect participants, and by
its direct participants and its indirect participants to beneficial owners will
be governed by arrangements among them, subject to any statutory or regulatory
requirements which may be in effect from time to time.
Redemption notices will be sent to Cede & Co. If less than all of the
bonds within an issue are being redeemed, DTC's practice is to determine by lot
the amount of the interest of each of its direct participants in that issue to
be redeemed.
Neither DTC nor Cede & Co. (nor such other nominee) will consent or
vote with respect to the bonds. Under its usual procedures, DTC mails an omnibus
proxy to an issuer as soon as possible after the record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those direct participants to
whose accounts the bonds are credited on the record date (identified in a
listing attached to the omnibus proxy).
Principal and interest payments and payments of purchase price with
respect to the bonds will be made to DTC. DTC's practice is to credit its direct
participants' accounts, upon receipt of funds and corresponding detail
information from the issuer or the trustee on payment dates in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payment on the date payable. Payments by DTC's
participants to beneficial owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of the DTC participant and not of DTC, the trustee or the Board
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 Board or the trustee, disbursement of those payments to direct participants
will be the responsibility of DTC, and disbursement of those payments to the
beneficial owners will be the responsibility of direct and indirect
participants.
Regardless of the statements above, if any bond is tendered but not
remarketed, with the result that the bond becomes owned by us, the trustee and
the Board will, if requested by us, take all action necessary to remove the
bonds from the book-entry system of DTC and to register that tendered but not
remarketed bond in our name. Bonds owned by us not in the book-entry system of
DTC will be held by us, or at our option, by the trustee on our behalf, and for
our benefit. When all bonds owned by us have been remarketed, we no longer own
any bonds and we have been reinstated in full, the trustee and the bond issuer
will take all actions necessary to return the bonds to the full book-entry
system of DTC.
The bond issuer and the underwriter cannot and do not give any
assurances that DTC, DTC's participants or others will distribute payments of
principal, interest or premium with respect to the bonds paid to DTC or its
nominee as the owner, or will distribute any prepayment notices or other
notices, to the beneficial owners, or that they will do so on a timely basis or
will serve and act in the manner described in this prospectus supplement. The
bond issuer and the underwriter are not responsible or liable for the failure of
DTC or any participant to make any payment or give any notice to a beneficial
owner with respect to the bonds or an error or delay relating thereto.
The foregoing description of the procedures and record-keeping with
respect to beneficial ownership interests in the bonds, payment of principal,
interest and other payments on the bonds to DTC's participants or beneficial
owners of the bonds, confirmation and transfer of beneficial ownership interests
in the bonds and other related transactions by and between DTC, DTC's
participants and the beneficial owners of the bonds is based solely on
information provided by DTC. Accordingly, no representations can be made
concerning these matters and neither the DTC participants nor the beneficial
owners should rely on the foregoing information with respect to these matters,
but should instead confirm the same with DTC or DTC's participants, as the case
may be.
DTC may discontinue providing its services with respect to the bonds at
any time by giving notice to the trustee and discharging its responsibilities
with respect thereto under applicable law or the Board may terminate
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participation in the system of book-entry transfers through DTC or any other
securities depository at any time. If the book-entry system is discontinued,
replacement certificates will be printed and delivered.
THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS,
WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY
FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO
NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICES AND ITS CONTEXT OR EFFECT WILL NOT
AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION
OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON THE
NOTICE.
SECURITY FOR THE BONDS
The bonds are limited obligations of the Board, payable solely from
amounts in the bond fund established by the indenture and secured solely by an
irrevocable pledge of certain revenues of the Board, described below. The bonds
are secured on a parity basis with the Board's previously issued $1,700,000
General Revenue Bonds, Series 1989, $7,808,748.90 General Revenue Refunding
Bonds, Series 1994, $23,090,000 General Revenue and Refunding Bonds, Series
1997, $15,065,000 General Revenue Bonds, Series 1998, $9,100,000 General Revenue
Bonds, Series 1999 and $36,475,000 General Revenue Bonds Series 2000. The 1989
bonds, the 1994 bonds, the 1997 bonds, the 1998 bonds, the 1999 bonds and the
2000 bonds are called the "prior bonds" in this prospectus supplement and are
outstanding as of the date of this prospectus supplement in the principal amount
of $83,415,000. Simultaneously with the issuance of the bonds, the Board will
issue its $10,100,000 General Revenue Bonds, Series 2001A, secured on a parity
basis with the bonds. The bonds, the 2001A bonds, the prior bonds and any
obligations subsequently issued on a parity with the bonds are called the
"parity bonds" in this prospectus supplement.
The Board is considering soliciting bids to enter into a fixed to
floating rate interest rate exchange agreement relating to the Board's 1998
bonds. The Board's obligations under the interest rate exchange agreement would
be payable from General Revenues on either a parity basis or subordinated basis
to the payment of debt service on the parity bonds, as may be later determined
by the Board.
The bonds are not a general obligation of the Board, the State of
Michigan or any political subdivision of the State and neither the credit nor
the taxing power of the State nor any political subdivision of the State will be
pledged for the payment of the bonds.
Revenues of the Board Pledged to Secure the Bonds
The revenues of the Board pledged to secure the bonds constitute:
o all fees, deposits, charges, receipts and income
from all or any part of the students of Grand Valley State
University, whether activity fees, tuition, instructional
fees, tuition surcharges, general fees, health fees or other
special purpose fees;
o all gross income, revenues and receipts from the
ownership, operation, and control of the Board's housing,
dining and auxiliary facilities system;
o all unrestricted receipts from the sales and
service of educational activities;
o all grants, gifts, donations and pledges and
receipts from them; and
o investment income on all of the above;
but exclude all of the following:
o any deposits required by law or contracts to be
held in escrow;
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o any gifts, grants, donations, or pledges
restricted as to use in a manner inconsistent with payment on
the bonds, any obligations issued on a parity with the bonds
or additional obligations subordinated to the bonds and other
parity bonds;
o appropriations from the State Legislature; and
o up to $3,000,000 collected annually from the
levy of a special fee or fees established at some date
following delivery of the bonds and designated by the Board to
be excluded from general revenues.
The pledge of the revenues of the Board used to secure the bonds is
valid against all parties (other than the holders of the prior bonds, which are
secured on a parity basis with the bonds) having claims of any kind, regardless
of notice, and is valid and binding without physical delivery or further act by
the Board.
On or before the first business day before a bond payment date, the
Board will transfer to the bond fund established under the indenture, from the
revenues of the Board pledged to secure the bonds, amounts sufficient to pay the
principal of, premium, if any, and interest due on the bonds. The Board has
covenanted and agreed in the indenture that to the extent that the monies on
deposit in the bond fund are not sufficient to meet the interest or principal
and interest payments coming due, the Board will pay to the trustee for deposit
in the bond fund all revenues of the Board pledged to secure the bonds received
until the amount on deposit in the bond fund is sufficient to pay the principal
of and interest due on the bonds. However, in making the payment over to the
trustee, the revenues of the Board pledged to secure the bonds will be divided
in each fiscal year pro rata between the bond fund and any similar fund for the
payment of any other parity bonds without regard to the existence of any debt
service reserve fund established for any parity bonds, based on the amount of
debt service due in each fiscal year. The revenues of the Board pledged to
secure the bonds, before their deposit with the trustee, may be used as general
operating funds of the Board.
The Board has irrevocably pledged the revenues of the Board described
above to the payment of the principal of and interest on the bonds. This pledge
of the revenues of the Board, together with the pledge of the revenues of the
Board as security for the payment of the prior bonds and any obligations
subsequently issued on a parity with the bonds, will constitute and be a first
charge or lien against all of the revenues of the Board pledged to secure bonds.
The rights and remedies of the holders of the bonds may be affected by
bankruptcy, insolvency, fraudulent conveyance or other laws affecting creditors'
rights existing now or enacted in the future and by the application of general
principles of equity, including those related to equitable subordination.
THE STANDBY BOND PURCHASE AGREEMENT
The obligations will rank equally with all of our other general
unsecured and unsubordinated obligations. The obligations are not issued under
an indenture. As of the date of this prospectus supplement, we have
approximately $3 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 standby bond purchase agreement. Under the standby
bond purchase agreement, we agree to make available to a specified intermediary
the purchase price for the bonds when we receive an appropriate demand for
payment. Our obligations under the standby bond purchase agreement will be
sufficient to pay a purchase price equal to the principal of the bonds and up to
35 days' interest on the bonds at an assumed rate of 10% per year.
Termination Events
The scheduled expiration date of the 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.
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The indenture specifies certain circumstances where we must purchase
bonds which a holder tenders for purchase pursuant to an optional or mandatory
tender, which have not been remarketed. These circumstances are summarized under
the headings "Optional Tender of Bonds" and "Mandatory Purchase of Bonds." Under
certain circumstances, we may terminate our obligation to purchase bonds. The
following events would permit termination:
o any portion of the commitment fee for the
standby bond purchase agreement has not been paid when due on
the quarterly payment date or any other amount payable under
the standby bond purchase agreement has not been paid when
due, and in either case, the failure continues for three
business days after notice thereof to the Board;
o the State of Michigan takes any action which
would have a materially adverse effect on the ability of the
Board to comply with the payment and security interest and
lien covenants and obligations under the bonds, the indenture,
the standby bond purchase agreement, the payment agreement,
and all other documents relating to the issuance of the bonds,
or any right or remedy of the company or any owners of the
bonds from time to time to enforce the covenants and
obligations;
o the Board fails to observe or perform any
covenant or agreement contained in the bonds, the indenture,
the standby bond purchase agreement or the payment agreement
(and any amendments, substitutions or modifications thereof),
and, if the failure is the result of a covenant breach which
is capable of being remedied, the failure continues for 90
days following written notice thereof to the Board from us.
However, if the failure (other than a payment default) cannot
be cured or corrected within the 90 day period, it will not
constitute an event of default if the Board institutes
curative or corrective action within the period and diligently
pursues the curative or corrective action until the failure of
performance is cured or corrected, or there has not been at
all times a remarketing agent performing its duties;
o an event of default has occurred and is
continuing under any of the indenture, the standby bond
purchase agreement, the payment agreement or the remarketing
agreement (and any amendments, substitutions or modifications
of these agreements), as "event of default" is defined in the
applicable document;
o any representation, warranty, certification or
statement made by the Board in the indenture, the standby bond
purchase agreement, the payment agreement or the remarketing
agreement (and any amendments, substitutions or modifications
of these agreements) or in any certificate, financial
statement or other document delivered under those agreements
proves to have been incorrect in any material respect when
made;
o any default by the Board has occurred and
continues in the payment of principal of or premium, if any,
or interest on any bond, note or other evidence of
indebtedness of the bond issuer, under any "Related
Documents," as defined in the standby bond purchase agreement,
which is senior to, or on parity with, the bonds;
o the Board 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 Board insolvent, or
adjudging it bankrupt, or appointing a trustee or receiver of
the Board, or approving a petition filed against the Board
seeking reorganization of the Board under any applicable law
or statute of the United States of America or any state, and
the order, judgment or decree is not vacated or set aside or
stayed within 60 days from the date of the entry of the order;
S-16
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 Board and the custody or
control is not terminated within 60 days from the date of
assumption of the custody or control;
o any material provision of the indenture, the
standby bond purchase agreement, the payment agreement, the
remarketing agreement and all other documents relating to the
issuance of the bonds, or the bonds (including bonds owned by
us) ceases for any reason whatsoever to be a valid and binding
agreement of the Board, or the Board contests the validity or
enforceability of those agreements; or
o the Board fails to pay when due any amount
payable under any bond (regardless of any waiver of that
failure by the holders of the bonds).
If a termination event happens, we may deliver notice to the Board, 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 Board are described in a separate disclosure
document relating to the bonds.
THE STANDBY LOAN AGREEMENT; GE CAPITAL
In order to obtain funds to fulfill our obligations under the standby
bond purchase agreement, we will enter into a standby loan agreement with GE
Capital, under which GE Capital will be irrevocably obligated to lend funds to
us as needed to purchase bonds. The amount of each loan under the standby loan
agreement will be no greater than the purchase price for tendered bonds. The
purchase price represents the outstanding principal amount of the tendered bonds
and interest accrued on the principal to but excluding the date we borrow funds
under the standby loan agreement. Each loan will mature on a date specified in
the standby loan agreement, which will be set forth in the applicable prospectus
supplement. The proceeds of each loan will be used only for the purpose of
paying the purchase price for tendered bonds. When we wish to borrow funds under
the standby loan agreement, we must give GE Capital prior written notice by a
specified time on the proposed borrowing date. GE Capital will make available
the amount of the borrowing requested no later than a specified time on each
borrowing date (if GE Capital has received the related notice of borrowing by
the necessary time on the borrowing date).
The standby loan agreement will expressly provide that it is not a
guarantee by GE Capital of the bonds or of our obligations under the standby
bond purchase agreement. GE Capital will not have any responsibility or incur
any liability for any act, or any failure to act, by us which results in our
failure to purchase tendered bonds with the funds provided under the standby
loan agreement.
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
S-17
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 the 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 rooms located at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York
10048. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. GE Capital's SEC filings are also available to the
public from commercial document retrieval services and at the web site
maintained by the SEC at "http://www.sec.gov."
Incorporation of Information Regarding GE Capital
The SEC allows us to "incorporate by reference" information into this
prospectus supplement, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus
supplement, except for any information superseded by information in this
prospectus supplement. This prospectus supplement incorporates by reference the
documents set forth below that GE Capital has previously filed with the SEC.
These documents contain important information about GE Capital, its business and
its finances.
Document Period
-------- ------
Annual Report on Form 10-K................ Year ended December 31, 2000
Quarterly Reports on Form 10-Q............ Quarters ended March 31, 2001 and June 30, 2001
LEGAL MATTERS
The legality of the obligations has been passed upon by in-house
counsel of 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.
S-18
APPENDIX A
TENDER TIMELINE
TENDERS FOR BONDS
PURCHASE DATE
(New York City time)
- --------------------------------------------------------------------------------
- ------------ -------------------- ----------------------- ----------
11:30 a.m. 11:45 a.m. 2:15 p.m. 2:30 p.m.
[1] [2] [3] [4]
1. Tender agent or the trustee will give immediate telephonic notice, in
any event not later than 11:30 a.m. on the Purchase Date, to FGIC-SPI
specifying the aggregate principal amount of bonds to be purchased by
FGIC-SPI on the Purchase Date.
2. FGIC-SPI must give GE Capital prior written notice of a borrowing under
the Standby Loan Agreement by 11:45 a.m. on the date of the proposed
borrowing.
3. No later than 2:15 p.m. on each Purchase Date, GE Capital will make
available the amount of borrowing requested.
4. FGIC-SPI purchases bonds, for which remarketing proceeds are
unavailable, by 2:30 p.m. on the Purchase Date.
A-1
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$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 on 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 May 31, 2001
We have provided the information contained in this Prospectus. We are
submitting this Prospectus in connection with the future sale of securities
summarized below under the heading "SUMMARY," and this Prospectus may not be
reproduced or used, in whole or in part, for any other purposes.
The reader of this Prospectus should rely only on the information
contained or incorporated by reference in this Prospectus. We have not, and the
underwriters have not, authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not, and the underwriters are not, making an
offer to sell these securities in any jurisdiction where the offer or sale is
not permitted.
This Prospectus and the applicable Prospectus Supplement constitute a
prospectus with respect to the Obligations of the Company under the Liquidity
Facilities to be issued from time to time by us in support of the Securities. We
do not anticipate that registration statements with respect to the Securities
issued by municipal authorities will be filed under the Securities Act of 1933,
as amended.
WHERE YOU CAN FIND MORE INFORMATION
We file annual and other reports and information with the Securities
and Exchange Commission (the "Commission"). You may read and copy any of these
documents at the Commission's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the Commission at
1-800-SEC-0330 for further information on the public reference rooms. Our
Commission filings are also available to the public at the Commission's web site
at http://www.sec.gov. We do not intend to deliver to holders of the Obligations
an annual report or other report containing financial information.
2
INCORPORATION BY REFERENCE
The Commission allows us to "incorporate by reference" the information
we file with it, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be part of this Prospectus and later information that we will
file with the Commission will automatically update or supersede this
information. We incorporate by reference (i) the Company's Annual Report on Form
10-K for the year ended December 31, 2000 and (ii) the Company's Quarterly
Reports on Form 10-Q for the quarterly period ended March 31, 2001, 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 all of the Obligations covered by this
Prospectus have been sold.
You may request a copy of these filings, at no cost, as follows:
Corporate Communications Department, FGIC Securities Purchase, Inc., 115
Broadway, New York, New York 10006, Telephone: (212) 312-3000.
You should not assume that the information in this Prospectus and the
accompanying Prospectus Supplement is accurate as of any date other than the
date on the front of those documents regardless of the time of delivery of this
Prospectus and the accompanying Prospectus Supplement or any sale of the
Obligations. Additional updating information with respect to the matters
discussed in this Prospectus and the accompanying Prospectus Supplement may be
provided in the future by means of appendices or supplements to this Prospectus
and the accompanying Prospectus Supplement or other documents including those
incorporated by reference.
3
SUMMARY
The proposed structure will be utilized to provide liquidity through a
"put" mechanism for floating or adjustable rate securities and other derivative
debt securities issued by municipal authorities or other issuers. Such
securities typically include a tender feature that permits broker-dealers to
establish interest rates on a periodic basis which would enable the securities
to be remarketed at par and that provides a secondary market liquidity mechanism
for holders desiring to sell their securities. Such securities will be
remarketed pursuant to an agreement under which the broker-dealers will be
obligated to use "best efforts" to remarket the securities. If 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 when certain other events happen. 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, if 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, the
Owner may elect to purchase from VRDN holders an amount of VRDNs equal to the
principal amount of INFLOs for which the INFLO Owner desires a fixed rate of
interest. The net effect of the 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 the 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 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 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 the 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 on the occurrence of
certain events of non-payment, default or insolvency on the part of the issuer
or other specified entity. If the obligations of the Company under the standby
purchase agreement or similar contractual agreement terminate, the
4
securities will be subject to a mandatory tender. Prior to that 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 the 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 the purchase price for the
Securities to which that Liquidity Facility relates when the Company receives an
appropriate demand for payment. 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 that 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 its obligations under the Liquidity
Facilities, the Company 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 lend funds to the Company 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. It is
anticipated 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 the securities,
premium, if any, 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. It is not anticipated that a Standby Lender will
guarantee the Securities to which its Standby Loan Agreement relates or the
Company's obligation under any Standby Purchase Agreement. Standby Lenders will
be identified in the appropriate Prospectus Supplement.
5
PLAN OF DISTRIBUTION
The Obligations will not be sold separately from the Securities, which
will be offered pursuant to a separate prospectus, official statement or
offering circular.
EXPERTS
The financial statements of FGIC Securities Purchase, Inc. as of
December 31, 2000 and 1999, and for each of the years in the three-year period
ended December 31, 2000, appearing in FGIC Securities Purchase, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 2000, have been incorporated
by reference in the Prospectus in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference in the
Prospectus, and upon the authority of said firm as experts in accounting and
auditing.
6
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TABLE OF CONTENTS
Page
----
Prospectus Supplement
INTRODUCTION S-1
DESCRIPTION OF THE BONDS S-1
BOOK-ENTRY SYSTEM S-12
SECURITY FOR THE BONDS S-14
THE STANDBY BOND PURCHASE AGREEMENT S-15
THE STANDBY LOAN AGREEMENT; GE CAPITAL S-17
LEGAL MATTERS S-18
EXPERTS S-18
Prospectus
WHERE YOU CAN FIND MORE INFORMATION 2
INCORPORATION BY REFERENCE 3
SUMMARY 4
THE COMPANY 5
THE LIQUIDITY FACILITIES 5
THE STANDBY LOAN AGREEMENT 5
PLAN OF DISTRIBUTION 6
EXPERTS 6
================================================================================
================================================================================
$21,275,000
principal amount, plus interest
LIQUIDITY FACILITY OBLIGATIONS
issued by
FGIC Securities
Purchase, Inc.
in support of
Board of Trustees of Grand Valley State University
General Revenue Variable Rate Demand Bonds,
Series 2001B
PROSPECTUS SUPPLEMENT
JULY 20, 2001
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