PROSPECTUS SUPPLEMENT
(To Prospectus dated November 5, 2001)
$48,600,000*
PRINCIPAL AMOUNT PLUS INTEREST
LIQUIDITY FACILITY OBLIGATIONS
OF
FGIC SECURITIES PURCHASE, INC.
IN SUPPORT OF
CITY OF TAMPA, FLORIDA
OCCUPATIONAL LICENSE TAX REFUNDING BONDS, SERIES 2002B AND SERIES 2002C
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Date of the bonds: Date of Delivery Due: October 1, 2027
Price: 100%
We are offering, in connection with the issuance by the City of Tampa,
Florida, of its Occupational License Tax Refunding Bonds, Series 2002B and
Series 2002C, our liquidity facility obligations under a standby bond purchase
agreement. 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. The final terms of the bonds will be included in a
pricing supplement to this prospectus supplement.
The bonds are limited obligations of the City of Tampa, Florida, payable
solely from its occupational license tax and the City's covenant to budget and
appropriate from its non-ad valorem revenues in any year that revenues derived
from the occupational license tax are not sufficient to pay all obligations in
connection with the bonds. The bonds are subject to redemption and tender prior
to their stated maturity 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 PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Our liquidity facility obligations under the standby bond purchase
agreement are not being sold separately from the bonds. The bonds are being
marketed under a separate disclosure document. The liquidity facility
obligations will not be severable from the bonds and may not be separately
traded. This prospectus supplement, the accompanying prospectus, appropriately
supplemented, and a pricing supplement may also be delivered in connection with
any remarketing of bonds purchased by us or by our affiliates.
Unless the context otherwise requires, the terms "the company," "we,"
"us" or "our" mean FGIC Securities Purchase, Inc.
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MORGAN STANLEY SALOMON SMITH BARNEY
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The date of this prospectus supplement is February 21, 2002.
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*Preliminary, subject to change.
At the time the City offers the bonds, we will attach a pricing
supplement to this prospectus supplement. The pricing supplement will contain
the specific descriptions of the bonds the City is offering and the terms of the
offering. The pricing supplement may also add, update or change information
contained in this prospectus supplement. You should not assume that the
information provided in this prospectus or the accompanying prospectus is
accurate as of any date other than the date of this prospectus supplement, or
that the information provided in any pricing supplement is accurate as of any
date other than the date of that pricing supplement.
You should rely only on the information contained or incorporated by
reference in this prospectus supplement, the accompanying prospectus and any
pricing supplement to this prospectus supplement. We have not, and the
underwriters have not, authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. We are not, and the underwriters are not, making an
offer to sell these securities in any jurisdiction where the offer or sale is
not permitted.
INTRODUCTION
We are providing you with this prospectus supplement to furnish
information regarding our liquidity facility obligations under a standby bond
purchase agreement in support of $48,600,000* (*preliminary, subject to change)
aggregate principal amount of Occupational License Tax Refunding Bonds, Series
2002B and Series 2002C which the City of Tampa, Florida, will issue on or about
March 6, 2002. Bondholders will have the right to tender, or in certain cases be
required to tender, the bonds. U.S. Bank National Association will act as paying
agent and is the entity responsible for accepting tender notices and tendered
bonds. Morgan Stanley & Co. Incorporated and Salomon Smith Barney Inc., or any
substitute entity, will act as the remarketing agent of any tendered bonds or
the respective series and will be obligated to use its best efforts to remarket
the tendered bonds. We will enter into a standby bond purchase agreement with
the paying agent, pursuant to which we will be obligated under certain
circumstances to purchase unremarketed bonds from the 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 initially with
General Electric Capital Corporation under which GE Capital will be irrevocably
obligated to lend funds to us as needed to purchase bonds. Our liquidity
facility 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. The
bonds may accrue interest at a weekly rate, a flexible rate or a fixed rate. The
bonds will not be entitled to the benefit of the liquidity facility while in the
fixed rate mode.
GE Capital has the unilateral right to assign its rights and obligations
pursuant to the terms of the standby loan agreement, subject only to
confirmation from the applicable rating agency that the assignment will not
result in a lower credit rating of the bonds. This means that GE Capital will be
released of all liabilities and obligations under any standby loan agreement
which it has assigned.
DESCRIPTION OF THE BONDS
GENERAL PROVISIONS
The 2002B and 2002C Bonds will be issued as fully registered bonds and
will be registered initially in the name of Cede & Co., as the nominee of The
Depository Trust Company, New York, New York ("DTC"). Individual purchases of
interests in the 2002B and 2002C Bonds will be made in book-entry form only.
Purchasers of 2002B and 2002C Bonds will not receive physical delivery of
certificates. Transfers of ownership interests in the 2002B and 2002C Bonds will
be effected through a book-entry only system. See "Book-Entry Only System".
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Interest on the 2002B and 2002C Bonds will be paid by check or draft of
U.S. Bank Trust National Association, Fort Lauderdale, Florida, as the registrar
and paying agent, by mail. While held in the DTC book-entry system, all such
payments will be made to Cede & Co. as the registered holder of the 2002B and
2002C Bonds and payments to purchasers of 2002B and 2002C Bonds will be the
responsibility of DTC and the DTC Participants. See "Book-Entry Only System".
The 2002B and 2002C Bonds will be in authorized denominations of
$100,000 and any integral multiple of $5,000 in excess of $100,000. The 2002B
and 2002C Bonds will bear interest initially at the weekly rate. Ownership
interests may be acquired in book-entry form only. See "Book-Entry Only System"
below.
With respect to 2002B and 2002C Bonds registered in the name of Cede &
Co., as nominee of DTC, neither the City, nor the paying agent will have any
responsibility or obligation to any DTC participant or to any indirect DTC
participant. See "Book-Entry Only System" for the definition of DTC participant.
Without limiting the immediately preceding sentence, neither the City nor the
registrar and the paying agent will have any responsibility or obligation with
respect to: (i) the accuracy of the records of DTC or any DTC participant with
respect to any ownership interest in the 2002B and 2002C Bonds; (ii) the
delivery to any DTC participant or any other person other than a registered
owner, as shown in the registration books kept by the registrar, of any notice
with respect to the 2002B and 2002C Bonds, including any notice of redemption;
or (iii) the payment to any DTC participant or any other person, other than a
registered owner, as shown in the registration books kept by the registrar, of
any amount with respect to principal of, premium, if any, or interest on the
2002B and 2002C Bonds. The City, the registrar and the paying agent may treat
and consider the person in whose name each 2002B and 2002C Bond is registered in
the registration books kept by the registrar as the holder and absolute owner of
such bond for the purpose of payment of principal of and interest with respect
to such bond, for the purpose of giving notices of redemption and other matters
with respect to such bond, for the purpose of registering transfers with respect
to such bond, and for all other purposes whatsoever. The paying agent will pay
all principal of, premium, if any, and interest on the 2002B and 2002C Bonds
only to or on the order of the respective registered owner, as shown in the
registration books kept by the registrar, or their respective attorneys duly
authorized in writing, as provided in the bond resolution, and all such payments
will be valid and effectual to satisfy and discharge the City's obligations with
respect to payment of principal of and interest on the 2002B and 2002C Bonds to
the extent of the sums so paid. No person other than a registered owner, as
shown in the registration books kept by the registrar, will receive a
certificated bond evidencing the obligation of the City to make payments of
principal of, premium, if any, and interest on the 2002B and 2002C Bonds
pursuant to the provisions of the bond resolution.
Interest on the 2002B and 2002C Bonds will be computed from the interest
payment date next preceding the date of authentication of such bonds, unless
such authentication date (i) is before the first interest payment date following
the initial delivery of the 2002B and 2002C Bonds, in which case interest will
be computed from such initial delivery date or (ii) is an interest payment date,
in which case interest will be computed from such authentication date.
INTEREST ON THE 2002B AND 2002C BONDS
Interest accrued on the 2002B and 2002C Bonds will be paid on each
interest payment date. For any weekly rate period, interest on the 2002B and
2002C Bonds will be payable on each interest payment date for the period
beginning on (and including) the immediately preceding interest accrual date
(or, if any interest payment date is not a Wednesday, beginning on (and
including) the second preceding interest accrual date) and ending on (and
including) the Tuesday immediately preceding the interest payment date (or, if
sooner, the last day of such weekly interest rate period). For any flexible rate
period or alternate rate period, interest on the 2002B and 2002C Bonds will be
payable on each interest payment date for the period beginning on (and
including) the immediately preceding interest accrual date and ending on the day
immediately preceding such interest payment date. In any event, interest on the
2002B and 2002C Bonds will be payable for the final interest rate period to but
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not including the date on which the 2002B and 2002C Bonds will have been paid in
full. While the 2002B and 2002C Bonds bear interest at a fixed rate, interest
will be payable semiannually in arrears, on each April 1 and October 1. Interest
will accrue with respect to any fixed rate period from the first date of such
fixed rate period and, after that, each April 1 and October 1. The amount of
interest payable on variable rate bonds on any interest payment date is computed
(i) on the basis of the actual number of days elapsed over a year of 365 or 366
days, whichever may be applicable, during weekly, flexible and alternate rate
periods and (ii) on the basis of a 360-day year of twelve 30-day months during
any fixed rate period.
Initially, the 2002B and 2002C Bonds will bear interest at the weekly
rate as determined with respect to the 2002B Bonds by Salomon Smith Barney Inc.
and with respect to the 2002C Bonds by Morgan Stanley & Co. Incorporated, the
remarketing agents. The firms acting in such capacity are collectively defined
herein as the remarketing agent. The interest rate determination method may be
changed from time to time with respect to the 2002B and 2002C Bonds in the
manner provided under "Conversion of Interest Rates on Series 2002B and 2002C
Bonds and Purchase." If for any reason the interest rate on the 2002B and 2002C
Bonds has not been determined by the remarketing agent or cannot be determined
in accordance with the provisions of the bond resolution, or the interest rate
so determined is held to be invalid or unenforceable, the bond resolution
provides alternate means by which the interest rate may be determined, including
a provision authorizing the City, with the consent of the remarketing agent, to
amend or supplement the bond resolution to provide for (or subsequently modify)
an alternate rate determination method.
INTEREST RATE DETERMINATION METHODS
DETERMINATION OF WEEKLY RATE. During each weekly rate period, the 2002B
and/or 2002C Bonds will bear interest at the weekly rate, as determined by the
remarketing agent initially no later than the first day of each weekly rate
period and then no later than Wednesday of each week during such weekly rate
period; provided, however, that the remarketing agent may determine the weekly
rate up to ten (10) days before the start of the applicable weekly rate period.
The bond resolution provides that the weekly rate will be the minimum rate of
interest that the remarketing agent determines, in its sole discretion based on
market conditions, would be necessary to sell the 2002B and/or 2002C Bonds on
such date of determination in a secondary market sale at the principal amount of
2002B and/or 2002C Bonds, plus accrued interest if such sale would not be on an
interest payment date.
If the remarketing agent does not determine the weekly rate for any week
or if for any reason the weekly rate cannot be determined for any week as
provided under this caption or if a weekly rate so determined for any week will
be held to be invalid or unenforceable by a court of law, the weekly rate for
such week will be a rate equal to 110% of the most recently published Bond
Market Association Municipal Swap Index.
The first weekly rate determined for each weekly rate period will apply
to the period beginning on the first day of such weekly rate period and ending
on the next succeeding Tuesday. After such period, each weekly rate will apply
to the period beginning on Wednesday and ending on the next succeeding Tuesday,
or if earlier, on the last day of the weekly rate period.
DETERMINATION OF FIXED RATE. On adjustment of the interest rate of the
2002B and/or 2002C Bonds to a fixed rate, as described in "Conversion of
Interest Rates On 2002B and 2002C Bonds and Purchase," such 2002B and/or 2002C
Bonds will bear interest to the final maturity date at the fixed rate determined
by the remarketing agent on a business day selected by the remarketing agent not
more than 15 days before and not later than the effective date of such fixed
rate with respect to the 2002B and/or 2002C Bonds. The bond resolution provides
that the fixed rate will be the minimum rate of interest that the remarketing
agent determines, in its sole discretion based on market conditions, would be
necessary to sell such 2002B and/or 2002C Bonds on such date of determination in
a secondary market sale at the principal
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amount of 2002B and/or 2002C Bonds.
If the remarketing agent for the 2002B and/or 2002C Bonds which, on the
conversion date, will not have determined the fixed rate or if for any reason
the fixed rate determined by the remarketing agent will be held to be invalid or
unenforceable by a court of law or if for any other reason the fixed rate cannot
be determined, the fixed rate will be a rate equal to the MMD Rate.
DETERMINATION OF FLEXIBLE RATE TERMS AND FLEXIBLE RATES DURING FLEXIBLE
RATE PERIOD. While the 2002B and/or 2002C Bonds are in a flexible rate period
there will be established and reestablished for each 2002B and/or 2002C Bond of
a flexible rate term, and each 2002B and/or 2002C Bond will bear interest at the
flexible rate for such 2002B and/or 2002C Bond during the applicable flexible
rate term. The flexible rate term and corresponding flexible rate for each 2002B
and 2002C Bond will be determined by the remarketing agent initially no later
than the first day of the flexible rate period and then on the first day of each
succeeding flexible rate term or on a business day selected by such remarketing
agent not more than five business days before the first day of such succeeding
flexible rate term. Each flexible rate term for any 2002B and 2002C Bond will be
a period, not less than one nor more than 180 days, determined by the
remarketing agent, in its sole discretion based on market conditions to be the
period which, together with all other flexible rate terms for all 2002B and/or
2002C Bonds of such Series then outstanding, will result in the lowest overall
interest expense on such 2002B and/or 2002C Bonds over the next succeeding 180
days; provided, however, that (1) each flexible rate term will end on either a
day which immediately precedes a business day or on the day before the final
maturity date, (2) if the remarketing agent for such Series of 2002B and/or
2002C Bonds will not have determined a flexible rate term for any of the 2002B
and/or 2002C Bonds or if for any reason a flexible rate term for any of the
2002B and/or 2002C Bonds determined by the remarketing agent will be held to be
invalid or unenforceable by a court of law, such flexible rate term will have
seven days or, if the last day of such flexible rate term would be after the
final maturity date, such flexible rate term will end on the day before the
final maturity date, (3) no flexible rate term will extend beyond the fifteenth
day before the stated expiration date of the liquidity facility then in effect
(if a liquidity facility is in effect) unless a substitute liquidity facility
has been timely delivered to and accepted by the City pursuant to the terms of
the bond resolution and (4) if any flexible rate bond is purchased by the
applicable liquidity provider with proceeds from a liquidity facility (if a
liquidity facility is in effect), the flexible rate term for the 2002B and/or
2002C Bond will be determined for successive one day terms until the 2002B
and/or 2002C Bond is remarketed and released by such liquidity provider in
accordance with the bond resolution. In determining the number of days in each
flexible rate term, the remarketing agent is required to take into account the
following factors: (A) existing short-term taxable and tax-exempt market rates
and indexes of such short-term rates, (B) the existing market supply and demand
for short-term tax-exempt securities, (C) existing yield curves for short-term
and long-term tax-exempt securities for obligations of credit quality comparable
to the 2002B and/or 2002C Bonds, (D) general economic conditions, (E) industry,
economic and financial conditions which may affect or be relevant to the 2002B
and/or 2002C Bonds, and (F) such other facts, circumstances and conditions as
the applicable remarketing agent in its sole discretion determines to be
relevant.
The bond resolution provides that the flexible rate for each flexible
rate term will be the minimum rate of interest which the remarketing agent
determines, in its sole discretion based on market conditions, would be
necessary to sell the 2002B and/or 2002C Bonds on such date of determination in
a secondary market sale at the principal amount of 2002B and/or 2002C Bonds. If
the remarketing agent for either the 2002B or 2002C Bonds will not have
determined a flexible rate or if for any reason a flexible rate determined by
such remarketing agent for any flexible rate term will be held to be invalid or
unenforceable by a court of law, the flexible rate for such flexible rate term
will be a rate equal to the MMD CP Rate.
NOTIFICATION OF INTEREST RATE AND CALCULATION OF INTEREST
Promptly following the determination of any interest rate, the
remarketing agent for the 2002B and/or 2002C Bonds will give written notice to
the City, and the paying agent. On the request of any holder of the 2002B and/or
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2002C Bonds, the paying agent will notify any such holder of the 2002B and/or
2002C Bonds of each change in the interest rate by first class mail. The bond
resolution provides that any failure to give any such notice will not affect the
change in the interest rate.
The establishment of the interest rates and the flexible rate terms as
provided in the bond resolution will be conclusive and binding on the City and
the applicable liquidity provider (if a liquidity facility is in effect), the
paying agent, the remarketing agent and the bondholders, absent manifest error.
The calculation and verification of interest payable on the 2002B and 2002C
Bonds as provided in the bond resolution will be conclusive and binding on the
City, the applicable liquidity provider (if a liquidity facility is in effect),
the remarketing agent, the paying agent and the bondholders, absent manifest
error.
REDEMPTION OF 2002B AND 2002C BONDS
MANDATORY REDEMPTION
The 2002B bonds are subject to mandatory redemption prior to their
maturity at 100% of the principal amount thereof plus accrued interest to the
date of redemption from moneys on deposit in the variable rate redemption
account within the bond fund created by the bond resolution in the following
principal amounts and on the following dates:
Amortization Installments
2002B Term Bonds due October 1, 2027
Mandatory Mandatory
Redemption Date Redemption Date
(October 1)* Amount* (October 1)* Amount*
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2020 $2,505,000 2024 $3,105,000
2021 2,760,000 2025 3,230,000
2022 2,870,000 2026 3,355,000
2023 2,985,000 2027 (1) 3,490,000
* Preliminary, subject to change.
(1) Final Maturity.
The 2002C bonds maturing on October 1, 2027 are subject to mandatory
redemption prior to their maturity at 100% of the principal amount thereof plus
accrued interest to the date of redemption from moneys on deposit in the
variable rate redemption account within the bond fund created by the bond
resolution in the following principal amounts and on the following dates:
Amortization Installments
2002B Term Bonds due October 1, 2027
Mandatory Mandatory
Redemption Date Redemption Date
(October 1)* Amount* (October 1)* Amount*
------------- ------- ------------- -------
2020 $2,505,000 2024 $3,100,000
2021 2,760,000 2025 3,225,000
2022 2,870,000 2026 3,360,000
2023 2,985,000 2027 (1) 3,495,000
*Preliminary, subject to change.
(1) Final Maturity
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OPTIONAL REDEMPTION.
(i) During each interest rate period specified below, the 2002B and
2002C Bonds to which each such interest rate period applies will be subject to
redemption at the option and on the written direction of the City to the paying
agent (such written direction to be given by the City at least 45 days before
the date fixed for redemption or such shorter period as will be agreed to by the
City and the paying agent), in whole or in part, as follows:
(A) during any weekly rate period, on any interest payment
date, at a redemption price equal to 100% of the principal amount of
such 2002B and 2002C Bonds, plus accrued and unpaid interest, if any, to
the redemption date;
(B) during any flexible rate period, on the interest payment
date for that bond, at a redemption price equal to 100% of the principal
amount of such 2002B and 2002C Bonds, plus accrued and unpaid interest,
if any, to the redemption date; and
(C) during any fixed rate period, on any date that occurs on
or after the first day of the optional redemption period, and at the
redemption prices, expressed as a percentage of the principal amount
being redeemed, plus accrued and unpaid interest, if any, to the
redemption date, as follows:
First Day of Optional
Length of interest rate period Redemption Period Redemption Price
- ------------------------------ ---------------------- ----------------
More than 10 years Eighth anniversary of 101% declining by1/2% on each
beginning of fixed rate succeeding anniversary of the
period Rate Period first redemption period until
reaching 100% and, after
that, at 100%
10 Years or less Not subject to redemption Not subject to redemption
Regardless of the statements above, on the conversion date the period in
which the bonds are not subject to redemption and the redemption prices
specified above may be changed by the remarketing agent on the written request
of the City if an opinion of bond counsel is received by the City to the effect
that such change will not have an adverse effect on the validity of the bonds or
the exemption from federal income taxation of interest on the bonds.
(ii) No later than 45 days before the date on which the interest rate
determination method on any 2002B and/or 2002C Bonds will be changed to a fixed
rate, the City, or the remarketing agent with the consent of the City, may
provide written notice to the City, the paying agent and bondholders, of any
revisions to the redemption dates and prices described under this caption "-
Optional Redemption", provided that if the City makes such revisions, it will
first obtain the written approval of the applicable remarketing agent and will
deliver such approval, together with the notice of the revisions, to the paying
agent. The City will execute and deliver a supplemental resolution to effect the
foregoing provisions of this subsection (ii). Any such revisions will also be
subject to the delivery of an opinion of bond counsel to the effect that such
revisions will not adversely effect the exclusion of interest on the 2002B
and/or 2002C Bonds from the gross income of the recipients of 2002B and/or 2002C
Bonds for federal income tax purposes.
NOTICE OF REDEMPTION
Notice of redemption of the 2002B and 2002C Bonds pursuant to the
provisions summarized above are required to be given by the paying agent by
first-class mail at least 30 days but not more than 60 days before each
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redemption. The notice will identify the 2002B and 2002C Bonds or portions of
such 2002B and 2002C Bonds to be redeemed and will state (i) the type of
redemption and the redemption date, (ii) the redemption price, (iii) that the
2002B and 2002C Bonds called for redemption must be surrendered to collect the
redemption price, (iv) the address at which the 2002B and 2002C Bonds must be
surrendered, (v) that if on the redemption date the bond fund contains moneys
sufficient to pay the redemption price, interest on the 2002B and 2002C Bonds
called for redemption will cease to accrue on the redemption date, (vi) the
CUSIP number of the 2002B and 2002C Bonds and (vii) any condition to the
redemption.
A copy of each notice of redemption will also be sent by the paying
agent by electronic means or by mail to each securities depository or repository
registered with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, on mailing notice to bondholders and to two
national information services that disseminate redemption notices, provided that
the paying agent may, in its discretion, provide for overnight, telecopied or
other form of notice to a depository acceptable to or requested by the
depository. Regardless of the statements above, if the depository for the 2002B
and 2002C Bonds is DTC, the City will follow the procedure for redemption and
notice as set forth in the DTC Letter of Representations.
With respect to any 2002B and 2002C Bonds to be redeemed that have not
been presented for redemption within 60 days after the redemption date, the City
will prepare and the paying agent will give a second notice of redemption to the
holder of any such 2002B and 2002C Bonds which have not been presented for
redemption, by first-class mail, within 30 days after the end of such 60 day
period.
Failure by the paying agent to give any notice of redemption or any
defect in such notice as to any particular 2002B and 2002C Bonds will not affect
the validity of the call for redemption of any 2002B and 2002C Bonds. Any notice
mailed as provided in the bond resolution will be conclusively presumed to have
been given whether or not actually received by any holder.
SELECTION OF BONDS TO BE REDEEMED
If fewer than all of the 2002B and/or 2002C Bonds are to be redeemed,
the paying agent will select the 2002B and/or 2002C Bonds to be redeemed from
among the outstanding 2002B and 2002C Bonds of such Series (subject to the
conditions for selection of such bonds for redemption set forth below): (i) if
2002B and 2002C Bonds are redeemed pursuant to the section herein entitled "-
Optional Redemption," (a) among the fixed rate bonds of such Series then
outstanding, in equal principal amounts by maturity and, among the variable rate
bonds of such Series then outstanding, by maturity and if the same maturity, by
random selection, or (b) in such other manner as will be specified in a written
direction of the City, accompanied by an opinion of bond counsel to the effect
that such manner of selection of 2002B and/or 2002C Bonds for redemption will
not adversely affect the exclusion of interest on such bonds from the gross
income of the recipients of such bonds for federal income tax purposes; and (ii)
if 2002B and/or 2002C Bonds are redeemed pursuant to any provision under the
bond resolution in any manner as will be specified in a written direction of the
City, or in the absence of such written direction, first, the applicable fixed
rate bonds, by inverse order of maturity and, if no fixed rate bonds will then
be outstanding, the applicable variable rate bonds by maturity and if the same
maturity, by random selection; provided, however, that notwithstanding the
manner of selection of 2002B and/or 2002C Bonds for redemption as set forth in
clauses (i) and (ii) hereof, liquidity provider bonds of the applicable Series
will be selected for redemption before any other 2002B and/or 2002C Bonds of
such Series. The paying agent will make the selection from bonds of the
applicable Series not previously called for redemption. If the 2002B and/or
2002C Bonds selected for redemption are variable rate bonds, the paying agent
will treat each holder of variable rate bonds as the owner of one variable rate
bond for purposes of selection for redemption, and, if 2002B and/or 2002C Bonds
of the applicable Series are not held in book-entry form, will select 2002B
and/or 2002C Bonds for redemption by random selection (a) from among the holders
of less than $500,000 in aggregate principal amount, provided that if there are
no such holders, or if, after selection from among such holders such selection
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has not resulted in redemption of a sufficient amount of 2002B and/or 2002C
Bonds of such Series, then (b) from among the holders of $500,000 or more in
aggregate principal amount of 2002B and/or 2002C Bonds of such Series. If the
2002B and/or 2002C Bonds of the applicable Series are not held in book-entry
form, the paying agent will, on or before the day on which notice of redemption
is mailed to the holders, give telephonic notice to the applicable remarketing
agent of the variable rate bonds selected for redemption and the name of the
holder or holders of the variable rate bonds. No portion of a bond may be
redeemed that would result in a 2002B and/or 2002C Bond remaining in an amount
other than an authorized denomination. For this purpose, the paying agent will
consider each 2002B and/or 2002C Bond in a denomination larger than the minimum
authorized denomination permitted hereunder to be separate 2002B and/or 2002C
Bonds each in the minimum authorized denomination. Provisions of the bond
resolution that apply to 2002B and/or 2002C Bonds called for redemption also
apply to portions of bonds called for redemption.
If flexible rate bonds are to be selected for redemption, they will be
selected in the chronological order in which their mandatory repurchase dates
occur within the applicable Series, beginning with the earliest mandatory
repurchase date. If fewer than all flexible rate bonds within a Series having
the same mandatory repurchase date (selected for redemption as set forth in the
immediately preceding sentence) are to be redeemed, the paying agent will select
the flexible rate bonds within the applicable Series to be redeemed on such
mandatory repurchase date by lot or other method it deems in its sole discretion
to be fair and appropriate.
Notwithstanding anything to the contrary in the bond resolution, there
will be no redemption of fewer than all of the 2002B and 2002C Bonds if there
will have occurred and be continuing an event of default.
PAYMENT OF 2002B AND 2002C BONDS CALLED FOR REDEMPTION
On or before the date fixed for redemption, the City will cause to be
transferred from the bond fund to the paying agent moneys sufficient to pay the
redemption price (including the accrued interest to the redemption date) of the
2002B and 2002C Bonds called for redemption. On surrender to the paying agent,
2002B and 2002C Bonds called for redemption will be paid as provided herein at
the redemption price provided for 2002B and 2002C Bonds. On the date fixed for
redemption, notice having been given in the manner and under the conditions
provided in the bond resolution, the 2002B and 2002C Bonds or portions of such
bonds called for redemption will be due and payable at the redemption price
provided for the 2002B and 2002C Bonds (including accrued interest to, but not
including, such date). On such redemption date, if moneys sufficient to pay the
redemption price of the 2002B and 2002C Bonds to be redeemed, plus accrued
interest on the 2002B and 2002C Bonds to but not including the date fixed for
redemption, are held by the paying agent, interest on the 2002B and 2002C Bonds
called for redemption will cease to accrue, such 2002B and 2002C Bonds will
cease to be entitled to any benefits or security under the bond resolution or to
be deemed outstanding and the holders of such 2002B and 2002C Bonds will have no
rights with respect to the bond resolution except to receive payment of the
redemption price of such 2002B and 2002C Bonds, plus accrued interest to, but
not including, the date of redemption.
REGISTRATION AND EXCHANGE OF 2002B AND 2002C BONDS
The 2002B and 2002C Bonds may be transferred only on the register
maintained by the paying agent. On surrender for transfer of any 2002B and/or
2002C Bond to the paying agent, duly endorsed for transfer or accompanied by an
assignment duly executed by the holder or the holder's attorney duly authorized
in writing and in either case with an appropriate guarantee of signature
conforming to the requirements of the bond resolution, the paying agent will
authenticate a new 2002B and/or 2002C Bond or 2002B and/or 2002C Bonds in an
equal aggregate principal amount and registered in the name of the transferee.
Except in connection with the optional tender of 2002B and 2002C Bonds
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pursuant to the bond resolution, the paying agent will not be required to
transfer or exchange any such bond during the period beginning 15 days before
the mailing of notice calling such 2002B and 2002C Bond or any portion of such
2002B and 2002C Bond for redemption and ending on the redemption date. The 2002B
and 2002C Bonds subject to redemption or mandatory repurchase may be transferred
or exchanged only if the paying agent provides the new holder of such 2002B and
2002C Bonds with a copy of the notice of redemption or mandatory repurchase, as
the case may be.
The paying agent may require the payment by a bondholder requesting
exchange or registration of transfer of any tax or other governmental charge
required to be paid in respect of the exchange or registration of transfer but
will not impose any other charge.
CONVERSION OF INTEREST RATES ON 2002B AND 2002C BONDS AND PURCHASE
ADJUSTMENT TO WEEKLY RATE
(a) ADJUSTMENT TO WEEKLY RATE. Subject to certain limitations set
forth under subparagraph (f) below, at the end of any alternate rate term
established pursuant to the bond resolution, the City may elect at any time
before the fixed rate conversion date that a 2002B and/or 2002C Bonds will bear
interest at a weekly rate. Such direction will specify the effective date of
such adjustment to a weekly rate which will be (A) an interest payment date with
respect to the 2002B and/or 2002C Bonds, and (B) not earlier than the fifteenth
(15th) day following the third business day after the date of receipt by the
paying agent of such direction; provided, however, that, if before the making of
such election, any 2002B or 2002C Bond will have been called for redemption and
such redemption will not have been effected at that time, the effective date of
each such weekly rate period will not precede such redemption date.
(b) ADJUSTMENT TO FIXED RATE. Subject to certain limitations set
forth under subparagraph (f) below, the City may elect at any time that a 2002B
and/or 2002C Bonds will bear interest at a fixed rate for the period from the
fixed rate conversion date through the final maturity date. Such direction will:
(1) specify the effective date or dates of such adjustment to a fixed rate which
will be (A) an interest payment date with respect to such 2002B and/or 2002C
Bonds and (B) not earlier than the 30th day following the third business day
after the date of receipt by the paying agent of such direction; provided,
however, that if, before the making of such election, any 2002B and/or 2002C
Bonds will have been called for redemption and such redemption will not have
been effected at that time, the effective date of each such fixed rate period
will not precede such redemption date; and (2) be accompanied by an opinion of
bond counsel stating that such adjustment in the interest rate determination
method to a fixed rate (A) is authorized or permitted by the bond resolution and
(B) will not impair the exclusion of interest on such 2002B and/or 2002C Bonds
from the gross income of the recipients of such 2002B and/or 2002C Bonds for
federal income tax purposes.
(c) ADJUSTMENT TO FLEXIBLE RATE PERIOD. Subject to certain
limitations set forth under subparagraph (f) below, the City may elect at any
time before the fixed rate conversion date that the 2002B and/or 2002C Bonds
will bear interest at a flexible rate or rates. Such direction will specify the
effective date of the flexible rate period during which such 2002B and/or 2002C
Bonds will bear interest at flexible rates which will be (1) an interest payment
date with respect to such 2002B and/or 2002C Bonds, and (2) not earlier than the
fifteenth (15th) day following the third business day after the date of such
direction; provided, however, that if, before the City's making such election,
any 2002B and/or 2002C Bonds will have been called for redemption and such
redemption will not have been effected at that time, the effective date of such
flexible rate period will not precede such redemption date.
If the City's notice complies with any one of the foregoing (a) through
(c) above and the conditions stated in such notice are satisfied, the 2002B
and/or 2002C Bonds so designated will bear interest at the rate determined by
the proposed interest rate determination method from and after the effective
date specified in such notice until there is another change as provided in the
bond resolution.
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(d) ADJUSTMENT FROM FLEXIBLE RATE PERIOD. If the interest rate
period for the 2002B and/or 2002C Bonds is being adjusted from a flexible rate
period, then for any flexible rate bond having a flexible rate term which ends
before the effective date of the new interest rate period, the remarketing agent
for each Series of the 2002B and 2002C Bonds will determine flexible rate terms
for such flexible rate bonds which may extend to, but not beyond, such effective
date. The remarketing agent for each Series of the 2002B and 2002C Bonds will
determine flexible rate terms that will best promote an orderly transition to
the new interest rate period, such that the day next succeeding the last day of
all flexible rate terms with respect to the 2002B and/or 2002C Bonds of such
Series will be the effective date of the next interest rate period.
(e) ADJUSTMENT IN INTEREST RATE DETERMINATION METHOD BY REMARKETING
AGENT. Subject to certain limitations set forth under subparagraph (f) below, at
any time during a weekly rate period or a flexible rate period, the applicable
remarketing agent for such Series of 2002B and 2002C Bonds, with the prior
written consent of the City, may direct that the interest rate determination
method permitted under the bond resolution on the 2002B and/or 2002C Bonds be
changed to another interest rate determination method (except for a fixed rate
determination method), if in the judgment of the applicable remarketing agent,
such a change would produce the greatest likelihood of the lowest overall
interest cost on the 2002B and/or 2002C Bonds for a period of at least 90 days.
Such written direction will be in such form, be given at such times and contain
such information as would be required by the bond resolution with respect to
adjustments to the weekly rate period or the flexible rate period, respectively,
and such direction will have the same effect and such adjustments will take
effect on the same date as if the direction had been given or the adjustments
had been made by the City.
(f) GENERAL PROVISIONS RELATING TO ADJUSTMENTS IN INTEREST RATE
DETERMINATION METHOD. Notwithstanding any provision in the bond resolution to
the contrary, no change will be made in the interest rate determination method
or at the end of any alternate rate term: (i) unless such change in the interest
rate determination method will apply to all of the 2002B and 2002C Bonds within
a Series then outstanding; (ii) unless, following such change in the interest
rate determination method permitted under the bond resolution (other than to a
fixed rate) or on the establishment of an alternate rate; (A) if a liquidity
facility is in effect for the 2002B and 2002C Bonds, the liquidity facility then
in effect with respect to the 2002B and 2002C Bonds will have a stated available
amount equal to the principal amount of the 2002B and 2002C Bonds outstanding
and will have an interest component for the new interest coverage period which
will be at least equal to the maximum number of days interest payable on such
change in the interest rate determination method calculated at the maximum rate
and (B) the City will have received from the rating agency or rating agencies
then rating the 2002B and 2002C Bonds subject to the adjustment in the interest
rate determination method, written confirmation that the ratings then in effect
with respect to the 2002B and 2002C Bonds will not be reduced or withdrawn
following such change in the interest rate determination method; (iii) if the
City will receive written notice before the change that the opinion of bond
counsel required under the bond resolution, with respect to an adjustment in the
interest rate determination method to a fixed rate has been rescinded or will
not be delivered, or (D) if any other condition to any such change required
under the bond resolution has not been satisfied. If of any of the foregoing,
the City will prepare and the paying agent will promptly send a notice to the
applicable liquidity provider (if a liquidity facility is in effect), the
remarketing agent for the related 2002B and 2002C Bonds and all bondholders to
whom the paying agent had sent notice of the change pursuant to the bond
resolution stating that no change will be made and that the interest rate
determination method from which the change was attempted will remain in effect.
No more than one of the interest rate determination methods set forth in
subparagraphs (a) through (c) above will be in effect for the same Series of
2002B and 2002C Bonds at the same time.
NOTICE TO BONDHOLDERS OF CHANGE IN INTEREST RATE DETERMINATION METHOD
When a change in the interest rate determination method is to be made
with respect to a Series of 2002B and/or 2002C Bonds, including the
establishment of an alternate rate, the City will prepare and the paying agent
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will send a notice to the affected bondholders, the remarketing agent for such
Series of 2002B and/or 2002C Bonds and the applicable liquidity provider (if a
liquidity facility is in effect) by first-class mail not fewer than 15 days (30
days on a change to a fixed rate) but not more than 60 days before the effective
date of the change. The notice is required to state:
(i) that the interest rate determination method for either or both
Series 2002B and 2002C Bonds will be changed;
(ii) any conditions to such change and, on the satisfaction of such
conditions, the effective date of the new interest rate determination method;
(iii) that a mandatory repurchase will occur on the effective date of
the change for the applicable Series of 2002B and/or 2002C Bonds as provided in
the 2002B and 2002C Bonds;
(iv) that, if any liquidity facility will then be in effect, the
interest component for the new interest coverage period will be at least equal
to the maximum number of days interest payable after such change in the interest
rate determination method calculated at the maximum rate; and
(v) all the information required by the bond resolution to be
included in a Notice of Mandatory Repurchase.
PURCHASES OF 2002B AND 2002C BONDS
(a) OPTIONAL TENDER OF 2002B AND 2002C BONDS.
(i) Except as provided in subparagraph (d) below, while any
2002B and 2002C Bond (other than liquidity provider bonds) bear interest
at the weekly rate, the holder (or while the 2002B and 2002C Bonds are
held pursuant to a book-entry system, the purchasers of 2002B and 2002C
Bonds) of such 2002B and 2002C Bond may elect to tender such 2002B and
2002C Bond (or portion of such 2002B and 2002C Bond, provided that each
of the portion to be purchased and the portion to be retained is in an
authorized denomination) for purchase at a purchase price equal to 100%
of the principal amount of such 2002B or 2002C Bond (or portion of such
2002B and 2002C Bond), plus accrued and unpaid interest on such 2002B
and 2002C Bond to but not including the date of purchase, on any
business day (the "optional tender date"), but only on (A) receipt by
the paying agent by not later than 11:00 a.m. Eastern Time at least
seven calendar days, but not more than 30 days, before the optional
tender date of telephonic (followed by written or facsimile confirmation
delivered to the paying agent no later than the close of business on the
next succeeding business day) or other written notice stating (1) the
principal amount of the 2002B or 2002C Bond (or portion of such 2002B
and 2002C Bond) to be tendered, (2) the 2002B or 2002C Bond number or
other identification satisfactory to the paying agent, and (3) the
optional tender date on which such 2002B or 2002C Bond will be tendered;
and (B) if the 2002B or 2002C Bonds are not being held under a
book-entry system, delivery of such 2002B or 2002C Bond (with an
appropriate instrument of transfer duly executed in blank) to the paying
agent by 10:00 a.m. Eastern Time on such optional tender date.
(ii) Any notice of optional tender for purchase delivered
pursuant to subpart (i) above will be irrevocable and will be binding on
the holder giving or delivering such notice and on any transferee of
such holder.
(iii) When the paying agent receives a notice of optional
tender for purchase pursuant to subpart (i) above, such paying agent
will give prompt telephonic notice of such optional tender for purchase
to the City, the remarketing agent and the applicable liquidity
provider (if a liquidity facility is in effect). If a liquidity
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facility is in effect, the paying agent also will, if necessary,
provide a notice of liquidity provider purchase at the time and in the
manner set forth in the bond resolution.
(b) MANDATORY REPURCHASE OF VARIABLE RATE BONDS; NOTICE.
Except as provided in subparagraph (d) below, variable rate bonds are
subject to mandatory repurchase as follows:
(i) as to any flexible rate bond, on each interest payment
date applicable to such flexible rate bond at a purchase price equal to 100% of
the principal amount of such flexible rate bond plus accrued and unpaid interest
on such flexible rate bond to but not including the date of purchase;
(ii) as to any variable rate bond, on any conversion date
with respect to such variable rate bond at a purchase price equal to
100% of the principal amount of such variable rate bond plus accrued and
unpaid interest on such variable rate bond to but not including the date
of purchase or the date that would have been the conversion date had the
conversion not failed;
(iii) as to any variable rate bond, and if a liquidity
facility is in effect and continues to be required, on the interest
payment date which next precedes by at least fourteen (14) days the
stated expiration date or termination date of the liquidity facility
with respect to such variable rate bond or, if such interest payment
date is not a business day, on the next succeeding business day, at a
purchase price equal to 100% of the principal amount of such variable
rate bond plus accrued and unpaid interest on such variable rate bond
to but not including the date of purchase, unless by the 20th day
before the interest payment date, (1) such liquidity facility has been
extended, or (2) a substitute liquidity facility to be effective on or
before the interest payment date has been obtained, in which event a
mandatory repurchase will occur in accordance with (iv) below;
(iv) as to any variable rate bond, on any liquidity
substitution date relating to such variable rate bond delivered pursuant
to the bond resolution, at a purchase price equal to 100% of the
principal amount of such variable rate bond plus accrued and unpaid
interest on such variable rate bond to but not including the date of
purchase;
(v) as to any weekly rate bond, on any interest payment date
selected by the City, or if such interest payment date is not a business
day, on the next succeeding business day, at a purchase price equal to
100% of the principal amount of such weekly rate bond plus accrued and
unpaid interest on such bond to but not including the date of purchase;
provided that any such mandatory repurchase will be subject to the prior
written consent of the applicable liquidity provider (if a liquidity
facility is in effect); and
(vi) as to any variable rate bond, and if a liquidity
facility is in effect, when the City receives a written notice of the
occurrence of a Notice Termination Event with respect to a related
liquidity facility (a copy of which will also be delivered by the
applicable liquidity provider to the City) at a purchase price equal to
100% of the principal amount of such variable rate bond plus accrued and
unpaid interest on such bond to but not including the date of purchase,
such purchase date to occur no more than 15 days after the date of the
notice to the bondholders and in no event later than the business day
before the last day on which funds will be available under the
applicable liquidity facility.
The City will prepare and the paying agent will send to the holders of
variable rate bonds subject to mandatory repurchase and to the related
remarketing agent and the applicable liquidity provider (if a liquidity facility
is in effect) a Notice of Mandatory Repurchase (the paying agent also will
deliver at such time to the remarketing agent and the applicable liquidity
provider (if a liquidity facility is in effect) telephonic notice of such
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mandatory repurchase) at least fifteen (15) days (thirty (30) days for mandatory
repurchase dates occurring in connection with a fixed rate conversion date) but
not more than 60 days (20 days in the case of a mandatory repurchase pursuant to
(iii) and (vi) above) before the mandatory repurchase date, except that no such
notice of mandatory repurchase will be given to holders of flexible rate bonds
if the mandatory repurchase is being made pursuant to subparagraph (i) above.
Notwithstanding anything to the contrary in the bond resolution, the
applicable liquidity provider (if a liquidity facility is in effect) will have
no obligation to purchase variable rate bonds if such variable rate bonds are
not eligible bonds or an immediate termination event has occurred. The City will
have no obligation to purchase variable rate bonds if the applicable liquidity
provider does not purchase such bonds.
By acceptance of any variable rate bond, each holder of a variable rate
bond agrees that if any variable rate bond owned by the bondholder is to be
purchased by mandatory repurchase under the bond resolution, but is not
delivered by the holder of the variable rate bond to the City before 10:00 a.m.
Eastern Time on the mandatory repurchase date, the holder of the variable rate
bond will, nonetheless, be deemed to have fulfilled the obligation to the holder
of the variable rate bond to the City on such mandatory repurchase date and such
variable rate bond will be deemed to have been timely delivered to the paying
agent and to have been purchased as of the mandatory repurchase date.
(c) PAYMENT FOR PURCHASED VARIABLE RATE BONDS.
To the extent that sufficient moneys are available by 2:45 p.m. Eastern
Time on the optional tender date or the mandatory repurchase date or other day
on which 2002B and 2002C Bonds have been successfully remarketed, as applicable
(the "purchase date"), on surrender to the paying agent of variable rate bonds
optionally tendered or called for mandatory repurchase as provided in the bond
resolution, the purchase price for such bonds will be paid in immediately
available funds by the paying agent not later than the close of business on the
purchase date. From and after the purchase date or, if later, the date on which
such moneys are made available to the paying agent, as applicable, interest
accruing on such variable rate bonds will cease to be payable to the prior
holder of such bonds, such variable rate bonds will cease to be entitled to the
benefits or security of the bond resolution and to such extent the prior holder
will have recourse solely to the funds held by the City and the paying agent for
the purchase of such variable rate bonds as provided in the bond resolution. On
surrender of a variable rate bond purchased in part and receipt by the paying
agent of such variable rate bond, the paying agent will authenticate and deliver
to the surrendering holder a new variable rate bond or variable rate bonds in
authorized denominations equal in aggregate principal amount to the unpurchased
portion of the bond surrendered.
(d) LIMITATIONS ON TENDERS.
Holders of variable rate bonds called for redemption or mandatory
repurchase will not have the right (without the prior consent of the respective
remarketing agent) to tender such variable rate bonds for purchase on an
optional tender date if such optional tender date will occur on or after the
10th day before the date fixed for redemption or mandatory repurchase of such
bond. Regardless of the statements above, holders of variable rate bonds called
for redemption will not have the right in any event to tender such variable rate
bonds for purchase on an optional tender date if such optional tender date will
occur on or after the second day before the date fixed for redemption of such
bond.
(e) REMARKETING OF PURCHASED VARIABLE RATE BONDS
(i) VARIABLE RATE BONDS TO BE REMARKETED. Variable rate
bonds purchased pursuant to optional tender or mandatory repurchase will be
remarketed by the applicable remarketing agent, except as follows:
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(1) Variable rate bonds purchased with moneys in the bond
fund will be cancelled. The City will inform the applicable remarketing
agent of a Series of variable rate bonds when any variable rate bonds of
such Series are purchased with such moneys, and, if any such variable
rate bonds are delivered to such remarketing agent for purchase, such
remarketing agent will deliver them to the paying agent for
cancellation.
(2) Variable rate bonds of a Series purchased pursuant to an
optional tender or a mandatory repurchase and as to which the
remarketing agent of such Series of variable rate bonds has received a
notice of redemption may be remarketed before the date fixed for
redemption only if the purchaser receives before purchasing such
variable rate bond a notice that such variable rate bond is subject to
redemption on the date fixed for redemption.
(3) Variable rate bonds will not be remarketed to the City.
(4) A remarketing agent is not be required to offer variable
rate bonds for sale (A) during the continuance of an event of default,
(B) if a liquidity facility in the form of a standby bond purchase
agreement is in effect as to such Series, during the period immediately
after receipt by the City of notice of the occurrence of a Notice
Termination Event or an immediate suspension or termination event
whereby the liquidity provider is not obligated to purchase the variable
rate bonds and as long as such event is continuing and the undertaking
of the liquidity provider has not been reinstated, (C) if a liquidity
facility is in effect and continues to be required as to such Series, if
the applicable liquidity provider will have wrongfully failed to honor
the applicable liquidity facility which failure has not been cured or is
otherwise in default under such liquidity facility or applicable
liquidity facility agreement, unless the Issuer will have arranged for a
substitute liquidity facility, or (D) as otherwise provided in the
related remarketing agreement. In addition, a remarketing agent will not
offer the variable rate bonds for sale on a mandatory repurchase
pursuant to provisions of the bond resolution applicable to such Series
unless (i) on or after the date of mandatory repurchase as set forth, a
liquidity facility will be in effect or (ii) a fixed rate conversion
date will occur.
(5) Variable rate bonds purchased pursuant to an optional
tender and as to which the remarketing agent for such Series of variable
rate bonds has received a notice of mandatory repurchase may be
remarketed before the mandatory repurchase date only if the purchaser
receives a copy of the notice of mandatory repurchase before purchasing
such variable rate bond.
(6) Liquidity provider bonds (if a liquidity facility is in
effect) will be remarketed before any other variable rate bonds of such
Series.
The City will provide written notice to holders of a 2002B and/or 2002C
Bonds when a written notice by a liquidity provider (if a liquidity facility is
in effect) of an Immediate Termination Event with respect to a liquidity
facility relating to such 2002B and/or 2002C Bonds. If a liquidity provider
notifies the City that the liquidity provider has subsequently withdrawn its
termination (or suspension) of its obligation to purchase 2002B and/or 2002C
Bonds pursuant to the applicable liquidity facility or liquidity facility
Agreement and has reinstated the applicable liquidity facility, the City will
provide written notice to the holders of such 2002B and/or 2002C Bonds of the
reinstatement of the related liquidity facility.
(ii) LIQUIDITY FACILITIES AND SUBSTITUTE LIQUIDITY
FACILITIES. The City has covenanted and agreed that at all times while the 2002B
and 2002C Bonds are outstanding (except in a fixed rate period rate), it will
cause a liquidity facility to be in effect for the 2002B and 2002C Bonds
provided by a Qualified Financial Institution and otherwise conforming to the
provisions of the bond resolution. In addition, the City has covenanted and
agreed that at all times while any 2002B and 2002C Bonds are outstanding for
which a liquidity facility has been provided and continues to be required, if
the rating on such 2002B and 2002C Bonds will have been reduced to a category
below "VMIG l" or "A-1" (or their equivalent) by the rating agency because the
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rating on the liquidity provider will have been reduced, then the City will in
good faith use its commercially reasonable efforts to obtain a substitute
liquidity facility within 90 days of the rating on the liquidity provider being
lowered below "VMIG 1" or "A-1" or their equivalent by the rating agency or
rating agencies then rating the applicable Series of 2002B and 2002C Bonds.
If a liquidity facility is in effect, the City will direct or send
appropriate notice to the liquidity provider as may be required requesting or
directing that the interest coverage rate be reduced and specifying the amount
that will then be available under such liquidity facility agreement, subject to
any requirements of such liquidity facility or the related liquidity facility
agreement. A liquidity facility will not be reduced to an amount less than the
principal amount of the applicable 2002B or 2002C Bonds outstanding, plus an
amount equal to interest on such 2002B or 2002C Bonds at the interest coverage
rate then required by any rating agency then rating such 2002B or 2002C Bonds
for the number of days then required by any rating agency then rating such 2002B
or 2002C Bonds, unless the City has provided a substitute liquidity facility
provided the liquidity facility continues to be required. Regardless of the
statements above, immediately after payment in full has been made on any 2002B
or 2002C Bond, either at maturity, on earlier redemption or on provision for
payment as provided in the bond resolution, the City will direct or send
appropriate notice to the applicable liquidity provider requesting or directing
that the amount available under the applicable liquidity facility be reduced by
an amount equal to such principal so paid plus the amount of interest provided
for at that time under such liquidity facility on such principal amount.
BOOK-ENTRY SYSTEM
DTC will act as securities depository for the bonds. The bonds will be
issued as fully-registered bonds in the name of Cede & Co. (DTC's partnership
nominee) or any other name as may be requested by an authorized representative
of DTC. One fully-registered bond will be issued in the aggregate principal
amount of the bonds and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its direct participants deposit with it.
DTC also facilitates the settlement among direct participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in its direct participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its direct participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange LLC and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks, and trust companies that clear through or
maintain a custodial relationship with a direct participant of DTC, either
directly or indirectly. The rules applicable to DTC and its direct and indirect
participants are on file with the Securities and Exchange Commission.
Purchases of the bonds under the DTC system must be made by or through
direct participants, which will receive a credit for the bonds on DTC's records.
The ownership interest of each actual purchaser, or beneficial owner, of each
bond is in turn to be recorded on the direct and indirect participants' records.
Purchasers of 2002B and 2002C Bonds will not receive written confirmation from
DTC of their purchase, but purchasers of 2002B and 2002C Bonds 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 purchasers of 2002B and 2002C Bonds 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 purchasers of 2002B
and 2002C Bonds. Purchasers of 2002B and 2002C Bonds will not receive
certificates representing their ownership interests in the bonds, unless the use
of the book-entry system for the bonds is discontinued.
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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 purchasers of 2002B and 2002C
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
purchasers of 2002B and 2002C Bonds. 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 purchasers of 2002B and
2002C Bonds 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 the purchase price of
tendered 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 purchasers of 2002B and 2002C Bonds 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 purchasers of 2002B and 2002C Bonds 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
purchasers of 2002B and 2002C Bonds, 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
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or any participant to make any payment or give any notice to a purchaser of a
2002B or 2002C Bond or an error or delay relating to such bonds.
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 purchasers of
2002B and 2002C Bonds, confirmation and transfer of beneficial ownership
interests in such bonds and other related transactions by and between DTC, DTC's
participants and the purchasers of 2002B and 2002C 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 purchasers of
2002B and 2002C Bonds 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 to such bonds 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 BONDHOLDERS ONLY
TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC
PARTICIPANT TO NOTIFY ANY PURCHASER OF 2002B OR 2002C BONDS, OF ANY NOTICES AND
ITS CONTENT 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.
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SECURITY FOR THE BONDS
The bonds are revenue bonds of the City constituting special, limited
obligations payable solely from the City's pledge of its occupational license
tax levied and collected by the City and as additional security for the bonds,
the City's covenant to budget and appropriate its non-ad valorem revenues in any
year that revenues derived from the occupational license tax are not sufficient
to pay all obligations in connection with the bonds.
The occupational license tax is a tax levied and collected by the City
pursuant to Chapter 205, Florida Statutes and Article V, Chapter 24 of the City
Code. Section 205.042 of Chapter 205 authorizes the City to levy "an
occupational license tax for the privilege of engaging in or managing any
business, profession, or occupation within its jurisdiction."
Non-ad valorem revenues of the City includes all revenues and taxes of
the City derived from any source other than ad valorem taxation on real and
personal property, which are legally available for payments under the bond
resolution after provision of services or programs which are for essential
public purposes affecting the health, welfare and safety of the inhabitants of
the City; provided contractually or legally restricted revenues, loan repayments
or revenues of persons or entities, including governmental entities other than
the City which are applied to the payment of non-ad valorem obligations are not
deemed to be non-ad valorem revenues. All occupational license tax revenues are
included in non-ad valorem revenues even though pledged to the payment of the
bonds. Non-ad valorem revenue obligations are obligations evidencing
indebtedness for borrowed money payable directly or indirectly from or secured
by a pledge of or lien on one or more non-ad valorem revenues and/or covenant to
budget and appropriate non-ad valorem revenues, but only if the City reasonably
expects to apply non-ad valorem revenues to the payment of debt service,
directly or indirectly, on such obligations and only to the extent that amounts
other than non-ad valorem revenues available and pledged to pay such obligations
during the prior fiscal year for which audited financial statements are
available were less than the maximum annual debt service for such obligations
for the then current or any subsequent fiscal year.
BOND INSURANCE
Concurrently with the issuance of the bonds, Financial Guaranty
Insurance Company, as bond insurer, will issue its municipal bond insurance
policy for the bonds. The bond insurer is affiliated with us. The bond insurer
is a wholly -owned subsidiary of FGIC Corporation, which is a subsidiary of
General Electric Capital Corporation. The policy unconditionally guarantees the
payment of that portion of the principal of and interest on the bonds which has
become due for payment, but remains unpaid by the City. The bond insurer will
make the payments to State Street Bank and Trust Company, N.A., as fiscal agent,
or its successor as its agent, on the later of the date on which the principal
and interest is due or on the business day next following the day on which the
bond insurer receives telephonic or telegraphic notice, subsequently confirmed
in writing, or written notice by registered or certified mail, from an owner of
bonds or the paying agent of the nonpayment of the amount by the City. The
fiscal agent will disburse the amount due on any bond to its owner upon receipt
by the fiscal agent of evidence satisfactory to the fiscal agent of the owner's
right to receive payment of the principal and interest due for payment and
evidence, including any appropriate instruments of assignment, that all of the
owner's rights to payment of the principal and interest are vested in the bond
insurer. The term "nonpayment" with respect to a bond includes any payment of
principal or interest made to an owner of a bond that has been recovered from
the owner pursuant to the United States Bankruptcy Code by a trustee in
bankruptcy in accordance with a final, nonappealable order of a court having
competent jurisdiction.
The policy is non-cancellable and the premium will be fully paid at the
time of delivery of the bonds. The policy covers failure to pay principal of the
bonds on their stated maturity date, or dates on which the bonds are called for
mandatory sinking fund redemption, but not on any other date on which the bonds
may be called for redemption, accelerated or advanced in maturity, and covers
the failure to pay an installment of interest on the stated date for its
payment.
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THE STANDBY BOND PURCHASE AGREEMENT
Our liquidity facility obligations under the standby bond purchase
agreement will rank equally with all of our other general unsecured and
unsubordinated obligations. The liquidity facility obligations are not issued
under an indenture. As of the date of this prospectus supplement, we have
approximately $4.6 billion of liquidity facility obligations currently
outstanding under various standby bond purchase agreements, not including the
liquidity facility obligations we are issuing under this prospectus supplement.
Owners of the bonds to which the liquidity facility obligations relate
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, upon receipt of an appropriate
demand for payment, the purchase price for the bonds. Our liquidity facility
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 ___ days'
interest on the bonds at an assumed maximum rate of 12% per year.
TERMINATION EVENTS
The scheduled expiration date of the standby bond purchase agreement is
March 6, 2007. The resolution of the City relating to the bonds will specify
certain circumstances where we must purchase bonds that a holder tenders for
purchase pursuant to an optional or mandatory tender, which have not been
remarketed. Under certain circumstances, we may terminate our obligation to
purchase the bonds. The following events would permit termination of our
obligation to purchase the bonds:
o if the City fails to pay any portion of the commitment fee when
due as set forth in the standby bond purchase agreement and the related payment
reimbursement agreement, or if the City fails to pay when due any other amount
it must pay under those documents and that failure continues for a specified
number of business days;
o if the City fails to observe or perform any agreement contained
in the standby bond purchase agreement, the resolution under which the bonds are
issued or a related municipal financing agreement (or the State of Florida takes
any action which would impair the power of the City to so comply) and, if that
failure is a result of a covenant breach that the City can remedy, that failure
continues for a specified number of days following written notice of that
failure from us to the City;
o if any representation, warranty, certification or statement
made by the City in the standby bond purchase agreement or any related document
or in any certificate, financial statement or other document the City delivers
under those documents proves to have been incorrect in any material respect when
made;
o if the City defaults in the payment of principal of or premium,
if any, or interest on any other indebtedness of the City that is senior to or
on a parity with the bonds, and that default is continuing;
o if the City commences a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of its or any substantial part of its property, or consents to any such
S-19
relief or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against it, or makes a general
assignment for the benefit of creditors, or fails generally to pay its debts as
they become due, or declares a moratorium, or takes any action to authorize any
of the foregoing;
o if an involuntary case or other proceeding is commenced against
the City seeking liquidation, reorganization or other relief with respect to it
or its debts under any bankruptcy, insolvency or other similar law or seeking
the appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and the involuntary case
remains undismissed and unstayed for a period of 60 days; or if an order for
relief is entered against the City under the federal bankruptcy laws;
o if any material provision of the standby bond purchase
agreement or any related document for any reason whatsoever ceases to be a valid
and binding agreement of the City or the City contests the validity or
enforceability of any of these documents; or
o if the City does not pay when due any amount payable under the
bonds (regardless of whether the holders of the bonds waive that failure).
If a termination event occurs, we may deliver notice to the City, the
paying agent, and the remarketing 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 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 under the bonds are as described in a
separate disclosure document relating to the bonds.
THE STANDBY LOAN AGREEMENT; GE CAPITAL; RIGHT OF ASSIGNMENT
In order to obtain funds to fulfill our liquidity facility obligations
under the standby bond purchase agreement, we have entered 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
the date on which the standby bond purchase agreement terminates by its terms
and may be paid by delivering tendered bonds owned by us to GE Capital. 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 liquidity facility 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.
S-20
GE Capital will have 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 liquidity facility 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 on 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,
-------------------------------------------------------------- Nine Months Ended
1996 1997 1998 1999 2000 September 29, 2001
- ------------ ------------- ------------- ------------- -------- ---------------------
1.53 1.48 1.50 1.60 1.52 1.69
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 and fixed charges. Fixed charges consist of interest
and discount on all indebtedness and one-third of rentals, which GE Capital
believe 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 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 room. 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. GE Capital maintains a web site at
http://www.gecapital.com. Information on GE Capital's web site is not intended
to be a part of this prospectus supplement.
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, June 30, 2001
and September 29, 2001
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EXPERTS
The financial statements and schedule of GE Capital 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 upon the authority of said firm as experts in accounting
and auditing.
S-22
Filed pursuant to Rule 424(b)(4)
File No. 333-71950
$2,000,000,000
PRINCIPAL AMOUNT PLUS INTEREST
LIQUIDITY FACILITY OBLIGATIONS
OF
FGIC SECURITIES PURCHASE, INC.
We intend to offer from time to time, in connection with the issuance by
municipal authorities of adjustable or floating rate debt securities, our
liquidity facility obligations under one or more standby bond purchase
agreements. The liquidity facility obligations will not be sold separately from
the securities, which will be offered pursuant to a separate prospectus or
offering statement. The liquidity facility 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 us or by our affiliates.
We will issue the liquidity facility obligations from time to time to
provide liquidity for certain adjustable or floating rate securities issued by
municipal authorities. The specific terms of the liquidity facility obligations
and the securities to which they relate will be set forth in a prospectus
supplement to this prospectus. Each issue of liquidity facility obligations may
vary, where applicable, depending upon the terms of the securities to which the
liquidity facility obligations relate.
We are a Delaware corporation that was incorporated in 1990. Our
principal executive office is at Financial Guaranty Insurance Company, 125 Park
Avenue, 5th Floor, New York, New York 10017 and our telephone number is (212)
312-3000. Unless the context otherwise indicates, the terms "the company," "we,"
"us" or "our" mean FGIC Securities Purchase, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
The date of this prospectus is November 5, 2001.
We have provided the information contained in this prospectus. We are submitting
this prospectus in connection with the future sale of the liquidity facility
obligations. You may not reproduce or use this prospectus, in whole or in part,
for any other purposes.
You 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 the liquidity
facility obligations in any jurisdiction where the offer or sale is not
permitted.
This prospectus and the applicable prospectus supplement constitute a prospectus
with respect to our liquidity facility obligations under the standby bond
purchase agreements to be entered into 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.
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
liquidity facility obligations. We may provide additional updating information
with respect to the matters discussed in this prospectus and the accompanying
prospectus supplement 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.
WHERE YOU CAN FIND MORE INFORMATION
We file annual and other reports and information with the Securities and
Exchange Commission. You may read and copy any of these documents at the
Commission's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the Commission at 1-800-SEC-0330 for further information on
the public reference room. The Commission also maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants, such as ourselves, that file electronically with the
Commission. The address of that web site is http://www.sec.gov. We do not intend
to deliver to holders of the liquidity facility obligations an annual report or
other report containing financial information. We do not have a web site;
however, Financial Guaranty Insurance Company, one of our affiliate companies,
has a web site that contains information about us. Financial Guaranty Insurance
Company's web site is http://www.fgic.com. Information on Financial Guaranty
Insurance Company's web site is not intended to be a part of this prospectus.
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:
o our annual report on Form 10-K for the year ended December 31,
2000;
o our quarterly reports on Form 10-Q for the quarterly periods
ended March 31, 2001 and June 30, 2001; and
o our current reports on Form 8-K filed with the Commission on
September 20, 2001, October 15, 2001, October 16, 2001, October
25, 2001, October 26, 2001 and October 31, 2001.
2
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 we have sold all of the liquidity facility
obligations covered by this prospectus.
We will provide without charge to any person (including any beneficial owner) to
whom this prospectus is delivered, upon the oral or written request of such
person, a copy of any or all of the information that has been incorporated by
reference in this prospectus but not delivered with this prospectus. You should
direct such requests to: Carolanne Gardner, Corporate Communications Department,
FGIC Securities Purchase, Inc., Financial Guaranty Insurance Company, 125 Park
Avenue, 5th Floor, New York, New York 10017, Telephone: (212) 312-3000.
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.
Our business consists and will consist of providing liquidity for certain
adjustable and floating rate securities issued by municipal authorities through
liquidity facilities in the form of standby bond purchase agreements. 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 facility for holders of
securities desiring to sell their securities. Pursuant to standby bond purchase
agreements with issuers, remarketing agents, tender agents or trustees of the
securities, we will be obligated to purchase unremarketed securities from the
holders of those securities who voluntarily or mandatorily tender their
securities for purchase. In order to obtain funds to purchase the securities, we
will enter into one or more standby loan agreements with General Electric
Capital Corporation or its permitted assignees under which GE Capital or its
permitted assignees will be irrevocably obligated to lend funds as needed to us
to purchase securities as required.
Our principal executive offices are located at Financial Guaranty Insurance
Company, 125 Park Avenue, 5th Floor, New York, New York 10017, telephone (212)
312-3000.
RECENT DEVELOPMENTS
We have issued the following liquidity facility obligations since the
date of our quarterly report on Form 10-Q for the period ending June 30, 2001:
o $21,275,000 principal amount plus interest in support of Board
of Trustees of Grand Valley State University, General Revenue Variable Rate
Demand Bonds, Series 2001B, issued on or about August 7, 2001, described in the
prospectus supplement dated July 20, 2001;
o $48,000,000 principal amount plus interest in support of Board
of Trustees of Oakland University, General Revenue Bonds (Variable Rate Demand),
Series 2001, issued on or about August 16, 2001, described in the prospectus
supplement dated August 7, 2001;
o $41,395,000 principal amount plus interest in support of Board
of Regents of Eastern Michigan University, General Revenue Variable Rate Demand
Refunding Bonds, Series 2001, issued on or about August 29, 2001, described in
the prospectus supplement dated August 13, 2001;
o $30,000,000 principal amount plus interest in support of Board
of Control of Northern Michigan University, General Revenue Variable Rate Demand
Bonds, Series 2001, issued on or about September 5, 2001, described in the
prospectus supplement dated August 27, 2001;
3
o $180,000,000 principal amount plus interest in support of
Massachusetts Water Resources Authority, Multi-Modal Subordinated $95,000,000
General Revenue Bonds, 2001 Series A and $85,000,000 General Revenue Bonds, 2001
Series B, issued on or about September 26, 2001, described in the prospectus
supplement dated September 19, 2001;
o $139,080,000 principal amount plus interest in support of City
of Detroit, Michigan, Sewage Disposal System Second Lien Revenue Bonds (Variable
Rate Demand), Series 2001(E), issued on or about October 23, 2001, described in
the prospectus supplement dated October 11, 2001 and the prospectus supplement
dated October 18, 2001;
o $127,165,000 principal amount plus interest in support of City
of Detroit, Michigan, Sewage Disposal System Senior Lien Revenue Refunding Bonds
(Variable Rate Demand), Series 2001(C-2), issued on or about October 23, 2001,
described in the prospectus supplement dated October 12, 2001;
o $140,000,000 principal amount plus interest in support of The
City of New York, General Obligation Taxable Adjustable Rate Bonds, Fiscal 2002
Subseries A-9 and A-11, issued on or about November 1, 2001, described in the
prospectus supplement dated October 24, 2001; and
o $66,280,000 principal amount plus interest in support of Rancho
California Water District Financing Authority, Adjustable Rate Revenue Bonds,
Series of 2001B, issued on or about November 1, 2001, described in the
prospectus supplement dated October 25, 2001 and the prospectus supplement dated
October 31, 2001.
SUMMARY
The proposed structure will be utilized to provide liquidity through a "put"
mechanism for floating or adjustable rate securities issued by municipal
authorities. The 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 facility for holders desiring to sell their securities. The
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 they cannot be remarketed, we will be obligated,
pursuant to a standby purchase agreement with the issuer, remarketing agent,
tender agent or trustee of the securities, to purchase unremarketed securities
from the holders desiring to tender their securities. This facility will assure
holders of securities 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. Variable rate demand securities are
municipal securities pursuant to which the interest rate is a variable interest
rate which is re-set by the remarketing agent or pursuant to a stated formula
from time to time (not to exceed a stated maximum rate). The owners of variable
rate demand securities have the optional right to tender their variable rate
demand securities to the issuer for purchase and, in the event the remarketing
agent does not successfully remarket the tendered variable rate demand
securities, we are obligated to pay the purchase price for those securities to
those owners pursuant to the terms of our liquidity facility.
The fees for providing the liquidity facility will be paid by the issuer or
other entity specified in the applicable prospectus supplement, typically over
the life of the liquidity facility or, in the case of variable rate demand
securities, until such time as a variable rate demand security is permanently
linked with a convertible inverse floating rate security. Except as otherwise
provided in a prospectus supplement, in order to obtain funds to purchase
unremarketed securities, we will enter into one or more standby loan agreements
with GE Capital or its permitted assignees under which GE Capital or its
permitted assignees will be irrevocably be obligated to lend funds to us as
needed to purchase securities for which the put option has been exercised.
4
Except as otherwise provided in a prospectus supplement, the standby bond
purchase agreement between us and the trustee, issuer or other specified entity
will provide that without the consent of the issuer and the trustee for the
holders of the securities, we will not agree or consent to any amendment,
supplement or modification of the related standby loan agreement, nor waive any
provision of the related standby loan agreement, if that amendment, supplement,
modification or waiver would materially adversely affect the issuer or other
specified entity, or the holders of the securities.
Except as otherwise provided in a prospectus supplement, our liquidity facility
obligations under the standby bond purchase agreement may only be terminated
upon the occurrence of certain events including the following:
o if the issuer or other specified entity fails to pay any portion of
the commitment fee when due as set forth in the standby bond purchase agreement
and the related payment reimbursement agreement, or if the issuer fails to pay
when due any other amount it must pay under those documents and that failure
continues for a specified number of business days;
o if the issuer or other specified entity fails to observe or perform
any agreement contained in the standby bond purchase agreement, the indenture or
a related municipal financing agreement (or the applicable state takes any
action which would impair the power of the issuer or other specified entity to
so comply) and, if that failure is a result of a covenant breach that the issuer
can remedy, that failure continues for a specified number of days following
written notice of that failure from us to the issuer;
o if any representation, warranty, certification or statement made by
the issuer in the standby bond purchase agreement or any related document or in
any certificate, financial statement or other document the issuer or other
specified entity delivers under those documents proves to have been incorrect in
any material respect when made;
o if the issuer or other specified entity defaults in the payment of
principal of or premium, if any, or interest on any bond, note or other evidence
of indebtedness that the issuer or other specified entity has issued, assumed or
guaranteed, and that default is continuing;
o if the issuer or other specified entity commences a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law or seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of its or any substantial part of its property, or
consents to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or makes a general assignment for the benefit of creditors, or fails generally
to pay its debts as they become due, or declares a moratorium, or takes any
action to authorize any of the foregoing;
o if an involuntary case or other proceeding is commenced against the
issuer or other specified entity seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and the involuntary case remains undismissed and unstayed for a period
of 60 days; or if an order for relief is entered against the issuer or other
specified entity under the federal bankruptcy laws;
o if any material provision of the standby bond purchase agreement or
any related document defined in the standby bond purchase agreement for any
reason whatsoever ceases to be a valid and binding agreement of the issuer or
other party to the standby bond purchase agreement or the issuer or other party
thereto contests the validity or enforceability of any of these documents; or
o if the issuer or other specified entity does not pay when due any
amount payable under the securities or under a related municipal financing
5
agreement (regardless of whether the holders of the securities waive that
failure).
You should be aware that the specific termination events applicable to a standby
bond purchase agreement will be subject to negotiation in each case. For this
reason, other or different termination events than those listed above may apply
to the specific standby bond purchase agreement. The final termination events
under each standby bond purchase agreement will be specified in the applicable
prospectus supplement.
Upon the occurrence of a termination event, we may deliver notice to the issuer,
any specified entity, the related trustee, 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 day following the date of
the notice, or if that date is not a business day, on the next business day.
However, before the time at which termination takes effect, the related
securities 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 related securities.
The above structure is intended to receive the highest short term rating from
the rating agencies and to municipal authorities with the lowest cost of
financing. There can be no assurances, however, that those ratings will be
maintained.
THE STANDBY BOND PURCHASE AGREEMENTS
Our liquidity facility obligations under the standby bond purchase agreements
will rank equally with all of our other general unsecured and unsubordinated
obligations. The liquidity facility obligations are not issued pursuant to an
indenture; they will arise under one or more standby bond purchase agreements.
Holders of the securities will be entitled to the benefits and will be subject
to the terms of the applicable standby bond purchase agreement as specified in
the prospectus supplement. Pursuant to the applicable standby bond purchase
agreement, we 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 that standby bond purchase agreement relates. Our liquidity
facility obligation under each standby bond purchase agreement will be
sufficient to pay a purchase price equal to the principal of the security to
which that standby bond purchase agreement relates and up to a specified amount
of interest at a specified rate set forth in the applicable prospectus
supplement. We expect that the standby bond purchase agreements will have a
shorter term than that of the securities to which they relate, but the standby
bond purchase agreements are subject to extension or renewal. The term of the
applicable standby bond purchase agreement and the term of the related
securities will be set forth in the applicable prospectus supplement.
THE STANDBY LOAN AGREEMENTS
In order to obtain funds to fulfill our liquidity facility obligations under the
standby bond purchase agreements, we will enter into one or more standby loan
agreements with GE Capital or its permitted assignee under which GE Capital or
its permitted assignee will be irrevocably obligated to loan funds to us as
needed to purchase the securities to which the applicable standby bond purchase
agreement 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. The purchase price will represent the
outstanding principal amount of those securities, and any accrued interest on
the principal 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, GE Capital 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
6
rating agency or rating agencies that the assignment will not result in a lower
credit rating on the securities. We do not anticipate that GE Capital will
guarantee the securities to which its standby loan agreement relates or our
obligation under any standby purchase agreement.
PLAN OF DISTRIBUTION
The liquidity facility obligations will not be sold separately from the
securities, which will be offered pursuant to a separate prospectus, official
statement or offering circular.
In connection with the offering of the liquidity facility obligations pursuant
to this prospectus, any underwriter or agent participating in the offering may
overallot or effect transactions which stabilize or maintain the market price of
the securities at a level above that which might otherwise prevail in the open
market. That stabilizing, if commenced, may be discontinued at any time.
LEGAL MATTERS
The legality of our liquidity facility obligations has been passed upon for the
company by Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue, New York, New
York 10103.
EXPERTS
Our financial statements as of December 31, 2000 and 1999, and for each of the
years in the three-year period ended December 31, 2000, appearing in our annual
report on Form 10-K for the year ended December 31, 2000, have been incorporated
by reference in this prospectus in reliance upon the report of KPMG LLP,
independent certified public accountants, incorporated by reference in this
prospectus upon the authority of said firm as experts in accounting and
auditing.
SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons, we have been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by one of
our directors, officers or controlling persons in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
7
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TABLE OF CONTENTS $48,600,000*
principal amount plus interest
Page LIQUIDITY FACILITY OBLIGATIONS
----
PROSPECTUS SUPPLEMENT
INTRODUCTION........................S-1
DESCRIPTION OF THE BONDS............S-1 issued by
THE STANDBY BOND PURCHASE
AGREEMENT......................S-19
THE STANDBY LOAN AGREEMENT; GE CAPITAL; FGIC Securities
RIGHT OF ASSIGNMENT................S-20 Purchase, Inc.
EXPERTS............................S-22
in support of
City of Tampa, Florida
PROSPECTUS Occupational License Tax Refunding Bonds,
WHERE YOU CAN FIND MORE Series 2002B and Series 2002C
INFORMATION.......................2
INCORPORATION BY REFERENCE............2
THE COMPANY...........................3 PROSPECTUS SUPPLEMENT
RECENT DEVELOPMENTS...................3
SUMMARY...............................4
THE STANDBY BOND PURCHASE
AGREEMENT.........................6 February 21, 2002
THE STANDBY LOAN AGREEMENTS...........6
PLAN OF DISTRIBUTION..................7 ________
LEGAL MATTERS.........................7 *Preliminary, subject to change.
EXPERTS...............................7
SEC POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES..8
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