Filed Pursuant to Rule 424(b)(5)
Registration No. 333-110739
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 25, 2003)
(Alcan Logo)
ALCAN INC.
$500,000,000 5.00% NOTES DUE 2015
ISSUE PRICE: 99.093%
$300,000,000 5.75% NOTES DUE 2035
ISSUE PRICE: 99.265%
Interest payable June 1 and December 1
We will pay interest on the Notes due 2015 and on the Notes due 2035 (together
with the Notes due 2015, the "Notes") each December 1 and June 1. The first
interest payment for the Notes will be made on December 1, 2005.
The Notes due 2015 will mature on June 1, 2015 and the Notes due 2035 will
mature on June 1, 2035. We may redeem the Notes, in whole or from time to time
in part, at our option on any date at a redemption price to be determined as
described in this prospectus supplement under the heading "Description of the
Notes--Optional Redemption Feature."
INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE S-8
FOR A DISCUSSION OF CERTAIN RISKS THAT YOU SHOULD CONSIDER BEFORE PURCHASING ANY
NOTES.
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved of these securities or determined if this prospectus
supplement or the prospectus to which it relates is truthful or complete. Any
representation to the contrary is a criminal offense.
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PRICE TO UNDERWRITING PROCEEDS
PUBLIC DISCOUNTS TO US
------------------------------------------------------------------------------------------------------
Per Note due 2015 99.093% 0.450% 98.643%
-----------------------------------------------------
Total $495,465,000 $2,250,000 $493,215,000
-----------------------------------------------------
Per Note due 2035 99.265% 0.875% 98.390%
-----------------------------------------------------
Total $297,795,000 $2,625,000 $295,170,000
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The Notes will not be listed on any securities exchange. Currently, there is no
public market for the Notes.
We expect that delivery of the Notes will be made to investors through the
book-entry facilities of The Depository Trust Company and its participants,
including Euroclear and Clearstream, Luxembourg, on or about May 31, 2005.
Joint Bookrunners
DEUTSCHE BANK SECURITIES JPMORGAN MERRILL LYNCH & CO.
Lead Managers for the Notes due Lead Managers for the Notes due
2015 2035
and Co-Managers for the Notes due and Co-Managers for the Notes
2035 due 2015
RBC CAPITAL MARKETS ABN AMRO INCORPORATED
SCOTIA CAPITAL BNP PARIBAS
SG CORPORATE & INVESTMENT BANKING HSBC
Co-Managers
CITIGROUP
MORGAN STANLEY
UBS INVESTMENT BANK
May 25, 2005
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
---------------
Forward Looking Statements.................................. S-3
Summary..................................................... S-5
Risk Factors................................................ S-8
Use of Proceeds............................................. S-15
Ratio of Earnings to Fixed Charges.......................... S-15
Description of the Notes.................................... S-16
Canadian Taxation........................................... S-18
United States Taxation...................................... S-19
Underwriters................................................ S-23
Where You Can Find More Information......................... S-25
PROSPECTUS
PAGE
---------------
Forward-Looking Statements.................................. 3
About this Prospectus....................................... 3
Where You Can Find More Information......................... 4
About Alcan Inc. ........................................... 5
Use of Proceeds............................................. 5
Ratios of Earnings to Fixed Charges and Earnings to Combined
Fixed Charges and Preferred Stock Dividends............... 6
Description of Debt Securities.............................. 7
Description of Share Capital................................ 19
Description of Preference Shares............................ 20
Description of Common Shares................................ 22
Description of Warrants..................................... 23
Tax Consequences............................................ 25
Experts..................................................... 25
Validity of Securities...................................... 25
Plan of Distribution........................................ 25
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
AS OF THE DATE OF THIS DOCUMENT.
Unless the context otherwise indicates, the terms "Alcan Inc." or "Alcan,"
the "Company," "we," "us" or "our" mean Alcan Inc. and its controlled
subsidiaries.
S-2
FORWARD LOOKING STATEMENTS
Certain statements made or incorporated by reference in this prospectus are
forward-looking statements within the meaning of the United States Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
subject to risks and uncertainties. Forward-looking statements include, but are
not limited to, statements concerning industry growth and other trend
projections, anticipated financial or operating performance, business and
financial prospects, strategies, objectives, goals, targets and synergies, as
well as the effects on Alcan of its recent acquisitions, including of Pechiney,
and of its spin-off of Novelis Inc. (the "Novelis Spin-Off"). Forward-looking
statements in this prospectus are sometimes preceded by, followed by or include
the words "believes", "expects", "estimates", "intends", "anticipates", "plans",
"may", "could", "should", "will" or similar expressions. Although Alcan's
management believes that the expectations reflected in such forward-looking
statements are reasonable, readers are cautioned that these forward-looking
statements by their nature involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future. Many factors,
in addition to those discussed elsewhere in this prospectus and in the documents
we incorporate by reference, could cause actual results and developments to
differ materially from those expressed or implied by these forward-looking
statements.
The following factors, among others, could cause actual results or outcomes
to differ from the results expressed or implied by forward-looking statements:
- changes in global supply and demand conditions for aluminum and other
products;
- changes in aluminum ingot prices;
- changes in raw materials costs and availability;
- changes in the relative values of various currencies;
- cyclical demand and pricing within the principal markets for Alcan's
products;
- changes in government regulations, particularly those affecting
environmental, health or safety compliance;
- fluctuations in the supply of and prices for power in the areas in which
Alcan maintains production facilities;
- the consequences of transferring, on January 6, 2005, most of the
aluminum rolled products businesses operated by Alcan to Novelis Inc.
("Novelis"), in particular as regards to the liabilities that could
arise as a result of the Novelis Spin-off;
- the effect of integrating acquired businesses and the ability to attain
expected benefits from acquisitions;
- potential discovery of unanticipated commitments or other liabilities
associated with the acquisition and integration of Pechiney;
- major changes in technology that affect Alcan's competitiveness;
- the risk of significant losses from trading operations, including losses
due to market and credit risks associated with derivatives;
- changes in prevailing interest rates and equity market returns related
to pension plan investments, which may result in Alcan's being required
to make larger than expected pension plan contributions;
- potential catastrophic damage, increased insurance and security costs
and general uncertainties associated with the increased threat of
terrorism or war;
- the effect of international trade disputes on Alcan's ability to import
materials, export its products and compete internationally;
- relationships with and financial and operating conditions of customers
and suppliers;
S-3
- economic, regulatory and political factors within the countries in which
Alcan operates or sells products; and
- factors affecting Alcan's operations, such as litigation, labour
relations and negotiations and fiscal regimes.
Additional information concerning factors that could cause actual results
to differ materially from those in forward-looking statements include, but are
not necessarily limited to, those discussed under the heading "Risk Factors" in
this prospectus supplement and under the heading "Risks and Uncertainties" in
the Management's Discussion and Analysis of Financial Condition and Results of
Operations incorporated into our Annual Report on Form 10-K for the year ended
December 31, 2004, which is incorporated by reference into this prospectus.
We do not undertake any obligation to release publicly the results of any
future revisions we may make to forward-looking statements to reflect events or
circumstances after the date of this report or to reflect the occurrence of
unanticipated events.
S-4
SUMMARY
ALCAN INC.
We are a Canadian corporation and the parent company of an international
group operating in many aspects of the aluminum and specialty packaging
businesses. Upon the completion of the Novelis Spin-Off, which occurred in
January 2005, we manage our business along four business groups or operating
segments: Bauxite and Aluminum; Primary Metal; Engineered Products; and
Packaging.
Our operations include:
- the mining and processing of bauxite, the basic aluminum ore;
- the refining of bauxite into alumina;
- the generation of electricity for use in smelting aluminum;
- the smelting of aluminum from alumina;
- the recycling of used and scrap aluminum;
- the fabrication of aluminum, aluminum alloys and non-aluminum materials
into semi-finished and finished products;
- the development and supply of specialized plates, hard alloy extrusions,
precision castings and technology to industrial and commercial end
users;
- the production and conversion of specialty packaging and packaging
products for many industries including the food, pharmaceutical,
cosmetic, personal care and tobacco sectors;
- the distribution and marketing of aluminum, non-aluminum and packaging
products; and
- in connection with our aluminum operations, the production and sale of
industrial chemicals.
We have a network of operations encompassing more than 510 facilities in 55
countries and regions with approximately 70,000 dedicated employees, a global
customer base, innovative products and advanced technologies.
Our principal executive offices are located at 1188 Sherbrooke Street West,
Montreal, Quebec, Canada H3A 3G2, and our telephone number is (514) 848-8000.
S-5
THE OFFERING
The following is not intended to be complete. For a more detailed
description of the Notes, see "Description of the Notes."
ISSUER..................... Alcan Inc.
NOTES OFFERED.............. $500 million aggregate initial principal amount of
Notes due 2015. $300 million aggregate initial
principal amount of Notes due 2035.
MATURITY DATE.............. The maturity date of the Notes due 2015 is June 1,
2015. The maturity date of the Notes due 2035 is
June 1, 2035.
ISSUE PRICE................ In the case of the Notes due 2015, 99.093% plus
accrued interest, if any, from May 31, 2005. In the
case of the Notes due 2035, 99.265% plus accrued
interest, if any, from May 31, 2005.
INTEREST................... The Notes due 2015 will bear interest at 5.00%. The
Notes due 2035 will bear interest at 5.75%.
Interest on the Notes will be payable semi-
annually in arrears. See "Description of the
Notes--Payment of Interest."
RANKING.................... The Notes will rank equally with all of our senior
unsecured indebtedness.
SINKING FUND............... The Notes will not be entitled to the benefit of
any sinking fund.
OPTIONAL REDEMPTION........ We may redeem the Notes, in whole or from time to
time in part, at our option on any date at the
redemption price specified under "Description of
the Notes--Optional Redemption Feature."
ABSENCE OF A PUBLIC MARKET
FOR THE NOTES.............. There is no public trading market for the Notes,
and there is no intention to apply for listing of
the Notes on any national securities exchange or
for quotation of the Notes on any automated dealer
quotation system. See "Risk Factors--We cannot
assure you that an active trading market will
develop for the Notes."
GLOBAL SETTLEMENT.......... Each series of Notes will be represented by one or
more global notes deposited with, or on behalf of,
The Depository Trust Company ("DTC"). You will not
receive certificated Notes unless one of the events
described in the accompanying prospectus under the
heading "Description of Debt Securities--Legal
Ownership and Book-Entry Only Issuance" occurs.
A holder may hold beneficial interests in the Notes
directly through DTC, if the holder is a
participant in DTC, or indirectly through
organizations that are participants in DTC or that
have accounts with participants in DTC, including
Euroclear and Clearstream, Luxembourg. See
"Description of Debt Securities -- Legal Ownership
and Book-Entry Only Issuance" in the accompanying
prospectus.
USE OF PROCEEDS............ We estimate that the net proceeds from the sale of
the Notes will be approximately $788 million. We
will use the net proceeds of this offering to repay
outstanding commercial paper. See "Use of
Proceeds."
RISK FACTORS............... Investing in the notes involves risks. See "Risk
Factors" beginning on page S-8 for a description of
certain risks you should consider before purchasing
any Notes.
S-6
ADDITIONAL NOTES........... We may, without the consent of the holders of the
Notes, issue additional Notes having the same
ranking and the same interest rate, maturity and
other terms as either series of Notes. Any
additional Notes having such similar terms,
together with the Notes of such series, will
constitute a single series of Notes under the
Indenture.
S-7
RISK FACTORS
An investment in the Notes involves risks. You should carefully consider
the following risks and the other information included in and incorporated by
reference into this prospectus supplement and the accompanying prospectus before
deciding to purchase any Notes.
RISKS RELATED TO OUR BUSINESS
WE ARE EXPOSED TO VOLATILITY IN THE ALUMINUM INDUSTRY AND IN ALUMINUM END USE
MARKETS, WHICH MAY ADVERSELY AFFECT OUR FINANCIAL RESULTS BECAUSE SUCH
VOLATILITY MAY SIGNIFICANTLY REDUCE OUR REVENUES WITHOUT RESULTING IN
CORRESPONDING COST SAVINGS.
We are a leading global producer of aluminum and aluminum fabricated
products. The aluminum industry is highly cyclical, with prices subject to
worldwide market forces of supply and demand and other influences. Prices have
been volatile historically and we expect such volatility to continue. Although
we use contractual arrangements with customers, employ certain measures to
manage our exposure to the volatility of London Metals Exchange ("LME") based
prices and are product and segment diversified to a significant extent, our
results of operations could be materially adversely affected by material adverse
changes in economic or aluminum industry conditions generally. In the past,
declining LME prices have adversely affected our profitability. Many of our
costs in these areas are fixed and cannot be reduced in tandem with lower market
prices for our products. Aluminum end use markets, including the automotive and
building and construction sectors, are also cyclical. When downturns occur in
these sectors, decreased demand for aluminum may result in lower prices for our
products and may have a material adverse effect on our results of operations.
WE HAVE MADE SIGNIFICANT CAPITAL EXPENDITURE COMMITMENTS TO EXPAND AND MODERNIZE
PRODUCTION CAPACITY AND REALIZE INTEGRATION BENEFITS.
We are undertaking significant capital projects, including in connection
with the expansion of our Gove alumina refinery in Australia and the expansion
of our Alouette smelter in Quebec. We have undertaken efforts toward
participating in large capital projects in the Republic of Guinea, Oman and
South Africa. We also intend to make significant capital expenditures in
accordance with our plan to realize synergies from our acquisition of Pechiney.
Our involvement in large capital investments subjects us to certain risks,
including risks of unanticipated delays, complications and increased costs
related to project executions. We may be required to commit to capital spending
for particular projects over the course of several years during which market
conditions may change, which could reduce the attractiveness of the project
relative to other potential investments.
WE ARE SUBJECT TO RISKS RELATED TO THE NOVELIS SPIN-OFF.
We derive significant cash flows under supply agreements and other
arrangements with Novelis, which encompasses most of our former rolled products
business, which we spun off to our shareholders earlier this year. In the event
that Novelis' business is subject to downturns or disruptions our cash flows
could be negatively affected. We do not control Novelis and cannot provide any
assurance regarding its operations. Novelis may make strategic decisions that
are disadvantageous to our commercial relationship with it. We may in the future
have disputes with Novelis that would not occur if it were controlled by us. We
must compete with other market participants for continued business from Novelis,
and Novelis could become a competitor to us over the long-term. In connection
with the spin-off, we entered into agreements with Novelis to license and supply
intellectual property, sell assets, lease properties, supply materials, assist
with transitional activities services, provide personnel and other resources,
supply materials, as well take part in other exchanges and transactions. No
assurance can be given that the terms of such arrangements are not inferior to
the terms that we may have been able to achieve with respect to such matters in
the market from a third party.
Our audited financial statements, and associated Management's Discussion
and Analysis of Financial Position and Results of Operations, for 2004 and prior
periods incorporated by reference into this prospectus do not reflect the
Novelis Spin-Off. We included certain unaudited pro-forma condensed consolidated
S-8
financial information reflecting the Novelis Spin-Off under Note 7 to our
audited consolidated financial statements incorporated by reference into this
prospectus. This pro-forma financial information is subject to important
qualifications and assumptions. The pro-forma financial information is for
illustrative and informational purposes only and is not intended to represent or
be indicative of what our financial condition and results of operations would
have been had the Novelis Spin-Off occurred as of the dates indicated. The
pro-forma financial information is not necessarily indicative of our future
financial condition and results of operations.
WE PARTICIPATE IN HIGHLY COMPETITIVE AND CYCLICAL MARKETS, INCLUDING THE
PACKAGING MARKET.
We are participants in the market for packaging materials. Our acquisition
of Pechiney in late 2003 increased the importance of our packaging business to
our overall results. The packaging market is highly competitive, with
competition based on cost and innovation. Our operating results could be
adversely affected if we cannot effectively compete in this market or if the
market continues to experience weakness. Our packaging business cost structure
is sensitive to the price of certain raw materials such as resins. In recent
periods price increases for resins have adversely affected our packaging
business' margins. We also derive a substantial portion of our business from
highly cyclical end use industries, such as the aerospace, housing and
automotive industries.
OUR OPERATIONS ARE AFFECTED BY CONDITIONS AND EVENTS BEYOND OUR CONTROL IN
COUNTRIES WHERE WE HAVE OPERATIONS OR SELL PRODUCTS.
Economic and other factors in the many countries in which we operate,
including inflation, fluctuations in currency and interest rates, competitive
factors, and civil unrest and labor problems, could affect our revenues,
expenses and results of operations. Our operations could also be adversely
affected by government actions such as controls on imports, exports and prices,
new forms of taxation, and increased government regulation in the countries in
which we operate or service customers. We operate in many areas in which
political or economic instability affect our ability to conduct operations or
realize projected economic benefits. We have substantial operations in
developing countries, which may be more vulnerable to risks of war, civil
disturbances, interruption of the supply of electricity and adverse governmental
action, such as nationalization, re-negotiation or nullification of existing
contracts, leases, permits or other agreements, changes in laws, policy and
currency restrictions, as well as other unanticipated risks, which may disrupt
or impede operations and markets, restrict the movement of funds, impose
limitations on foreign exchange transactions or result in the expropriation of
assets. Any of these factors could materially adversely affect our operations in
such countries.
OUR OPERATIONS ARE ENERGY-INTENSIVE AND, AS A RESULT, OUR PROFITABILITY MAY BE
ADVERSELY AFFECTED BY RISING ENERGY COSTS OR BY ENERGY SUPPLY INTERRUPTIONS.
We consume substantial amounts of energy in our operations. Although we
generally expect to meet the energy requirements for our aluminum smelters and
alumina refineries from internal sources or from long-term contracts, the
following factors could materially adversely affect our energy position:
- the unavailability of hydroelectric power due to droughts;
- significant increases in costs of supplied electricity;
- interruptions in energy supply due to equipment failure or other causes;
or
- the inability to extend contracts upon expiration on economical terms.
We obtain significant electricity under contracts which we may not be able
to renew or replace on comparable terms following their expiry.
In addition, aluminum smelters generally require an uninterrupted supply of
intense electrical energy, and any interruption for more than a very short
duration, whatever the cause, may have a major technical, commercial and
financial impact on the activities of the facility concerned.
If energy costs were to rise, or if energy supplies or supply arrangements
were disturbed, our profitability may decline. The factors that affect our
energy costs and supply reliability tend to be specific to each of our
S-9
facilities, and thus our competitors could enjoy a relative advantage over us if
we face energy reliability or cost issues.
OUR PROFITABILITY COULD BE ADVERSELY AFFECTED BY INCREASES IN THE COSTS AND
DISRUPTIONS IN THE AVAILABILITY OF RAW MATERIALS.
The raw materials that we use in manufacturing our products include
alumina, aluminum, caustic soda, platics and calcined petroleum coke and resin.
The prices of many of the raw materials we use depend on supply and demand
relationships at a worldwide level, and are therefore subject to continuous
volatility.
Prices for the raw materials we require may increase from time to time and,
if they do, we may not be able to pass on the entire cost of the increases to
our customers or offset fully the effects of higher raw material costs through
productivity improvements, which may cause our profitability to decline. In
addition, there is a potential time lag between changes in prices under our
purchase contracts and the point when we can implement a corresponding change
under our sales contracts with our customers. As a result, we can be exposed to
fluctuations in raw materials prices since, during the time lag period, we may
have to temporarily bear the additional cost of the change under our purchase
contracts, which could have a negative impact on our profitability.
THE MARKETS FOR OUR PRODUCTS ARE HIGHLY COMPETITIVE AND THE WILLINGNESS OF
CUSTOMERS TO ACCEPT SUBSTITUTIONS FOR OUR PRODUCTS IS HIGH.
The markets for aluminum and packaging products are highly competitive. In
addition, aluminum competes with other materials, such as steel, plastics and
glass, among others, for various applications in our key customer sectors. The
willingness of customers to accept substitutions for our products, the ability
of large customers to apply buyer power in the marketplace to affect the pricing
for fabricated aluminum or packaging products or other developments could
adversely affect our results of operations.
CERTAIN OF OUR CUSTOMERS ARE SIGNIFICANT TO OUR PROFITABILITY, AND WE COULD BE
ADVERSELY AFFECTED BY CHANGES IN THE BUSINESS OR FINANCIAL CONDITION OF THESE
CUSTOMERS.
A significant downturn in the business or financial condition of our
significant customers could materially adversely affect our results of
operations. In addition, if our existing relationships with significant
customers materially deteriorate or are terminated in the future, and we are not
successful in replacing business lost to such customers, our results of
operations may be harmed. Our markets are competitive and customers may seek to
consolidate supplier relationships or change suppliers to accrue cost savings
and other benefits.
WE MAY NOT BE ABLE TO SUCCESSFULLY DEVELOP AND IMPLEMENT NEW TECHNOLOGY REQUIRED
TO ACHIEVE CONTINUED PROFITABILITY.
We have invested in and are involved with a number of technology and
process initiatives. Several technical aspects of these initiatives are still
unproven and the eventual commercial outcomes cannot be assessed with any
certainty. Accordingly, the costs and benefits from our investments in new
technologies and the consequent effects on our future earnings and financial
results may vary widely from present expectations.
We are committed to protecting our trade secrets and investing in research
and development in order to maintain the benefits of our technology in the
future. However, we may not be able to protect, or continue to develop, all of
our proprietary technology in the future. In addition, we may be subject to
litigation in the future regarding the use of proprietary technology that we
have developed.
WE ARE CONTINUING TO INTEGRATE PECHINEY INTO OUR OVERALL OPERATIONS.
We are continuing our efforts to integrate Pechiney into our overall
operations. Our ability to fully realize anticipated merger-related benefits and
synergies resulting from the combination with Pechiney will depend on whether
the integration can be completed in an efficient and effective manner. No
assurance can be provided that the anticipated benefits of the integration will
be achieved completely. Failure to successfully integrate the business
organizations could have a material adverse effect on our financial condition
and results of operations
S-10
and result in the failure to achieve certain of the expected benefits from the
combination, including synergies and other operating efficiencies. The
integration of the business organizations could interfere with the activities of
one or more of the businesses of the companies which could have material adverse
effects on their operations. In addition, the integration of the business
organizations may involve a number of other risks, including the diversion of
management attention and other corporate resources from day-to-day operations.
FUTURE ACQUISITIONS OR DIVESTITURES MAY ADVERSELY AFFECT OUR FINANCIAL
CONDITION.
We have grown partly through the acquisition of other businesses. There are
numerous risks commonly encountered in business combinations, including the risk
that we may not be able to effectively integrate businesses acquired or generate
the cost savings and synergies anticipated. Failure to do so could have a
material adverse effect on our costs, earnings and cash flows.
As part of our strategy for growth, we may continue to make acquisitions,
divestitures or strategic alliances, which may not be completed or may not be
ultimately beneficial to us.
RISKS RELATED TO OUR EXPOSURE TO MARKET RISKS
FLUCTUATIONS IN CURRENCY EXCHANGE RATES MAY NEGATIVELY AFFECT OUR FINANCIAL
RESULTS AND COST STRUCTURE.
In recent years, we have been under increasing cost pressure due to
relative weakness in the U.S. dollar, and foreign currency translation effects
have negatively affected our reported financial results. A substantial portion
of our revenue is determined in U.S. dollars while a significant portion of our
costs related to those revenues are incurred in Canadian and Australian dollars
and in euros. Fluctuations in exchange rates between the U.S. dollar and these
currencies give rise to currency exposure. This exposure is generally favorable
to us when the U.S. dollar strengthens against the Canadian and Australian
dollars and the euro and unfavorable when it weakens. Where judged appropriate,
we seek to manage a portion of the impact of this risk by entering into forward
currency contracts and options, but such hedging activities are limited in
nature, may be costly and in any event do not normally extend beyond three years
and therefore will not eliminate a material portion of the potentially
significant adverse effect that exchange rate fluctuations could have on our
results of operations or financial condition over an extended period. We also
have substantial liabilities denominated in Canadian and Australian dollars and
in euros, and appreciation in such currencies against the U.S. dollar will
inflate the U.S. dollar value of these liabilities.
We conduct operations and own assets worldwide and transact business in a
variety of currencies. Adverse changes in the relative values of currencies can
pressure our ability to sell our products or increase the cost of imports and
can reduce the value of our assets in relative terms.
WE ARE EXPOSED TO MARKET AND CREDIT RISKS FROM OUR DERIVATIVES PORTFOLIO AND
TRADING ACTIVITIES.
We use derivatives to hedge, among other things, exposure to changes in
exchange rates, interest rates and metals prices. In addition, we are engaged in
substantial alumina and other metals trading activities, and we use derivatives
as one way to protect against losses related to commodity price fluctuations.
Our extensive use of derivatives subjects us to market and credit risks. These
risks could result in credit or derivative-related charges and losses
independent of the relative strength of our core businesses. We are therefore
exposed to risks associated with trading activities and with the derivatives
themselves, including counterparty credit risks and the risk of significant
losses if prices move contrary to expectations or if our risk management
procedures prove to be inadequate. The risks from our trading and brokerage
businesses may result in material losses which could adversely affect our
results of operations, liquidity and financial position.
WE ARE SUBJECT TO RISKS CAUSED BY CHANGES IN INTEREST RATES.
Increases in benchmark interest rates will likely increase the interest
cost associated with our variable interest debt in a rising rate environment and
increase the cost of future borrowings, which could harm our financial condition
and results of operations. We continue to monitor our exposure to interest rate
risk and still
S-11
hedge a portion of this risk through the use of derivative instruments where
appropriate. However, there can be no assurance that risk management initiatives
will adequately compensate for adverse changes in interest rates.
WE COULD BE REQUIRED TO MAKE LARGE CONTRIBUTIONS TO OUR DEFINED BENEFIT PENSION
PLANS AS A RESULT OF ADVERSE CHANGES IN INTEREST RATES AND THE EQUITY MARKETS.
We sponsor defined benefit pension plans for our employees in Canada, the
United States, the United Kingdom, Switzerland, France and certain other
countries. Our pension plan assets consist primarily of listed stocks and bonds.
Our estimates of liabilities and expenses for pensions and other post-retirement
benefits incorporate significant assumptions, including expected long-term rates
of return on plan assets and interest rates used to discount future benefits.
Our results of operations, liquidity or shareholders' equity in a particular
period could be materially adversely affected by equity market returns that are
less than their expected long-term rate of return or a decline of the rate used
to discount future benefits.
If the assets of our pension plans do not achieve expected investment
returns for any fiscal year, such deficiency would result in one or more charges
against earnings. In addition, changing economic conditions, poor pension
investment returns or other factors may require us to make substantial cash
contributions to the pension plans in the future, preventing the use of such
cash for other purposes. For example, we recently made a significant
contribution to one of our Canadian defined benefit plans as a result of recent
poor investment performance, we have made significant pension contributions
during the first quarter of 2005 and expect to make further significant
contributions during the remainder of this year and in subsequent periods.
RISKS RELATED TO DISPUTES, PROCEEDINGS AND LAWS AND REGULATIONS
WE HAVE A UNIONIZED WORKFORCE, AND UNION DISPUTES AND OTHER EMPLOYEE RELATIONS
ISSUES COULD HARM OUR FINANCIAL RESULTS.
The majority of our hourly-paid employees are represented by labor unions
under a large number of collective labor agreements in various countries,
including France, Canada and the United States. We may not be able to
satisfactorily renegotiate our collective labor agreements when they expire. In
addition, existing labor agreements may not prevent a strike or work stoppage at
our facilities in the future, and any such work stoppage could have a material
adverse effect on our financial condition and results of operations.
WE MAY BE EXPOSED TO SIGNIFICANT LEGAL PROCEEDINGS OR INVESTIGATIONS.
Our results of operations or liquidity in a particular period could be
affected by significant adverse legal proceedings or investigations, including
environmental, product liability, health and safety and other claims, as well as
commercial or contractual disputes with suppliers or customers.
WE ARE SUBJECT TO A BROAD RANGE OF ENVIRONMENTAL LAWS AND REGULATIONS IN THE
JURISDICTIONS IN WHICH WE OPERATE, AND WE MAY BE EXPOSED TO SUBSTANTIAL
ENVIRONMENTAL COSTS AND LIABILITIES.
We are subject to a broad range of environmental laws and regulations in
each of the jurisdictions in which we have operations. These laws and
regulations impose increasingly stringent environmental protection standards and
permitting requirements regarding, among other things, air emissions, wastewater
storage, treatment and discharges, the use and handling of hazardous or toxic
materials, waste disposal practices, and the remediation of environmental
contamination. The costs of complying with these laws and regulations, including
participation in assessments and remediation of sites and installation of
pollution control facilities, have been and could be significant. In addition,
these standards can create the risk of substantial environmental liabilities,
including liabilities associated with divested assets and past activities. We
are involved in a number of compliance efforts, remediation activities and legal
proceedings concerning environmental matters. We have established reserves for
environmental remediation activities and liabilities. However, environmental
matters cannot be predicted with certainty, and these amounts may not be
adequate, especially in light of potential changes in environmental conditions,
changing interpretations of laws and regulations by regulators and courts, the
discovery of previously unknown environmental conditions, the risk
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of governmental orders to carry out additional compliance on certain sites not
initially included in remediation in progress, our potential liability to
remediate sites for which provisions have not been previously established and
the adoption of more stringent environmental laws. Such future developments
could result in increased environmental costs and liabilities that could have a
material adverse effect on our financial position and results of operations.
Some of our current and potential operations are located in or near
communities that may now, or in the future, regard such operations as having a
detrimental effect on their social and economic circumstances. Should this
occur, the consequences of such a development may have a material adverse impact
upon the profitability or, in extreme cases, the viability of an operation. In
addition, such developments may adversely affect our ability to enter into new
operations in such location or elsewhere.
LEGISLATION AIMED AT CURBING THE EMISSION OF GREENHOUSE GASSES, IN PARTICULAR,
MAY HAVE AN ADVERSE AFFECT ON OUR OPERATIONS AND EXPENSES.
Increasing public concerns over the potential for global climate change
have prompted a number of national and international initiatives to reduce the
emission of greenhouse gases. The European Union and Canada have recently taken
measures to begin to implement the Kyoto Protocol. These measures may
significantly restrict a variety of air emissions from a number of industries
including aluminum manufacturing. While it is too early to predict the precise
requirements and timing of these and other environmental initiatives by
governments and industry groups, future efforts to reduce greenhouse gas
emissions could require significant capital expenditures, affect production
output and increase our energy costs or otherwise have a material adverse effect
on us.
WE MAY BE SUBJECT TO LIABILITY RELATED TO THE USE OF HAZARDOUS SUBSTANCES IN
PRODUCTION.
We use a variety of hazardous materials and chemicals in our manufacturing
processes, as well as in connection with maintenance work on our manufacturing
facilities. In the event that any of these substances or related residues proves
to be toxic, we may be liable for certain costs, including, among others, costs
for health-related claims or removal or retreatment of such substances.
Although we do not currently use asbestos or its derivatives as raw
materials in our manufacturing processes, there is some risk of asbestos
exposure associated with the existence of asbestos-containing materials in our
manufacturing buildings and equipment.
WE ARE, AND MAY BE IN THE FUTURE, SUBJECT TO SUITS REGARDING PRODUCT LIABILITY,
COMMERCIAL DISPUTES AND CLAIMS BY INDIVIDUALS, CORPORATIONS AND GOVERNMENTAL
ENTITIES RELATED TO OUR PAST AND CURRENT ACTIVITIES AND THE ACTIVITIES OF
COMPANIES WE HAVE ACQUIRED AND MAY ACQUIRE IN THE FUTURE.
We are involved in the manufacture of numerous products, including complex
component and finished products. The production of such products used in a
variety of end uses and integrated into separately manufactured end products
entails an inherent risk of suit and liability relating to product operation and
performance. Companies that we have acquired and that we may acquire in the
future may be subject to similar risk of suit and to pending litigation. We
maintain product liability and other insurance to cover liability contingencies.
Our policies, however, are subject to deductibles and recovery limitations as
well as limitations on contingencies covered. Suits against us could be resolved
in a manner that materially and adversely affects our financial condition, and
we could be subject to future material product liability, tort or contractual
suits and to proceedings imposed by governmental entities.
RISKS RELATED TO THE NOTES
AN ACTIVE TRADING MARKET FOR THE NOTES MAY NOT DEVELOP.
Prior to this offering, there has been no public market for the Notes. We
do not intend to apply for listing of the Notes on any securities exchange or
for quotation through The National Association of Securities Dealers Automated
Quotation System. Certain of the underwriters may make a market in the Notes
after this
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offering is completed. However, they are not obligated to and the underwriters
may cease any such market-making activities at any time. If an active market
does not develop or is not maintained, the market price of the Notes may decline
and you may not be able to resell the Notes.
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USE OF PROCEEDS
We expect that the net proceeds to us of the offering of the Notes, after
taking into account underwriting discounts and commissions and our estimated
expenses of the offering, will be approximately $788 million. We will use the
net proceeds of this offering to repay outstanding commercial paper. The
commercial paper indebtedness to be refinanced bears interest at the London
Interbank Offered Rate, or "LIBOR". As of May 24, 2005, the weighted average
interest rate of our commercial paper borrowings was 3.09%.
RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31,
THREE MONTHS ENDED --------------------------------------
MARCH 31, 2005 2004 2003 2002 2001(1)(3) 2000
------------------ ---- ---- ---- ---------- ----
RATIO OF EARNINGS TO FIXED
CHARGES(2).................. 3.63 2.50 3.13 4.04 -- 4.90
---------------
(1) The results for 2001 included restructuring, impairment and other special
charges of $653 million pre-tax in connection with a restructuring program.
(2) Earnings consist of income from continuing operations before the cumulative
effect of accounting changes, before fixed charges (excluding capitalized
interest) and income taxes, and eliminating undistributed income of less
than 50% owned companies. Fixed charges consist of interest expenses and
amortization of debt discount and expense and premium and that portion of
rental payments which is considered as being representative of the interest
factor implicit in our operating leases.
(3) Earnings before fixed charges were inadequate to cover total fixed charges
by $116 million for the year ended December 31, 2001.
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DESCRIPTION OF THE NOTES
The following is a description of the particular terms of the Notes offered
by this prospectus supplement and the accompanying prospectus and, to the extent
inconsistent with the accompanying prospectus, replaces the description of the
general terms and provisions of Debt Securities provided in the prospectus. We
refer potential purchasers of the Notes to that description, as well as to the
following description. The statements in this prospectus supplement concerning
the Notes and the Indenture do not purport to be complete.
GENERAL
Each series of Notes is an issue of debt securities described in the
prospectus that follows. Each series of Notes will be issued as a separate
series of senior debt securities under the Indenture, under which Deutsche Bank
Trust Company Americas (formerly Bankers Trust Company), serves as trustee (the
"Trustee"). The Trustee will also serve as registrar and paying agent with
respect to the Notes.
The Trustee is an affiliate of Deutsche Bank Securities Inc., one of the
joint-book runners of this underwritten offering of the Notes. Under the Trust
Indenture Act of 1939, as amended, due to this affiliation, if a default were to
occur on a series of the Notes, Deutsche Bank Trust Company Americas would be
required to resign as the Trustee of such series within 90 days of the default
unless the default were cured, duly waived, or otherwise eliminated.
The Notes due 2015 will be limited initially to $500 million in aggregate
principal amount and will mature at 100% of their principal amount on June 1,
2015. The Notes due 2035 will be limited initially to $300 million in aggregate
principal amount and will mature at 100% of their principal amount on June 1,
2035. In addition to the Notes, we may issue from time to time other series of
Securities under the Indenture consisting of notes, debentures or other
evidences of indebtedness. Such other series will be separate from and
independent of the Notes. The Notes due 2015 and Notes due 2035 are the
seventeenth and eighteenth series, respectively, of Securities to be issued
under the Indenture. The Notes will be issued only in registered form in
denominations of $1,000 and integral multiples of $1,000. The Notes will not be
entitled to the benefit of any sinking fund.
ADDITIONAL NOTES
We may, without the consent of the holders of the Notes, issue additional
Notes having the same ranking and the same interest rate, maturity and other
terms as either series of Notes. Any additional Notes having such similar terms,
together with the Notes of such series, will constitute a single series of Notes
under the Indenture.
PAYMENT OF INTEREST
Each series of the Notes will bear interest from May 31, 2005 at the
respective applicable interest rate set forth on the cover page of this
prospectus supplement. Interest on the Notes due 2015 and on the Notes due 2035
will be payable semi-annually on June 1 and December 1 of each year (each an
"interest payment date"), commencing December 1, 2005, to the person in whose
name such Notes are registered at the close of business on the preceding May 15
or November 15. Interest on all of the Notes will be computed on the basis of a
360-day year consisting of twelve 30-day months.
OPTIONAL REDEMPTION FEATURE
With respect to each series of Notes, we may redeem the Notes of such
series in whole or from time to time in part, at our option on any date (the
date of any such redemption a "redemption date"), on not less than 30 or more
than 60 days' notice mailed to registered Holders of the such Notes (see
"Description
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of Debt Securities--Legal Ownership and Book- Entry Only Issuance" in the
accompanying prospectus), at a redemption price equal to the greater of:
- 100% of the principal amount of the Notes to be redeemed; and
- the sum of the present values of the Remaining Scheduled Payments
discounted to the redemption date on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate
plus 15 basis points (0.15%), in the case of the Notes due 2015, and 25
basis points (0.25%), in the case of the Notes due 2035,
together with accrued interest on the principal amount of the Notes being
redeemed to the date of redemption.
Unless we default in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the Notes or any portion
thereof called for redemption. On or before any redemption date, we shall
deposit with a paying agent (or the Trustee) money sufficient to pay the
redemption price of and accrued interest on the Notes to be redeemed on such
date. If less than all the Notes of either series are to be redeemed, the Notes
to be redeemed shall be selected by the Trustee by such method as the Trustee
shall deem fair and appropriate.
DEFINITIONS
"Treasury Rate" means, with respect to any redemption date for Notes, (a)
the yield, under the heading that represents the average for the immediately
preceding week, appearing in the most recently published statistical releases
designated "H. 15(5 19)" or any successor publication that is published weekly
by the Board of Governors of the Federal Reserve System and that establishes
yields on actively traded United States Treasury securities, adjusted to
constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Comparable Treasury Issue (if no maturity is
within three months before or after the maturity date of the Notes to be
redeemed, yields for the two published maturities most closely corresponding to
the Comparable Treasury Issue shall be determined and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight-line basis, rounding
to the nearest month) or (b) if such release (or any successor release) is not
published during the week preceding the calculation date or does not contain
such yields, the rate per annum equal to the semiannual equivalent yield to
maturity (computed as of the third business day immediately preceding such
redemption date) of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of its principal amount)
equal to the Comparable Treasury Price for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the series of Notes to be redeemed that would be utilized
at the time of selection and in accordance with customary financial practice in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Notes. "Independent Investment Banker" means one of the
Reference Treasury Dealers appointed by us.
"Comparable Treasury Price" means, with respect to any redemption date, (a)
the average of four Reference Treasury Dealer Quotations for such redemption
date, as the case may be, after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (b) if the Trustee obtains fewer than
four such Reference Treasury Dealer Quotations, the average of all such
Quotations. "Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer as of 5:00 p.m., New
York City time, on the third business day preceding such redemption date.
"Reference Treasury Dealer" means (1) each of Deutsche Bank Securities
Inc., J.P. Morgan Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, and their respective successors; provided, however, that if any of
the foregoing shall cease to be a primary U.S. Government securities dealer in
New York City (a "Primary Treasury Dealer"), the Company shall substitute
therefor another nationally
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recognized investment banking firm that is a Primary Treasury Dealer, and (2)
any other Primary Treasury Dealer selected by the Company.
"Remaining Scheduled Payments" means, with respect to each Note to be
redeemed, the remaining scheduled payments of the principal thereof and interest
thereon that would be due after the related redemption date but for such
redemption; provided, however, that if such redemption date is not an interest
payment date with respect to such Note, the amount of the next succeeding
scheduled interest payment thereon will be reduced by the amount of interest
accrued thereon to such redemption date.
AMENDMENT OF INDENTURE
Concurrently with Alcan's issuance of the Notes, it will enter into a
supplemental indenture with the Trustee. The terms of the supplemental indenture
will provide that all financial calculations undertaken under the Indenture will
be made in accordance with accounting principles from time to time generally
accepted in the United States. The terms of the supplemental indenture will
apply to the Notes and to all series of securities issued under the Indenture
subsequent to the issuance of the Notes. The supplemental indenture is intended
to update the Indenture for Alcan's change in its primary presentation of
financial information from Canadian to U.S. GAAP beginning in 2004. See
"Description of Debt Securities--Indenture Covenants" in the accompanying
Prospectus.
GLOBAL SETTLEMENT
Each series of Notes will be issued in the form of one or more fully
registered global notes which will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York, as depositary ("DTC"), and
registered in the name of DTC's nominee. Except as set forth in the prospectus,
the global Notes may be transferred, in whole and not in part, only to DTC or
another nominee of DTC. A holder may hold beneficial interests in the Notes
directly through DTC, if the holder is a participant in DTC, or indirectly
through organizations that are participants in DTC or that have accounts with
participants in DTC, including Euroclear and Clearstream, Luxembourg. See
"Description of Debt Securities--Legal Ownership and Book--Entry Only Issuance"
in the prospectus.
So long as any series of Notes is represented by a global certificate, the
interest payable on the applicable series of Notes will be paid to Cede & Co.,
the nominee of DTC, or its registered assigns as the registered owner of the
global certificate representing such Notes by wire transfer of immediately
available funds on each of the applicable interest payment dates, not later than
2:30 p.m., New York City time. If the Notes are no longer represented by a
global certificate, payment of interest may, at our option, be made by check
mailed to the person entitled to payment. No service charge will be made for any
transfer or exchange of Notes but we may require payment of a sum sufficient to
satisfy any tax or governmental charge payable in connection with the transfer
or exchange.
Settlement for the Notes will be made in immediately available funds.
Secondary market trading in the Notes will be settled in immediately available
funds.
CANADIAN TAXATION
We have been advised by Hugh Berwick, Senior Tax Counsel of Alcan Inc., our
Canadian tax counsel, of the following tax considerations under the laws of
Canada and Quebec as currently in effect and under the current administrative
practices of the Canadian and Quebec tax authorities:
- there will be no non-resident withholding taxes payable under the laws
of Canada in respect of the Notes or the interest thereon if the
beneficial owner of the Notes is a person with whom we deal at arm's
length;
- there will be no non-resident withholding taxes payable under the laws
of Quebec in respect of the Notes or any interest on the Notes;
- there will be no taxes on income or capital gains payable under the laws
of Canada or of Quebec in respect of the Notes or the interest on the
Notes by any owner who is not, and is not deemed to be,
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a resident of Canada and who does not, and is not deemed to, use or hold
the Notes in carrying on a business in Canada; and
- there will be no estate taxes or succession duties imposed by Canada or
Quebec in respect of the Notes or any interest on the Notes.
Prospective investors should contact their own tax advisers for specific
advice relative to their particular tax situations.
UNITED STATES TAXATION
This section describes the material United States federal income tax
consequences of ownership and disposition of the Notes we are offering. This
section is the opinion of Sullivan & Cromwell LLP, counsel to Alcan Inc. It
applies to you only if you acquire Notes in the offering at the offering price
and you hold your Notes as capital assets for tax purposes. This section does
not apply to you if you are a member of a class of holders subject to special
rules, such as:
- a dealer in securities or currencies,
- a trader in securities that elects to use a mark-to-market method of
accounting for your securities holdings,
- a bank,
- a life insurance company,
- a tax-exempt organization,
- a person that owns Notes that are a hedge or that are hedged against
interest rate risks,
- a person that actually or constructively owns 10% or more of the voting
stock of Alcan Inc.,
- a person that owns Notes as part of a straddle or conversion transaction
for tax purposes, or
- a United States holder (as defined below) whose functional currency for
tax purposes is not the U.S. dollar.
If you purchase Notes at a price other than the offering price, the
amortizable bond premium or market discount rules may also apply to you. You
should consult your tax advisor regarding this possibility.
This section is based on the Internal Revenue Code of 1986, as amended, its
legislative history, existing and proposed regulations under the Internal
Revenue Code, published rulings and court decisions, all as currently in effect.
These laws are subject to change, possibly on a retroactive basis.
Please consult your own tax advisor concerning the consequences of owning
these Notes in your particular circumstances under the Internal Revenue Code and
the laws of any other taxing jurisdiction.
UNITED STATES HOLDERS
This subsection describes the tax consequences to a United States holder.
You are a United States holder if you are a beneficial owner of a Note and you
are:
- a citizen or resident of the United States,
- a domestic corporation,
- an estate whose income is subject to United States federal income tax
regardless of its source, or
- a trust if a United States court can exercise primary supervision over
the trust's administration and one or more United States persons are
authorized to control all substantial decisions of the trust.
If you are not a United States holder, this subsection does not apply to
you and you should refer to "United States Alien Holders" below.
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PAYMENTS OF INTEREST
You will be taxed on interest on your Note as ordinary income at the time
you receive the interest or when it accrues, depending on your method of
accounting for tax purposes. Interest paid by Alcan Inc. on the Notes is income
from sources outside the United States subject to the rules regarding the
foreign tax credit allowable to a United States holder. Under the foreign tax
credit rules, interest paid in taxable years beginning before January 1, 2007,
with certain exceptions, will be "passive" or "financial services" income, while
interest paid in taxable years beginning after December 31, 2006 will, depending
on your circumstance, be "passive" or "general" income, which, in either case,
is treated separately from other types of income for purposes of computing the
foreign tax credit.
PURCHASE, SALE AND RETIREMENT OF THE NOTES
Your tax basis in your Note generally will be its cost. You will generally
recognize capital gain or loss on the sale or retirement of your Note equal to
the difference between the amount you realize on the sale or retirement,
excluding any amounts attributable to accrued but unpaid interest (which are
treated as interest as described under "--Payments of Interest" above), and your
tax basis in your Note. Capital gain of a noncorporate United States holder that
is recognized before January 1, 2009 is generally taxed at a maximum rate of 15%
where the holder has a holding period greater than one year. Gain or loss, if
any, will generally be U.S. source income for purposes of computing a United
States shareholder's foreign tax credit limitation.
UNITED STATES ALIEN HOLDERS
This subsection describes the tax consequences to a United States alien
holder. You are a United States alien holder if you are a beneficial owner of a
Note and you are, for United States federal income tax purposes:
- a nonresident alien individual,
- a foreign corporation,
- a foreign partnership, or
- an estate or trust that in either case is not subject to United States
federal income tax on a net income basis on income or gain from a Note.
If you are a United States holder, this subsection does not apply to you.
Under United States federal income and estate tax law, and subject to the
discussion of backup withholding below, if you are a United States alien holder
of a Note, interest on a Note paid to you is exempt from United States federal
income tax, including withholding tax, whether or not you are engaged in a trade
or business in the United States, unless:
- you are a life insurance company carrying on a United States insurance
business to which the interest is attributable, within the meaning of
the Internal Revenue Code, or
- you both:
-- have an office or other fixed place of business in the United States
to which the interest is attributable, and
-- derive the interest in the active conduct of a banking, financing or
similar business within the United States.
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PURCHASE, SALE, RETIREMENT AND OTHER DISPOSITION OF THE NOTES.
If you are a United States alien holder of a Note, you generally will not
be subject to United States federal income tax on gain realized on the sale,
exchange or retirement of a Note unless:
- the gain is effectively connected with your conduct of a trade or
business in the United States, or
- you are an individual, you are present in the United States for 183 or
more days during the taxable year in which the gain is realized and
certain other conditions exist.
For purposes of the United States federal estate tax, the Notes will be
treated as situated outside the United States and will not be includible in the
gross estate of a holder who is neither a citizen nor a resident of the United
States at the time of death.
BACKUP WITHHOLDING AND INFORMATION REPORTING
If you are a noncorporate United States holder, information reporting
requirements, on Internal Revenue Service Form 1099, generally will apply to:
- payments of principal and interest on a Note within the United States,
including payments made by wire transfer from outside the United States
to an account you maintain in the United States, and
- the payment of the proceeds from the sale of a Note effected at a United
States office of a broker.
Additionally, backup withholding will apply to such payments if you are a
noncorporate United States holder that:
- fails to provide an accurate taxpayer identification number,
- is notified by the Internal Revenue Service that you have failed to
report all interest and dividends required to be shown on your federal
income tax returns, or
- in certain circumstances, fails to comply with applicable certification
requirements.
If you are a United States alien holder, you are generally exempt from
backup withholding and information reporting requirements with respect to:
- payments of principal and interest made to you outside the United States
by Alcan Inc. or another non-United States payor, and
- other payments of principal and interest and the payment of the proceeds
from the sale of a Note effected at a United States office of a broker,
as long as the income associated with such payments is otherwise exempt
from United States federal income tax, and:
-- the payor or broker does not have actual knowledge or reason to know
that you are a United States person and you have furnished to the
payor or broker:
-- an Internal Revenue Service Form W-8BEN or an acceptable substitute
form upon which you certify, under penalties of perjury, that you are
a non-United States person, or
-- other documentation upon which it may rely to treat the payments as
made to a non-United States person in accordance with U.S. Treasury
regulations, or
-- you otherwise establish an exemption.
Payment of the proceeds from the sale of a Note effected at a foreign
office of a broker generally will not be subject to information reporting or
backup withholding. However, a sale of a Note that is effected at a foreign
office of a broker will be subject to information reporting and backup
withholding if:
- the proceeds are transferred to an account maintained by you in the
United States,
- the payment of proceeds or the confirmation of the sale is mailed to you
at a United States address, or
- the sale has some other specified connection with the United States as
provided in U.S. Treasury regulations,
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unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above are
met or you otherwise establish an exemption.
In addition, a sale of a Note effected at a foreign office of a broker will
be subject to information reporting if the broker is:
- a United States person,
- a controlled foreign corporation for United States tax purposes,
- a foreign person 50% or more of whose gross income is effectively
connected with the conduct of a United States trade or business for a
specified three-year period, or
- a foreign partnership, if at any time during its tax year:
-- one or more of its partners are "U.S. persons", as defined in U.S.
Treasury regulations, who in the aggregate hold more than 50% of
the income or capital interest in the partnership, or
-- such foreign partnership is engaged in the conduct of a United
States trade or business,
unless the broker does not have actual knowledge or reason to know that you are
a United States person and the documentation requirements described above are
met or you otherwise establish an exemption. Backup withholding will apply if
the sale is subject to information reporting and the broker has actual knowledge
that you are a United States person.
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UNDERWRITERS
Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated are the representatives of the
underwriters of this offering. Under the terms and subject to the conditions
contained in an underwriting agreement dated May 25, 2005, the underwriters
named below have severally agreed to purchase and we have agreed to sell to
them, severally, the following respective principal amounts of the Notes:
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
UNDERWRITER NOTES DUE 2015 NOTES DUE 2035
----------- ------------------- -------------------
Deutsche Bank Securities Inc. ............................ 125,465,000 75,522,000
J.P. Morgan Securities Inc. .............................. 125,470,000 75,519,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 125,465,000 75,519,000
RBC Capital Markets Corporation........................... 21,200,000 6,240,000
Scotia Capital (USA) Inc.................................. 21,200,000 6,240,000
SG Americas Securities, LLC............................... 21,200,000 6,240,000
ABN AMRO Incorporated..................................... 10,000,000 12,000,000
BNP Paribas Securities Corp............................... 10,000,000 12,000,000
HSBC Securities (USA) Inc................................. 10,000,000 12,000,000
Citigroup Global Markets Inc.............................. 10,000,000 6,240,000
Morgan Stanley & Co. Incorporated......................... 10,000,000 6,240,000
UBS Securities LLC........................................ 10,000,000 6,240,000
------------ ------------
Total..................................................... $500,000,000 $300,000,000
============ ============
The underwriting agreement provides that the underwriters are obligated to
purchase all of the Notes if any are purchased. The underwriting agreement also
provides that if an underwriter defaults the purchase commitments of
non-defaulting underwriters may be increased or the offering of the Notes may be
terminated.
All sales of Notes in the United States will be made through U.S.
registered broker/dealers.
The underwriters propose to offer the Notes initially at the public
offering price on the cover page of this prospectus supplement and to selling
group members at that price less a selling concession of 0.30% of the principal
amount in the case of the Notes due 2015 and 0.50% of the principal amount in
the case of the Notes due 2035. The underwriters and selling group members may
allow a discount of 0.15% of the principal amount in the case of the Notes due
2015 and a discount of 0.25% of the principal amount in the case of the Notes
due 2035 on sales to other broker/dealers. After the initial public offering the
underwriters may change the public offering price and concession and discount to
broker/dealers.
We have agreed not to offer or sell certain securities substantially
similar to the Notes prior to the closing of the sale of the Notes.
We estimate that our out-of-pocket expenses for this offering will be
approximately $400,000.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.
Certain of the underwriters and their respective affiliates have, from time
to time, performed various investment or commercial banking and financial
advisory services for us in the ordinary course of business and may from time to
time in the future provide such services to us, for which they have received and
may continue to receive customary fees.
In connection with the offering, the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions, and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934 (the "Exchange Act").
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- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
- Over-allotment involves sales by the underwriters of securities in
excess of the principal amount of the Notes the underwriters are
obligated to purchase, which creates a syndicate short position.
- Syndicate covering transactions involve purchases of the Notes in the
open market after the distribution has been completed in order to cover
syndicate short positions. A short position is more likely to be created
if the underwriters are concerned that there may be downward pressure on
the price of the Notes in the open market after pricing that could
adversely affect investors who purchase in the offering.
- Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when the Notes originally sold by the syndicate
member are purchased in a stabilizing transaction or a syndicate
covering transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may have the effect of raising or maintaining the market price of the Notes
or preventing or retarding a decline in the market price of the Notes. As a
result, the price of the Notes may be higher than the price that might otherwise
exist in the open market. These transactions may be effected in the
over-the-counter market or otherwise and, if commenced, may be discontinued at
any time.
Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc. will make the
Notes available for distribution on the Internet through a proprietary Web site
and/or a third party system operated by MarketAxess Corporation, an
Internet-based communications technology provider. MarketAxess Corporation is
providing the system as a conduit for communications between Deutsche Bank
Securities Inc. and J.P. Morgan Securities Inc. and their respective customers
and is not a party to any transactions. MarketAxess Corporation, a registered
broker-dealer, will receive compensation from Deutsche Bank Securities Inc. and
J.P. Morgan Securities Inc. based on transactions Deutsche Bank Securities Inc.
and J.P. Morgan Securities Inc. conduct through the system. Deutsche Bank
Securities Inc. and J.P. Morgan Securities Inc. will make the Notes available to
their respective customers through Internet distributions, whether made through
a proprietary or third-party system, on the same terms as distributions made
through other channels.
S-24
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information with
the SEC. You may read and copy any document we file at the SEC's public
reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of the
public reference room. Our SEC filings are also available to the public over the
Internet at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, 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 supplement, and information that we
file later with the SEC will automatically update and supersede this
information. We incorporate by reference the following documents we filed with
the SEC and our future filings with the SEC under Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act until we or the underwriters sell all of the Notes:
- Annual Report on Form 10-K for the year ended December 31, 2004;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2005;
- those portions of our Management Proxy Circular for the annual meeting
of shareholders held on April 28, 2005 that are expressly incorporated
by reference in the Annual Report on Form 10-K; and
- Each of our Current Reports on Form 8-K, dated January 7, 2005, April
19, 2005 and April 29, 2005.
Information furnished under Item 2.02 or Item 7.01 of our Current Reports
on Form 8-K is not incorporated by reference in this prospectus supplement.
You may request a copy of these filings at no cost, by writing or calling
us at the following address:
Alcan Inc.
1188 Sherbrooke Street West
Montreal, Quebec, Canada H3A 3G2
(514) 848-8000
Attention: Secretary
Our common shares are traded on the New York Stock Exchange and on the
Toronto Stock Exchange under the symbol "AL". You may also inspect our SEC
filings at the offices of the New York Stock Exchange, 11 Wall Street, New York,
New York 10005.
S-25
PROSPECTUS
ALCAN INC.
[ALCAN LOGO]
$3,000,000,000
SENIOR DEBT SECURITIES
SUBORDINATED DEBT SECURITIES
PREFERENCE SHARES
COMMON SHARES
WARRANTS
---------------------
Alcan Inc. intends to offer at one or more times separately or in
combination debt securities, equity securities and warrants with a total
offering price not to exceed $3,000,000,000. We will provide the specific prices
and other terms of these securities in supplements to this prospectus. You
should read this prospectus and the applicable supplement carefully before you
invest.
Alcan Inc. may sell the securities (or any combination) to or through one
or more underwriters, dealers or agents. The names of the underwriters, dealers
or agents will be set forth in supplements to this prospectus.
Alcan Inc.'s common shares are listed on the New York Stock Exchange and
The Toronto Stock Exchange under the symbol "AL".
---------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated November 25, 2003.
TABLE OF CONTENTS
Forward-Looking Statements.................................. 3
About this Prospectus....................................... 4
Where You Can Find More Information......................... 4
About Alcan Inc. ........................................... 6
Use of Proceeds............................................. 6
Ratios of Earnings to Fixed Charges and Earnings to Combined
Fixed Charges and
Preferred Stock Dividends................................. 7
Description of Debt Securities.............................. 9
Description of Share Capital................................ 21
Description of Preference Shares............................ 22
Description of Common Shares................................ 24
Description of Warrants..................................... 25
Tax Consequences............................................ 27
Experts..................................................... 27
Validity of Securities...................................... 27
Plan of Distribution........................................ 28
FORWARD LOOKING STATEMENTS
Certain statements made or incorporated by reference in this prospectus are
forward-looking statements. These forward-looking statements are subject to
risks and uncertainties. Forward-looking statements include, but are not limited
to, statements concerning industry growth and other trend projections,
anticipated financial or operating performance, business and financial
prospects, strategies, objectives, goals, targets and synergies, and the savings
and benefits anticipated to be realized from the combination of Alcan and
Pechiney. Forward-looking statements in this prospectus are sometimes preceded
by, followed by or include the words "believes", "expects", "estimates",
"intends", "anticipates", "plans", "may", "could", "should", "will" or similar
expressions. Although Alcan's management believes that the expectations
reflected in such forward-looking statements are reasonable, readers are
cautioned that these forward-looking statements by their nature involve risk and
uncertainty because they relate to events and depend on circumstances that will
occur in the future. Many factors, in addition to those discussed elsewhere in
this prospectus and in the documents we incorporate by reference, could cause
actual results and developments to differ materially from those expressed or
implied by these forward-looking statements.
Factors that could cause actual results or outcomes to differ materially
from the results expressed or implied by forward-looking statements include, but
are not necessarily limited to, among other things:
- changes in global aluminum supply and demand conditions;
- changes in aluminum ingot prices;
- changes in raw materials costs and availability;
- changes in the relative values of various currencies;
- cyclical demand and pricing within the principal markets for Alcan's and
Pechiney's products;
- changes in government regulations, particularly those affecting
environmental, health or safety compliance;
- fluctuations in the supply of and prices for energy in the areas in which
Alcan or Pechiney maintains production facilities;
- the effect of integrating acquired businesses (including Pechiney) and
the ability to realize anticipated savings and benefits;
- potential catastrophic damage, increased insurance and security costs and
general uncertainties associated with the increased threat of terrorism
or war;
- the effect of international trade disputes on Alcan's or Pechiney's
ability to import materials, export its products and compete
internationally;
- relationships with, and financial and operating conditions of, customers
and suppliers;
- economic, regulatory and political factors within the countries in which
Alcan or Pechiney operate or sell products; and
- factors affecting Alcan's operations, including after the acquisition of
Pechiney, such as litigation, labor relations and negotiations and fiscal
regimes.
We may note additional factors in this prospectus, in an accompanying
prospectus supplement and in documents incorporated by reference into this
prospectus and an accompanying prospectus supplement. We undertake no obligation
to release publicly the results of any future revisions we may make to
forward-looking statements to reflect events or circumstances after the date of
this prospectus or to reflect the occurrence of unanticipated events.
3
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission (SEC) utilizing a "shelf" registration, or
continuous, process. Under this shelf process, we may, from time to time, sell
any combination of the following securities described in this prospectus in one
or more offerings with a total offering price not to exceed $3,000,000,000:
- senior debt securities;
- subordinated debt securities;
- preference shares;
- common shares (together with associated common shares purchase rights);
and
- warrants, rights or other securities exercisable or exchangeable for or
convertible into equity securities or debt securities.
The common shares and the preference shares are referred to as the equity
securities; the senior debt securities and the subordinated debt securities are
referred to as the debt securities; the equity securities, the debt securities
and the warrants are referred to as the securities.
Unless otherwise indicated, dollar amounts provided in this prospectus are
denominated in U.S. dollars.
This prospectus provides you with a general description of the securities
we may offer. Each time we sell the securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering. A prospectus supplement may include a discussion of risks or other
special considerations applicable to the offered securities or to us. A
prospectus supplement may also add, update or change information in this
prospectus. If there is any inconsistency between the information in this
prospectus and the applicable prospectus supplement, you must rely on the
information in the prospectus supplement. Please carefully read both this
prospectus and the applicable prospectus supplement together with additional
information described under the heading "WHERE YOU CAN FIND MORE INFORMATION".
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with
the SEC. You may read and copy any document we file at the SEC's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Our SEC filings are also available to the public over the
Internet at the SEC's web site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, 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 information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below, and filings that we will
make after the date of the filing of any amendment to the registration statement
of which this prospectus forms a part and prior to the effectiveness of the
registration statement and our other future filings with the SEC under Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until we or
any underwriters sell all of the securities:
- Annual Report on Form 10-K for the year ended December 31, 2002, as
amended by the Company's amendment to such annual report on Form 10-K/A
filed on September 11, 2003;
- those portions of Alcan Inc.'s Annual Report for the year ended December
31, 2002 and Management Proxy Circular for the annual meeting of
shareholders held on April 24, 2003 that are expressly incorporated by
reference in the Annual Report on Form 10-K, as amended;
- Quarterly Reports on Form 10-Q (i) for the quarterly period ended March
31, 2003, as amended by the Company's amendment to such quarterly report
on Form 10-Q/A filed September 11, 2003;
4
(ii) for the quarterly period ended June 30, 2003; and (iii) for the
quarterly period ended September 30, 2003; and
- Current Reports on Form 8-K, dated (i) April 16, 2003 (information
included under Item 5); (ii) May 2, 2003, as amended by the Company's
amendment to such current report on Form 8-K/A filed on August 1, 2003;
(iii) July 8, 2003; (iv) September 11, 2003; (v) September 15, 2003; (vi)
October 22, 2003 (information included under Item 5); (vii) November 18,
2003; and (viii) November 25, 2003.
Information furnished under Item 9 or Item 12 of our current reports on
Form 8-K is not incorporated by reference in this prospectus. We furnished
information under Item 12 of our current reports on Form 8-K filed on April 16,
2003, July 22, 2003 and October 22, 2003.
We make available free of charge through our website, accessible at
www.alcan.com, all of our reports and other information filed with or furnished
to the SEC by means of a hyperlink to the SEC's EDGAR database of electronic
filings. We also post on our website annual and quarterly reports filed with the
SEC as soon as reasonably practicable after the reports are electronically filed
with the SEC. Material contained on or accessible through our website is not
incorporated into this prospectus. You may also request a copy of these filings
at no cost, by writing or calling us at the following address:
Alcan Inc.
1188 Sherbrooke Street West
Montreal, Quebec, Canada H3A 3G2
(514) 848-8000
Attention: Secretary
Our common shares are traded on the New York Stock Exchange under the
symbol "AL". You may inspect our reports filed with or furnished to the SEC and
other information concerning us at the offices of the New York Stock Exchange,
11 Wall Street, New York, New York 10005.
You should rely only on the information incorporated by reference or
provided in this prospectus and any applicable supplement. We have not
authorized anyone else to provide you with other or different information.
Neither we nor any underwriter or agent will make an offer to sell these
securities in any jurisdiction where the offer or sale is not permitted. Unless
otherwise stated in the prospectus supplement, we have not qualified the
securities for sale under the securities laws of any Province or Territory of
Canada and the securities are not being and may not be offered or sold in Canada
in violation of the securities laws of any Province or Territory of Canada. You
should assume that the information appearing in this prospectus, as well as
information we have previously filed with the SEC and incorporated by reference,
is accurate only as of the date on the front cover of this prospectus. Our
business, financial condition, results of operations and prospects, as well as
applicable laws and regulations, may have changed since that date. You should
assume that the information appearing in a prospectus supplement, as well as
information contained in a document incorporated by reference in a prospectus
supplement, is accurate only as of the date of the prospectus supplement or
incorporated document.
We are a Canadian corporation. Most of our directors and officers, as well
as the experts named in this prospectus, are not citizens or residents of the
United States and all or a substantial part of the assets of these individuals
may be located outside the United States. Also, a large part of our assets are
located outside the United States. As a result, it may be difficult for you to
effect service of process within the United States upon these individuals or to
realize against them or us within the United States upon judgments of courts of
the United States predicated upon civil liabilities under the Securities Act of
1933. Roy Millington, Corporate Secretary, our Canadian counsel, has advised us,
however, that the civil liability provisions of that Act may be enforced in
original actions taken in the Province of Quebec against us or any such
individual, but judgments of United States courts predicated on such provisions
will not be enforceable in the Province of Quebec unless they meet the
requirements for the recognition and enforcement of foreign judgments under the
Civil Code of Quebec.
5
ABOUT ALCAN INC.
We are a Canadian corporation and the parent company of an international
group operating in many aspects of the aluminum and speciality packaging
businesses.
Our operations include:
- the mining and processing of bauxite, the basic aluminum ore;
- the refining of bauxite into alumina;
- the generation of electricity for use in smelting aluminum;
- the smelting of aluminum from alumina;
- the recycling of used and scrap aluminum;
- the fabrication of aluminum, aluminum alloys and non-aluminum materials
into semi-finished and finished products;
- the production and conversion of specialty packaging and packaging
products for many industries including the food, pharmaceutical,
cosmetic, personal care and tobacco sectors;
- the distribution and marketing of aluminum, non-aluminum and packaging
products; and
- in connection with our aluminum operations, the production and sale of
industrial chemicals.
We have a network of operations in 42 countries with 54,000 dedicated
employees, a global customer base, innovative products and advanced
technologies.
Our principal executive offices are located at 1188 Sherbrooke Street West,
Montreal, Quebec, Canada H3A 3G2, and our telephone number is (514) 848-8000.
Unless the context otherwise indicates, the terms "Alcan Inc." or "Alcan", "we",
"us" or "our" mean Alcan Inc. and its controlled subsidiaries.
USE OF PROCEEDS
Unless otherwise indicated in an accompanying prospectus supplement, we
expect to use the net proceeds from the sale of securities for any general
corporate purposes, which may include, among other things, working capital,
capital expenditures, repurchase of our common shares or preference shares, the
repayment of short-term or long-term borrowings or acquisitions. Unless
otherwise indicated, funds that will not be used immediately for such purposes
may be invested in short-term investments.
6
RATIOS OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table shows our consolidated ratios of earnings to fixed
charges and earnings to combined fixed charges and preferred stock dividends for
the periods indicated:
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------
2003 2002(3) 2001(3)(4) 2000(3) 1999 1998
----------------- ------- ---------- ------- ------ ----
Ratio of Earnings to Fixed
Charges (Canadian GAAP)(1).... 3.99 4.03 1.09(2) 5.49(2) 5.79(2) 5.87
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends (Canadian
GAAP)(1)...................... 3.83 3.89 1. 05(2) 5.01(2) 5.22(2) 5.23
---------------
(1) The ratio of earnings to fixed charges is determined by dividing fixed
charges (including capitalized interest) into income from continuing
operations before fixed charges (excluding capitalized interest) and income
taxes, and eliminating undistributed income of less than 50% owned persons.
The ratio of earnings to combined fixed charges and preferred stock
dividends is determined by dividing the sum of fixed charges (including
capitalized interest) and preferred stock dividends into income from
continuing operations before fixed charges (excluding capitalized interest)
and income taxes, and eliminating undistributed income of less than 50%
owned persons. Fixed charges consist of interest expenses and amortization
of debt discount and expense and premium and that portion of rental payments
which is considered as being representative of the interest factor implicit
in our operating leases. The ratios shown above are based on Alcan's
consolidated financial statements, which were prepared in accordance with
generally accepted accounting principles in Canada.
(2) Revised due to the accounting change described in Note 3, Accounting
Changes, under Deferred Foreign Exchange Translation Gains and Losses, to
the Consolidated Financial Statements in our Amendment to Annual Report on
Form 10-K/A, which amends our Annual Report on Form 10-K for the fiscal year
ended December 31, 2002, which is incorporated by reference into this
prospectus.
(3) Ratios for 2002, 2001 and 2000 have been restated to exclude the impact of
discontinued operations.
(4) The results for 2001 included restructuring, impairment and other special
charges of pre-tax $654 million in connection with a restructuring program.
The following table shows our consolidated ratios of earnings to fixed
charges and earnings to combined fixed charges and preferred stock dividends for
the periods indicated as determined under generally accepted accounting
principles in the United States.
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------------------
2003 2002(2) 2001(2)(3) 2000(2) 1999 1998
----------------- ------- ---------- ------- ---- ----
Ratio of Earnings to Fixed Charges
(U.S. GAAP) (1)................. 3.93 4.28 0.85 5.49 5.85 6.01
Ratio of Earnings to Combined
Fixed Charges and Preferred
Stock Dividends (U.S. GAAP)
(1)............................. 3.77 4.14 0.82 5.02 5.26 5.35
---------------
(1) Earnings consist of income from continuing operations before cumulative the
effect of accounting changes, before fixed charges (excluding capitalized
interest) and income taxes, and eliminating undistributed income of less
than 50% owned persons. Fixed charges consist of interest expenses and
amortization of debt discount and expense and premium and that portion of
rental payments which is considered as being representative of the interest
factor implicit in our operating leases.
(2) Ratios for 2002, 2001 and 2000 have been restated to exclude the impact of
discontinued operations.
7
(3) The results for 2001 included restructuring, impairment and other special
charges of pre-tax $654 million in connection with a restructuring program.
For further information regarding differences between Canadian and United
States generally accepted accounting principles, see note 7 to the Consolidated
Financial Statements in our Amendment to Annual Report on Form 10-K/A, which
amends our Annual Report on Form 10-K for the fiscal year ended December 31,
2002 and note 5 to the unaudited interim consolidated financial statements in
our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
2003, each of which is incorporated by reference into this prospectus.
8
DESCRIPTION OF DEBT SECURITIES
RANK AND UNSECURED STATUS
We may issue senior or subordinated debt securities from time to time.
Neither the senior debt securities nor the subordinated debt securities will be
secured by any of our property or assets. Thus, by owning a debt security, you
are one of our unsecured creditors.
The senior debt securities will constitute part of our senior debt and will
rank equally with all of our other unsecured and unsubordinated debt.
The subordinated debt securities will constitute part of our subordinated
debt and will be subordinate in right of payment to all of our senior
indebtedness, as that term is defined in the Indenture. The prospectus
supplement for any series of subordinated debt securities will indicate the
approximate amount of senior indebtedness outstanding as of the end of our most
recent fiscal quarter. We will not be limited in our ability to subsequently
incur additional senior indebtedness.
We use the term debt securities in this prospectus to refer to both the
senior debt securities and the subordinated debt securities.
INDENTURE FOR THE DEBT SECURITIES
The debt securities covered by this prospectus will be issued in one or
more series under an Indenture dated as of May 15, 1983, as supplemented (as so
supplemented, the Indenture), between us and Deutsche Bank Trust Company
Americas (formerly Bankers Trust Company), as Trustee. In the event that we
issue subordinated debt securities we will enter into a supplement to the
Indenture to permit issuances of subordinated debt securities under the
Indenture. The Trustee can enforce the rights of the holders of the debt
securities against us if we default on our obligations under the terms of the
Indenture or the debt securities, subject to limitations contained in the
Indenture. The Indenture is a contract governed by the laws of the State of New
York. We have summarized selected provisions of the Indenture below. This is a
summary and is not complete. You should read the Indenture we filed as an
exhibit to the registration statement of which this prospectus forms a part. The
Indenture contains the full legal text of the matters described in this section
describing its terms. In the summary below (which reflects the terms of the
Seventh and Eighth Supplemental Indentures, the forms of which have been filed
as exhibits to the registration statement of which this prospectus forms a
part), we have included references to section numbers of the Indenture so that
you can easily locate the summarized provisions. Capitalized terms used in the
summary have the meanings specified in the Indenture.
GENERAL PROVISIONS
The prospectus supplement relating to any series of the debt securities
being offered will include specific terms relating to the debt securities
offered. These terms will include some or all of the following:
- whether the debt securities are senior debt securities or subordinated
debt securities;
- the series designation of the debt securities;
- the total principal amount of the debt securities;
- the percentage of the principal amount at which the debt securities will
be issued;
- the date or dates on which the debt securities will mature;
- the rate or rates, if any, per year at which the debt securities will
bear interest, or the method of determination of such rate or rates;
- the times on which the interest, if any, on the debt securities will be
payable;
- if interest payments are subject to interest deferral provisions,
specific information about such deferral provisions;
9
- if we may pay interest or principal through issuances of equity or debt
securities, a description of such terms;
- the record dates for payments of interest, if any, and principal;
- provisions for a sinking, purchase or other similar fund, if any;
- the date, or dates, or circumstances, if any, triggering the right to
redeem the debt securities, at our option or the option of the holder and
the redemption price or prices;
- if the debt securities may be converted into or exercised or exchanged
for our common shares or preferred shares or any other of our securities,
the terms on which conversion, exercise or exchange may occur, including
whether conversion, exercise or exchange is mandatory, at the option of
the holder or at our option, the period during which conversion, exercise
or exchange may occur, the initial conversion, exercise or exchange price
or rate and the circumstances or manner in which the amount of common
shares or preferred shares or other securities issuable upon conversion,
exercise or exchange may be adjusted; and
- any other terms of the debt securities that are not inconsistent with the
provisions of the Indenture.
The Indenture provides that debt securities of a single series may be
issued at various times, with different maturity dates, and may bear interest at
different rates. Unless otherwise indicated in the prospectus supplement,
principal, premium, if any, and interest, if any, will be payable, and the debt
securities offered will be transferable, at the corporate trust office of
Citibank, N.A., as registrar and paying agent, in New York, New York. The
payment of interest, if any, may be made at our option by our mailing a check to
the person entitled to receive the interest at the address listed in the debt
security register. (Section 3.1)
We will establish a record date for the payment of interest, if any, on the
debt securities of each series. If no record date is established and interest
payment dates fall on the first day of a calendar month, the record date will be
the fifteenth day of the calendar month preceding the interest payment date. If
no record date is established and interest payment dates fall on the fifteenth
day of a calendar month, the record date will be the first day of the calendar
month. (Section 2.7)
WE ARE NOT LIMITED FROM ISSUING ADDITIONAL DEBT AND OTHER SECURITIES
We may issue as many distinct series of debt securities under the Indenture
as we wish. The Indenture does not limit other indebtedness or securities that
we may issue, under the Indenture or otherwise, and contains no financial or
similar restrictions on us except as described below. The Indenture does not
limit our ability to incur additional indebtedness senior to any subordinated
debt securities we may issue.
FORM OF DEBT SECURITIES
Unless otherwise indicated in a prospectus supplement, we will issue the
debt securities in book-entry only form. This means that the debt securities
will be represented by one or more permanent global certificates registered in
the name of a depositary, which will be The Depository Trust Company, New York,
New York (DTC), or its nominee unless otherwise indicated in a prospectus
supplement. We will refer to debt securities in this form here and in the
prospectus supplement as book-entry only. Alternatively, we may issue the debt
securities in certificated form registered in the name of the holder. Under
these circumstances, holders may receive certificates representing the debt
securities. Unless otherwise indicated in a prospectus supplement, senior debt
securities in certificated form will be issued only in multiples of $1,000 and
subordinated debt securities in certificated form will be issued only in
multiples of $25. Certificated debt securities will be exchangeable without
charge except for reimbursement of taxes or other governmental charges, if any.
We will refer to debt securities in this form in the prospectus supplement as
certificated.
LEGAL OWNERSHIP AND BOOK-ENTRY ONLY ISSUANCE
In this section, we describe special considerations that will apply to
registered debt securities issued in global -- that is, "book-entry only"
-- form. First we describe the difference between legal ownership and
10
indirect ownership of registered debt securities. Then we describe special
provisions that apply to global securities.
WHO IS THE LEGAL OWNER OF A REGISTERED SECURITY?
Each debt security in registered form will be represented either by a
certificate issued in definitive form to a particular investor or by one or more
global securities representing the entire series of debt securities. We refer to
those who have debt securities registered in their own names, on the books that
we or the Trustee maintain for this purpose, as the holders of those debt
securities. These persons are the legal holders of the debt securities. We refer
to those who, indirectly through others, own beneficial interests in debt
securities that are not registered in their own names as indirect owners of
those debt securities. As we discuss below, indirect owners are not legal
holders, and investors in debt securities issued in book-entry only form or in
street name will be indirect owners.
Book-Entry Owners
Unless otherwise indicated in the applicable prospectus supplement, we will
issue each debt security in book-entry only form. This means debt securities
will be represented by one or more global securities registered in the name of a
financial institution that holds them as depositary on behalf of other financial
institutions that participate in the depositary's book-entry system. These
participating institutions, in turn, hold beneficial interests in the debt
securities on behalf of themselves or their customers.
Under the Indenture, only the person in whose name a debt security is
registered is recognized as the holder of that debt security. Consequently, for
debt securities issued in global form, we will recognize only the depositary as
the holder of the series of debt securities and we will make all payments on the
debt securities to the depositary. The depositary will pass along the payments
it receives to its participants, which in turn will pass the payments along to
their customers who are the beneficial owners. The depositary and its
participants will do so under agreements they have made with one another or with
their customers; they are not obligated to do so under the Indenture or the
terms of the debt securities.
As a result, investors will not own debt securities directly. Instead, they
will own beneficial interests in a global security, through a bank, broker or
other financial institution that participates in the depositary's book-entry
system or holds an interest through a participant. As long as the debt
securities are issued in global form, investors will be indirect owners, and not
holders, of the debt securities.
Street Name Owners
In the future we may terminate a global security or issue debt securities
initially in non-global form. In these cases, investors may choose to hold their
debt securities in their own names or in street name. Debt securities held by an
investor in street name would be registered in the name of a bank, broker or
other financial institution that the investor chooses, and the investor would
hold only a beneficial interest in those debt securities through an account he
or she maintains at that institution.
For debt securities held in street name, we will recognize only the
intermediary banks, brokers and other financial institutions in whose names the
debt securities are registered as the holders of those debt securities and we
will make all payments on those debt securities, including deliveries of any
property other than cash, to them. These institutions pass along the payments
they receive to their customers who are the beneficial owners, but only because
they agree to do so in their customer agreements or because they are legally
required to do so. Investors who hold debt securities in street name will be
indirect owners, not holders, of those debt securities.
Legal Holders
Our obligations, as well as the obligations of the Trustee and any agent
employed by us run only to the holders of the debt securities. We do not have
obligations to investors who hold beneficial interests in global securities, in
street name or by any other indirect means. This will be the case whether an
investor chooses to
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be an indirect owner of a debt security or has no choice because we are issuing
the debt securities only in global form.
For example, once we make a payment or give a notice to the holder, we have
no further responsibility for that payment or notice even if that holder is
required, under agreements with depositary participants or customers or by law,
to pass it along to the indirect owners but does not do so. Similarly, if we
want to obtain the approval of the holders for any purpose -- for example, to
amend the Indenture or to relieve us of the consequences of a default or of our
obligation to comply with a particular provision of the Indenture -- we would
seek the approval only from the holders, and not the indirect owners, of the
relevant debt securities. Whether and how the holders contact the indirect
owners is up to the holders.
When we refer to "you" in this prospectus, we mean those who invest in the
debt securities being offered by this prospectus, whether they are the holders
or only indirect owners of those debt securities. When we refer to debt
securities owned or held by you in this prospectus, we mean the debt securities
in which you will hold a direct or indirect interest.
Special Considerations for Indirect Owners
If you hold debt securities through a bank, broker or other financial
institution, either in book-entry form or in street name, you should check with
your own institution to find out:
- how it handles securities payments and notices;
- whether it imposes fees or charges;
- whether and how you can instruct it to exercise any rights to exchange or
convert a debt security for or into other property;
- how it would handle a request for the holders' consent, if ever required;
- whether and how you can instruct it to send you debt securities
registered in your own name so you can be a holder, if that is permitted
in the future;
- how it would exercise rights under the debt securities if there were a
default or other event triggering the need for holders to act to protect
their interests; and
- if the debt securities are in book-entry form, how the depositary's rules
and procedures will affect these matters.
WHAT IS A BOOK-ENTRY ONLY SECURITY?
Each debt security issued in book-entry form will be represented by a
global security that we deposit with and register in the name of one or more
financial institutions or clearing systems, or their nominees, which we select.
A financial institution or clearing system that we select for any debt security
for this purpose is called the "depositary" for that debt security. A debt
security will usually have only one depositary but it may have more.
Each series of debt securities will have one or more of the following as
the depositaries:
- DTC;
- a financial institution holding the debt securities on behalf of
Euroclear Bank S.A./N.V., as operator of the Euroclear system, which is
known as "Euroclear";
- a financial institution holding the debt securities on behalf of
Clearstream Banking, societe anonyme, Luxembourg, which is known as
"Clearstream"; and
- any other clearing system or financial institution named in the
applicable prospectus supplement.
The depositaries named above may also be participants in one another's
systems. Thus, for example, if DTC is the depositary for a global security,
investors may hold beneficial interests in that debt security
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through Euroclear or Clearstream, as DTC participants. If we designate a
depositary other that DTC we will indicate this in the prospectus supplement,
and we will enter into a supplement to the Indenture to permit the designation.
A global security may not be transferred to or registered in the name of
anyone other than the depositary or its nominee, unless special termination
situations arise. We describe those situations below under " -- Holder's Option
to Obtain a Non-Book-Entry Only Security; Special Situations When a Global
Security Will Be Terminated". As a result of these arrangements, the depositary,
or its nominee, will be the sole registered owner and holder of all debt
securities represented by a global security, and investors will be permitted to
own only indirect interests in a global security. Indirect interests must be
held by means of an account with a broker, bank or other financial institution
that in turn has an account with the depositary or with another institution that
does. Thus, an investor whose debt security is represented by a global security
will not be a holder of the debt security, but only an indirect owner of an
interest in the global security.
If the prospectus supplement for a particular debt security indicates that
the debt security will be issued in book-entry only form, then the debt security
will be represented by a global security at all times unless and until the
global security is terminated. We describe the situations in which this can
occur below under "--Holder's Option to Obtain a Non-Global Security; Special
Situations When a Global Security Will Be Terminated". If termination occurs, we
may issue the debt securities through another book-entry clearing system or
decide that the debt securities may no longer be held through any book-entry
clearing system.
Special Considerations for Book-Entry Only Securities
As an indirect owner, an investor's rights relating to a book-entry only
security will be governed by the account rules of the depositary and those of
the investor's financial institution or other intermediary through which it
holds its interest (e.g., Euroclear or Clearstream, if DTC is the depositary),
as well as general laws relating to securities transfers. We do not recognize
this type of investor or any intermediary as a holder of debt securities and
instead deal only with the depositary that holds the global security.
If debt securities are issued in book-entry only form, an investor should
be aware of the following:
- an investor cannot cause the debt securities to be registered in his or
her own name, and cannot obtain non-global certificates for his or her
interest in the debt securities, except in the special situations we
describe below;
- an investor will be an indirect holder and must look to his or her own
bank or broker for payments on the debt securities and protection of his
or her legal rights relating to the debt securities, as we describe above
under "-- Who Is the Legal Owner of a Registered Security?";
- an investor may not be able to sell interests in the debt securities to
some insurance companies and other institutions that are required by law
to own their debt securities in non-book-entry form;
- an investor may not be able to pledge his or her interest in a global
security in circumstances where certificates representing the debt
securities must be delivered to the lender or other beneficiary of the
pledge in order for the pledge to be effective;
- the depositary's policies will govern payments, deliveries, transfers,
exchanges, notices and other matters relating to an investor's interest
in a global security, and those policies may change from time to time.
Neither we nor the Trustee will have any responsibility for any aspect of
the depositary's policies, actions or records of ownership interests in a
global security. Neither we nor the Trustee supervise the depositary in
any way;
- the depositary will require that those who purchase and sell interests in
a global security within its book-entry system use immediately available
funds and your broker or bank may require you to do so as well; and
- financial institutions that participate in the depositary's book-entry
system and through which an investor holds its interest in the global
securities, directly or indirectly, may also have their own policies
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affecting payments, deliveries, transfers, exchanges, notices and other
matters relating to the debt securities, and those policies may change
from time to time. For example, if you hold an interest in a global
security through Euroclear or Clearstream, when DTC is the depositary,
Euroclear or Clearstream, as applicable, will require those who purchase
and sell interests in that debt security through them to use immediately
available funds and comply with other policies and procedures, including
deadlines for giving instructions as to transactions that are to be
effected on a particular day. There may be more than one financial
intermediary in the chain of ownership for an investor. We do not monitor
and are not responsible for the policies or actions or records of
ownership interests of any of those intermediaries.
Holder's Option to Obtain a Non-Book-Entry Only Security; Special Situations
When a Global Security Will be Terminated
If we issue any series of debt securities in book-entry only form but we
choose to give the beneficial owners of that series the right to obtain
non-global securities, any beneficial owner entitled to obtain non-global
securities may do so by following the applicable procedures of the depositary,
any transfer agent or registrar for that series and that owner's bank, broker or
other financial institution through which that owner holds its beneficial
interest in the debt securities. If you are entitled to request a non-global
certificate and wish to do so, you will need to allow sufficient lead time to
enable us or our agent to prepare the requested certificate.
In addition, in a few special situations described below, a global security
will be terminated and interests in it will be exchanged for certificates in
non-global form representing the debt securities it represented. After that
exchange, the choice of whether to hold the debt securities directly or in
street name will be up to the investor. Investors must consult their own banks
or brokers to find out how to have their interests in a global security
transferred on termination to their own names, so that they will be holders. We
have described the rights of holders and street name investors above under
"-- Who Is the Legal Owner of a Registered Security?"
The special situations for termination of a global security are as follows:
- the depositary notifies us that it is unwilling or unable to continue as
depositary for the global security, or if the depositary is DTC, if at
any time it ceases to be a clearing agency registered under the
Securities Exchange Act of 1934;
- we notify the Trustee that we have decided not to have the debt
securities of that series represented by a global security; or
- an event of default has occurred and is continuing with respect to the
debt securities.
If a global security is terminated, only the depositary, and neither we nor
the Trustee will be responsible for deciding the names of the institutions in
whose names the debt securities represented by the global security will be
registered and, therefore, who will be the holders of those debt securities. In
this event certificated debt securities will be issued in exchange for the
terminated global security as directed by the depositary.
Considerations Relating to Euroclear and Clearstream
Euroclear and Clearstream are securities clearance systems in Europe. Both
systems clear and settle securities transactions between their participants
through electronic, book-entry delivery of securities against payment.
Euroclear and Clearstream may be depositaries for a global security. In
addition, if DTC is the depositary for a global security, Euroclear and
Clearstream may hold interests in the global security as participants in DTC.
As long as any global security is held by Euroclear or Clearstream, as
depositary, you may hold an interest in the global security only through an
organization that participates, directly or indirectly, in Euroclear or
Clearstream. If Euroclear or Clearstream is the depositary for a global security
and there is no depositary in
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the United States, you will not be able to hold interests in that global
security through any securities clearance system in the United States.
Payments, deliveries, transfers, exchanges, notices and other matters
relating to the debt securities made through Euroclear or Clearstream must
comply with the rules and procedures of those systems. Those systems could
change their rules and procedures at any time. We have no control over those
systems or their participants and we take no responsibility for their
activities. Transactions between participants in Euroclear or Clearstream, on
one hand, and participants in DTC, on the other hand, when DTC is the
depositary, would also be subject to DTC's rules and procedures.
Special Timing Considerations for Transactions in Euroclear and Clearstream
Investors will be able to make and receive through Euroclear and
Clearstream payments, deliveries, transfers, exchanges, notices and other
transactions involving any debt securities held through those systems only on
days when those systems are open for business. Those systems may not be open for
business on days when banks, brokers and other institutions are open for
business in the United States.
In addition, because of time-zone differences, U.S. investors who hold
their interests in the debt securities through these systems and wish to
transfer their interests, or to receive or make a payment or delivery or
exercise any other right with respect to their interests, on a particular day
may find that the transaction will not be effected until the next business day
in Luxembourg or Brussels, as applicable. Thus, investors who wish to exercise
rights that expire on a particular day may need to act before the expiration
date. In addition, investors who hold their interests through both DTC and
Euroclear or Clearstream may need to make special arrangements to finance any
purchases or sales of their interests between the U.S. and European clearing
systems, and those transactions may settle later than would be the case for
transactions within one clearing system.
INDENTURE COVENANTS
The Indenture contains promises by us, called "covenants" for the benefit
of the holders of the debt securities. The covenants described under the
headings "Limitations on Liens" and "Limitation on Sale Leaseback Transactions"
are made for the benefit of holders of our senior debt securities only. THE
HOLDERS OF OUR SUBORDINATED DEBT SECURITIES WILL NOT RECEIVE THE BENEFITS OF
THESE COVENANTS.
LIMITATIONS ON LIENS
We have agreed in the Indenture that we will not, nor will we permit any
Subsidiary to, mortgage, hypothecate, charge, pledge, or otherwise encumber
(collectively referred to as "mortgages") any of our Principal Properties or the
capital stock or Funded Indebtedness of any Subsidiary which owns a Principal
Property, to secure any Indebtedness, without securing the debt securities
equally and ratably with, or prior to, such Indebtedness.
This covenant has certain exceptions which permit, among other things:
- the giving or assumption of any Purchase Money Mortgage;
- any mortgage given by a Subsidiary to us or any other Subsidiary so long
as the mortgage will be held for our benefit or for the benefit of a
Subsidiary;
- mortgages on property, capital stock or Indebtedness of a corporation
existing at the time the corporation becomes a Subsidiary;
- mortgages in favor of Canada or the United States or any Province or
State thereof, or any department, agency, or instrumentality or political
subdivision of Canada or the United States, to secure certain payments or
other obligations;
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- the sale or other transfer of production payments, mineral payments, ore
payments and similar arrangements unless we or a Subsidiary have
personally assumed or become generally liable for any Indebtedness in
connection with the sale or transfer; and
- any extension, renewal or replacement, or successive extensions, renewals
or replacements, in whole or in part of any mortgage permitted above, so
long as the principal amount of Indebtedness secured will not exceed the
principal amount of Indebtedness secured at the time of the extension,
renewal or replacement, and that the extension, renewal or replacement
will be limited to all or part of the property which secured the mortgage
that was extended, renewed or replaced.
In addition to these exceptions, we and our Subsidiaries may create or
assume mortgages without equally and ratably securing the debt securities
(mortgages which have been created or assumed being referred to as "Basket
Mortgages"), so long as at the time of and after giving effect to such creation
or assumption, the total amount of all Indebtedness secured by our Basket
Mortgages less any Indebtedness concurrently retired plus the total amount of
Attributable Debt in respect of certain sale and leaseback transactions (as
defined in the Indenture) existing at the time do not exceed 10% of consolidated
shareholders' equity as of a date not more than 135 days prior to such time.
(Section 3.6)
DEFINED TERMS
The following terms used above have the following meanings (Section 1.1):
"Attributable Debt" means the present value of rents during the remaining
term of leases.
"Indebtedness" means:
- all indebtedness for the repayment of money borrowed;
- all liabilities under leases which must be capitalized under generally
accepted accounting principles in Canada on the lessee's balance sheet;
and
- all guarantees, endorsements, assumptions and other contingent
obligations in respect of such indebtedness or liabilities.
"Funded Indebtedness" means Indebtedness which matures by its terms or is
renewable by the borrower to a date more than one year after the date of its
original creation, assumption or guarantee.
"Principal Property" means any mineral property, smelter, refinery, mill,
fabricating plant or similar processing or manufacturing facility, or any
electric generating plant of ours or any of our Subsidiaries constituting the
primary source of power for any such facility, located in the United States or
Canada and having a net book value of more than 0.5 percent of Consolidated Net
Tangible Assets, unless our Board of Directors by resolution declares that the
property, plant or facility is not important to our business as a whole.
Principal Property may also include similar property we have designated to which
we have applied the proceeds of sale and leaseback transactions.
"Consolidated Net Tangible Assets" means (1) the total of all assets,
including assets leased under capital lease obligations (less depreciation,
obsolescence, amortization, valuation and other proper reserves), which in
accordance with generally accepted accounting principles in Canada would appear
on the asset side of our consolidated balance sheet as of a date not more than
135 days preceding the date on which Consolidated Net Tangible Assets are to be
determined, after eliminating (A) franchises, licenses, permits, patents, patent
applications, copyrights, trade names, goodwill, organizational expenses and
other like intangibles and (B) unamortized debt discount and expense, less (2)
the total of all consolidated current liabilities which would appear on the
liability side of the balance sheet, as determined in accordance with generally
accepted accounting principles in Canada.
"Subsidiary" means any corporation of which we or one or more of our
Subsidiaries owns at least a majority of the outstanding voting stock.
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"Purchase Money Mortgage" means any hypothec, mortgage, lien, pledge,
security interest or other encumbrance (including conditional sale agreements or
other title retention agreements or capital leases) upon property that has been
or is to be acquired, constructed or improved by us or a Subsidiary and created
prior to, contemporaneously with, or within six months after, the acquisition or
the completion of the construction or improvement to secure the amount of the
purchase price of the property or the cost of the construction or improvement,
or any part thereof, or any hypothec, mortgage, lien, pledge, security interest
or other encumbrance existing on the property at the time of the acquisition,
whether the obligations secured are payable to the person from whom such
property is acquired or otherwise.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS
The Indenture imposes restrictions on our ability to enter into sale
leaseback transactions. Neither we nor any Subsidiary owning a Principal
Property may enter into any Sale and Leaseback Transaction (which excludes
leases expiring within three years of making, leases between us and a Subsidiary
or between Subsidiaries and any lease of part of a Principal Property, which has
been sold, for use in connection with the winding up or termination of the
business conducted on such Principal Property) unless:
- we or any of our Subsidiaries could create or assume a mortgage on the
Principal Property to be leased without equally and ratably securing the
debt securities by reason of one of the exceptions described under
"Limitation on Liens";
- immediately prior to entering into such arrangement, we or a Subsidiary
could create a mortgage on the Principal Property securing Indebtedness
in an amount equal to the Attributable Debt relating to the particular
Sale and Leaseback Transaction without equally and ratably securing the
debt securities; or
- an amount equal to the net proceeds of the sale of the property leased is
applied to the retirement, otherwise than by payment at maturity or
pursuant to mandatory sinking fund requirements, of the debt securities
or other Funded Indebtedness of ours or of a Subsidiary ranking on a
parity with the debt securities or to the purchase, improvement or
construction of Principal Properties. (Section 3.8)
SUBORDINATION PROVISIONS
Direct holders of subordinated debt securities should recognize that
contractual provisions in the Indenture may prohibit us from making payments on
those securities. Subordinated debt securities are subordinate and junior in
right of payment, to the extent and in the manner stated in the Indenture, to
all of our senior indebtedness, as defined in the Indenture, including all of
the senior debt securities we have issued and will issue under the Indenture.
Under the Indenture, "senior indebtedness" includes all of our obligations
to pay principal, premium, interest, penalties, fees and other charges:
- for borrowed money;
- in the form of or evidenced by other instruments, including obligations
incurred in connection with our purchase of property, assets or
businesses;
- under capital leases;
- under letters of credit, bankers' acceptances or similar facilities;
- issued or assumed in the form of a deferred purchase price of property or
services, such as master leases;
- under swaps and other hedging arrangements;
- pursuant to our guarantee of another entity's obligations and all
dividend obligations guaranteed by us; and
- to satisfy the expenses and fees of the Trustee under the Indenture.
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The following types of our indebtedness will not rank senior to the
subordinated debt securities:
- indebtedness we owe to a subsidiary of ours;
- indebtedness which, by its terms, expressly provides that it does not
rank senior to the subordinated debt securities;
- indebtedness incurred in the form of trade accounts payable or accrued
liabilities arising in the ordinary course of business; and
- indebtedness we may incur in violation of the Indenture.
The Indenture provides that, unless all principal of and any premium or
interest on the senior indebtedness has been paid in full, no payment or other
distribution may be made in respect of any subordinated debt securities in the
following circumstances:
- in the event of any insolvency or bankruptcy proceedings, or any
receivership, liquidation, reorganization, assignment for creditors or
other similar proceedings or events involving us or our assets; or
- (1) in the event and during the continuation of any default in the
payment of principal, premium, if any, or interest on any senior
indebtedness beyond any applicable grace period or (2) in the event that
any event of default with respect to any senior indebtedness has occurred
and is continuing, permitting the direct holders of that senior
indebtedness (or a trustee) to accelerate the maturity of that senior
indebtedness, whether or not the maturity is in fact accelerated (unless,
in the case of (1) or (2), the payment default or event of default has
been cured or waived or ceased to exist and any related acceleration has
been rescinded) or (3) in the event that any judicial proceeding is
pending with respect to a payment default or event of default described
in (1) or (2).
If the Trustee under the Indenture or any direct holders of the
subordinated debt securities receive any payment or distribution that is
prohibited under the subordination provisions, then the Trustee or the direct
holders will have to repay that money to the direct holders of our senior
indebtedness.
Even if the subordination provisions prevent us from making any payment
when due on the subordinated debt securities of any series, we will be in
default on our obligations under that series if we do not make the payment when
due. This means that the Trustee under the Indenture and the direct holders of
that series can take action against us, but they will not receive any money
until the claims of the direct holders of senior indebtedness have been fully
satisfied.
CONSOLIDATION OR MERGER
We may consolidate or merge with any other corporation or transfer all or
substantially all of our assets to any other person provided that:
- we are not in default under any covenant or provision under the
Indenture; and
- the person or successor corporation, which must be organized under the
laws of Canada or any Province, the United States or any State or the
District of Columbia, expressly assumes our obligations under the
Indenture by supplemental indenture satisfactory to the Trustee. (Section
9.1)
Unless otherwise indicated in the prospectus supplement, certain of the
covenants described above would not necessarily afford holders of debt
securities protection in the event we were involved in a highly leveraged
transaction, such as a leveraged buyout.
EVENTS OF DEFAULT, WAIVER, AND NOTICE
"Event of Default" means, with respect to any series of debt securities,
any of the following:
- failure to pay interest on that series of debt securities for 30 days
after payment is due;
- failure to pay principal and premium, if any, on that series of debt
securities when due either at maturity, upon redemption, by declaration
or otherwise;
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- failure to perform any other covenants or agreements in the Indenture for
the benefit of the holders of the applicable series for 90 days after we
are given notice of the failure; and
- certain events of bankruptcy, insolvency and reorganization relating to
us. (Section 5.1)
The Trustee may withhold notice to the holders of debt securities of any
default, except a default in payment of principal of or interest or premium on
the debt securities, if the Trustee considers it in the interest of the holders
of the debt securities to do so. (Section 5.11)
The Indenture provides that:
- if an Event of Default due to the default in the payment of principal,
interest or premium, if any, on, or in the performance of any other of
the covenants or agreements in the Indenture affecting any series of debt
securities occurs and continues, the Trustee or holders of 25% of the
principal amount outstanding of that series of debt securities may
declare the principal of all that series of debt securities to be due and
payable immediately; and
- if an Event of Default resulting from certain events of bankruptcy,
insolvency and reorganization occurs and continues, the Trustee or the
holders of 25% of the principal amount outstanding of all debt securities
may declare the principal of all debt securities to be due and payable
immediately.
Under certain conditions such declarations may be rescinded and past
defaults may be waived, except defaults in payment of principal of or interest
or premium on the debt securities, by the holders of a majority of that series
of debt securities then outstanding, or of all series, as the case may be.
(Section 5.1)
The holders of a majority in principal amount of the debt securities of any
and all series affected and then outstanding, each voting as a separate class,
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee. This right is subject to certain
exceptions and provided that the holders of the debt securities have offered to
the Trustee reasonable indemnity against expenses and liabilities. (Sections 5.9
and 6.2)
Investors holding debt securities in book entry form should consult with
their banks or brokers for information on how to give notice or direction to or
make a request of the trustee and to make or cancel a declaration of
acceleration.
We are required to file with the Trustee an annual certificate as to the
absence of certain defaults under the Indenture. (Section 3.5)
The Indenture provides that none of the terms of the Indenture will require
the Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if there is reasonable ground for believing that
the repayment of such funds or adequate indemnity against such liability is not
reasonably assured to the Trustee.
DEFEASANCE AND COVENANT DEFEASANCE
We may elect either:
- to be discharged from all of our obligations with respect to the debt
securities under the Indenture, except for the obligations to register
the transfer or exchange of the debt securities, to replace temporary or
mutilated, destroyed, lost or stolen debt securities, to maintain an
office or agency in respect of the debt securities and to hold moneys for
payment in trust (defeasance); or
- to be discharged from all of our obligations with respect to the debt
securities under certain sections of the Indenture, including the
restrictions set forth in "Limitation on Liens" and "Limitations on Sale
and Leaseback Transactions" above (covenant defeasance).
In order for us to exercise either defeasance or covenant defeasance, we
must deposit with the Trustee, in trust for such purpose, money and/or U.S.
Government Obligations which through the scheduled payment of principal and
interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of and interest on such debt securities not
later than one day before the scheduled due dates. A trust
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may only be established if, among other things, we have delivered to the Trustee
an opinion of counsel to the effect that the holders of the debt securities:
- will not recognize income, gain or loss for federal income tax purposes
as a result of defeasance or covenant defeasance; and
- will be subject to federal income tax on the same amount, in the same
manner and at the same time as would have been the case if such
defeasance or covenant defeasance had not occurred.
In the case of defeasance, the opinion must refer to and be based upon a
ruling of the Internal Revenue Service or a change in applicable federal income
tax law occurring after July 15, 1989. (Sections 13.1 through 13.4)
MODIFICATION OF THE INDENTURE
Under the Indenture our rights and the rights of the holders of debt
securities may be changed. Certain changes to the rights of the holders of the
debt securities in the Indenture or any Supplemental Indenture require the
consent of the holders of not less than 66 2/3% in principal amount of the debt
securities of all series affected by such change at the time outstanding.
However, the following changes may not be made without the consent of each
holder of the debt securities affected:
- extending the final maturity of any debt security, or reducing the
principal amount thereof, including in the case of a discounted debt
security the amount payable thereon in the event of acceleration or the
amount provable in bankruptcy, or any redemption premium thereon, or
reducing the rate or extending the time of payment of interest thereon,
or impairing or affecting the right of any holder of debt securities to
institute suit for the payment thereof or the right of repayment, if any,
at the option of the holder; or
- reducing the stated percentage of holders necessary to modify the
Indenture. (Section 8.2)
We may enter into one or more supplemental indentures without the consent
of any holder of debt securities:
- to secure the debt securities;
- to evidence the succession to us of another corporation and the
assumption by any such successor of our covenants contained in the
Indenture and the debt securities;
- to add to the covenants contained in the Indenture and to add any
additional Events of Default;
- to cure any ambiguity or to correct or supplement any provision of the
Indenture which may be defective or inconsistent with any other provision
of the Indenture, or to make other provisions which do not adversely
affect the interests of the holders of debt securities;
- to establish the form or terms of debt securities of any series; and
- to evidence and provide for a successor Trustee under the Indenture for
one or more series of debt securities and to provide for or facilitate
the administration of the trusts under the Indenture by more than one
Trustee. (Section 8.1)
CONSENT TO JURISDICTION
We agree that any legal suit, action or proceeding brought by the Trustee
or any holder of debt securities in connection with the debt securities or the
Indenture may be instituted in any state or federal court in the City or State
of New York.
REGARDING THE TRUSTEE
Deutsche Bank Trust Company Americas (formerly Bankers Trust Company),
Trustee under the Indenture, serves as a depositary of funds of, and performs
corporate trust and commercial banking services for
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us and our subsidiaries from time to time in the normal course of business and
also makes loans to us and our subsidiaries. In addition, we have two-long-term,
global, multi-year and multi-currency borrowing facilities each amounting to $1
billion and a $4 billion 364-day, global, multi-currency, senior bridge term
facility with a syndicate of major international banks. Deutsche Bank A.G., the
parent of Deutsche Bank Trust Company Americas, has a $30 million participation
under one $1 billion long-term facility, has a $44 million participation under
the other $1 billion long-term facility and has a $41.2 million participation
under the $4 billion 364-day senior bridge term facility. As of October 31,
2003, we did not have any amounts outstanding under either facility.
Deutsche Bank Trust Company Americas is currently trustee of six series of
outstanding senior debt securities issued under the Indenture in an aggregate
principal amount of $2.1 billion.
Under the Trust Indenture Act of 1939, upon the occurrence of a default
under any series of debt securities under the Indenture, if the Trustee has a
conflicting interest, as defined in the Trust Indenture Act, the Trustee must,
within 90 days, either eliminate the conflicting interest or resign, unless the
default is cured, waived or otherwise eliminated within the 90-day period. Under
the Trust Indenture Act, the Trustee will be considered to have a conflicting
interest if the Trustee is one of our creditors. In addition, in the event we
have outstanding one or more series of senior debt securities and subordinated
debt securities for which the Trustee acts as trustee and a default occurs under
the terms of either or both types of series, the Trustee would be considered to
have a conflicting interest under the Trust Indenture Act and would be required
to resign as trustee in respect of either the senior debt securities or the
subordinated debt securities. If the Trustee fails to either eliminate the
conflicting interest or to resign within ten days after the expiration of the 90
day period, the Trustee will be required to notify the holders to this effect
and any holder who has been a bona fide holder for at least six months may
petition a court to remove the Trustee and to appoint a successor trustee.
DESCRIPTION OF SHARE CAPITAL
OUTSTANDING SERIES OF SHARE CAPITAL
AUTHORIZED OUTSTANDING*
---------- ------------
Common Shares............................................... Unlimited 322,278,372
Preference Shares, issuable in series, of which the
following
series are outstanding:................................... Unlimited
Floating Rate Cumulative Redeemable Preference Shares,
Series C, 1984......................................... 4,200,000 4,200,000
Floating Rate Cumulative Redeemable Preference Shares,
Series C, 1985......................................... 1,500,000 1,500,000
Cumulative Redeemable Preference Shares, Series E......... 3,000,000 3,000,000
---------------
* As at October 31, 2003.
The currently outstanding series of preference shares are not offered under
this prospectus.
AUTHORIZED CAPITAL
We may issue an unlimited number of additional common shares and preference
shares from time to time upon approval by our Board of Directors for such
consideration as the Board of Directors decides appropriate, without the need of
further shareholder authorization. However, the Board of Directors is not
allowed to create or issue any series of preference shares with voting rights,
other than voting rights arising only in the event of non-payment of dividends,
without the consent of our Common shareholders, given by way of special
resolution. The terms of any preference shares, including dividend rates,
conversion and voting rights, if any, redemption prices and similar matters will
be determined by the Board of Directors prior to issuance.
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DESCRIPTION OF PREFERENCE SHARES
DESCRIPTION OF TERMS OF PREFERENCE SHARES WE MAY OFFER
The terms of each series of preference shares will be determined by the
Board of Directors prior to issuance. The Board of Directors may not create or
issue any series of preference shares with voting rights, other than voting
rights arising only in the event of non-payment of dividends, without the
consent of the holders of our common shares, given in the form of a special
resolution.
Unless otherwise indicated in a prospectus supplement, all preference
shares to be issued from time to time under this Prospectus will be fully paid
and nonassessable.
The prospectus supplement relating to the particular series of preference
shares will contain a description of the specific terms of that series as fixed
by our board of directors, including, as applicable:
- the offering price at which we will issue the preference shares;
- the title, designation of number of shares and stated value of the
preference shares;
- the dividend rate or method of calculation, the payment dates for
dividends and the place or places where the dividends will be paid,
whether dividends will be cumulative or noncumulative, and, if
cumulative, the dates from which dividends will begin to cumulate;
- any conversion or exchange rights;
- whether the preference shares will be subject to redemption and the
redemption price and other terms and conditions relative to the
redemption rights;
- any liquidation rights;
- any sinking fund provisions;
- any voting rights; and
- any other rights, preferences, privileges, limitations and restrictions
that are not inconsistent with the terms of our restated articles of
incorporation.
REDEMPTION
If so specified in the applicable prospectus supplement, a series of
preference shares may be redeemable at any time, in whole or in part, at our
option or the holder's, and may be mandatorily redeemed by us.
Any restriction on the repurchase or redemption by us of our preference
shares while we are in arrears in the payment of dividends will be described in
the applicable prospectus supplement.
Any partial redemptions of preference shares will be made in the discretion
of our board of directors.
Unless we default in the payment of the redemption price, dividends will
cease to accrue after the redemption date on preference shares called for
redemption and all rights of holders of these shares will terminate except for
the right to receive the redemption price.
DIVIDENDS
Holders of each series of preference shares will be entitled to receive
dividends when, as and if declared by our board of directors from funds legally
available for payment of dividends. The rates and dates of payment of dividends
will be set forth in the applicable prospectus supplement relating to each
series of preference shares. Dividends will be payable to holders of record of
preference shares as they appear on our books on the record dates fixed by the
board of directors. Dividends on any series of preference shares may be
cumulative or noncumulative, as set forth in the applicable prospectus
supplement.
We may not declare, pay or set apart funds for payment of dividends on a
particular series of preference shares unless full dividends on any other series
of preference shares that ranks equally with or senior to the
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series of preference shares have been paid or sufficient funds have been set
apart for payment for either of the following:
- all prior dividend periods of the other series of preference shares that
pay dividends on a cumulative basis; or
- the immediately preceding dividend period of the other series of
preference shares that pay dividends on a noncumulative basis.
Partial dividends declared on shares of any series of preference shares and
other series of preference shares ranking on an equal basis as to dividends will
be declared pro rata. A pro rata declaration means that the ratio of dividends
declared per share to accrued dividends per share will be the same for each
series of preference shares.
CONVERSION OR EXCHANGE RIGHTS
The prospectus supplement relating to any series of preference shares that
is convertible, exercisable or exchangeable will state the terms on which shares
of that series are convertible into or exercisable or exchangeable for our
common shares, another series of our preference shares or our other securities
or debt or equity securities of third parties.
LIQUIDATION PREFERENCE
In the event of our voluntary or involuntary liquidation, dissolution or
winding-up, holders of each series of our preference shares will have the right
to receive distributions upon liquidation in the amount described in the
applicable prospectus supplement relating to each series of preference shares,
plus an amount equal to any accrued and unpaid dividends. These distributions
will be made before any distribution is made on the common stock or on any
securities ranking junior to the preference shares upon liquidation, dissolution
or winding-up.
If the liquidation amounts payable relating to the preference shares of any
series and any other securities ranking on a parity regarding liquidation rights
are not paid in full, the holders of the preference shares of that series and
the other securities will have the right to a ratable portion of our available
assets, up to the full liquidation preference of each security. Holders of these
series of preference shares or other securities will not be entitled to any
other amounts from us after they have received their full liquidation
preference.
VOTING RIGHTS
The holders of shares of preference shares will have no voting rights,
except:
- as otherwise stated in the applicable prospectus supplement;
- as otherwise stated in the certificate of designations establishing the
series; or
- as required by applicable law.
SUMMARY OF SPECIFIC PROVISIONS OF OUTSTANDING PREFERENCE SHARES
We currently have the following preference shares outstanding: Floating
Rate Cumulative Redeemable Preference Shares Series C, 1984 and 1985 and
Cumulative Redeemable Preference Shares Series E. The holders of each class of
preference shares will be entitled to receive cumulative cash dividends at the
following rates:
Series C, 1984 and 1985: quarterly dividends in an amount determined
by applying to C$ 25 per share 25% of the greater of (1) 72% of the average
of the Canadian prime interest rates quoted by two major Canadian banks for
stated periods, and (2) the lesser of 7.5% and the average of the Canadian
prime interest rates quoted by two major Canadian banks for stated periods.
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Series E: quarterly dividends in an amount determined by applying to
C$ 25 per share 25% of 75% of the average of the Canadian prime interest
rates quoted by two major Canadian banks for stated periods.
The holders of outstanding preference shares are not entitled to vote at
meetings of shareholders unless we fail to pay six quarterly dividends on such
preference shares. Thereafter, so long as such dividends remain in arrears, the
holders will be entitled, voting separately as a class, to elect two members of
the Board of Directors.
All of our outstanding preference shares are fully paid and nonassessable.
In the event that we liquidate, dissolve or wind up or distribute our
assets among shareholders for the purpose of winding up our affairs, the holders
of the outstanding preference shares will be entitled to receive, in preference
to holders of the common shares, the sum of C$ 25 per preference share for
Series C and E plus all accrued and unpaid dividends. Additionally, if such
distribution is voluntary, an additional amount equal to the premium, if any,
will be payable on redemption.
The outstanding preference shares are redeemable at our option at C$ 25 per
preference share plus all accrued and unpaid dividends.
Unless all dividends then payable on the outstanding preference shares have
been declared and paid or set apart for payment, we will not (1) pay any
dividends, other than stock dividends, or make any distributions on any shares
ranking junior to the outstanding preference shares with respect to the payment
of dividends or return of capital, (2) retire for value any shares ranking
junior to the outstanding preference shares with respect to payment of dividends
or return of capital, or (3) except in connection with the exercise of a
retraction privilege, retire less than all of a series of preference shares.
The outstanding preference shares are listed on the Toronto Stock Exchange.
The transfer agent for the outstanding preference shares is CIBC Mellon Trust
Company.
DESCRIPTION OF COMMON SHARES
ATTRIBUTES
The common shares are subject to the rights of the holders of the
preference shares, as described above, and of any other preferred securities
issued in the future.
The holders of common shares are entitled to one vote per common share at
all meetings of Shareholders, to participate ratably in any dividends which may
be declared on common shares by our Board of Directors and, in the event of our
liquidation, dissolution or winding-up or other distribution of our assets or
property, to a pro rata share of our assets after payment of all liabilities and
obligations. The common shares have no pre-emptive, redemption or conversion
rights. All of our outstanding common shares and all common shares to be issued
from time to time under this prospectus will be fully paid and nonassessable.
The provisions of the Canada Business Corporations Act (CBCA) require that
the amendment of certain rights of holders of any class of shares, including the
common shares, must be approved by not less than two-thirds of the votes cast by
the holders of such shares. A quorum for any meeting of the holders of common
shares is 40% of the common shares then outstanding. Therefore, it is possible
for the rights of the holders of common shares to be changed other than by the
affirmative vote of the holders of the majority of the outstanding common
shares. In circumstances where certain rights of holders of common shares may be
amended, however, holders of common shares will have the right, under the CBCA,
to dissent from such amendment and require us to pay them the then fair value of
their common shares.
The transfer agents for the common shares are CIBC Mellon Trust Company in
Canada, Mellon Investor Services L.L.C. in New York, and CIBC Mellon Trust
Company in England.
Shareholders are also entitled to rights and privileges under the
shareholder rights plan summarized below.
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SHAREHOLDER RIGHTS PLAN
In 1990, Shareholders approved a plan whereby each of our common shares
carries one right to purchase additional common shares. The plan, with certain
amendments, was reconfirmed by the Shareholders at the 1995 Annual Meeting, and
further amendments were approved at the 1999 Annual Meeting. The terms of the
rights are contained in an agreement called the Shareholder Rights Agreement,
made as of December 14, 1989 between us and CIBC Mellon Trust Company, which is
the rights agent under the agreement. The agreement is governed by the laws of
Ontario and Canada. A copy of the plan, as amended to date, is attached as
Schedule B of the Management Proxy Circular filed as Exhibit 99 to our Annual
Report on Form 10-K for the year ended December 31, 1998. The rights expire in
2008, subject to re-confirmation at the Annual Meeting of Shareholders in 2005.
The rights under the plan are not currently exercisable, nor may they be
separated from the common shares. Subject to specified exceptions and
qualifications, on the tenth business day after the first to occur of:
- the acquisition by a person or group of affiliated or associated persons
of beneficial ownership of 20% or more of our outstanding voting shares;
or
- a bid to acquire 20% or more of our outstanding voting shares,
holders of rights, with the exception of the acquiring or bidding party, will be
entitled to purchase from us, upon payment of the exercise price (currently
U.S.$200.00), the number of common shares that can be purchased for double the
exercise price, based on the market value of our common shares at the time the
rights become exercisable. At and after such time the rights will also be
transferable separately from the common shares. The exercise price mentioned
above is subject to adjustment according to the terms of the rights plan to
account for, among other things, adjustments to our common shares such as stock
splits, stock dividends and distributions to shareholders.
The rights agreement has a permitted bid feature which allows a take-over
bid to proceed without the rights becoming exercisable, provided that the bid
meets specified minimum specified standards of fairness and disclosure, even if
our Board of Directors does not support the bid.
The rights may be redeemed by our Board of Directors prior to the
expiration or reauthorization of the rights agreement, with the prior consent of
the holders of rights or common shares, for U.S.$0.01 per right. In addition,
under specified conditions, our Board of Directors may waive the application of
the rights agreement for particular share acquisitions or take-over bids, and in
that event the Board of Directors will be deemed to have elected to redeem the
rights at U.S.$0.01 per right.
DESCRIPTION OF WARRANTS
GENERAL
We may from time to time offer warrants in one or more series to purchase
our common shares, preference shares or debt securities, or any combination of
these instruments. We may offer warrants either alone or together with the
underlying instruments, and the warrants may be attached or separate from the
underlying instruments. Each series of warrants will be issued under a separate
warrant agreement, which, together with the warrants themselves, will contain
the terms of the warrants. Each warrant agreement will be between us and a
warrant agent we will retain for the applicable series of warrants. The warrant
agent will act exclusively as our agent in connection with the warrants of the
applicable series and will not have any obligation or relationship of agency for
or with the holders or beneficial owners of the warrants.
The following describes some of the general terms and provisions of the
warrants we may offer. Additional terms of the warrants and the applicable
warrant agreement will be described in the applicable prospectus supplement. The
following description of the terms of the warrants and the supplemental
description contained in the applicable prospectus supplement may not be
complete, and we urge you to read the applicable warrant agreement and form of
warrant because those documents will define your rights as a holder of our
warrants.
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The prospectus supplement relating to a series of warrants will describe
the terms of the series of warrants, including the following:
- the series designation of the warrants;
- the price or prices at which the warrants will be offered;
- the total number of warrants to be offered;
- the designation and the terms of the securities to be purchased on
exercise of the warrants;
- the date on which the right to purchase the underlying securities will
begin, and the date on which the purchase right will expire;
- the exercise price of the securities to be purchased on exercise of the
warrants;
- information about the warrant agent;
- the procedures and conditions for exercising the warrants;
- if applicable, information with respect to book-entry procedures;
- if applicable, the minimum or maximum number of warrants that may be
exercised by an individual beneficial holder, or by all beneficial
holders, at any one time;
- if applicable, the designation and the terms of the underlying securities
with which the warrants are issued and the number of warrants issued with
each underlying security;
- if applicable, the date on and after which the warrants and the related
underlying securities will be separately transferable;
- the governing law of the warrants and warrant agreement, if other than
the law of the State of New York;
- if applicable, any anti-dilution provisions; and
- any other terms of the warrants, including terms, procedures limitations
and conditions relating to the exchange and exercise of the warrants.
Unless otherwise indicated in a prospectus supplement, we will issue
warrants in fully registered form only. The warrants will be exercisable only
for cash. Warrant certificates may be exchanged for new warrant certificates of
different denominations, and warrants may be exercised at the warrant agent's
corporate trust office or at any other office designated for such purpose as
provided in the applicable prospectus supplement.
Holders of warrants prior to exercise of the applicable purchase right will
be holders of the warrants alone and will not be considered holders of the
underlying securities. As a result, holders of warrants prior to exercise will
not have any of the rights of holders of the underlying equity or debt
securities purchasable upon exercise, and will not be entitled to payments of
principal (or premium, if any) or interest, if any, or voting or other rights on
any underlying debt securities, and will not be entitled to dividend, if any,
voting or other rights of the common or preference shares for which the warrants
may be exercised.
WARRANT EXERCISE
Each series of warrants will entitle the holder to purchase for cash a
number of underlying securities at an exercise price that will be stated in, or
determined as described in, the prospectus supplement for the series. Warrants
may be exercised at any time up until the close of regular business hours on the
expiration date set forth in the applicable prospectus supplement. After the
close of business on the applicable expiration date the warrants will be void
and will no longer be exercisable for purchase of the underlying securities.
Warrants will be exercisable as described in the applicable prospectus
supplement. Upon receipt of payment and the properly completed and duly executed
warrant certificate at the corporate trust office of the warrant agent or any
other office indicated in the applicable prospectus supplement as the location
for warrant
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certificate presentment and exercise, we will, as soon as practicable, forward
the securities purchasable upon exercise of the warrants. If a holder decides to
exercise fewer than all of the warrants represented by the warrant certificate,
we will issue to the holder a new warrant certificate representing the remaining
warrants.
ENFORCEABILITY OF RIGHTS AND GOVERNING LAW
The holders of warrants may, on their own behalf and for their own benefit,
without the consent of the warrant agent, enforce, and may institute and
maintain any suit, action or proceeding against us to enforce, their rights to
exercise and receive the securities purchasable upon exercise of their warrants.
Unless otherwise stated in the applicable prospects supplement, each series of
warrants and the applicable warrant agreement will be governed by the laws of
the State of New York.
TAX CONSEQUENCES
Where appropriate, the applicable prospectus supplement will describe the
Canadian tax considerations, Quebec tax considerations and U.S. federal income
tax considerations relevant to the securities being offered.
EXPERTS
The financial statements incorporated in this prospectus by reference to
our Report on Form 10-K/A, filed on September 11, 2003, which amends our Annual
Report on Form 10-K for the fiscal year ended December 31, 2002, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting. The financial statements of Pechiney incorporated into
this prospectus by reference to our Current Report on Form 8-K dated November
25, 2003, have been so incorporated in reliance on the report of
PricewaterhouseCoopers Audit, independent accountants, given the authority of
said firm as experts in auditing and accounting.
VALIDITY OF SECURITIES
Roy Millington, our Corporate Secretary, will pass upon the validity of the
equity securities. In connection with particular offerings of debt securities
and warrants, the validity of the debt securities and warrants will be passed
upon by Roy Millington, as to matters of Canadian law and applicable matters of
Quebec law, and by Sullivan & Cromwell LLP, New York, New York, as to matters of
New York law. Davis Polk & Wardwell, New York, New York will issue an opinion as
to certain legal matters for the agents or underwriters.
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PLAN OF DISTRIBUTION
We may sell any series of securities at any time after effectiveness of the
registration statement of which this prospectus forms a part in one or more of
the following ways from time to time:
- through underwriters or dealers;
- through agents; or
- directly to one or more purchasers.
The offered securities may be distributed periodically in one or more
transactions at:
- a fixed price or prices, which may be changed;
- market prices prevailing at the time of sale;
- prices related to the prevailing market prices; or
- negotiated prices.
The prospectus supplement will include:
- the initial public offering price;
- the names of any underwriters, dealers or agents;
- the purchase price of the securities;
- our proceeds from the sale of the securities;
- any underwriting discounts or agency fees and other underwriters' or
agents' compensation;
- any discounts or concessions allowed or reallowed or paid to dealers;
- the place and time of delivery of the securities; and
- any securities exchange on which the securities may be listed.
If underwriters are used in the sale, they will buy the securities for
their own account. The underwriters may then resell the securities in one or
more transactions, at any time or times at a fixed public offering price or at
varying prices. The underwriters may change from time to time any fixed public
offering price and any discounts or commissions allowed or re-allowed or paid to
dealers. If dealers are utilized in the sale of the securities, we will sell the
securities to the dealers as principals. The dealers may then resell the
securities in the public at varying prices to be determined by such dealers.
In connection with the offering of securities, we may grant to the
underwriters an option to purchase additional securities to cover
over-allotments, if any, at the initial public offering price (with an
additional underwriting commission), as may be set forth in the prospectus
supplement for such securities. If we grant any over-allotment option, the terms
of the option will be set forth in the prospectus supplement for the securities.
This prospectus may be delivered by underwriters and dealers in connection
with short sales undertaken to hedge exposures under commitments to acquire our
securities to be issued on a delayed or contingent basis.
Underwriters, dealers and agents that participate in the distribution of
the securities may be underwriters as defined in the Securities Act of 1933. Any
discounts or commissions that we pay them and any profit they receive when they
resell the securities may be treated as underwriting discounts and commissions
under that Act. We may have agreements with underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act of 1933, to contribute with respect to payments which they
may be required to make in respect of such liabilities and to reimburse them for
certain expenses.
Underwriters, dealers and agents, and their affiliates or associates, may
engage in transactions with us or perform services for us in the ordinary course
of business and receive compensation from us.
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Each series of offered securities will be a new issue of securities and
will have no established trading market, other than our common shares, which are
principally listed on the New York Stock Exchange and the Toronto Stock
Exchange. We will apply to list any common shares sold pursuant to a prospectus
supplement on the New York Stock Exchange and the Toronto Stock Exchange. Other
securities may or may not be listed on a national or foreign securities exchange
or automated quotation system. Any underwriters or agents to whom securities are
sold for public offering or sale may but are not required to make a market in
the securities, and the underwriters or agents may discontinue making a market
in the securities at any time without notice. No assurance can be given as to
the liquidity or the existence of trading markets for any securities other than
our common shares.
Any underwriters utilized may engage in stabilizing transactions and
syndicate covering transactions in accordance with Rule 104 of Regulation M
under the Securities Exchange Act of 1934. Stabilizing transactions permit bids
to purchase the offered securities or any underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of securities in the open market after the
distribution has been completed in order to cover syndicate short positions.
Such stabilizing transactions and syndicate covering transactions may cause the
price of the offered securities to be higher than would be the case in the
absence of such transactions.
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