Prospectus Supplement to Prospectus dated August 7, 2001.
$25,000,000
SOUTHERN COMPANY CAPITAL FUNDING, INC.
Series B Floating Rate Senior Notes due February 1, 2004
Fully and Unconditionally Guaranteed By
(Southern Company Logo)
----------------------
Southern Company Capital Funding, Inc. will pay interest on the Series B
Senior Notes on the first day of each month, beginning March 1, 2002. The per
annum interest rate on the Series B Senior Notes for each monthly interest
period will be reset monthly based on the one-month LIBOR rate plus 0.35%;
however, under certain circumstances set forth in this prospectus supplement,
the interest rate on the Series B Senior Notes will be determined without
reference to LIBOR.
The Series B Senior Notes are redeemable, in whole or in part, at the
option of Southern Company Capital Funding, Inc. beginning on February 1, 2003
and on each interest payment date thereafter at a redemption price equal to 100%
of the principal amount to be redeemed plus any accrued and unpaid interest to
the date of redemption.
The Southern Company will unconditionally and irrevocably guarantee the due
and punctual payment of principal, premium, if any, and interest on the Series B
Senior Notes. The Series B Senior Notes Guarantee will be unsecured and will
rank equally with all of The Southern Company's other unsecured indebtedness and
will be effectively subordinated to all secured debt of The Southern Company.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
Per Senior Note Total
--------------- -----------
Initial public offering price............................ 100% $25,000,000
Underwriting discount.................................... 0% $ 0
Proceeds, before expenses, to The Southern Company....... 100% $25,000,000
The public offering price set forth above does not include accrued
interest, if any. Interest on the Series B Senior Notes will accrue from the
date of original issuance of the Series B Senior Notes, expected to be February
1, 2002.
----------------------
The underwriter expects to deliver the Series B Senior Notes in book-entry
form only through The Depository Trust Company against payment in New York, New
York on February 1, 2002.
GOLDMAN, SACHS & CO.
----------------------
Prospectus Supplement dated January 30, 2002.
THE SOUTHERN COMPANY
The Southern Company ("Southern") was incorporated under the laws of
Delaware on November 9, 1945. Southern is domesticated under the laws of Georgia
and is qualified to do business as a foreign corporation under the laws of
Alabama. The principal executive offices of Southern are located at 270
Peachtree Street, N.W., Atlanta, Georgia 30303, and the telephone number is
(404) 506-5000.
SOUTHERN COMPANY CAPITAL FUNDING, INC.
Southern Company Capital Funding, Inc. ("Capital") was established to
obtain financing for Southern and direct and indirect subsidiaries of Southern
other than the operating affiliates. Capital does not and will not engage in
business activities other than such financing.
Capital was incorporated under the laws of Delaware on January 24, 1997 and
is an indirect wholly-owned subsidiary of Southern. The principal executive
offices of Capital are located at 1403 Foulk Road, Suite 102, Wilmington,
Delaware 19803, and the telephone number is (302) 478-3473.
SELECTED FINANCIAL INFORMATION
The following data of Southern is qualified in its entirety by reference to
and, therefore, should be read together with the detailed information and
financial statements appearing herein, in the accompanying Prospectus or in the
documents incorporated herein by reference.
YEAR ENDED DECEMBER 31,
------------------------------------------------
1997 1998 1999 2000 2001
------ ------ ------ ------- -----------
(MILLIONS, EXCEPT RATIOS) (UNAUDITED)
Operating Revenues.................... $8,774 $9,499 $9,317 $10,066 $10,155
Earnings From Continuing Operations
Before Interest and Income Taxes.... 2,350 2,380 2,265 2,429 2,413
Earnings From Continuing Operations
Before Cumulative Effect of
Accounting Change................... 990 986 915 994 1,119
Consolidated Net Income............... 972 977 1,276 1,313 1,262
Ratio of Earnings to Fixed
Charges(1).......................... 3.52 3.36 3.03 2.84 3.19
Ratio of Earnings to Fixed Charges
Plus Preferred Dividend Requirements
(Pre-Income Tax Basis)(2)........... 3.20 3.18 2.91 2.74 3.08
S-1
CAPITALIZATION
AS OF SEPTEMBER 30, 2001
-------------------------
ACTUAL AS ADJUSTED(3)
------- ---------------
(MILLIONS, EXCEPT
PERCENTAGES)
Common Stock Equity...................................... $ 7,972 $ 7,972 40.6%
Cumulative Preferred Stock............................... 368 368 1.9
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiaries Substantially All of Whose
Assets are Junior Subordinated Debentures or Notes..... 2,246 2,276 11.6
Senior Notes............................................. 4,458 5,003 25.4
Other Long-Term Debt..................................... 3,483 4,031 20.5
------- ------- -----
Total, excluding amounts due within one year of
$529 million................................. $18,527 $19,650 100.0%
======= ======= =====
---------------
(1) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Earnings From Continuing Operations Before Interest and Income
Taxes" the debt portion of allowance for funds used during construction; and
(ii) "Fixed Charges" consist of "Net Interest Charges" plus the debt portion
of allowance for funds used during construction.
(2) In computing this ratio, "Preferred Dividend Requirements" represent the
before-tax earnings necessary to pay such dividends, computed at the
effective tax rates for the applicable periods.
(3) Reflects (i) the issuance in October 2001 by Gulf Power Company of
$75,000,000 aggregate principal amount of Series D 6.10% Senior Notes due
September 30, 2016; (ii) the issuance in November 2001 by Gulf Power Capital
Trust III of $30,000,000 aggregate liquidation amount of its 7.375% Trust
Preferred Securities for the benefit of Gulf Power Company; (iii) the
issuance in November 2001 and January 2002 by Southern Power Company of
$293,000,000 and $239,000,000, respectively, aggregate principal amounts of
variable rate long term notes due November 15, 2004; (iv) Georgia Power
Company's obligations in connection with the sale in December 2001 of
$19,500,000 of Development Authority of Appling County Pollution Control
Revenue Bonds (Georgia Power Company Plant Hatch Project), Second Series
2001; (v) the issuance in January 2002 by Gulf Power Company of $45,000,000
aggregate principal amount of Series E 6.00% Senior Notes due January 30,
2012; (vi) the proposed redemption in March 2002 by Alabama Power Company of
$4,000,000 principal amount of its First Mortgage Bonds, 7 3/4% Series due
February 1, 2023; (vii) the proposed issuance in February 2002 by Capital of
$400,000,000 aggregate principal amount of Series A 5.30% Senior Notes due
February 1, 2007; and (viii) the proposed issuance of the Series B Senior
Notes offered hereby.
RECENT RESULTS OF OPERATIONS
For the year ended December 31, 2001, the unaudited amounts for "Operating
Revenues," "Earnings From Continuing Operations Before Interest and Income
Taxes," "Earnings From Continuing Operations Before Cumulative Effect of
Accounting Change" and "Consolidated Net Income" of Southern were
$10,155,000,000, $2,413,000,000, $1,119,000,000 and $1,262,000,000,
respectively. In the opinion of the management of Southern, the above unaudited
amounts for the year ended December 31, 2001 reflect all adjustments (which were
only normal recurring adjustments) necessary to present fairly the results of
operations for such period. The "Ratio of Earnings to Fixed Charges" and the
"Ratio of Earnings to Fixed Charges Plus Preferred Dividend Requirements
(Pre-Income Tax Basis)" for the year ended December 31, 2001 were 3.19 and 3.08,
respectively.
S-2
USE OF PROCEEDS
The proceeds from the sale of the Series B Senior Notes will be remitted to
Southern and applied by Southern to repay a portion of its outstanding
short-term indebtedness, which aggregated approximately $1,125,000,000 as of
January 29, 2002.
DESCRIPTION OF THE SERIES B SENIOR NOTES
Set forth below is a description of the specific terms of the Series B
Floating Rate Senior Notes due February 1, 2004 (the "Series B Senior Notes").
This description supplements, and should be read together with, the description
of the general terms and provisions of the Senior Notes set forth in the
accompanying Prospectus under the caption "Description of the Senior Notes." The
following description does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the description in the accompanying
Prospectus and the Senior Note Indenture, as supplemented (the "Senior Note
Indenture"), among Capital, Southern, as guarantor, and The Bank of New York, as
trustee (the "Senior Note Indenture Trustee").
GENERAL
The Series B Senior Notes will be issued as a series of Senior Notes under
the Senior Note Indenture. The Series B Senior Notes will initially be issued in
the aggregate principal amount of $25,000,000. Capital may, without the consent
of the holders of the Series B Senior Notes, issue additional notes having the
same ranking and the same interest rate, maturity and other terms as the Series
B Senior Notes. Any additional notes having such similar terms, together with
the Series B Senior Notes, will constitute a single series of Senior Notes under
the Senior Note Indenture.
The entire principal amount of the Series B Senior Notes will mature and
become due and payable, together with any accrued and unpaid interest thereon,
on February 1, 2004. The Series B Senior Notes are not subject to any sinking
fund provision. The Series B Senior Notes are available for purchase in
denominations of $1,000 and any integral multiple thereof.
INTEREST
Each Series B Senior Note shall bear interest from the date of original
issuance, payable monthly in arrears on the first day of each month (each, an
"Interest Payment Date") to the person in whose name such Series B Senior Note
is registered at the close of business on the fifteenth calendar day prior to
such payment date. The initial Interest Payment Date is March 1, 2002. The
amount of interest payable will be computed on the basis of the actual number of
days elapsed over a 360-day year. If any Interest Payment Date would otherwise
be a day that is not a Business Day, the Interest Payment Date will be the next
succeeding Business Day.
The Series B Senior Notes will bear interest for each monthly Interest
Period at a per annum rate determined by the Calculation Agent, subject to the
maximum interest rate permitted by New York or other applicable state law, as
such law may be modified by United States law of general application. The
interest rate applicable during each monthly Interest Period will be equal to
LIBOR on the Interest Determination Date for such Interest Period plus 0.35%;
provided, however, that in certain circumstances described below, the interest
rate will be determined without reference to LIBOR. Promptly upon such
determination, the Calculation Agent will notify Southern, Capital and the
Senior Note Indenture Trustee, if the Senior Note Indenture Trustee is not then
serving as the Calculation Agent, of the interest rate for the new Interest
Period. The interest rate determined by the Calculation Agent, absent manifest
error, shall be binding and conclusive upon the beneficial owners and holders of
the Series B Senior Notes, Southern, Capital and the Senior Note Indenture
Trustee.
S-3
If the following circumstances exist on any Interest Determination Date,
the Calculation Agent shall determine the interest rate for the Series B Senior
Notes as follows:
(1) In the event no Reported Rate (as defined below) appears on
Telerate Page 3750 (as defined below) as of approximately 11:00 a.m.,
London time, on an Interest Determination Date, the Calculation Agent shall
request the principal London offices of each of four major banks in the
London interbank market selected by the Calculation Agent (after
consultation with the Company) to provide a quotation of the rate (the
"Rate Quotation") at which one month deposits in amounts of not less than
$1,000,000 are offered by it to prime banks in the London interbank market,
as of approximately 11:00 a.m., London time, on such Interest Determination
Date, that is representative of single transactions at such time (the
"Representative Amounts"). If at least two Rate Quotations are provided,
the interest rate will be the arithmetic mean of the Rate Quotations
obtained by the Calculation Agent, plus 0.35%.
(2) In the event no Reported Rate appears on Telerate Page 3750 as of
approximately 11:00 a.m., London time, on an Interest Determination Date
and there are fewer than two Rate Quotations, the interest rate will be the
arithmetic mean of the rates quoted approximately 11:00 a.m., New York City
time, on such Interest Determination Date, by three major banks in New York
City selected by the Calculation Agent (after consultation with the
Company), for loans in Representative Amounts in U.S. dollars to leading
European banks, having an index maturity of one month for a period
commencing on the second London Business Day immediately following such
Interest Determination Date, plus 0.35%; provided, however, that if fewer
than three banks selected by the Calculation agent are quoting such rates,
the interest rate for the applicable Interest Period will be the same as
the interest rate in effect for the immediately preceding Interest Period.
Upon the request of a holder of the Series B Senior Notes, the Calculation
Agent will provide to such holder the interest rate in effect on the date of
such request and, if determined, the interest rate for the next Interest Period.
CERTAIN DEFINITIONS
The following definitions apply to the Series B Senior Notes.
"Business Day" means a day other than (i) a Saturday or Sunday, (ii) a day
on which banks in New York, New York are authorized or obligated by law or
executive order to remain closed, or (iii) a day on which the Senior Note
Indenture Trustee's corporate trust office is closed for business.
"Calculation Agent" means The Bank of New York, or its successor appointed
by Capital, acting as calculation agent.
"Interest Determination Date" means the second London Business Day
immediately preceding the first day of the relevant Interest Period.
"Interest Period" means the period commencing on an Interest Payment Date
for the Series B Senior Notes (or, with respect to the initial Interest Period
only, commencing on the issue date for the Series B Senior Notes) and ending on
the day before the next succeeding interest payment date for the Series B Senior
Notes.
"LIBOR" for any interest determination date will be the offered rate for
deposits in U.S. dollars having an index maturity of one month for a period
commencing on the second London Business Day immediately following the Interest
Determination Date in amounts of not less than $1,000,000, as such rate appears
on Telerate Page 3750 or a successor reporter of such rates selected by the
Calculation Agent and acceptable to Capital and Southern, at approximately 11:00
a.m., London time, on the Interest Determination Date (the "Reported Rate").
S-4
"London Business Day" means a day that is a Business Day and a day on which
dealings in deposits in U.S. dollars are transacted, or with respect to any
future date are expected to be transacted, in the London interbank market.
"Telerate Page 3750" means the display designated on page 3750 on Bridge
Telerate, Inc. (or such other page as may replace the 3750 page on that service
or such other service as may be nominated by the British Bankers' Association
for the purpose of displaying London interbank offered rates for U.S. dollar
deposits).
RANKING
The Series B Senior Notes will be direct, unsecured and unsubordinated
obligations of Capital ranking pari passu with all other unsecured and
unsubordinated obligations of Capital. The Series B Senior Notes will be
effectively subordinated to all secured debt of Capital. At September 30, 2001,
Capital had no outstanding secured debt. The Senior Note Indenture contains no
restrictions on the amount of additional indebtedness that may be incurred by
Capital.
OPTIONAL REDEMPTION
Capital shall have the right to redeem the Series B Senior Notes, in whole
or in part, without premium, from time to time, on any Interest Payment Date on
or after February 1, 2003, upon not less than 5 nor more than 15 days' notice,
at a redemption price (the "Redemption Price") equal to 100% of the principal
amount to be redeemed plus any accrued and unpaid interest to the date of
redemption (the "Redemption Date").
If notice of redemption is given as aforesaid, the Series B Senior Notes so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price together with any accrued interest thereon, and from and after
such date (unless Capital shall default in the payment of the Redemption Price
and accrued interest) such Series B Senior Notes shall cease to bear interest.
Subject to the foregoing and to applicable law (including, without
limitation, United States federal securities laws), Southern, Capital or their
affiliates may, at any time and from time to time, purchase outstanding Series B
Senior Notes by tender, in the open market or by private agreement.
SERIES B SENIOR NOTES GUARANTEE
Pursuant to the Subordinated Note Indenture, Southern will irrevocably and
unconditionally guarantee the Series B Senior Notes as described under
"Description of the Series B Senior Notes Guarantee."
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as the initial securities
depositary for the Series B Senior Notes. The Series B Senior Notes will be
issued only as fully registered securities registered in the name of Cede & Co.,
DTC's nominee. One or more fully registered global Series B Senior Notes
certificates will be issued, representing in the aggregate the total principal
amount of Series B Senior Notes, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended. DTC holds securities that its participants
S-5
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the Securities and Exchange Commission.
Purchases of Series B Senior Notes within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Series B Senior
Notes on DTC's records. The ownership interest of each actual purchaser of
Series B Senior Notes ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Series B Senior
Notes. Transfers of ownership interests in the Series B Senior Notes are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Series B Senior Notes, except in the event that use
of the book-entry system for the Series B Senior Notes is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Series B Senior
Notes. DTC's records reflect only the identity of the Direct Participants to
whose accounts such Series B Senior Notes are credited, which may or may not be
the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to DTC. If less than all of the Series B
Senior Notes are being redeemed, DTC will reduce the amount of the interest of
each Direct Participant in the Series B Senior Notes in accordance with its
procedures.
Although voting with respect to the Series B Senior Notes is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will itself
consent or vote with respect to Series B Senior Notes. Under its usual
procedures, DTC would mail an Omnibus Proxy to Capital as soon as possible after
the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Direct Participants to whose accounts the Series B Senior Notes
are credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Payments on the Series B Senior Notes will be made to DTC. DTC's practice
is to credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the account of customers registered in "street name," and will be the
responsibility of such Participant and not of DTC, Capital or Southern, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment to DTC is the responsibility of Capital, disbursement of such
payments to Direct Participants is the responsibility of DTC, and disbursement
of such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
S-6
Except as provided herein, a Beneficial Owner of a global Series B Senior
Note will not be entitled to receive physical delivery of Series B Senior Notes.
Accordingly, each Beneficial Owner must rely on the procedures of DTC to
exercise any rights under the Series B Senior Notes. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of securities in definitive form. Such laws may impair the ability to
transfer beneficial interests in a global Series B Senior Note.
DTC may discontinue providing its services as securities depositary with
respect to the Series B Senior Notes at any time by giving reasonable notice to
Capital. Under such circumstances, in the event that a successor securities
depositary is not obtained, Series B Senior Notes certificates will be printed
and delivered to the holders of record. Additionally, Capital or Southern may
decide to discontinue use of the system of book-entry transfers through DTC (or
a successor depositary) with respect to the Series B Senior Notes. In that
event, certificates for the Series B Senior Notes will be printed and delivered
to the holders of record.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Capital and Southern believe to be reliable,
but Capital and Southern take no responsibility for the accuracy thereof.
Capital and Southern have no responsibility for the performance by DTC or its
Participants of their respective obligations as described herein or under the
rules and procedures governing their respective operations.
DESCRIPTION OF THE SERIES B SENIOR NOTES GUARANTEE
Pursuant to the Senior Note Indenture, Southern will irrevocably and
unconditionally guarantee the due and punctual payment of principal, premium, if
any, and interest on the Series B Senior Notes when and as the same shall become
due and payable, at maturity or otherwise. The Series B Senior Notes Guarantee
will constitute a direct, unsecured and unsubordinated obligation of Southern
and will rank pari passu with all other unsecured and unsubordinated debt that
may be issued by Southern. The Series B Senior Notes Guarantee will be
effectively subordinated to all secured debt of Southern. As of September 30,
2001, Southern had no secured debt outstanding. Since Southern is a holding
company, the right of Southern and, hence, the right of creditors of Southern
(including holders of Series B Senior Notes) to participate in any distribution
of the assets of any subsidiary of Southern, whether upon liquidation,
reorganization or otherwise, is subject to prior claims of creditors of each
such subsidiary.
S-7
UNDERWRITING
Southern, Capital and Goldman, Sachs & Co. (the "Underwriter") have entered
into an underwriting agreement with respect to the Series B Senior Notes.
Subject to certain conditions, the Underwriter has agreed to purchase the entire
principal amount of Series B Senior Notes.
The Underwriter is committed to take and pay for all of the Series B Senior
Notes being offered, if any are taken.
Series B Senior Notes sold by the Underwriter to the public will initially
be offered at the initial public offering price set forth on the cover of this
Prospectus Supplement. If all the Series B Senior Notes are not sold at the
initial offering price, the Underwriter may change the offering price.
The Series B Senior Notes are a new issue of securities with no established
trading market. Southern and Capital have been advised by the Underwriter that
the Underwriter intends to make a market in the Series B Senior Notes but is not
obligated to do so and may discontinue market making at any time without notice.
No assurance can be given as to the liquidity of the trading market for the
Series B Senior Notes.
In connection with the offering of the Series B Senior Notes, the
Underwriter may purchase and sell Series B Senior Notes in the open market.
These transactions may include short sales, stabilizing transactions and
purchases to cover positions created by short sales. Short sales involve the
sale by the Underwriter of a greater number of Series B Senior Notes than it is
required to purchase in the offering of the Series B Senior Notes. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the Series B Senior
Notes while the offering of the Series B Senior Notes is in progress.
These activities by the Underwriter may stabilize, maintain or otherwise
affect the market price of the Series B Senior Notes. As a result, the price of
the Series B Senior Notes may by higher than the price that otherwise might
exist in the open market. If these activities are commenced, they may be
discontinued by the Underwriter at any time. These transactions may be effected
in the over-the-counter market or otherwise.
Series B Senior Notes will be approximately $170,000. The Underwriter has
agreed to reimburse Southern for certain of the expenses in connection with the
offering of the Series B Senior Notes.
Delivery of the Series B Senior Notes is expected to occur two Business
Days after the pricing of the offering.
Southern has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
The Underwriter and its affiliates engage in transactions with and perform
services for Southern in the ordinary course of business and have engaged, and
may in the future engage, in investment banking transactions with Southern or
its affiliates.
S-8
PROSPECTUS
$1,000,000,000
SOUTHERN COMPANY CAPITAL FUNDING, INC.
SENIOR NOTES
JUNIOR SUBORDINATED NOTES
FULLY AND UNCONDITIONALLY
GUARANTEED BY
THE SOUTHERN COMPANY
---------------------------
SOUTHERN COMPANY CAPITAL TRUST VI
SOUTHERN COMPANY CAPITAL TRUST VII
TRUST PREFERRED SECURITIES
FULLY AND UNCONDITIONALLY GUARANTEED, AS DESCRIBED HEREIN, BY
THE SOUTHERN COMPANY
---------------------------
We will provide the specific terms of these securities in supplements to
this Prospectus. You should read this Prospectus and the applicable prospectus
supplement carefully before you invest.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------------
August 7, 2001
ABOUT THIS PROSPECTUS
This Prospectus is part of a registration statement filed with the
Securities and Exchange Commission (the "Commission") using a "shelf"
registration process under the Securities Act of 1933, as amended (the "1933
Act"). Under the shelf process, Southern Company Capital Funding, Inc.
("Capital") may sell, in one or more transactions,
- senior notes (the "Senior Notes")
- junior subordinated notes (the "Junior Subordinated Notes")
and Southern Company Capital Trust VI and Southern Company Capital Trust VII
(individually, a "Trust" and collectively, the "Trusts") may sell
- trust preferred and capital securities (the "Preferred Securities")
in one or more offerings up to a total dollar amount of $1,000,000,000. The
Senior Notes, the Junior Subordinated Notes and the Preferred Securities will be
guaranteed by The Southern Company ("Southern") to the extent described herein.
This Prospectus provides a general description of those securities. Each time
Capital or a Trust sells securities, it will provide a prospectus supplement
that will contain specific information about the terms of that offering
("Prospectus Supplement"). The Prospectus Supplement may also add, update or
change information contained in this Prospectus. You should read this Prospectus
and the applicable Prospectus Supplement together with additional information
under the heading "Available Information."
AVAILABLE INFORMATION
Southern, Capital and the Trusts have filed with the Commission a combined
registration statement on Form S-3 (the "Registration Statement," which term
encompasses any amendments thereof and exhibits thereto) under the 1933 Act. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto, to which reference is hereby made.
Southern is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York
10048 and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material may also be obtained at prescribed rates
by writing to the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants including Southern that file electronically at
http://www.sec.gov. In addition, reports and other material concerning Southern
may be inspected at the offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005, on which Exchange the common stock of Southern is
listed.
No separate financial statements of Capital or any Trust have been included
herein. Southern, Capital and the Trusts do not consider that such financial
statements would be material to holders of the securities because each of
Capital and each Trust is a special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than, in the case of Capital, obtaining financing for
Southern and direct and indirect subsidiaries of Southern other than the
operating affiliates (as defined below) and, in the case of each Trust, holding
as trust assets Junior Subordinated Notes, issuing Trust Securities (as defined
below) and engaging in other activities as are necessary, advisable or
incidental thereto. See "Southern Company Capital Funding, Inc.," "Description
of the Preferred Securities," "Description of the Junior Subordinated Notes,"
"Description of the Junior Subordinated Notes Guarantees" and "Description of
the Preferred Securities Guarantees." In addition, Southern does not expect that
Capital or any Trust will file reports, proxy statements and other information
under the 1934 Act with the Commission.
2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by Southern with the Commission
pursuant to the 1934 Act and are incorporated herein by reference and made a
part of this Prospectus:
(a) Southern's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000;
(b) Southern's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2001; and
(c) Southern's Current Reports on Form 8-K dated February 28, 2001 and
April 2, 2001.
All documents filed by Southern with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the 1934 Act subsequent to the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated herein by reference and made a part of this Prospectus from the
respective dates of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
SOUTHERN WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS PROSPECTUS
IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY
OR ALL DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN THE EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE).
SUCH REQUESTS SHOULD BE DIRECTED TO TOMMY CHISHOLM, SECRETARY, THE SOUTHERN
COMPANY, 270 PEACHTREE STREET, N.W., ATLANTA, GEORGIA 30303, TELEPHONE: (404)
506-5000.
THE SOUTHERN COMPANY
Southern was incorporated under the laws of Delaware on November 9, 1945.
Southern is domesticated under the laws of Georgia and is qualified to do
business as a foreign corporation under the laws of Alabama. The principal
executive offices of Southern are located at 270 Peachtree Street, N.W.,
Atlanta, Georgia 30303, and the telephone number is (404) 506-5000.
Southern owns all the outstanding common stock of Alabama Power Company
("ALABAMA"), Georgia Power Company ("GEORGIA"), Gulf Power Company ("GULF"),
Mississippi Power Company ("MISSISSIPPI") and Savannah Electric and Power
Company ("SAVANNAH")(ALABAMA, GEORGIA, GULF, MISSISSIPPI and SAVANNAH being
collectively referred to herein as the "operating affiliates"), each of which is
an operating public utility company, and of Southern Company Services, Inc. (the
system service company). ALABAMA and GEORGIA each own 50% of the outstanding
common stock of Southern Electric Generating Company ("SEGCO"). The operating
affiliates supply electric service in the states of Alabama, Georgia, Florida,
Mississippi and Georgia, respectively, and SEGCO owns generating units at a
large electric generating station which supplies power to ALABAMA and GEORGIA.
Southern also owns all the outstanding common stock of Southern Communications
Services, Inc. ("Southern LINC"), Southern Nuclear Operating Company, Inc.
("Southern Nuclear"), Southern Power Company ("Southern Power") and Southern
Management Development, Inc. ("Management"). Southern LINC provides digital
wireless communications services to Southern's integrated Southeast utilities
and also markets these services to the public within the Southeast. Southern
Nuclear provides services to ALABAMA and GEORGIA's nuclear plants. Southern
Power, formed in January 2001, will be the primary growth engine for Southern's
market-based energy business. Management is an energy-related company.
SOUTHERN COMPANY CAPITAL FUNDING, INC.
Capital was established to obtain financing for Southern and direct and
indirect subsidiaries of Southern other than the operating affiliates. Capital
does not and will not engage in business activities other than such financing.
3
Capital was incorporated under the laws of Delaware on January 24, 1997 and
is an indirect wholly-owned subsidiary of Southern. The principal executive
offices of Capital are located at 1403 Foulk Road, Suite 102, Wilmington,
Delaware 19803, and the telephone number is (302) 478-3473.
THE TRUSTS
Each Trust is a statutory business trust created under Delaware law
pursuant to the filing of a certificate of trust with the Delaware Secretary of
State on September 28, 1998. Each Trust's business is defined in a trust
agreement, executed by Capital, as Depositor, and the Delaware Trustee
thereunder. The trust agreement of each Trust will be amended and restated in
its entirety substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus forms a part (each, a "Trust Agreement").
Each Trust Agreement will be qualified as an indenture under the Trust Indenture
Act of 1939, as amended (the "1939 Act"). Capital will own all of the common
securities (the "Common Securities" and, together with the Preferred Securities,
the "Trust Securities") of each Trust. The Trust Securities represent undivided
beneficial interests in the assets of the respective Trusts. Each Trust exists
for the exclusive purposes of (i) issuing its Trust Securities representing
undivided beneficial interests in the assets of such Trust, (ii) investing the
gross proceeds of its Trust Securities in a related series of Junior
Subordinated Notes, and (iii) engaging in only those other activities necessary,
appropriate, convenient or incidental thereto.
Each Trust's business and affairs will be conducted by its trustees, which
shall be appointed by Capital as the holder of the Common Securities: two
employees of a subsidiary of Southern as Administrative Trustees; Bankers Trust
Company as Property Trustee; and Bankers Trust (Delaware) as Delaware Trustee
(collectively, the "Securities Trustees"). The Property Trustee of each Trust
will act as the indenture trustee with respect to such Trust for purposes of
compliance with the provisions of the 1939 Act.
The principal place of business of each Trust shall be c/o Southern, 270
Peachtree Street, N.W., Atlanta, Georgia 30303, telephone (404) 506-5000, Attn:
Secretary.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a Trust for further information concerning such Trust.
ACCOUNTING TREATMENT OF THE TRUSTS
For financial reporting purposes, the Trusts will be treated as
subsidiaries of Southern and, accordingly, the accounts of the Trusts will be
included in the consolidated financial statements of Southern. The Preferred
Securities will be presented as a separate line item in the consolidated balance
sheet of Southern, and appropriate disclosures concerning the Preferred
Securities, the Preferred Securities Guarantees (as defined below), the Junior
Subordinated Notes and the Junior Subordinated Notes Guarantees (as defined
below) will be included in the notes to the consolidated financial statements.
For financial reporting purposes, Southern will record distributions payable on
the Preferred Securities as an expense.
4
CERTAIN RATIOS
The following table sets forth the Ratios of Earnings to Fixed Charges and
Earnings to Fixed Charges Plus Preferred Dividend Requirements (Pre-Income Tax
Basis) for the periods indicated.
TWELVE
MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------ MARCH 31,
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ---------
Ratio of Earnings to Fixed Charges(1).......... 3.68 2.87 2.46 2.74 2.84 2.90
Ratio of Earnings to Fixed Charges Plus
Preferred Dividend Requirements
(Pre-Income Tax Basis)(2).................... 3.12 2.67 2.38 2.68 2.74 2.80
---------------
(1) This ratio is computed as follows: (i) "Earnings" have been calculated by
adding to "Earnings Before Interest, Minority Interests and Income Taxes"
the debt portion of allowance for funds used during construction; and (ii)
"Fixed Charges" consist of "Net Interest Charges" plus the debt portion of
allowance for funds used during construction.
(2) In computing this ratio, "Preferred Dividend Requirements" represent the
before-tax earnings necessary to pay such dividends, computed at the
effective tax rates for the applicable periods.
USE OF PROCEEDS
Each Trust will invest the proceeds received from the sale of its Trust
Securities in Junior Subordinated Notes. Except as may be otherwise described in
an applicable Prospectus Supplement, the net proceeds received by Southern from
such investment and any proceeds received from the sale of Senior Notes or other
sales of Junior Subordinated Notes will be used to pay scheduled maturities
and/or refundings of its securities, to repay short-term indebtedness to the
extent outstanding and for other general corporate purposes.
DESCRIPTION OF THE SENIOR NOTES
Set forth below is a description of the general terms of the Senior Notes.
The following description does not purport to be complete and is subject to, and
is qualified in its entirety by reference to, the Senior Note Indenture to be
entered into among Southern, Capital and The Bank of New York, as trustee (the
"Senior Note Indenture Trustee"), as to be supplemented by a supplemental
indenture thereto establishing the Senior Notes of each series (the Senior Note
Indenture, as so supplemented, is hereinafter referred to as the "Senior Note
Indenture"), the forms of which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part. The terms of the Senior Notes
will include those stated in the Senior Note Indenture and those made a part of
the Senior Note Indenture by reference to the 1939 Act. Certain capitalized
terms used herein are defined in the Senior Note Indenture.
GENERAL
The Senior Notes will be issued as unsecured senior debt securities under
the Senior Note Indenture and will rank pari passu with all other unsecured and
unsubordinated debt of Capital. The Senior Notes will be effectively
subordinated to all secured debt of Capital. At March 31, 2001, Capital had no
outstanding secured debt. The Senior Note Indenture does not limit the aggregate
principal amount of Senior Notes that may be issued thereunder and provides that
Senior Notes may be issued from time to time in one or more series pursuant to
an indenture supplemental to the Senior Note Indenture. The Senior Note
Indenture gives Capital the ability to reopen a previous issue of Senior Notes
and issue additional Senior Notes of such series, unless otherwise provided.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Senior Notes being offered
thereby: (i) the title of such Senior Notes; (ii) any limit on the aggregate
principal amount of such Senior Notes; (iii) the date or dates on which the
principal of such
5
Senior Notes is payable; (iv) the rate or rates at which such Senior Notes shall
bear interest, if any, or any method by which such rate or rates will be
determined, the date or dates from which such interest will accrue, the interest
payment dates on which such interest shall be payable and the regular record
date for the interest payable on any interest payment date; (v) the place or
places where the principal of (and premium, if any) and interest, if any, on
such Senior Notes shall be payable; (vi) the period or periods within which, the
price or prices at which and the terms and conditions on which such Senior Notes
may be redeemed, in whole or in part, at the option of Capital; (vii) the
obligation, if any, of Capital to redeem or purchase such Senior Notes; (viii)
the date or dates, if any, after which such Senior Notes may be converted or
exchanged at the option of the holder into or for shares of Common Stock of
Southern and the terms for any such conversion or exchange; (ix) the
denominations in which such Senior Notes shall be issuable; (x) if other than
the principal amount thereof, the portion of the principal amount of such Senior
Notes which shall be payable upon declaration of acceleration of the maturity
thereof; (xi) any deletions from, modifications of or additions to the Events of
Default or covenants of Capital as provided in the Senior Note Indenture
pertaining to such Senior Notes; (xii) whether such Senior Notes shall be issued
in whole or in part in the form of a Global Security; and (xiii) any other terms
of such Senior Notes.
The Senior Note Indenture does not contain provisions that afford holders
of Senior Notes protection in the event of a highly leveraged transaction
involving Southern or Capital.
SENIOR NOTES GUARANTEE
Pursuant to the Senior Note Indenture, Southern will irrevocably and
unconditionally guarantee (each, a "Senior Notes Guarantee") the Senior Notes as
described under "Description of the Senior Notes Guarantees."
EVENTS OF DEFAULT
The Senior Note Indenture provides that any one or more of the following
described events with respect to the Senior Notes of any series, which has
occurred and is continuing, constitutes an "Event of Default" with respect to
the Senior Notes of such series:
(a) failure for 10 days to pay interest on the Senior Notes of such
series, when due on an interest payment date other than at maturity or upon
earlier redemption; or
(b) failure to pay principal or premium, if any, or interest on the
Senior Notes of such series when due at maturity or upon earlier
redemption; or
(c) failure for three Business Days to deposit any sinking fund
payment when due by the terms of a Senior Note of such series; or
(d) failure to observe or perform any other covenant or warranty in
the Senior Note Indenture (other than a covenant or warranty which has
expressly been included therein solely for the benefit of one or more
series of Senior Notes other than such series) for 90 days after written
notice to Southern and Capital from the Senior Note Indenture Trustee or
the holders of at least 25% in principal amount of the outstanding Senior
Notes of such series; or
(e) certain events of bankruptcy, insolvency or reorganization of
Southern or Capital; or
(f) the Senior Notes Guarantee shall be held in a judicial proceeding
to be unenforceable or invalid or shall cease for any reason to be in full
force and effect.
The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Senior Note Indenture Trustee with respect to the Senior Notes of such series.
If a Senior Note Indenture Event of Default occurs and is continuing with
respect to the Senior Notes of any series, then the Senior Note Indenture
Trustee or the holders of not less than 25% in aggregate outstanding principal
amount of the Senior Notes of such series may declare the principal amount
thereof due and payable immediately by notice in writing to Southern and Capital
(and to the Senior Note Indenture Trustee if given
6
by the holders), and upon any such declaration, such principal amount shall
become immediately due and payable. At any time after such a declaration of
acceleration with respect to the Senior Notes of any series has been made and
before a judgment or decree for payment of the money due has been obtained as
provided in Article Five of the Senior Note Indenture, the holders of not less
than a majority in aggregate outstanding principal amount of the Senior Notes of
such series may rescind and annul such declaration and its consequences if the
default has been cured or waived and Southern or Capital has paid or deposited
with the Senior Note Indenture Trustee a sum sufficient to pay all matured
installments of interest and principal due otherwise than by acceleration and
all sums paid or advanced by the Senior Note Indenture Trustee, including
reasonable compensation and expenses of the Senior Note Indenture Trustee.
The holders of not less than a majority in aggregate outstanding principal
amount of the Senior Notes of any series may, on behalf of the holders of all
the Senior Notes of such series, waive any past default with respect to such
series, except (i) a default in the payment of principal or interest or (ii) a
default in respect of a covenant or provision which under Article Nine of the
Senior Note Indenture cannot be modified or amended thereunder without the
consent of the holder of each outstanding Senior Note of such series affected
thereby.
REGISTRATION AND TRANSFER
Capital shall not be required to (i) issue, register the transfer of or
exchange Senior Notes of any series during a period of 15 days immediately
preceding the date notice is given identifying the Senior Notes of such series
called for redemption, or (ii) register the transfer of or exchange any Senior
Notes so selected for redemption, in whole or in part, except the unredeemed
portion of any Senior Note being redeemed in part.
PAYMENT AND PAYING AGENT
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of any Senior Notes will be made only against surrender to the
Paying Agent of such Senior Notes. Principal of and interest on Senior Notes
will be payable, subject to any applicable laws and regulations, at the office
of such Paying Agent or Paying Agents as Capital may designate from time to
time, except that, at the option of Capital, payment of any interest may be made
by wire transfer or by check mailed to the address of the person entitled
thereto as such address shall appear in the Security Register with respect to
the Senior Notes. Payment of interest on Senior Notes on any interest payment
date will be made to the person in whose name the Senior Notes (or predecessor
security) are registered at the close of business on the record date for such
interest payment.
Unless otherwise indicated in an applicable Prospectus Supplement, the
Senior Note Indenture Trustee will act as Paying Agent with respect to the
Senior Notes. Capital may at any time designate additional Paying Agents or
rescind the designation of any Paying Agents or approve a change in the office
through which any Paying Agent acts.
All moneys paid by Capital to a Paying Agent for the payment of the
principal of or interest on the Senior Notes of any series which remain
unclaimed at the end of two years after such principal or interest shall have
become due and payable will be repaid to Capital, and the holder of such Senior
Notes will thereafter look only to Capital for payment thereof.
MODIFICATION
The Senior Note Indenture contains provisions permitting Capital, Southern
and the Senior Note Indenture Trustee, with the consent of the holders of not
less than a majority in principal amount of the outstanding Senior Notes of each
series affected thereby, to modify the Senior Note Indenture or the rights of
the holders of the Senior Notes of such series; provided, that no such
modification may, without the consent of the holder of each outstanding Senior
Note affected thereby, (i) change the stated maturity of the principal of, or
any installment of principal of or interest on, any Senior Note, or reduce the
principal amount thereof or the rate of interest thereon or any premium payable
upon the redemption thereof, or change the method of calculating the rate of
interest thereon, or impair the right to institute suit for the enforcement of
any such
7
payment on or after the stated maturity thereof (or, in the case of redemption,
on or after the redemption date), or (ii) reduce the percentage of principal
amount of the outstanding Senior Notes of any series, the consent of whose
holders is required for any such supplemental indenture, or the consent of whose
holders is required for any waiver (of compliance with certain provisions of the
Senior Note Indenture or certain defaults thereunder and their consequences)
provided for in the Senior Note Indenture, or (iii) modify any of the provisions
of the Senior Note Indenture relating to supplemental indentures, waiver of past
defaults or waiver of certain covenants, except to increase any such percentage
or to provide that certain other provisions of the Senior Note Indenture cannot
be modified or waived without the consent of the holder of each outstanding
Senior Note affected thereby.
In addition, Capital, Southern and the Senior Note Indenture Trustee may
execute, without the consent of any holders of Senior Notes, any supplemental
indenture for certain other usual purposes, including the creation of any new
series of Senior Notes.
CONSOLIDATION, MERGER AND SALE
Neither Southern nor Capital shall consolidate with or merge into any other
corporation or convey, transfer or lease its properties and assets substantially
as an entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such other corporation or person
expressly assumes, by supplemental indenture executed and delivered to the
Senior Note Indenture Trustee, the payment of the principal of (and premium, if
any) and interest on all the Senior Notes and the performance of every covenant
of the Senior Note Indenture and the Senior Notes Guarantee on the part of
Southern or Capital, as the case may be, to be performed or observed; (2)
immediately after giving effect to such transactions, no Senior Note Indenture
Event of Default, and no event which, after notice or lapse of time or both,
would become a Senior Note Indenture Event of Default, shall have happened and
be continuing; and (3) Southern or Capital, as the case may be, has delivered to
the Senior Note Indenture Trustee an officers' certificate and an opinion of
counsel, each stating that such transaction complies with the provisions of the
Senior Note Indenture governing consolidation, merger, conveyance, transfer or
lease and that all conditions precedent thereto have been complied with.
INFORMATION CONCERNING THE SENIOR NOTE INDENTURE TRUSTEE
The Senior Note Indenture Trustee, prior to a Senior Note Indenture Event
of Default with respect to Senior Notes of any series, undertakes to perform,
with respect to Senior Notes of such series, only such duties as are
specifically set forth in the Senior Note Indenture and, in case a Senior Note
Indenture Event of Default with respect to Senior Notes of any series has
occurred and is continuing, shall exercise, with respect to Senior Notes of such
series, the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Senior Note
Indenture Trustee is under no obligation to exercise any of the powers vested in
it by the Senior Note Indenture at the request of any holder of Senior Notes of
any series, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities which might be incurred thereby. The Senior Note
Indenture Trustee is not required to expend or risk its own funds or otherwise
incur any financial liability in the performance of its duties if the Senior
Note Indenture Trustee reasonably believes that repayment or adequate indemnity
is not reasonably assured to it.
Southern and certain of its subsidiaries maintain deposit accounts and
banking relationships with The Bank of New York. The Bank of New York serves as
trustee under other indentures pursuant to which securities of subsidiaries of
Southern are outstanding.
GOVERNING LAW
The Senior Note Indenture and the Senior Notes will be governed by, and
construed in accordance with, the internal laws of the State of New York.
8
MISCELLANEOUS
Each of Southern and Capital will have the right at all times to assign any
of its rights or obligations under the Senior Note Indenture to a direct or
indirect wholly-owned subsidiary of Southern; provided, that, in the event of
any such assignment, Southern or Capital, as the case may be, will remain
primarily liable for all such obligations. Subject to the foregoing, the Senior
Note Indenture will be binding upon and inure to the benefit of the parties
thereto and their respective successors and assigns.
DESCRIPTION OF THE SENIOR NOTES GUARANTEES
Pursuant to the Senior Note Indenture, Southern will irrevocably and
unconditionally guarantee the due and punctual payment of principal, premium, if
any, and interest on the Senior Notes when and as the same shall become due and
payable. Each Senior Notes Guarantee will constitute an unsecured and
unsubordinated obligation of Southern and will rank pari passu with all other
unsecured and unsubordinated debt that may be issued by Southern. The Senior
Notes Guarantees will be effectively subordinated to all secured debt of
Southern. As of March 31, 2001, Southern had no secured debt. Since Southern is
a holding company, the right of Southern and, hence, the right of creditors of
Southern (including holders of Senior Notes) to participate in any distribution
of the assets of any subsidiary of Southern, whether upon liquidation,
reorganization or otherwise, is subject to prior claims of creditors of each
such subsidiary.
DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES
Set forth below is a description of the general terms of the Junior
Subordinated Notes. The following description does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Subordinated Note Indenture, dated as of June 1, 1997, among Southern, Capital
and Bankers Trust Company, as trustee (the "Subordinated Note Indenture
Trustee"), as to be supplemented by a supplemental indenture thereto
establishing the Junior Subordinated Notes of each series (the Subordinated Note
Indenture, as so supplemented, is hereinafter referred to as the "Subordinated
Note Indenture"), the forms of which are filed as exhibits to the Registration
Statement of which this Prospectus forms a part. The terms of the Junior
Subordinated Notes will include those stated in the Subordinated Note Indenture
and those made a part of the Subordinated Note Indenture by reference to the
1939 Act. Certain capitalized terms used herein are defined in the Subordinated
Note Indenture.
GENERAL
The Junior Subordinated Notes will be issued as unsecured junior
subordinated debt securities under the Subordinated Note Indenture. The
Subordinated Note Indenture does not limit the aggregate principal amount of
Junior Subordinated Notes that may be issued thereunder and provides that Junior
Subordinated Notes may be issued from time to time in one or more series
pursuant to an indenture supplemental to the Subordinated Note Indenture. The
Subordinated Note Indenture gives Capital the ability to reopen a previous issue
of Junior Subordinated Notes and issue additional Junior Subordinated Notes,
unless otherwise provided.
Reference is made to the Prospectus Supplement that will accompany this
Prospectus for the following terms of the series of Junior Subordinated Notes
being offered thereby: (i) the title of such Junior Subordinated Notes; (ii) any
limit on the aggregate principal amount of such Junior Subordinated Notes; (iii)
the date or dates on which the principal of such Junior Subordinated Notes is
payable; (iv) the rate or rates at which such Junior Subordinated Notes shall
bear interest, if any, or any method by which such rate or rates will be
determined, the date or dates from which such interest will accrue, the interest
payment dates on which such interest shall be payable and the regular record
date for the interest payable on any interest payment date; (v) the place or
places where the principal of (and premium, if any) and interest, if any, on
such Junior Subordinated Notes shall be payable; (vi) the period or periods
within which, the price or prices at which and the terms and conditions on which
such Junior Subordinated Notes may be redeemed, in whole or in part, at the
option of Capital, (vii) the obligation, if any, of Capital to redeem or
purchase such Junior
9
Subordinated Notes; (viii) the date or dates, if any, after which such Junior
Subordinated Notes may be converted or exchanged at the option of the holder
into or for shares of Common Stock of Southern and the terms for any such
conversion or exchange; (ix) the denominations in which such Junior Subordinated
Notes shall be issuable; (x) if other than the principal amount thereof, the
portion of the principal amount of such Junior Subordinated Notes which shall be
payable upon declaration of acceleration of the maturity thereof; (xi) any
deletions from, modifications of or additions to the Subordinated Note Indenture
Events of Default or covenants of Capital or Southern as provided in the
Subordinated Note Indenture pertaining to such Junior Subordinated Notes; (xii)
whether such Junior Subordinated Notes shall be issued in whole or in part in
the form of a Global Security; (xiii) the right, if any, of Capital to extend
the interest payment periods of such Junior Subordinated Notes; and (xiv) any
other terms of such Junior Subordinated Notes. The terms of each series of
Junior Subordinated Notes issued to a Trust will correspond to those of the
related Preferred Securities of such Trust as described in the Prospectus
Supplement relating to such Preferred Securities.
The Subordinated Note Indenture does not contain provisions that afford
holders of Junior Subordinated Notes protection in the event of a highly
leveraged transaction involving Southern or Capital.
SUBORDINATION
The Junior Subordinated Notes are subordinated and junior in right of
payment to all Senior Indebtedness (as defined below) of Capital. No payment of
principal of (including redemption payments, if any), or premium, if any, or
interest on (including Additional Interest (as defined herein)) the Junior
Subordinated Notes may be made if (a) any Senior Indebtedness is not paid when
due and any applicable grace period with respect to such default has ended with
such default not being cured or waived or otherwise ceasing to exist, or (b) the
maturity of any Senior Indebtedness has been accelerated because of a default,
or (c) notice has been given of the exercise of an option to require repayment,
mandatory payment or prepayment or otherwise. Upon any payment or distribution
of assets of Capital to creditors upon any liquidation, dissolution, winding-up,
reorganization, assignment for the benefit of creditors, marshalling of assets
or liabilities, or any bankruptcy, insolvency or similar proceedings of Capital,
the holders of Senior Indebtedness shall be entitled to receive payment in full
of all amounts due or to become due on or in respect of all Senior Indebtedness
before the holders of the Junior Subordinated Notes are entitled to receive or
retain any payment or distribution. Subject to the prior payment of all Senior
Indebtedness, the rights of the holders of the Junior Subordinated Notes will be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments and distributions applicable to such Senior Indebtedness until all
amounts owing on the Junior Subordinated Notes are paid in full.
The term "Senior Indebtedness" means, with respect to any person, (i) any
payment due in respect of indebtedness of such person, whether outstanding at
the date of execution of the Subordinated Note Indenture or thereafter incurred,
created or assumed, (a) in respect of money borrowed (including any financial
derivative, hedging or futures contract or similar instrument) and (b) evidenced
by securities, debentures, bonds, notes or other similar instruments issued by
such person that, by their terms, are senior or senior subordinated debt
securities including, without limitation, all obligations under its indentures
with various trustees; (ii) all capital lease obligations; (iii) all obligations
issued or assumed as the deferred purchase price of property, all conditional
sale obligations and all obligations of such person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary course
of business and long-term purchase obligations); (iv) all obligations for the
reimbursement of any letter of credit, banker's acceptance, security purchase
facility or similar credit transaction; (v) all obligations of the type referred
to in clauses (i) through (iv) above of other persons the payment of which such
person is responsible or liable as obligor, guarantor or otherwise; and (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons secured by any lien on any property or asset of such person (whether or
not such obligation is assumed by such person), except for (1) any such
indebtedness that is by its terms subordinated to or pari passu with the Junior
Subordinated Notes and (2) any unsecured indebtedness between or among such
person and its affiliates. Such Senior Indebtedness shall continue to be Senior
Indebtedness and be entitled to the benefits of the subordination provisions
contained in the Subordinated Note Indenture irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness.
10
ADDITIONAL INTEREST
"Additional Interest" is defined in the Subordinated Note Indenture as (i)
such additional amounts as may be required so that the net amounts received and
retained by a holder of Junior Subordinated Notes (if the holder is a Trust)
after paying taxes, duties, assessments or governmental charges of whatever
nature (other than withholding taxes) imposed by the United States or any other
taxing authority will not be less than the amounts the holder would have
received had no such taxes, duties, assessments or other governmental charges
been imposed; and (ii) any interest due and not paid on an interest payment
date, together with interest thereon from such interest payment date to the date
of payment, compounded quarterly, on each interest payment date.
JUNIOR SUBORDINATED NOTES GUARANTEE
Pursuant to the Subordinated Note Indenture, Southern will irrevocably and
unconditionally guarantee (each, a "Junior Subordinated Notes Guarantee") the
Junior Subordinated Notes as described under "Description of the Junior
Subordinated Notes Guarantees."
CERTAIN COVENANTS
Southern and Capital each covenants in the Subordinated Note Indenture, for
the benefit of the holders of each series of Junior Subordinated Notes, that,
(i) if at such time Capital shall have given notice of its election to extend an
interest payment period for such series of Junior Subordinated Notes and such
extension shall be continuing, (ii) if at such time Southern shall be in default
with respect to its payment or other obligations under (A) the Preferred
Securities Guarantee with respect to the Trust Securities, if any, related to
such series of Junior Subordinated Notes or (B) the Junior Subordinated Notes
Guarantee, if any, related to such series of Junior Subordinated Notes, or (iii)
if at such time a Subordinated Note Indenture Event of Default with respect to
such series of Junior Subordinated Notes shall have occurred and be continuing,
(a) neither Southern nor Capital shall declare or pay any dividend or make any
distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock, and (b) neither
Southern nor Capital shall make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities issued by it which
rank pari passu with or junior to the Junior Subordinated Notes or the Junior
Subordinated Notes Guarantee. None of the foregoing, however, shall restrict (i)
any of the actions described in the preceding sentence resulting from any
reclassification of Southern's or Capital's capital stock or the exchange or
conversion of one class or series of Southern's or Capital's capital stock for
another class or series of Southern's or Capital's capital stock, (ii) the
purchase of fractional interests in shares of Southern's or Capital's capital
stock pursuant to the conversion or exchange provisions of such capital stock or
the security being converted or exchanged, (iii) dividends, payments or
distributions payable in shares of capital stock, (iv) redemptions, purchases or
other acquisitions of shares of capital stock in connection with any employment
contract, incentive plan, benefit plan or other similar arrangement of Southern
or any of its subsidiaries or in connection with a dividend reinvestment or
stock purchase plan, or (v) any declaration of a dividend in connection with
implementation of any stockholders' rights plan, or the issuance of rights,
stock or other property under any such plan, or the redemption, repurchase or
other acquisition of any such rights pursuant thereto.
The Subordinated Note Indenture further provides that, for so long as the
Trust Securities of any Trust remain outstanding, Capital covenants (i) to
directly or indirectly maintain 100% ownership of the Common Securities of such
Trust; provided, however, that any permitted successor of Capital or Southern
under the Subordinated Note Indenture may succeed to Capital's ownership of such
Common Securities, and (ii) to use its reasonable efforts to cause such Trust
(a) to remain a statutory business trust, except in connection with the
distribution of Junior Subordinated Notes to the holders of Trust Securities in
liquidation of such Trust, the redemption of all of the Trust Securities of such
Trust, or certain mergers, consolidations or amalgama-
11
tions, each as permitted by the related Trust Agreement, and (b) to otherwise
continue to be classified as a grantor trust for United States federal income
tax purposes.
EVENTS OF DEFAULT
The Subordinated Note Indenture provides that any one or more of the
following described events with respect to the Junior Subordinated Notes of any
series, which has occurred and is continuing, constitutes an "Event of Default"
with respect to the Junior Subordinated Notes of such series:
(a) failure for 10 days to pay interest on the Junior Subordinated
Notes of such series, including any Additional Interest (as defined in
clause (ii) of the definition thereof in the Subordinated Note Indenture)
in respect thereof, when due on an interest payment date other than at
maturity or upon earlier redemption; provided, however, that a valid
extension of the interest payment period by Capital shall not constitute a
default in the payment of interest for this purpose; or
(b) failure for 10 days to pay Additional Interest (as defined in
clause (i) of the definition thereof in the Subordinated Note Indenture);
or
(c) failure to pay principal or premium, if any, or interest,
including Additional Interest (as defined in clause (ii) of the definition
thereof in the Subordinated Note Indenture), on the Junior Subordinated
Notes of such series when due at maturity or upon earlier redemption; or
(d) failure for three Business Days to deposit any sinking fund
payment when due by the terms of a Junior Subordinated Note of such series;
or
(e) failure to observe or perform any other covenant or warranty in
the Subordinated Note Indenture (other than a covenant or warranty which
has expressly been included therein solely for the benefit of one or more
series of Junior Subordinated Notes other than such series) for 90 days
after written notice to Southern and Capital from the Subordinated Note
Indenture Trustee or the holders of at least 25% in principal amount of the
outstanding Junior Subordinated Notes of such series; or
(f) certain events of bankruptcy, insolvency or reorganization of
Southern or Capital; or
(g) the Junior Subordinated Notes Guarantee shall be held in a
judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Subordinated Note Indenture Trustee with respect to the Junior
Subordinated Notes of such series. If a Subordinated Note Indenture Event of
Default occurs and is continuing with respect to the Junior Subordinated Notes
of any series, then the Subordinated Note Indenture Trustee or the holders of
not less than 25% in aggregate outstanding principal amount of the Junior
Subordinated Notes of such series may declare the principal amount thereof due
and payable immediately by notice in writing to Southern and Capital (and to the
Subordinated Note Indenture Trustee if given by the holders), and upon any such
declaration, such principal amount shall become immediately due and payable. At
any time after such a declaration of acceleration with respect to the Junior
Subordinated Notes of any series has been made and before a judgment or decree
for payment of the money due has been obtained as provided in Article Five of
the Subordinated Note Indenture, the holders of not less than a majority in
aggregate outstanding principal amount of the Junior Subordinated Notes of such
series may rescind and annul such declaration and its consequences if the
default has been cured or waived and Southern or Capital has paid or deposited
with the Subordinated Note Indenture Trustee a sum sufficient to pay all matured
installments of interest (including any Additional Interest) and principal due
otherwise than by acceleration and all sums paid or advanced by the Subordinated
Note Indenture Trustee, including reasonable compensation and expenses of the
Subordinated Note Indenture Trustee.
A holder of Preferred Securities may institute a legal proceeding directly
against Southern and Capital, without first instituting a legal proceeding
against the Property Trustee or any other person or entity, for enforcement of
payment to such holder of principal of or interest on the Junior Subordinated
Notes of the
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related series having a principal amount equal to the aggregate stated
liquidation amount of the Preferred Securities of such holder on or after the
due dates specified in the Junior Subordinated Notes of such series.
The holders of not less than a majority in aggregate outstanding principal
amount of the Junior Subordinated Notes of any series may, on behalf of the
holders of all the Junior Subordinated Notes of such series, waive any past
default with respect to such series, except (i) a default in the payment of
principal or interest or (ii) a default in respect of a covenant or provision
which under Article Nine of the Subordinated Note Indenture cannot be modified
or amended thereunder without the consent of the holder of each outstanding
Junior Subordinated Note of such series affected thereby.
REGISTRATION AND TRANSFER
Capital shall not be required to (i) issue, register the transfer of or
exchange Junior Subordinated Notes of any series during a period of 15 days
immediately preceding the date notice is given identifying the Junior
Subordinated Notes of such series called for redemption, or (ii) register the
transfer of or exchange any Junior Subordinated Notes so selected for
redemption, in whole or in part, except the unredeemed portion of any Junior
Subordinated Note being redeemed in part.
PAYMENT AND PAYING AGENT
Unless otherwise indicated in an applicable Prospectus Supplement, payment
of principal of any Junior Subordinated Notes will be made only against
surrender to the Paying Agent of such Junior Subordinated Notes. Principal of
and interest on Junior Subordinated Notes will be payable, subject to any
applicable laws and regulations, at the office of such Paying Agent or Paying
Agents as Capital may designate from time to time, except that, at the option of
Capital, payment of any interest may be made by wire transfer or by check mailed
to the address of the person entitled thereto as such address shall appear in
the Security Register with respect to the Junior Subordinated Notes. Payment of
interest on Junior Subordinated Notes on any interest payment date will be made
to the person in whose name the Junior Subordinated Notes (or predecessor
security) are registered at the close of business on the record date for such
interest payment.
Unless otherwise indicated in an applicable Prospectus Supplement, the
Subordinated Note Indenture Trustee will act as Paying Agent with respect to the
Junior Subordinated Notes. Capital may at any time designate additional Paying
Agents or rescind the designation of any Paying Agents or approve a change in
the office through which any Paying Agent acts.
All monies paid by Capital to a Paying Agent for the payment of the
principal of or interest on the Junior Subordinated Notes of any series which
remain unclaimed at the end of two years after such principal or interest shall
have become due and payable will be repaid to Capital, and the holder of such
Junior Subordinated Notes will thereafter look only to Capital for payment
thereof.
MODIFICATION
The Subordinated Note Indenture contains provisions permitting Capital,
Southern and the Subordinated Note Indenture Trustee, with the consent of the
holders of not less than a majority in principal amount of the outstanding
Junior Subordinated Notes of each series affected thereby, to modify the
Subordinated Note Indenture or the rights of the holders of the Junior
Subordinated Notes of such series; provided, that no such modification may,
without the consent of the holder of each outstanding Junior Subordinated Note
affected thereby, (i) change the stated maturity of the principal of, or any
installment of principal of or interest on, any Junior Subordinated Note, or
reduce the principal amount thereof or the rate of interest (including
Additional Interest) thereon or any premium payable upon the redemption thereof,
or change the method of calculating the rate of interest thereon, or impair the
right to institute suit for the enforcement of any such payment on or after the
stated maturity thereof (or, in the case of redemption, on or after the
redemption date), or (ii) reduce the percentage of principal amount of the
outstanding Junior Subordinated Notes of any series, the consent of whose
holders is required for any such supplemental indenture, or the consent of whose
holders is required for any waiver (of compliance with certain provisions of the
Subordinated Note Indenture or certain defaults thereunder and their
consequences) provided for in the Subordinated Note Indenture, or (iii) modify
13
any of the provisions of the Subordinated Note Indenture relating to
supplemental indentures, waiver of past defaults or waiver of certain covenants,
except to increase any such percentage or to provide that certain other
provisions of the Subordinated Note Indenture cannot be modified or waived
without the consent of the holder of each outstanding Junior Subordinated Note
affected thereby, or (iv) reduce any amount payable under, delay or defer the
required time of payment under, or impair the right to institute suit to enforce
any payment under the Junior Subordinated Notes Guarantee, or (v) modify the
provisions of the Subordinated Note Indenture with respect to the subordination
of the Junior Subordinated Notes or the Junior Subordinated Notes Guarantee in a
manner adverse to such holder.
In addition, Capital, Southern and the Subordinated Note Indenture Trustee
may execute, without the consent of any holders of Junior Subordinated Notes,
any supplemental indenture for certain other usual purposes, including the
creation of any new series of Junior Subordinated Notes.
CONSOLIDATION, MERGER AND SALE
Neither Southern nor Capital shall consolidate with or merge into any other
corporation or convey, transfer or lease its properties and assets substantially
as an entirety to any person, unless (1) such other corporation or person is a
corporation organized and existing under the laws of the United States, any
state thereof or the District of Columbia and such other corporation or person
expressly assumes, by supplemental indenture executed and delivered to the
Subordinated Note Indenture Trustee, the payment of the principal of (and
premium, if any) and interest (including Additional Interest) on all the Junior
Subordinated Notes and the performance of every covenant of the Subordinated
Note Indenture and the Junior Subordinated Notes Guarantee on the part of
Southern or Capital, as the case may be, to be performed or observed; (2)
immediately after giving effect to such transactions, no Subordinated Note
Indenture Event of Default, and no event which, after notice or lapse of time or
both, would become a Subordinated Note Indenture Event of Default, shall have
happened and be continuing; and (3) Southern or Capital, as the case may be, has
delivered to the Subordinated Note Indenture Trustee an officers' certificate
and an opinion of counsel, each stating that such transaction complies with the
provisions of the Subordinated Note Indenture governing consolidation, merger,
conveyance, transfer or lease and that all conditions precedent thereto have
been complied with.
INFORMATION CONCERNING THE SUBORDINATED NOTE INDENTURE TRUSTEE
The Subordinated Note Indenture Trustee, prior to a Subordinated Note
Indenture Event of Default with respect to Junior Subordinated Notes of any
series, undertakes to perform, with respect to Junior Subordinated Notes of such
series, only such duties as are specifically set forth in the Subordinated Note
Indenture and, in case a Subordinated Note Indenture Event of Default with
respect to Junior Subordinated Notes of any series has occurred and is
continuing, shall exercise, with respect to Junior Subordinated Notes of such
series, the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provision, the Subordinated
Note Indenture Trustee is under no obligation to exercise any of the powers
vested in it by the Subordinated Note Indenture at the request of any holder of
Junior Subordinated Notes of any series, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which might be incurred
thereby. The Subordinated Note Indenture Trustee is not required to expend or
risk its own funds or otherwise incur any financial liability in the performance
of its duties if the Subordinated Note Indenture Trustee reasonably believes
that repayment or adequate indemnity is not reasonably assured to it.
Bankers Trust Company, the Subordinated Note Indenture Trustee, also serves
as Property Trustee and as Guarantee Trustee. Southern and certain of its
subsidiaries maintain deposit accounts and banking relationships with Bankers
Trust Company. Bankers Trust Company serves as trustee under other indentures
pursuant to which securities of subsidiaries of Southern are outstanding.
14
GOVERNING LAW
The Subordinated Note Indenture and the Junior Subordinated Notes will be
governed by, and construed in accordance with, the internal laws of the State of
New York.
MISCELLANEOUS
Each of Southern and Capital will have the right at all times to assign any
of its rights or obligations under the Subordinated Note Indenture to a direct
or indirect wholly-owned subsidiary of Southern; provided, that, in the event of
any such assignment, Southern or Capital, as the case may be, will remain
primarily liable for all such obligations. Subject to the foregoing, the
Subordinated Note Indenture will be binding upon and inure to the benefit of the
parties thereto and their respective successors and assigns.
DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES GUARANTEES
Pursuant to the Subordinated Note Indenture, Southern will irrevocably and
unconditionally guarantee the due and punctual payment of principal, premium, if
any, and interest (including any Additional Interest) on the Junior Subordinated
Notes when and as the same shall become due and payable, whether at maturity,
upon redemption or otherwise. Each Junior Subordinated Notes Guarantee will
constitute an unsecured obligation of Southern and will rank subordinate and
junior to all Senior Indebtedness that may be issued by Southern. As of March
31, 2001, Senior Indebtedness of Southern aggregated approximately $728,000,000.
Since Southern is a holding company, the right of Southern and, hence, the right
of creditors of Southern (including the holders of the Junior Subordinated
Notes) to participate in any distribution of the assets of any subsidiary of
Southern, whether upon liquidation, reorganization or otherwise, is subject to
prior claims of creditors of each such subsidiary.
DESCRIPTION OF THE PREFERRED SECURITIES
Each Trust may issue only one series of Preferred Securities having terms
described in the Prospectus Supplement relating thereto. The Trust Agreement of
each Trust will authorize the Administrative Trustees, on behalf of the Trust,
to issue the Preferred Securities of such Trust. The Preferred Securities of
each Trust will have such terms, including distributions, redemption, voting,
liquidation rights and such other preferred, deferral or other special rights or
such restrictions as shall be set forth in the Trust Agreement of such Trust.
Reference is made to the Prospectus Supplement relating to the Preferred
Securities of a Trust for specific terms, including (i) the distinctive
designation of such Preferred Securities; (ii) the number of Preferred
Securities issued by such Trust; (iii) the annual distribution rate (or method
of determining such rate) for Preferred Securities of such Trust and the date or
dates on which such distributions shall be payable; (iv) whether distributions
on such Preferred Securities shall be cumulative and, in the case of Preferred
Securities having cumulative distribution rights, the date or dates, or method
of determining the date or dates, from which distributions on such Preferred
Securities shall be cumulative; (v) the amount or amounts that shall be paid out
of the assets of such Trust to the holders of the Preferred Securities of such
Trust upon voluntary or involuntary dissolution, winding-up or termination of
such Trust; (vi) the obligation, if any, of such Trust to purchase or redeem
such Preferred Securities and the price or prices at which, the period or
periods within which, and the terms and conditions upon which such Preferred
Securities shall be purchased or redeemed, in whole or in part, pursuant to such
obligation; (vii) the date or dates, if any, after which such Preferred
Securities may be converted or exchanged at the option of the holder into or for
shares of common stock of Southern or debt securities of Capital and the terms
for any such conversion or exchange; (viii) the voting rights, if any, of such
Preferred Securities in addition to those required by law, including the number
of votes per Preferred Security and any requirement for the approval by the
holders of Preferred Securities as a condition to specified action or amendments
to the Trust Agreement of such Trust; (ix) the rights, if any, to defer
distributions on the Preferred Securities by extending the interest payment
period on the related Junior Subordinated Notes; and (x) any other relative
rights, preferences, privileges, limitations or restrictions of such Preferred
Securities not inconsistent with the Trust Agreement of such Trust or applicable
law. All Preferred Securities offered hereby will be guaranteed by Southern to
the extent set forth under "Description
15
of the Preferred Securities Guarantees." Any material United States federal
income tax considerations applicable to an offering of Preferred Securities will
be described in the Prospectus Supplement relating thereto.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEES
Set forth below is a summary of information concerning the Preferred
Securities Guarantees that will be executed and delivered by Southern for the
benefit of the holders of Preferred Securities of the respective Trusts from
time to time. Each Preferred Securities Guarantee will be qualified as an
indenture under the 1939 Act. Bankers Trust Company will act as indenture
trustee under each Preferred Securities Guarantee (the "Guarantee Trustee") for
purposes of the 1939 Act. The terms of the respective Preferred Securities
Guarantees will be those set forth therein and those made part thereof by the
1939 Act. The following summary does not purport to be complete and is subject
in all respects to the provisions of, and is qualified in its entirety by
reference to, the Preferred Securities Guarantees, the form of which is filed as
an exhibit to the Registration Statement of which this Prospectus forms a part,
and the 1939 Act. Each Preferred Securities Guarantee will be held by the
Guarantee Trustee for the benefit of holders of the Preferred Securities to
which it relates.
GENERAL
Pursuant to each Preferred Securities Guarantee, Southern will irrevocably
and unconditionally agree, to the extent set forth therein, to pay in full, to
the holders of the related Preferred Securities, the Guarantee Payments (as
defined herein), to the extent not paid by, or on behalf of, the related Trust,
regardless of any defense, right of set-off or counterclaim that Southern may
have or assert against any person. The following payments or distributions with
respect to the Preferred Securities of any Trust to the extent not paid or made
by, or on behalf of, such Trust will be subject to the Preferred Securities
Guarantee related thereto (without duplication): (i) any accrued and unpaid
distributions required to be paid on the Preferred Securities of such Trust but
if and only if and to the extent that such Trust has funds legally and
immediately available therefor; (ii) the redemption price, including all accrued
and unpaid distributions to the date of redemption (the "Redemption Price"),
with respect to any Preferred Securities called for redemption by such Trust,
but if and only to the extent such Trust has funds legally and immediately
available therefor; and (iii) upon a dissolution, winding-up or termination of
such Trust (other than in connection with the distribution of Junior
Subordinated Notes to the holders of Trust Securities of such Trust or the
redemption of all of the Preferred Securities of such Trust), the lesser of (a)
the aggregate of the liquidation amount and all accrued and unpaid distributions
on the Preferred Securities of such Trust to the date of payment, to the extent
such Trust has funds legally and immediately available therefor, and (b) the
amount of assets of such Trust remaining available for distribution to holders
of Preferred Securities of such Trust in liquidation of such Trust (the
"Guarantee Payments"). Southern's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by Southern to the holders
of the related Preferred Securities or by causing the related Trust to pay such
amounts to such holders.
Each Preferred Securities Guarantee will be a guarantee of the Guarantee
Payments with respect to the related Preferred Securities from the time of
issuance of such Preferred Securities, but will not apply to the payment of
distributions and other payments on such Preferred Securities when the related
Trust does not have sufficient funds legally and immediately available to make
such distributions or other payments. IF CAPITAL DOES NOT MAKE INTEREST PAYMENTS
ON THE JUNIOR SUBORDINATED NOTES HELD BY THE PROPERTY TRUSTEE UNDER ANY TRUST,
SUCH TRUST WILL NOT MAKE DISTRIBUTIONS ON ITS PREFERRED SECURITIES.
SUBORDINATION
Southern's obligations under each Preferred Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of Southern and
will rank (i) subordinate and junior in right of payment to all other
liabilities of Southern, except those obligations or liabilities made pari passu
or subordinate by their terms, (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by Southern and with any guarantee now
or hereafter entered into by Southern in respect of any preferred or preference
16
securities of any affiliate of Southern, and (iii) senior to all common stock of
Southern. The terms of the Preferred Securities will provide that each holder of
Preferred Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Preferred Securities Guarantee related
thereto. Southern has outstanding common stock that ranks junior to the
Preferred Securities Guarantees.
Each Preferred Securities Guarantee will constitute a guarantee of payment
and not of collection (that is, the guaranteed party may institute a legal
proceeding directly against the guarantor to enforce its rights under the
guarantee without first instituting a legal proceeding against any other person
or entity).
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially and adversely
affect the rights of holders of the related Preferred Securities (in which case
no consent will be required), each Preferred Securities Guarantee may be amended
only with the prior approval of the holders of not less than 66 2/3% in
liquidation amount of such outstanding Preferred Securities. The manner of
obtaining any such approval of holders of the Preferred Securities will be as
set forth in an accompanying Prospectus Supplement. All guarantees and
agreements contained in each Preferred Securities Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of Southern and
shall inure to the benefit of the holders of the related Preferred Securities
then outstanding.
TERMINATION
Each Preferred Securities Guarantee will terminate and be of no further
force and effect as to the related Preferred Securities upon full payment of the
Redemption Price of all such Preferred Securities, upon distribution of Junior
Subordinated Notes to the holders of such Preferred Securities, or upon full
payment of the amounts payable upon liquidation of the related Trust. Each
Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the related
Preferred Securities must restore payment of any sums paid with respect to such
Preferred Securities or under such Preferred Securities Guarantee.
EVENTS OF DEFAULT
An event of default under each Preferred Securities Guarantee will occur
upon the failure by Southern to perform any of its payment obligations
thereunder. The holders of a majority in liquidation amount of the Preferred
Securities to which any Preferred Securities Guarantee relates have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of such Preferred Securities
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under such Preferred Securities Guarantee. Any holder of the
related Preferred Securities may institute a legal proceeding directly against
Southern to enforce its rights under such Preferred Securities Guarantee without
first instituting a legal proceeding against the Guarantee Trustee or any other
person or entity. The holders of a majority in liquidation amount of Preferred
Securities of any series may, by vote, on behalf of the holders of all the
Preferred Securities of such series, waive any past event of default and its
consequences.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of any event of default with
respect to any Preferred Securities Guarantee and after the curing or waiving of
all events of default with respect to such Preferred Securities Guarantee,
undertakes to perform only such duties as are specifically set forth in such
Preferred Securities Guarantee and, in case an event of default has occurred,
shall exercise the same degree of care as a prudent individual would exercise in
the conduct of his or her own affairs. Subject to such provisions, the Guarantee
Trustee is under no obligation to exercise any of the powers vested in it by any
Preferred Securities Guarantee at the request of any holder of the related
Preferred Securities, unless offered reasonable indemnity against the costs,
expenses and liabilities which might be incurred thereby.
17
Bankers Trust Company, the Guarantee Trustee, also serves as Property
Trustee and as Subordinated Note Indenture Trustee. Southern and certain of its
subsidiaries maintain deposit accounts and banking relationships with Bankers
Trust Company. Bankers Trust Company serves as trustee under other indentures
pursuant to which securities of subsidiaries of Southern are outstanding.
GOVERNING LAW
Each Preferred Securities Guarantee will be governed by, and construed in
accordance with, the internal laws of the State of New York.
THE AGREEMENTS AS TO EXPENSES AND LIABILITIES
Pursuant to an Agreement as to Expenses and Liabilities to be entered into
by Southern under each Trust Agreement, Southern will irrevocably and
unconditionally guarantee to each person or entity to whom each Trust becomes
indebted or liable the full payment of any indebtedness, expenses or liabilities
of such Trust, other than obligations of such Trust to pay to the holders of the
related Preferred Securities or other similar interests in such Trust the
amounts due such holders pursuant to the terms of such Preferred Securities or
such other similar interests, as the case may be.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE JUNIOR SUBORDINATED NOTES, THE PREFERRED SECURITIES GUARANTEES AND THE
JUNIOR SUBORDINATED NOTES GUARANTEES
As long as payments of interest and other payments are made when due on
each series of Junior Subordinated Notes issued to a Trust, such payments will
be sufficient to cover distributions and payments due on the related Trust
Securities of such Trust primarily because (i) the aggregate principal amount of
each series of Junior Subordinated Notes will be equal to the sum of the
aggregate stated liquidation amount of the related Trust Securities; (ii) the
interest rate and interest and other payment dates on each series of Junior
Subordinated Notes will match the distribution rate and distribution and other
payment dates for the related Preferred Securities; (iii) Southern shall pay for
all costs and expenses of each Trust pursuant to the Agreements as to Expenses
and Liabilities; and (iv) each Trust Agreement provides that the Securities
Trustees thereunder shall not cause or permit the Trust to, among other things,
engage in any activity that is not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor are legally and
immediately available) and other payments due on the Preferred Securities (to
the extent funds therefor are legally and immediately available) will be
guaranteed by Southern as and to the extent set forth under "Description of the
Preferred Securities Guarantees." If Capital does not make interest payments on
any series of Junior Subordinated Notes, it is not expected that the related
Trust will have sufficient funds to pay distributions on its Preferred
Securities. Each Preferred Securities Guarantee is a guarantee from the time of
its issuance, but does not apply to any payment of distributions unless and
until the related Trust has sufficient funds legally and immediately available
for the payment of such distributions.
If Capital fails to make interest or other payments on any series of Junior
Subordinated Notes when due (taking into account any extension period as
described in the applicable Prospectus Supplement), the Trust Agreement provides
a mechanism whereby the holders of the related Preferred Securities may appoint
a substitute Property Trustee. Such holders may also direct the Property Trustee
to enforce its rights under the Junior Subordinated Notes of such series and the
related Junior Subordinated Notes Guarantee, including proceeding directly
against Capital to enforce such Junior Subordinated Notes and against Southern
to enforce such Junior Subordinated Notes Guarantee. If the Property Trustee
fails to enforce its rights under any series of Junior Subordinated Notes or the
related Junior Subordinated Notes Guarantee, to the fullest extent permitted by
applicable law, any holder of related Preferred Securities may institute a legal
proceeding directly against Capital to enforce the Property Trustee's rights
under such series of Junior Subordinated Notes and against Southern to enforce
such Junior Subordinated Notes Guarantee without first instituting any legal
proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, a
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holder of Preferred Securities may institute a legal proceeding directly against
Southern and Capital, without first instituting a legal proceeding against the
Property Trustee or any other person or entity, for enforcement of payment to
such holder of principal of or interest on Junior Subordinated Notes of the
related series having a principal amount equal to the aggregate stated
liquidation amount of the Preferred Securities of such holder on or after the
due dates specified in the Junior Subordinated Notes of such series.
If Southern fails to make payments under any Preferred Securities
Guarantee, such Preferred Securities Guarantee provides a mechanism whereby the
holders of the Preferred Securities to which such Preferred Securities Guarantee
relates may direct the Guarantee Trustee to enforce its rights thereunder. In
addition, any holder of Preferred Securities may institute a legal proceeding
directly against Southern to enforce the Guarantee Trustee's rights under the
related Preferred Securities Guarantee without first instituting a legal
proceeding against the Guarantee Trustee or any other person or entity.
Together, each Junior Subordinated Notes Guarantee, each Preferred
Securities Guarantee, the Subordinated Note Indenture, the Junior Subordinated
Notes of the related series, the related Trust Agreement and the related
Agreement as to Expenses and Liabilities, as described above, constitute a full
and unconditional guarantee by Southern and Capital of the payments due on the
related series of Preferred Securities.
Upon any voluntary or involuntary dissolution, winding-up or termination of
any Trust, unless Junior Subordinated Notes of the related series are
distributed in connection therewith, the holders of Preferred Securities of such
Trust will be entitled to receive, out of assets legally available for
distribution to holders, a liquidation distribution in cash as described in the
applicable Prospectus Supplement. Upon any voluntary or involuntary liquidation
or bankruptcy of Capital, the Property Trustee, as holder of the related series
of Junior Subordinated Notes, would be a subordinated creditor of Capital,
subordinated in right of payment to all Senior Indebtedness, but entitled to
receive payment in full of principal and interest, before any stockholders of
Capital receive payments or distributions. Because Southern is guarantor under
each Preferred Securities Guarantee and each Junior Subordinated Notes Guarantee
and has agreed to pay for all costs, expenses and liabilities of each Trust
(other than the Trust's obligations to holders of the Preferred Securities)
pursuant to the related Agreement as to Expenses and Liabilities, the positions
of a holder of Preferred Securities and a holder of Junior Subordinated Notes of
the related series relative to other creditors and to stockholders of Southern
in the event of liquidation or bankruptcy of Southern would be substantially the
same.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Subordinated Note Indenture.
However, in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Junior Subordinated Notes
provide that no payments may be made in respect of the Junior Subordinated Notes
until such Senior Indebtedness has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on the
Junior Subordinated Notes of any series would constitute an Event of Default
under the Subordinated Note Indenture with respect to the Junior Subordinated
Notes of such series except that failure to make interest payments on the Junior
Subordinated Notes of such series will not be an Event of Default during an
extension period as described in the applicable Prospectus Supplement.
PLAN OF DISTRIBUTION
Capital may sell the Senior Notes and the Junior Subordinated Notes and the
Trusts may sell the Preferred Securities in one or more of the following ways
from time to time: (i) to underwriters for resale to the public or to
institutional investors; (ii) directly to institutional investors; or (iii)
through agents to the public or to institutional investors. The Prospectus
Supplement with respect to any series of Senior Notes, Junior Subordinated Notes
or Preferred Securities will set forth the terms of the offering of such Senior
Notes, Junior Subordinated Notes or Preferred Securities, including the name or
names of any underwriters or agents, the purchase price of such Senior Notes,
Junior Subordinated Notes or Preferred Securities and the proceeds to Southern,
Capital or the applicable Trust from such sale, any underwriting discounts or
agency fees and other items constituting underwriters' or agents' compensation,
any initial public offering price, any
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discounts or concessions allowed or reallowed or paid to dealers and any
securities exchange on which such Senior Notes, Junior Subordinated Notes or
Preferred Securities may be listed.
If underwriters participate in the sale, such Senior Notes, Junior
Subordinated Notes or Preferred Securities will be acquired by the underwriters
for their own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale.
Unless otherwise set forth in the Prospectus Supplement, the obligations of
the underwriters to purchase any series of Senior Notes, Junior Subordinated
Notes or Preferred Securities will be subject to certain conditions precedent
and the underwriters will be obligated to purchase all of such series of Senior
Notes, Junior Subordinated Notes or Preferred Securities, if any are purchased.
Underwriters and agents may be entitled under agreements entered into with
Southern, Capital and/or the applicable Trust to indemnification against certain
civil liabilities, including liabilities under the 1933 Act. Underwriters and
agents may engage in transactions with, or perform services for, Southern in the
ordinary course of business.
Each series of Senior Notes, Junior Subordinated Notes or Preferred
Securities will be a new issue of securities and will have no established
trading market. Any underwriters to whom Senior Notes, Junior Subordinated Notes
or Preferred Securities are sold for public offering and sale may make a market
in such Senior Notes, Junior Subordinated Notes or Preferred Securities, but
such underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. The Senior Notes, Junior Subordinated Notes
or Preferred Securities may or may not be listed on a national securities
exchange.
LEGAL MATTERS
Certain matters of Delaware law relating to the validity of the Preferred
Securities will be passed upon on behalf of Capital and the Trusts by Richards,
Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to Capital
and the Trusts. The validity of the Senior Notes, the Junior Subordinated Notes,
the Senior Notes Guarantees and the Junior Subordinated Notes Guarantees and
certain matters relating thereto will be passed upon on behalf of Southern and
Capital by Troutman Sanders LLP, Atlanta, Georgia. Certain legal matters will be
passed upon for the Underwriters by Dewey Ballantine LLP, New York, New York.
EXPERTS
The financial statements and schedules of Southern included in Southern's
Annual Report on Form 10-K for the year ended December 31, 2000, incorporated by
reference in this Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are incorporated herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports.
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No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the Series B Senior Notes offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
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TABLE OF CONTENTS
Prospectus Supplement
Page
----
The Southern Company........................... S-1
Southern Company Capital Funding, Inc. ........ S-1
Selected Financial Information................. S-1
Recent Results of Operations................... S-2
Use of Proceeds................................ S-3
Description of the Series B Senior Notes....... S-3
Description of the Series B Senior Notes
Guarantee.................................... S-7
Underwriting................................... S-8
Prospectus
About this Prospectus.......................... 2
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 3
The Southern Company........................... 3
Southern Company Capital Funding, Inc.......... 3
The Trusts..................................... 4
Accounting Treatment of the Trusts............. 4
Certain Ratios................................. 5
Use of Proceeds................................ 5
Description of the Senior Notes................ 5
Description of the Senior Notes Guarantees..... 9
Description of the Junior Subordinated Notes... 9
Description of the Junior Subordinated Notes
Guarantees................................... 15
Description of the Preferred Securities........ 15
Description of the Preferred Securities
Guarantees................................... 16
Relationship Among the Preferred Securities,
the Junior Subordinated Notes, the Preferred
Securities Guarantees and the Junior
Subordinated Notes Guarantees................ 18
Plan of Distribution........................... 19
Legal Matters.................................. 20
Experts........................................ 20
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$25,000,000
SOUTHERN COMPANY
CAPITAL FUNDING, INC.
Series B Floating Rate Senior
Notes due February 1, 2004
Fully and unconditionally guaranteed by
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(Southern Company Logo)
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GOLDMAN, SACHS & CO.
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